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  85R22634 CLG-D
 
  By: Hinojosa, Oliveira, Meyer, Parker H.B. No. 3488
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to authorizing public benefit corporations.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 3.007, Business Organizations Code, is
  amended by adding Subsection (e) to read as follows:
         (e)  Notwithstanding Section 2.008, instead of including in
  its certificate of formation or amending its certificate of
  formation to include one or more social purposes as provided by
  Subsection (d), a for-profit corporation may elect to be a public
  benefit corporation governed by Subchapter S, Chapter 21, by
  including in its initially filed certificate of formation, or,
  subject to Section 21.954, by amending its certificate of formation
  to include:
               (1)  one or more specific public benefits, as defined
  by Section 21.952, to be promoted by the corporation; and
               (2)  instead of the statement required by Section
  3.005(a)(2), a statement that the filing entity is a for-profit
  corporation electing to be a public benefit corporation.
         SECTION 2.  Section 10.352(2), Business Organizations Code,
  is amended to read as follows:
               (2)  "Responsible organization" means:
                     (A)  the organization responsible for:
                           (i)  the provision of notices under this
  subchapter; and
                           (ii)  the primary obligation of paying the
  fair value for an ownership interest held by a dissenting owner;
                     (B)  with respect to a merger or conversion:
                           (i)  for matters occurring before the merger
  or conversion, the organization that is merging or converting; and
                           (ii)  for matters occurring after the merger
  or conversion, the surviving or new organization that is primarily
  obligated for the payment of the fair value of the dissenting
  owner's ownership interest in the merger or conversion;
                     (C)  with respect to an interest exchange, the
  organization the ownership interests of which are being acquired in
  the interest exchange; [and]
                     (D)  with respect to the sale of all or
  substantially all of the assets of an organization, the
  organization the assets of which are to be transferred by sale or in
  another manner; and
                     (E)  with respect to an amendment to a domestic
  for-profit corporation's certificate of formation described by
  Section 10.354(a)(1)(G), the corporation.
         SECTION 3.  Section 10.354, Business Organizations Code, is
  amended by amending Subsection (a) and adding Subsection (d) to
  read as follows:
         (a)  Subject to Subsection (b), an owner of an ownership
  interest in a domestic entity subject to dissenters' rights is
  entitled to:
               (1)  dissent from:
                     (A)  a plan of merger to which the domestic entity
  is a party if owner approval is required by this code and the owner
  owns in the domestic entity an ownership interest that was entitled
  to vote on the plan of merger;
                     (B)  a sale of all or substantially all of the
  assets of the domestic entity if owner approval is required by this
  code and the owner owns in the domestic entity an ownership interest
  that was entitled to vote on the sale;
                     (C)  a plan of exchange in which the ownership
  interest of the owner is to be acquired;
                     (D)  a plan of conversion in which the domestic
  entity is the converting entity if owner approval is required by
  this code and the owner owns in the domestic entity an ownership
  interest that was entitled to vote on the plan of conversion;
                     (E)  a merger effected under Section 10.006 in
  which:
                           (i)  the owner is entitled to vote on the
  merger; or
                           (ii)  the ownership interest of the owner is
  converted or exchanged; [or]
                     (F)  a merger effected under Section 21.459(c) in
  which the shares of the shareholders are converted or exchanged; or
                     (G)  if the owner owns shares that were entitled
  to vote on the amendment, an amendment to a domestic for-profit
  corporation's certificate of formation to:
                           (i)  add the provisions required by Section
  3.007(e) to elect to be a public benefit corporation; or
                           (ii)  delete the provisions required by
  Section 3.007(e), which in effect cancels the corporation's
  election to be a public benefit corporation; and
               (2)  subject to compliance with the procedures set
  forth in this subchapter, obtain the fair value of that ownership
  interest through an appraisal.
         (d)  Notwithstanding Subsection (a), an owner of an
  ownership interest in a domestic for-profit corporation subject to
  dissenters' rights may not dissent from an amendment to the
  corporation's certificate of formation described by Subsection
  (a)(1)(G) if the shares held by the owner are part of a class or
  series of shares, on the record date set for purposes of determining
  which owners are entitled to vote on the amendment:
               (1)  listed on a national securities exchange; or
               (2)  held of record by at least 2,000 owners.
         SECTION 4.  Chapter 21, Business Organizations Code, is
  amended by adding Subchapter S to read as follows:
  SUBCHAPTER S. PUBLIC BENEFIT CORPORATIONS
         Sec. 21.951.  LAW APPLICABLE TO PUBLIC BENEFIT CORPORATIONS;
  FORMATION.  (a) A for-profit corporation may elect under Section
  3.007(e) to be a public benefit corporation that is governed by this
  subchapter.
         (b)  If a corporation elects to be a public benefit
  corporation, the corporation is subject to the other provisions of
  this chapter and other provisions of this code applicable to
  for-profit corporations.
         (c)  To the extent of a conflict between this subchapter and
  another provision of this chapter or another provision of this code
  applicable to for-profit corporations, this subchapter controls.
         Sec. 21.952.  DEFINITIONS. In this subchapter:
               (1)  "Public benefit" means a positive effect, or a
  reduction of a negative effect, on one or more categories of
  persons, entities, communities, or interests, other than
  shareholders in their capacities as shareholders of the
  corporation, including effects of an artistic, charitable,
  cultural, economic, educational, environmental, literary, medical,
  religious, scientific, or technological nature.
               (2)  "Public benefit corporation" means a domestic
  for-profit corporation that elects under Section 3.007(e) to be a
  public benefit corporation governed by this subchapter.
               (3)  "Public benefit provisions" means the provisions
  of a certificate of formation that are required by Section 3.007(e)
  and this subchapter.
         Sec. 21.953.  PURPOSE OF PUBLIC BENEFIT CORPORATION; NAME OF
  CORPORATION. (a) A public benefit corporation is a domestic
  for-profit corporation that is intended to produce a public benefit
  or benefits and to operate in a responsible and sustainable manner.
         (b)  To accomplish the purpose of the corporation described
  by Subsection (a), a public benefit corporation shall be managed in
  a manner that balances:
               (1)  the shareholders' pecuniary interests;
               (2)  the best interests of those persons materially
  affected by the corporation's conduct; and
               (3)  the public benefit or benefits specified in the
  corporation's certificate of formation.
         (c)  The name of the public benefit corporation specified in
  its certificate of formation may contain the words "public benefit
  corporation," the abbreviation "P.B.C.," or the designation "PBC."  
  If the name does not contain those words or that abbreviation or
  designation, the corporation must, before issuing unissued shares
  or disposing of treasury shares and except as provided by
  Subsection (d), provide notice that the corporation is a public
  benefit corporation to any person:
               (1)  to whom the unissued shares are issued; or
               (2)  who acquires the treasury shares.
         (d)  Notice is not required to be provided under Subsection
  (c) if:
               (1)  the issuance or disposal of shares described by
  that subsection is under an offering registered under the
  Securities Act of 1933 (15 U.S.C. Section 77a et seq.); or
               (2)  at the time of the issuance or disposal of shares
  described by that subsection, the corporation has a class of
  securities registered under the Securities Exchange Act of 1934 (15
  U.S.C. Section 78a et seq.).
         (e)  Section 5.054(a) does not apply to a public benefit
  corporation that includes in its name the words, abbreviation, or
  designation permitted by Subsection (c).
         Sec. 21.954.  CERTAIN AMENDMENTS, MERGERS, EXCHANGES, AND
  CONVERSIONS; VOTER APPROVAL REQUIRED. (a)  Notwithstanding any
  other provision of this chapter, a domestic for-profit corporation
  that is not a public benefit corporation may not, without the
  approval of the owners of two-thirds of the outstanding shares of
  the corporation entitled to vote on the matter, which must be a vote
  by class or series of shares if otherwise required by Section
  21.364, 21.457, or 21.458:
               (1)  amend the corporation's certificate of formation
  to comply with the requirements of Section 3.007(e) to elect for the
  corporation to be governed as a public benefit corporation; 
               (2)  merge or effect an interest exchange with another
  entity if, as a result of the merger or exchange, the shares in the
  corporation would become, or be converted into or exchanged for the
  right to receive, shares or other equity interests in a domestic or
  foreign public benefit corporation or similar entity; or
               (3)  convert into a foreign public benefit corporation
  or similar entity.
         (b)  Subsection (a) does not apply until the corporation has
  issued and outstanding shares of the corporation's capital stock.
         (c)  A domestic entity that is not a domestic for-profit
  corporation may not, without the approval of the owners of
  two-thirds of the outstanding ownership interests of the entity
  entitled to vote on the matter:
               (1)  merge or effect an interest exchange with another
  entity if, as a result of the merger or exchange, the ownership
  interests in the entity would become, or be converted into or
  exchanged for the right to receive, shares or other equity
  interests in a domestic or foreign public benefit corporation or
  similar entity; or
               (2)  convert into a domestic or foreign public benefit
  corporation or similar entity.
         (d)  Notwithstanding any other provision of this chapter, a
  public benefit corporation may not, without the approval of
  two-thirds of the outstanding shares of the corporation entitled to
  vote on the matter, which must be a vote by class or series of shares
  if otherwise required by Section 21.364, 21.457, or 21.458:
               (1)  amend the corporation's certificate of formation
  to delete or amend a provision required by Section 3.007(e) or
  described by Section 21.957(c);
               (2)  convert into a domestic or foreign entity:
                     (A)  that is not a public benefit corporation or
  similar entity; and
                     (B)  that does not contain in its certificate of
  formation or similar governing document provisions identical to the
  provisions in the certificate of formation of the public benefit
  corporation containing the public benefit or benefits specified
  under Section 3.007(e) or imposing requirements under
  Section 21.957(c); or 
               (3)  merge or effect an interest exchange with another
  entity if, as a result of the merger or exchange, the shares in the
  corporation would become, or be converted into or exchanged for the
  right to receive, shares or other equity interests in a domestic or
  foreign entity:
                     (A)  that is not a public benefit corporation or
  similar entity; and
                     (B)  that does not contain in its certificate of
  formation or similar governing document provisions identical to the
  provisions in the certificate of formation of the public benefit
  corporation containing the public benefit or benefits specified
  under Section 3.007(e) or imposing requirements under
  Section 21.957(c).
         (e)  Notwithstanding any other provision of this section, a
  nonprofit corporation or nonprofit association may not:
               (1)  with respect to a merger governed by this section,
  be a party to the merger; or
               (2)  convert into a public benefit corporation.
         (f)  An owner of a domestic entity affected by an action
  described by this section has the rights of dissent and appraisal as
  an owner described by Section 10.354 and to the extent provided by
  Subchapter H, Chapter 10.
         Sec. 21.955.  STOCK CERTIFICATES; NOTICES REGARDING
  UNCERTIFICATED STOCK. (a)  A stock certificate issued by a public
  benefit corporation must note conspicuously that the corporation is
  a public benefit corporation governed by this subchapter.
         (b)  A notice sent by a public benefit corporation under
  Section 3.205 must state conspicuously that the corporation is a
  public benefit corporation governed by this subchapter.
         Sec. 21.956.  DUTIES OF DIRECTORS. (a) The board of
  directors of a public benefit corporation shall manage or direct
  the business and affairs of the corporation in a manner that
  balances:
               (1)  the pecuniary interests of the shareholders;
               (2)  the best interests of those persons materially
  affected by the corporation's conduct; and
               (3)  the specific public benefit or benefits specified
  in the corporation's certificate of formation.
         (b)  A director of a public benefit corporation does not, by
  virtue of the public benefit provisions included in the certificate
  of formation or by virtue of the purpose and requirements of
  Sections 21.953(a) and (b), owe any duty to any person because of:
               (1)  any interest the person has in the public benefit
  or benefits specified in the certificate of formation; or
               (2)  any interest materially affected by the
  corporation's conduct.
         (c)  With respect to a decision implicating the balance
  requirement of Subsection (a), a director of a public benefit
  corporation is considered to have satisfied the director's duties
  to shareholders and the corporation if the director's decision is
  both informed and disinterested and is not a decision that no person
  of ordinary, sound judgment would approve.
         (d)  The certificate of formation of a public benefit
  corporation may include a provision that any disinterested failure
  of a director to satisfy the requirements of this section does not,
  for the purposes of the applicable provisions of this code,
  constitute an act or omission not in good faith or a breach of the
  duty of loyalty.
         Sec. 21.957.  PERIODIC STATEMENTS. (a) A public benefit
  corporation shall include in each notice of a meeting of
  shareholders a statement to the effect that the corporation is a
  public benefit corporation governed by this subchapter.
         (b)  A public benefit corporation, at least biennially,
  shall provide to the corporation's shareholders a statement
  pertaining to the corporation's promotion of the public benefit or
  benefits specified in the corporation's certificate of formation
  and promotion of the best interests of those materially affected by
  the corporation's conduct. The statement must include:
               (1)  the objectives the board of directors has
  established to promote the public benefit or benefits and
  interests;
               (2)  the standards the board of directors has adopted
  to measure the corporation's progress in promoting the public
  benefit or benefits and interests;
               (3)  objective factual information based on those
  standards regarding the corporation's success in meeting the
  objectives for promoting the public benefit or benefits and
  interests; and
               (4)  an assessment of the corporation's success in
  meeting the objectives and promoting the public benefit or benefits
  and interests.
         (c)  The certificate of formation or bylaws of a public
  benefit corporation may require that the corporation:
               (1)  provide the statement required by Subsection (b)
  more frequently than biennially; or
               (2)  make the statement required by Subsection (b)
  available to the public.
         Sec. 21.958.  DERIVATIVE SUITS. (a)  In this section,
  "shareholder" means:
               (1)  shareholders of a public benefit corporation that
  own, individually or collectively, at least two percent of the
  corporation's outstanding shares; or
               (2)  shareholders of a public benefit corporation the
  shares of which are listed on a national securities exchange that
  own at least the lesser of:
                     (A)  the percentage of shares described by
  Subdivision (1); or
                     (B)  shares whose market value is at least $2
  million.
         (b)  A shareholder of a public benefit corporation may
  maintain a derivative action on behalf of the corporation to
  enforce compliance with the requirements of Section 21.956(a).
         Sec. 21.959.  NO EFFECT ON OTHER CORPORATIONS. Except as
  provided by Section 21.954, this subchapter does not apply to a
  corporation that is not a public benefit corporation.
         SECTION 5.  This Act takes effect September 1, 2017.