Full Text of SB2358 98th General Assembly
SB2358 98TH GENERAL ASSEMBLY |
| | 98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014 SB2358 Introduced 2/15/2013, by Sen. Heather A. Steans SYNOPSIS AS INTRODUCED: |
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Creates the Benefit Limited Liability Company Act. Provides that a limited liability company may become a benefit limited liability company for public benefit and other purposes. Defines key terms and contains accountability and transparency provisions.
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| | | FISCAL NOTE ACT MAY APPLY | |
| | A BILL FOR |
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| 1 | | AN ACT concerning business.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Article 1. | 5 | | General Provisions | 6 | | Section 1-1. Short title. This Act may be cited as the | 7 | | Benefit Limited Liability Company Act. | 8 | | Section 1-5. Application and effect of the Act. | 9 | | (a) This Act applies to all benefit liability companies. | 10 | | (b) The existence of a provision of this Act shall not of | 11 | | itself create an implication that a contrary or different rule | 12 | | of law is applicable to a limited liability company that is not | 13 | | a benefit limited liability company. This Act shall not affect | 14 | | a statute or rule of law that is applicable to a limited | 15 | | liability company that is not a benefit limited liability | 16 | | company. | 17 | | (c) The Limited Liability Company Act applies to benefit | 18 | | limited liability companies, including their organization, and | 19 | | they shall enjoy the powers and privileges and be subject to | 20 | | the duties, restrictions, and liabilities of other limited | 21 | | liability companies, except so far as provided by this Act. If | 22 | | any provision of this Act conflicts with the Limited Liability |
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| 1 | | Company Act, this Act takes precedence. | 2 | | (d) A provision of the articles of organization or | 3 | | operating agreement of a benefit limited liability company may | 4 | | not relax, be inconsistent with, or supersede a provision of | 5 | | this Act.
| 6 | | Section 1-10. Definitions. As used in this Act, unless the | 7 | | context otherwise requires, the words and phrases defined in | 8 | | this Section shall have the meanings set forth herein. | 9 | | "Benefit limited liability company" means a limited | 10 | | liability company organized under the Limited Liability | 11 | | Company Act:
| 12 | | (1) that has elected to become subject to this Act; and
| 13 | | (2) whose status as a benefit limited liability company | 14 | | has not been terminated under Section 2-10.
| 15 | | "Benefit enforcement proceeding" means a claim or action | 16 | | for:
| 17 | | (1) the failure of a benefit limited liability company | 18 | | to pursue or create general public benefit or a specific | 19 | | public benefit set forth in its articles of organization; | 20 | | or
| 21 | | (2) a violation of an obligation, duty, or standard of | 22 | | conduct under this Act.
| 23 | | "General public benefit" means a material positive impact | 24 | | on society and the environment, taken as a whole, assessed | 25 | | against a third-party standard, from the business and |
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| 1 | | operations of a benefit limited liability company.
| 2 | | "Minimum status vote" means that,
in addition to any (i) | 3 | | other approval, vote, or consent required by the statutory law | 4 | | that principally governs the internal affairs of the limited | 5 | | liability company, (ii) provision of the publicly filed record | 6 | | or document required to form the limited liability company, or | 7 | | (iii) agreement binding on some or all of the holders of equity | 8 | | interests in the limited liability company,
the holders of | 9 | | every class or series of equity interest in the limited | 10 | | liability company that are entitled to receive a distribution | 11 | | of any kind from the limited liability company shall be | 12 | | entitled to vote on or consent to the action regardless of any | 13 | | otherwise applicable limitation on the voting or consent rights | 14 | | of any class or series and
the action must be approved by a | 15 | | vote or consent of at least two-thirds of those holders.
| 16 | | "Specific public benefit" means:
| 17 | | (1) providing low-income or underserved individuals or | 18 | | communities with beneficial products or services;
| 19 | | (2) promoting economic opportunity for individuals or | 20 | | communities beyond the creation of jobs in the ordinary | 21 | | course of business;
| 22 | | (3) preserving the environment;
| 23 | | (4) improving human health;
| 24 | | (5) promoting the arts, sciences, or advancement of | 25 | | knowledge;
| 26 | | (6) increasing the flow of capital to entities with a |
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| 1 | | public benefit purpose; or
| 2 | | (7) the accomplishment of any other particular benefit | 3 | | for society or the environment.
| 4 | | "Subsidiary" of a person means an entity in which the | 5 | | person owns beneficially or of record 50% or more of the | 6 | | outstanding equity interests. For the purposes of this | 7 | | definition, a percentage of ownership in an entity shall be | 8 | | calculated as if all outstanding rights to acquire equity | 9 | | interests in the entity have been exercised.
| 10 | | "Third-party standard" means a standard for defining, | 11 | | reporting, and assessing overall corporate, social, and | 12 | | environmental performance that:
| 13 | | (1) is a comprehensive assessment of the impact of the | 14 | | business and the business' operations upon the | 15 | | considerations listed in subdivisions (a)(1)(B) through | 16 | | (a)(1)(E) of Section 4-1; | 17 | | (2) is developed by an entity that has no material | 18 | | financial relationship with the benefit corporation or any | 19 | | of its subsidiaries; | 20 | | (3) is developed by an entity that is not materially | 21 | | financed by any of the following organizations and not more | 22 | | than one-third of the members of the governing body of the | 23 | | entity are representatives of:
| 24 | | (A) associations of businesses operating in a | 25 | | specific industry, the performance of whose members is | 26 | | measured by the standard;
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| 1 | | (B) businesses from a specific industry or an | 2 | | association of businesses in that industry; or
| 3 | | (C) businesses whose performance is assessed | 4 | | against the standard; | 5 | | (4) is developed by an entity that:
| 6 | | (A) accesses necessary and appropriate expertise | 7 | | to assess overall corporate social and environmental | 8 | | performance; and
| 9 | | (B) uses a balanced multi-stakeholder approach, | 10 | | including a public comment period of at least 30 days | 11 | | to develop the standard; and
| 12 | | (5) makes the following information regarding the | 13 | | standard publicly available:
| 14 | | (A) the factors considered when measuring the | 15 | | overall social and environmental performance of a | 16 | | business and the relative weight, if any, given to each | 17 | | of those factors;
| 18 | | (B) the identity of the directors, officers, any | 19 | | material owners, and the governing body of the entity | 20 | | that developed, and controls revisions to, the | 21 | | standard, and the process by which
revisions to the | 22 | | standard and changes to the membership of the governing | 23 | | body are made; and | 24 | | (C) an accounting of the sources of financial | 25 | | support for the entity, with sufficient detail to | 26 | | disclose any relationships that could reasonably be |
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| 1 | | considered to present a potential conflict of | 2 | | interest. | 3 | | Section 1-15. Application to low-profit limited liability | 4 | | companies. Nothing contained in this Act prohibits a benefit | 5 | | limited liability company from also being or becoming a | 6 | | low-profit limited liability company while remaining a benefit | 7 | | limited liability company if the benefit limited liability | 8 | | company satisfies the requirements for low-profit limited | 9 | | liability companies under the Limited Liability Company Act. | 10 | | Article 2. | 11 | | Formation of Benefit Limited Liability Companies | 12 | | Section 2-1. Formation of benefit limited liability | 13 | | companies. A benefit limited liability company must be formed | 14 | | in accordance with Article 5 of the Limited Liability Company | 15 | | Act. In addition to the formation requirements of that Act, the | 16 | | articles of organization of a benefit limited liability company | 17 | | must state that it is a benefit limited liability company in | 18 | | accordance with the provisions of this Article. | 19 | | Section 2-5. Election of status. | 20 | | (a) A limited liability company may become a benefit | 21 | | limited liability company under this Act by amending its | 22 | | articles of organization so that they contain a statement that |
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| 1 | | the limited liability company is a benefit limited liability | 2 | | company. In order to be effective, the amendment must be | 3 | | adopted by at least the minimum status vote.
| 4 | | (b) For any entity that is a party to a merger or | 5 | | consolidation or is the exchanging entity in a share exchange, | 6 | | where the surviving, new, or resulting entity in the merger, | 7 | | consolidation, or share exchange is intended to be a benefit | 8 | | limited liability company, the plan of merger, consolidation, | 9 | | or share exchange must be adopted by at least the minimum | 10 | | status vote in order to be effective.
| 11 | | Section 2-10. Termination of status. | 12 | | (a) A benefit limited liability company may terminate its | 13 | | status as such and cease to be subject to this Act by amending | 14 | | its articles of organization to remove the statement that the | 15 | | limited liability company is a benefit limited liability | 16 | | company. In order to be effective, the amendment must be | 17 | | adopted by at least the minimum status vote.
| 18 | | (b) If a plan of merger, conversion, or share exchange | 19 | | would have the effect of terminating the status of a limited | 20 | | liability company as a benefit limited liability company, in | 21 | | order to be effective, the plan must be adopted by at least the | 22 | | minimum status vote.
| 23 | | (c) A sale, lease, exchange, or other disposition of all or | 24 | | substantially all of the assets of a benefit limited liability | 25 | | company, unless the transaction is in the usual and ordinary |
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| 1 | | course of business, shall not be effective unless the | 2 | | transaction is adopted by at least the minimum status vote.
| 3 | | Article 3. | 4 | | Benefit Limited Liability Company Purposes | 5 | | Section 3-1. Benefit limited liability company purposes. | 6 | | (a) A benefit limited liability company shall have a | 7 | | purpose of creating general public benefit. This purpose is in | 8 | | addition to its purposes under Section 1-25 of the Limited | 9 | | Liability Company Act and any specific purpose set forth in its | 10 | | articles of organization in accordance with subsection (b).
| 11 | | (b) The articles of organization of a benefit limited | 12 | | liability company may identify one or more specific public | 13 | | benefits the creation of which is a purpose of the benefit | 14 | | corporation in addition to its purposes under Section 1-25 of | 15 | | the limited Liability Company and subsection (a). The | 16 | | identification of a specific public benefit under this | 17 | | subsection does not limit the obligation of a benefit limited | 18 | | liability company under subsection (a).
| 19 | | (c) The creation of general public benefit and specific | 20 | | public benefit under subsections (a) and (b) is in the best | 21 | | interests of the benefit limited liability company.
| 22 | | (d) A benefit limited liability company may amend its | 23 | | articles of organization to add, change, or remove a specific | 24 | | public benefit. In order to be effective, the amendment must be |
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| 1 | | adopted by at least the minimum status vote.
| 2 | | Article 4. | 3 | | Accountability | 4 | | Section 4-1. Standard of conduct for members and managers. | 5 | | (a) Without regard to whether the benefit limited liability | 6 | | company is subject to Section 15-15 of the Limited Liability | 7 | | Company Act, in discharging the duties of their respective | 8 | | positions, the members and managers of a benefit limited | 9 | | liability company in considering the best interests of the | 10 | | benefit limited liability company:
| 11 | | (1) shall consider the effects of any action upon:
| 12 | | (A) the members of the benefit limited liability | 13 | | company;
| 14 | | (B) the employees and work force of the benefit | 15 | | limited liability company, its subsidiaries, and its | 16 | | suppliers;
| 17 | | (C) the interests of customers as beneficiaries of | 18 | | the general public benefit or specific public benefit | 19 | | purposes of the benefit limited liability company;
| 20 | | (D) community and societal considerations, | 21 | | including those of each community in which offices or | 22 | | facilities of the benefit limited liability company, | 23 | | its subsidiaries or its suppliers are located;
| 24 | | (E) the local and global environment;
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| 1 | | (F) the short-term and long-term interests of the | 2 | | benefit limited liability company, including benefits | 3 | | that may accrue to the benefit limited liability | 4 | | company from its long-term plans and the possibility | 5 | | that these interests may be best served by the | 6 | | continued independence of the benefit limited | 7 | | liability company; and
| 8 | | (G) the ability of the benefit limited liability | 9 | | company to accomplish its general public benefit | 10 | | purpose and any specific public benefit purpose; and
| 11 | | (2) may consider:
| 12 | | (A) considerations listed in Section 15-5 of the | 13 | | Limited Liability Company Act; and
| 14 | | (B) any other pertinent factors or the interests of | 15 | | any other group that they deem appropriate; but
| 16 | | (3) need not give priority to the interests of a | 17 | | particular person or group referred to in paragraphs (1) or | 18 | | (2) over the interests of another person or group unless | 19 | | the benefit limited liability company has stated in its | 20 | | articles of organization its intention to give priority to | 21 | | certain interests related to its accomplishment of its | 22 | | general public benefit purpose or a specific public benefit | 23 | | purpose identified in its articles of organization.
| 24 | | (b) The consideration of interests and factors in the | 25 | | manner required by subsection (a) is in addition to the ability | 26 | | of members and managers to consider interests and factors as |
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| 1 | | provided in Section 15-15 of the Limited Liability Company Act.
| 2 | | (c) A member or manager is not personally liable for | 3 | | monetary damages for:
| 4 | | (1) any action taken as a member or manager if the | 5 | | member or manager performed the duties of office in | 6 | | compliance with Article 15 of the Limited Liability Company | 7 | | Act and this Section; or
| 8 | | (2) a failure of the benefit limited liability company | 9 | | to pursue or create general public benefit or a specific | 10 | | public benefit.
| 11 | | (d) A member or manager does not have a duty to a person | 12 | | that is a beneficiary of the general public benefit purpose or | 13 | | a specific public benefit purpose of a benefit limited | 14 | | liability company arising from the status of the person as a | 15 | | beneficiary.
| 16 | | Section 4-5. Right of action; benefit enforcement | 17 | | proceeding. | 18 | | (a) No person may bring an action or assert a claim against | 19 | | a benefit limited liability company or its members or managers | 20 | | with respect to failure to pursue or create general public | 21 | | benefit or a specific public benefit set forth in its articles | 22 | | of organization or violation of a duty or standard of conduct | 23 | | under this Act except in a benefit enforcement proceeding.
| 24 | | (b) A benefit enforcement proceeding may be commenced or | 25 | | maintained only:
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| 1 | | (1) directly by the benefit limited liability company; | 2 | | or
| 3 | | (2) derivatively by:
| 4 | | (A) a member;
| 5 | | (B) a manager;
| 6 | | (C) a person or group of persons that owns | 7 | | beneficially or of record 5% or more of the equity | 8 | | interests in an entity of which the benefit limited | 9 | | liability company is a subsidiary; or
| 10 | | (D) other persons as specified in the articles of | 11 | | organization or management agreement of the benefit | 12 | | limited liability company.
| 13 | | (c) A benefit limited liability company shall not be liable | 14 | | for monetary damages under this Act for any failure of the | 15 | | benefit limited liability company to pursue or create general | 16 | | public benefit or a specific public benefit.
| 17 | | Article 5. | 18 | | Transparency | 19 | | Section 5-1. Annual benefit report. | 20 | | (a) A benefit limited liability company shall prepare an | 21 | | annual benefit report including all of the following:
| 22 | | (1) A narrative description of:
| 23 | | (A) the process and rationale for selecting the | 24 | | third party standard used to prepare the benefit |
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| 1 | | report;
| 2 | | (B) the ways in which the benefit limited liability | 3 | | company pursued general public benefit during the year | 4 | | and the extent to which general public benefit was | 5 | | created;
| 6 | | (C) the ways in which the benefit limited liability | 7 | | company pursued a specific public benefit that the | 8 | | articles of organization state it is the purpose of the | 9 | | benefit limited liability company to create and the | 10 | | extent to which that specific public benefit was | 11 | | created; and
| 12 | | (D) any circumstances that have hindered the | 13 | | pursuit by the benefit limited liability company of its | 14 | | general public benefit purpose and any specific public | 15 | | benefit purpose or the creation by the benefit limited | 16 | | liability company of general public benefit and any | 17 | | specific public benefit.
| 18 | | (2) An assessment of the overall social and | 19 | | environmental performance of the benefit limited liability | 20 | | company against a third-party standard:
| 21 | | (A) applied consistently with any application of | 22 | | that standard in prior benefit reports; or
| 23 | | (B) accompanied by an explanation of the reasons | 24 | | for any inconsistent application.
| 25 | | (3) The compensation paid by the benefit limited | 26 | | liability company during the year to each manager in the |
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| 1 | | capacity of a manager.
| 2 | | (4) The name of each person that owns 5% or more of the | 3 | | outstanding shares of the benefit limited liability | 4 | | company either:
| 5 | | (A) beneficially, to the extent known to the | 6 | | benefit limited liability company without independent | 7 | | investigation; or
| 8 | | (B) of record.
| 9 | | (5) A statement of any connection between the | 10 | | organization that established the third-party standard, or | 11 | | its directors, officers, or material owners, and the | 12 | | benefit limited liability company or its members or | 13 | | managers, including any financial or governance | 14 | | relationship that might materially affect the credibility | 15 | | of the use of the third-party standard.
| 16 | | (b) The benefit limited liability company shall send a | 17 | | benefit report annually to each member:
| 18 | | (1) within 120 days following the end of the fiscal | 19 | | year of the benefit limited liability company; or
| 20 | | (2) at the same time that the benefit limited liability | 21 | | company delivers any other annual report to its members.
| 22 | | (c) A benefit limited liability company shall post all of | 23 | | its benefit reports on the public portion of its Internet | 24 | | website, if any, but the compensation paid to managers and | 25 | | financial or proprietary information included in the benefit | 26 | | reports may be omitted from the benefit reports as posted.
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| 1 | | (d) If a benefit limited liability company does not have an | 2 | | Internet website, the benefit limited liability company shall | 3 | | provide a copy of its most recent benefit report, without | 4 | | charge, to any person that requests a copy.
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