Laws of Benefit Corporations

Corporations Code Title 1, Division 3, Part 13 deals with benefit corporations in California. Chapter 2 contains corporate purposes.

Section 14610 requires a benefit corporation to have the purpose of creating general public benefit. This purpose is in addition to, and may be a limitation on, the corporation’s purpose under law and any specific purpose set forth in its articles. The articles of incorporation of a benefit corporation must contain the specified statement.

A benefit corporation may amend its articles to add, amend, or delete the identification of a specific public benefit that is the purpose of the benefit corporation to create. The amendment is not effective unless the amendment is adopted by at least the minimum status vote.

Chapter 3 deals with accountability. Section 14620 requires a director to perform the duties of a director including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner the director believes to be in the best interests of the benefit corporation and with that care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

In discharging their respective duties, and in considering the best interests of the benefit corporation, the board of directors, committees of the board, and individual directors of a benefit corporation are required to consider the impacts of any action or proposed action upon all of the seven specified conditions.

In discharging their respective duties, the persons described may consider any of the specified information. These persons are not required to give priority to any particular factor or the interests of any particular person or group referred to over any other factor or the interests of any other person or group unless the benefit corporation has stated its intention to give priority to a specific public benefit purpose identified in the articles.

In performing the duties of a director, a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by any of the specified individuals.

A director is not liable for monetary damages under this part for any failure of the benefit corporation to create a general or specific public benefit. A person who performs the duties of a director in accordance with this part is not liable for monetary damages for any alleged failure to discharge the person’s obligations as a director.

A director does not have a fiduciary duty to a person that is a beneficiary of the general or specific public benefit purposes of a benefit corporation arising from the status of the person as a beneficiary.

Section 14621 requires the board of directors of a benefit corporation to prepare for inclusion in the annual benefit report to shareholders a statement indicating whether, in the opinion of the board of directors, the benefit corporation failed to pursue its general, and any specific, public benefit purpose in all material respects during the period covered by the report.

Section 14622 requires each officer of a benefit corporation to consider the interests and factors described in the manner provided in that section when either of the specified conditions applies. The consideration by an officer of interests and factors in the manner described in does not constitute a violation of the duties of the officer.

Section 14623 prohibits any person from bringing an action or asserting a claim against a benefit corporation or its directors or officers under this chapter except in a benefit enforcement proceeding. A benefit enforcement proceeding may be commenced or maintained only as specified in this section.

Chapter 4 deals with transparency. Section 14630 requires a benefit corporation to deliver to each shareholder an annual benefit report including all nine specified items of information. The benefit report is sent annually to each shareholder within 120 days following the end of the fiscal year of the benefit corporation or at the same time that the benefit corporation delivers any other annual report to its shareholders.

Section 14631 requires all certificates representing shares of a benefit corporation to contain, in addition to any other statements required by the General Corporation Law, the specified conspicuous language on the face of the certificate.