85R9121 CLG-D     By: Hinojosa H.B. No. 3488       A BILL TO BE ENTITLED   AN ACT   relating to authorizing the formation of 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 amending Subsection (d) and adding Subsection (e) to   read as follows:          (d)  Notwithstanding Section 2.008 and subject to Section   21.954, a for-profit corporation may include one or more social   purposes in addition to the purpose or purposes required to be   stated in the corporation's certificate of formation by Section   3.005(a)(3).  The corporation may also include in the certificate   of formation a provision that the board of directors and officers of   the corporation shall consider any social purpose specified in the   certificate of formation in discharging the duties of directors or   officers under this code or otherwise.          (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 become a   public benefit corporation under Subchapter S, Chapter 21, in the   manner provided by this subsection and that subchapter. The   certificate of formation of a public benefit corporation must:                (1)  specify one or more specific public benefits, as   defined by Section 21.952, to be promoted by the corporation; and                (2)  state in its heading that the corporation is a   public benefit corporation.          SECTION 2.  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 corporation may elect to become a public benefit   corporation as provided by Section 3.007(e) that is governed by   this subchapter.          (b)  If a corporation elects to become 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 in this chapter, 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, including   effects of an artistic, charitable, cultural, economic,   educational, environmental, literary, medical, religious,   scientific, or technological nature.                (2)  "Public benefit corporation" means a for-profit   corporation that is formed under Section 3.007(e) and the other   applicable provisions of Chapter 3 and is subject to this   subchapter.                (3)  "Public benefit provisions" means the provisions   of a certificate of formation contained in the document as   specified 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 must contain   the words "public benefit corporation," the abbreviation "P.B.C.,"   or the designation "PBC," which is considered to satisfy the   applicable requirements of Chapter 5.          Sec. 21.954.  CERTAIN AMENDMENTS AND MERGERS; VOTER APPROVAL   REQUIRED. (a) Notwithstanding any other provision of this   chapter, a corporation that is not a public benefit corporation may   not, without the approval of 90 percent of the owners of outstanding   shares of each class of shares of the corporation of which there are   outstanding shares, whether voting or nonvoting:                (1)  amend the corporation's certificate of formation   to include a specific public benefit; or                (2)  merge or consolidate with or into another entity   if, as a result of the merger or consolidation, 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.          (b)  This section does not apply:                (1)  until the corporation has received payment for any   of the corporation's capital stock; or                (2)  with respect to a nonstock corporation, until the   corporation has members.          (c)  Any shareholder of a corporation that is not a public   benefit corporation is entitled to an appraisal of the fair value of   the shareholder's shares of stock by a court, if the shareholder:                (1)  holds shares of the corporation immediately before   the effective date of:                      (A)  an amendment to the corporation's   certificate of formation to include a specific public benefit   authorized by Section 3.007(e); or                      (B)  a merger or consolidation that would result   in the conversion of the corporation's shares into or exchange of   the corporation's shares for the right to receive shares or other   equity interests in a domestic or foreign public benefit   corporation or similar entity; and                (2)  has not:                      (A)  voted in favor of an amendment, merger, or   consolidation described by Subdivision (1); or                      (B)  given written consent to the action under the   applicable provisions of this code.          (d)  Notwithstanding any other provision of this chapter, a   corporation that is a public benefit corporation may not, without   the approval of two-thirds of the owners of outstanding shares of   each class of the stock of the corporation of which there are   outstanding shares, whether voting or nonvoting:                (1)  amend the corporation's certificate of formation   to delete or amend a provision described by Section 3.007(e)(1) or   21.957(c); or                (2)  merge or consolidate with or into another entity   if, as a result of the merger or consolidation, 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 corporation:                      (A)  that is not a public benefit corporation or   similar entity; and                      (B)  the certificate of formation, or similar   governing document of which does not contain identical provisions   to the provisions containing the public benefit or benefits that   are specified in the certificate of formation under Section   3.007(e) or imposing requirements under Section 21.957(c).          (e)  Notwithstanding any other provision of this section, a   nonprofit nonstock corporation may not be a constituent corporation   to any merger or consolidation governed by this section.          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 formed under 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 formed under Section 3.007(e) and is   governed by this subchapter and the other applicable provisions of   this code.          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 specified in the   certificate of formation as provided by Section 3.007(e) 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   fiduciary duties to shareholders and the corporation if the   director's decision is both informed and disinterested and a   decision that a 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 AND THIRD-PARTY   CERTIFICATION. (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;                (2)  make the statement required by Subsection (b)   available to the public; or                (3)  use a third-party standard in connection with or   attain a periodic third-party certification addressing the   corporation's promotion of the public benefit or benefits specified   in the certificate of formation or the best interests of those   persons materially affected by the corporation's conduct.          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 the lesser of:                      (A)  the percentage of shares described by   Subdivision (1); or                      (B)  shares whose market value is at least   $2,000,000.          (b)  A shareholder of a public benefit corporation may bring   a derivative action 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 3.  This Act takes effect September 1, 2017.