By: Hinojosa, et al. (Senate Sponsor - Estes) H.B. No. 3488          (In the Senate - Received from the House May 8, 2017;   May 10, 2017, read first time and referred to Committee on Natural   Resources & Economic Development; May 18, 2017, reported favorably   by the following vote:  Yeas 8, Nays 2, 1 present not voting;   May 18, 2017, sent to printer.)Click here to see the committee vote     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.     * * * * *