AB870: Bill Text

2013 Assembly BILL 870

March 14, 2014 - Introduced by Representatives Hesselbein, Weininger, Genrich, Hulsey, Sargent, Doyle, Pasch, Ohnstad, Wright, Kolste, Berceau, Barca, Kahl, Goyke, Thiesfeldt, Vruwink and Richards, cosponsored by Senators Wirch and T. Cullen. Referred to Committee on Financial Institutions.

AB870,1,5 An Act to amend 183.0103 (1) and 183.0202 (2); and to create 183.0202 (7), subchapter XIV of chapter 183 [precedes 183.1401] and chapter 204 of the statutes; relating to: creation of a category of business corporation identified as a benefit corporation and a category of limited liability company identified as a low-profit limited liability company.

Analysis by the Legislative Reference Bureau

Benefit corporations

This bill creates a category of business corporation identified as a benefit corporation. A benefit corporation may also fall within other categories of business corporations, such as service corporations or statutory close corporations.

Under the bill, a benefit corporation may be created by including in the articles of incorporation at the time of formation, or by later amending the articles of incorporation to include, a statement that the corporation is a benefit corporation. A business corporation's status as a benefit corporation may be terminated by amending the articles of incorporation to delete this statement.

A benefit corporation must have a purpose of creating general public benefit and the benefit corporation may also specify in its articles of incorporation additional specific public benefit purposes. A "general public benefit" is defined as a material positive impact on society and the environment by the operations of a benefit corporation taken as a whole, through activities that promote some combination of specific public benefits. Examples of "specific public benefit" include all of the following: 1) providing low-income or underserved individuals or communities with beneficial products or services; 2) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; 3) preserving the environment; 4) improving human health; 5) promoting the arts, sciences, or advancement of knowledge; 6) increasing the flow of capital to entities with a public benefit purpose; and 7) the accomplishment of any other particular benefit for society or the environment.

The board of directors of a benefit corporation must include one director designated as the "benefit director." The benefit director must annually prepare and present to the board of directors a statement as to whether, in the opinion of the benefit director, the benefit corporation acted in accordance with its general public benefit purpose and any specific public benefit purpose in all material respects and whether the benefit corporation's directors and officers complied with specified duties. Notwithstanding provisions of the business corporation law, the board of directors, committees of the board, and individual directors of a benefit corporation, in considering the best interests of the benefit corporation, must consider the effects of any action or inaction on all of the following: 1) the shareholders of the benefit corporation; 2) the employees and workforce of the benefit corporation and its subsidiaries and suppliers; 3) the interests of customers as beneficiaries of the general public benefit or specific public benefit purposes of the benefit corporation; 4) community and societal factors, including those of any community in which offices or facilities of the benefit corporation or its subsidiaries or suppliers are located; 5) the local and global environment; 6) the short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by the continued independence of the benefit corporation; and 7) the ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose. In addition, the board, committees, and individual directors may consider the resources, intent, and conduct of any person seeking to acquire control of the benefit corporation and any other pertinent factors or the interests of any other group.

A benefit corporation may also designate a "benefit officer," who has the powers and duties relating to the benefit corporation's purpose of creating general public benefit or specific public benefit and is also responsible for preparing an annual benefit report (described below). Each officer of a benefit corporation must consider the same interests and factors applicable for directors, identified as 1) to 7) immediately above, when the officer has discretion to act with respect to a matter that may have a material effect on the creation of general or specific public benefit by the benefit corporation.

A benefit corporation must prepare an annual benefit report that contains certain information for the reporting year, including the following: 1) a narrative description of the ways in which the benefit corporation pursued general public benefit and any specific public benefit and the extent to which such public benefit was created; and 2) an assessment of the social and environmental performance of the benefit corporation. The bill also includes certain limitations on imposing personal liability on directors and officers of benefit corporations.

Low-profit limited liability companies

This bill allows an entity operated for profit and organized as a limited liability company (LLC) to become a low-profit LLC by stating in its articles of organization that it is a low-profit LLC. However, to qualify as a low-profit LLC, an LLC must significantly further the accomplishment of one or more charitable or educational purposes, cannot have the production of income or appreciation of property as its primary purpose, and cannot have any political or legislative purpose. In general, provisions of law applicable to LLCs also apply to low-profit LLCs, although one of the permissible identifiers in the name of a low-profit LLC is "L3C" instead of "LLC."

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB870,1 Section 1. 183.0103 (1) of the statutes is amended to read:

AB870,3,7 183.0103 (1) The Except as provided in s. 183.1402, the name of a limited liability company as set forth in its articles of organization must contain the words "limited liability company" or "limited liability co." or end with the abbreviation "L.L.C." or "LLC". The name may not contain language stating or implying that the limited liability company is organized for any purpose other than that permitted under s. 183.0106 (1).

AB870,2 Section 2. 183.0202 (2) of the statutes is amended to read:

AB870,3,10 183.0202 (2) A name for the limited liability company that satisfies s. 183.0103 and, if applicable, s. 183.1402.

AB870,3 Section 3. 183.0202 (7) of the statutes is created to read:

AB870,3,12 183.0202 (7) If applicable, the statements under s. 183.1403 (2).

AB870,4 Section 4. Subchapter XIV of chapter 183 [precedes 183.1401] of the statutes is created to read:

AB870,3,15 Chapter 183

AB870,4,3 Subchapter XIV low-profit limited liability companies

AB870,4,6 183.1401 Definition. In this subchapter, "low-profit limited liability company" means a limited liability company that is operated for profit and that satisfies the requirements under s. 183.1403.

AB870,4,10 183.1402 Name. The name of a low-profit limited liability company as set forth in its articles of organization must contain the words "low-profit limited liability company" or "low-profit limited liability co." or end with the abbreviation "L3C".

AB870,4,14 183.1403 Requirements. (1) To qualify as a low-profit limited liability company under this subchapter, a limited liability company shall at all times significantly further the accomplishment of one or more charitable or educational purposes within the meaning of section 170 (c) (2) (B) of the Internal Revenue Code.

AB870,4,17 (2) To qualify as a low-profit limited liability company under this subchapter, a limited liability company shall state in its articles of organization all of the following:

AB870,4,18 (a) That it is a low-profit limited liability company.

AB870,4,20 (b) That the production of income or appreciation of property is not its primary purpose.

AB870,4,22 (c) That it has no purpose to accomplish any political or legislative purpose within the meaning of section 170 (c) (2) (D) of the Internal Revenue Code.

AB870,4,25 (3) (a) Subject to par. (b), to qualify as a low-profit limited liability company under this subchapter, a limited liability company's operations shall at all times be consistent with the statements in sub. (2) (b) and (c).

AB870,5,4 (b) The fact that a limited liability company produces significant income or capital appreciation is not, in the absence of other factors, conclusive evidence that the limited liability company has as its primary purpose the production of income or appreciation of property.

AB870,5,7 (c) The operating agreement of a low-profit limited liability company may not eliminate or reduce the obligations or purposes of the low-profit limited liability company under this section.

AB870,5,10 (4) Except as otherwise provided in this subchapter, all provisions of this chapter applicable to domestic limited liability companies are applicable to low-profit limited liability companies.

AB870,5,16 183.1404 Additional duty. (1) In addition to the duties under s. 183.0402, a member or manager of a low-profit limited liability company shall discharge his or her duties relating to the obligations and purposes of the low-profit limited liability company under s. 183.1403 (2) (b) and (c) with the degree of diligence, care, and skill that an ordinarily prudent person would exercise under similar circumstances.

AB870,5,18 (2) The operating agreement of a low-profit limited liability company may not eliminate or reduce the duty imposed under sub. (1).

AB870,5,23 183.1405 Ceasing to operate as a low-profit limited liability company. A low-profit limited liability company that ceases to meet any of the requirements under s. 183.1403 ceases to qualify as a low-profit limited liability company and shall promptly amend its articles of organization to remove the statements specified in s. 183.1403 (2) and amend its name consistent with s. 183.0103.

AB870,5 Section 5. Chapter 204 of the statutes is created to read:

AB870,5,25 CHAPTER 204

AB870,6,1 BENEFIT CoRpOratiONS

AB870,6,2 SUBCHAPTER I

AB870,6,3 GENERAL PROVISIONS

AB870,6,5 204.101 Application and effect of chapter. (1) General rule. This chapter shall be applicable to all benefit corporations.

AB870,6,10 (2) Application of business corporation law generally. The existence of a provision of this chapter shall not of itself create an implication that a contrary or different rule of law is applicable to a business corporation that is not a benefit corporation. This chapter shall not affect any statute or rule that is applicable to a business corporation that is not a benefit corporation.

AB870,6,15 (3) Laws applicable to benefit corporations. Except as otherwise provided in this chapter, ch. 180 shall be generally applicable to all benefit corporations. The specific provisions of this chapter shall control over the general provisions of ch. 180. A benefit corporation may be simultaneously subject to this chapter and provisions of other chapters.

AB870,6,18 (4) Organic records. A provision of the articles or bylaws of a benefit corporation may not relax, be inconsistent with, or supersede a provision of this chapter.

AB870,6,20 204.102 Definitions. Unless the context clearly indicates otherwise, in this chapter:

AB870,6,23 (1) "Benefit corporation" means a business corporation that has elected to become subject to this chapter and whose status as a benefit corporation has not been terminated under s. 204.105.

AB870,6,25 (2) "Benefit director" means the person designated as the benefit director of a benefit corporation as provided in s. 204.302.

AB870,7,2 (3) "Benefit officer" means the officer of a benefit corporation, if any, designated as the benefit officer as provided in s. 204.304.

AB870,7,3 (4) "Entity" has the meaning given in s. 180.0103 (8).

AB870,7,6 (5) "General public benefit" means a material positive impact on society and the environment by the operations of a benefit corporation taken as a whole, through activities that promote some combination of specific public benefits.

AB870,7,7 (6) "Service corporation" has the meaning given in s. 180.1901 (2).

AB870,7,8 (7) "Specific public benefit" includes all of the following:

AB870,7,10 (a) Providing low-income or underserved individuals or communities with beneficial products or services.

AB870,7,12 (b) Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business.

AB870,7,13 (c) Preserving the environment.

AB870,7,14 (d) Improving human health.

AB870,7,15 (e) Promoting the arts, sciences, or advancement of knowledge.

AB870,7,16 (f) Increasing the flow of capital to entities with a public benefit purpose.

AB870,7,18 (g) The accomplishment of any other particular benefit for society or the environment.

AB870,7,21 204.103 Formation of benefit corporations. A benefit corporation shall be formed in accordance with ch. 180, except that its articles shall also state that it is a benefit corporation.

AB870,8,2 204.104 Election of an existing business corporation to become a benefit corporation. (1) Amendment. An existing business corporation may become a benefit corporation under this chapter by amending its articles so that they contain, in addition to the requirements of s. 180.0202, a statement that the corporation is a benefit corporation.

AB870,8,9 (2) Fundamental transactions. If a corporation that is not a benefit corporation is a party to a merger, consolidation, or division or is the exchanging corporation in a share exchange, and the surviving, new, or any resulting corporation in the merger, consolidation, division, or share exchange is to be a benefit corporation, then the plan of merger, consolidation, division, or share exchange shall not be effective unless the articles of the surviving, new, or resulting corporation contain a statement that the corporation is a benefit corporation.

AB870,8,13 204.105 Termination of benefit corporation status. A benefit corporation may terminate its status as such and cease to be subject to this chapter by amending its articles to delete the provision required by ss. 204.103 and 204.104 to be stated in the articles of a benefit corporation.

AB870,8,14 SUBCHAPTER II

AB870,8,15 corporate PurposeS

AB870,8,19 204.201 Corporate purposes. (1) General public benefit purpose. A benefit corporation shall have a purpose of creating general public benefit. This purpose is in addition to its purpose under s. 180.0301 and any specific purpose set forth in its articles under sub. (2).

AB870,8,24 (2) Optional specific public benefit purpose. The articles of a benefit corporation may identify one or more specific public benefits that it is the purpose of the benefit corporation to create in addition to its purposes under s. 180.0301 and sub. (1). The identification of a specific public benefit under this subsection does not limit the obligation of a benefit corporation to create general public benefit.

AB870,9,3 (3) Effect of purposes. The creation of general public benefit and specific public benefit as provided in subs. (1) and (2) shall be considered to be in the best interests of the benefit corporation.

AB870,9,6 (4) Amendment. A benefit corporation may amend its articles to add, amend, or delete the identification of a specific public benefit that it is the purpose of the benefit corporation to create.

AB870,9,9 (5) Service corporations. A service corporation that is a benefit corporation is not limited by ss. 180.1903 and 180.1905 in its authority to create general public benefit or a specific public benefit.

AB870,9,10 SUBCHAPTER III

AB870,9,11 ACCOUNTABILITY

AB870,9,17 204.301 Standard of conduct for directors. (1) Consideration of interests. (a) Notwithstanding ss. 180.0302 (15) and 180.0827, in discharging the duties of their respective positions, the board of directors, committees of the board, and individual directors of a benefit corporation, in considering the best interests of the benefit corporation, shall consider the effects of any action or inaction on all of the following:

AB870,9,18 1. The shareholders of the benefit corporation.

AB870,9,20 2. The employees and workforce of the benefit corporation and its subsidiaries and suppliers.

AB870,9,22 3. The interests of customers as beneficiaries of the general public benefit or specific public benefit purposes of the benefit corporation.

AB870,9,25 4. Community and societal factors, including those of any community in which offices or facilities of the benefit corporation or its subsidiaries or suppliers are located.

AB870,10,1 5. The local and global environment.

AB870,10,5 6. The short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by the continued corporate independence of the benefit corporation.

AB870,10,7 7. The ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose.

AB870,10,11 (b) Notwithstanding ss. 180.0302 (15) and 180.0827, in discharging the duties of their respective positions, the board of directors, committees of the board, and individual directors of a benefit corporation, in considering the best interests of the benefit corporation, may consider any of the following: