Source: https://legislature.vermont.gov/statutes/fullchapter/11A/021
Timestamp: 2019-11-12 00:59:04
Document Index: 738572285

Matched Legal Cases: ['§ 21', '§ 1', '§ 21', '§ 1', '§ 21', '§ 1', '§ 1', '§ 21', '§ 1', '§ 21', '§ 1', '§ 21', '§ 21', '§ 21', '§ 1', '§ 21', '§ 1', '§ 1', '§ 21', '§ 1', '§ 1', '§ 21', '§ 1', '§ 1', '§ 21', '§ 1', '§ 21', '§ 1', '§ 21', '§ 1', '§ 1']

Chapter 021: BENEFIT CORPORATIONS
§ 21.01. Short title
This chapter shall be known and may be cited as the "Vermont Benefit Corporations Act." (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011.)
§ 21.02. Law applicable
(a) This chapter shall apply only to a domestic corporation meeting the definition of a benefit corporation in subdivision 21.03(a)(1) of this title. The provisions of this title other than those set forth in this chapter shall apply to a benefit corporation in the absence of a contrary or inconsistent provision in this chapter. A corporation whose status as a benefit corporation terminates shall immediately become subject to the obligations and rights of a general corporation as provided in this title.
(b) The existence of a provision of this chapter does not of itself create any implication that a contrary or different rule of law is or would be applicable to a corporation that is not a benefit corporation. This chapter does not affect any statute or rule of law as it applies to a corporation that is not a benefit corporation.
(c) A provision of the articles of incorporation or bylaws of a benefit corporation may not be inconsistent with any provision of this chapter.
(d) Terms that are defined in other chapters of this title shall have the same meaning when used in this chapter, except that in this chapter, "corporation" shall have the meaning set forth in section 1.40 of this title. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011.)
§ 21.03. Definitions
(1) "Benefit corporation" means a corporation as defined in section 1.40 of this title whose articles of incorporation include the statement "This corporation is a benefit corporation."
(2) "Benefit director" means:
(A) a director designated as a benefit director of a benefit corporation as provided in section 21.10 of this title; or
(B) a person with one or more of the powers, duties, or rights of a benefit director to the extent provided in the articles of incorporation or shareholder agreement of a close corporation pursuant to subsection 21.10(e) of this title.
(3) "Benefit officer" means the officer of a benefit corporation, if any, designated as the benefit officer as provided in section 21.12 of this title.
(4) "General public benefit" means a material positive impact on society and the environment, as measured by a third-party standard, through activities that promote some combination of specific public benefits.
(5) "Independent" means that a person has no material relationship with a benefit corporation or any of its subsidiaries (other than the relationship of serving as the benefit director or benefit officer), either directly or as an owner or manager of an entity that has a material relationship with the benefit corporation or any of its subsidiaries. A material relationship between a person and the benefit corporation or any of its subsidiaries will be conclusively presumed to exist if:
(A) the person is, or has been within the last three years, an employee of the benefit corporation or any of its subsidiaries, other than as a benefit officer;
(B) an immediate family member of the person is, or has been within the last three years, an executive officer, other than a benefit officer, of the benefit corporation or any of its subsidiaries; or
(C) the person, or an entity of which the person is a manager or in which the person owns beneficially or of record five percent or more of the equity interests, owns beneficially or of record five percent or more of the shares of the benefit corporation.
(6) "Specific public benefit" includes:
(G) the accomplishment of any other identifiable benefit for society or the environment.
(7) "Subsidiary" of a person means an entity in which the person owns beneficially or of record 50 percent or more of the equity interests.
(8) "Third-party standard" means a recognized standard for defining, reporting, and assessing corporate social and environmental performance that:
(A) is developed by a person that is independent of the benefit corporation; and
(B) is transparent because the following information about the standard is publicly available:
(iii) the identity of the persons who developed and control changes to the standard and the process by which those changes are made.
(b) For purposes of subdivisions (a)(5)(C) and (7) of this section, a percentage of ownership in an entity shall be calculated as if all outstanding rights to acquire equity interests in the entity had been exercised. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011; amended 2011, No. 146 (Adj. Sess.), § 1.)
§ 21.04. Incorporation of a benefit corporation
A benefit corporation shall be formed in accordance with sections 2.01, 2.02, 2.03, and 2.05 of this title, except that its articles of incorporation shall also contain the provision required by subdivision 21.03(a)(1) of this title to meet the definition of a benefit corporation. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011.)
§ 21.05. Election of existing corporation to become a benefit corporation
Any corporation organized under this title may become a benefit corporation by amending its articles of incorporation to add the statement required by subdivision 21.03(a)(1) of this title to meet the definition of a benefit corporation. The amendment shall be adopted and shall become effective in accordance with sections 10.01 through 10.09 of this title, except that:
(1) the notice of the meeting of shareholders that will approve the amendment shall include a statement from the board of directors of the reasons why the board is proposing the amendment and the anticipated effect on shareholders of becoming a benefit corporation; and
(2) the amendment shall be approved by the higher of:
(A) the vote required by the articles of incorporation; or
(B) two-thirds of the votes entitled to be cast by the outstanding shares of the corporation, provided that if any class of shares is entitled to vote as a group, approval shall also require the affirmative vote of the holders of at least two-thirds of the votes entitled to be cast by the outstanding shares of each voting group. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011.)
§ 21.06. Merger and share exchange
(a) A plan of merger or share exchange that if effected would terminate the benefit corporation status of a corporation shall be adopted and shall become effective in accordance with chapter 11 of this title, except that:
(1) the notice of the meeting of shareholders that will approve the plan shall include a statement from the board of directors of the reasons why the board is proposing that the surviving corporation should not be a benefit corporation and the anticipated effect on the shareholders of the surviving corporation ceasing to be a benefit corporation; and
(2) the plan shall be approved by the higher of:
(B) two-thirds of the votes entitled to be cast by the outstanding shares of the corporation, provided that if any class of shares is entitled to vote as a group, approval shall also require the affirmative vote of the holders of at least two-thirds of the votes entitled to be cast by the outstanding shares of each voting group.
(b) If a corporation that is not a benefit corporation is a party to a plan of merger or share exchange in which the surviving corporation is a benefit corporation, the plan of merger shall be adopted and shall become effective in accordance with chapter 11 of this title, except that:
(1) the notice of the meeting of shareholders that will approve the plan shall include a statement from the board of directors of the reasons why the board is proposing that the surviving corporation should become a benefit corporation and the effect on the shareholders of the surviving corporation becoming a benefit corporation; and
(2) the plan shall be approved in the case of the corporation that is not a benefit corporation by the higher of:
§ 21.07. Termination of benefit corporation status by amendment of articles of incorporation; vote required
A corporation may terminate its status as a benefit corporation and cease to be subject to this chapter by amending its articles of incorporation to delete the provision required by subdivision 21.03(a)(1) of this title to meet the definition of a benefit corporation, in addition to the provisions required by section 2.02 of this title to be stated in the articles of incorporation of a benefit corporation. The amendment shall be adopted and shall become effective in accordance with sections 10.01 through 10.09 of this title, except that:
(1) the notice of the meeting of shareholders that will approve the plan shall include a statement from the board of directors of the reasons why the board is proposing the amendment and the effect of terminating the status of the corporation as a benefit corporation; and
§ 21.08. Corporate purpose
(a) A benefit corporation shall have the purpose of creating general public benefit. This purpose is in addition to, and may be a limitation on, the purposes of the benefit corporation under subsection 3.01(a) of this title.
(b) The articles of incorporation of a benefit corporation may identify one or more specific public benefits that are the purpose of the benefit corporation to create in addition to its purposes under subsection 3.01(a) of this title and subsection (a) of this section. The adoption of a specific public benefit purpose under this subsection does not limit the obligation of a benefit corporation to create general public benefit.
(c) The creation of general and specific public benefit as provided in subsections (a) and (b) of this section is in the best interests of the benefit corporation.
(d) A benefit corporation may amend its articles of incorporation to add, amend, or delete a specific public benefit. The amendment shall be adopted and shall become effective in accordance with sections 10.01 through 10.09 of this title and shall be approved by the higher of the vote required by the articles of incorporation or by subsection (e) of this section.
(e) An amendment of the articles of incorporation of a benefit corporation to add, amend, or delete a specific public benefit in the articles of incorporation shall be adopted by a vote of at least two-thirds of the votes entitled to be cast by the outstanding shares of the corporation, provided that if any class of shares is entitled to vote as a group, approval shall also require the affirmative vote of the holders of at least two-thirds of the votes entitled to be cast by the outstanding shares of each voting group. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011.)
§ 21.09. Standard of conduct for directors
(a) Each director of a benefit corporation, in discharging his or her duties as a director, including the director's duties as a member of a committee:
(1) shall, in determining what the director reasonably believes to be in the best interests of the benefit corporation, consider the effects of any action or inaction upon:
(B) the employees and workforce of the benefit corporation and its subsidiaries and suppliers;
(C) the interests of customers to the extent they are beneficiaries of the general or specific public benefit purposes of the benefit corporation;
(D) community and societal considerations, including those of any community in which offices or facilities of the benefit corporation or its subsidiaries or suppliers are located;
(E) the local and global environment; and
(F) the long-term and short-term interests of the benefit corporation, including the possibility that those interests may be best served by the continued independence of the benefit corporation;
(2) may consider any other pertinent factors or the interests of any other group that the director determines are appropriate to consider;
(3) shall not be required to give priority to the interests of any particular person or group referred to in subdivision (1) or (2) of this subsection over the interests of any other person or group unless the benefit corporation has stated in its articles of incorporation its intention to give priority to interests related to the accomplishment of its general or specific public benefit purposes; and
(4) shall not be subject to a different or higher standard of care when an action or inaction might affect control of the benefit corporation.
(b) The consideration of interests and factors in the manner described in subsection (a) of this section shall not constitute a violation of section 8.30 of this title.
(c) A director is not liable for the failure of a benefit corporation to create general or specific public benefit.
(d) A director is not liable to the benefit corporation or any person entitled to bring a benefit enforcement proceeding under section 21.13 of this title for any action or failure to take action in his or her official capacity if the director performed the duties of his or her office in compliance with section 8.30 of this title and with this section.
(e) A director of a benefit corporation shall not have any duty to a person who is a beneficiary of the general or specific public benefit purposes of the benefit corporation arising only from the person's status as a beneficiary. If a benefit corporation has adopted a provision in its articles of incorporation authorized by subdivision 2.02(b)(4) of this title, the provision shall also apply to a failure by a director to discharge his or her duties in accordance with this chapter. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011; amended 2011, No. 146 (Adj. Sess.), § 1.)
§ 21.10. Benefit director
(a) Except as provided in subsection (e) of this section, the board of directors of a benefit corporation shall include at least one director who shall be designated a "benefit director" and shall have, in addition to all of the powers, duties, rights, and immunities of the other directors of the benefit corporation, the powers, duties, rights, and immunities provided in this section.
(b) A benefit director shall be elected and may be removed in the manner provided by subchapter 1 of chapter 8 of this title and shall be an individual who is independent of the benefit corporation. A benefit director may serve as the benefit officer at the same time as serving as a benefit director. The articles of incorporation or bylaws of a benefit corporation may prescribe additional qualifications of a benefit director not inconsistent with this subsection.
(c)(1) A benefit director shall be responsible for the preparation of the annual benefit report required under section 21.14 of this title.
(2) A benefit director may retain an independent third party to audit the annual benefit report or conduct any other assessment of the benefit corporation's social and environmental performance.
(3) A benefit director shall prepare and shall include in the annual benefit report a statement whether, in the opinion of the benefit director:
(A) the benefit corporation acted in accordance with its general public benefit purpose and any specific public benefit purpose in all material respects during the period covered by the report; and
(B) the directors and officers acted in accordance with the requirements of subsection 21.09(a) and section 21.11 of this title, respectively.
(4) If in the opinion of the benefit director the benefit corporation failed to act in accordance with its general and any specific public benefit purposes or if its directors or officers failed to act in accordance with the requirements of subsection 21.09(a) and section 21.11 of this title, respectively, then the statement of the benefit director shall include a description of the ways in which the benefit corporation or its directors or officers failed to so act.
(d) The acts and omissions of an individual in the capacity of a benefit director shall constitute for all purposes acts and omissions of that individual in the capacity of a director of the benefit corporation.
(e) If the articles of incorporation of a benefit corporation that is a close corporation dispense with or restrict the discretion or powers of the board of directors pursuant to sections 20.08 and 20.09 of this title, then the articles of incorporation or the shareholder agreement shall specify the persons who shall exercise the powers, duties, and rights of the board of directors and the benefit director, as provided in this chapter. A person who exercises one or more of the powers, duties, or rights of a benefit director pursuant to this subsection:
(1) except in the case of a corporation with annual gross revenue of $5 million or more in each of the two years preceding his or her appointment, is not required to be independent of the benefit corporation;
(2) shall have the immunities of a benefit director;
(3) may share the powers, duties, and rights of a benefit director with one or more other persons; and
(4) shall not be subject to the procedures for election or removal of directors provided in subchapter 1 of chapter 8 of this title unless the person is also a director of the benefit corporation or the articles of incorporation or shareholder agreement makes those procedures applicable.
(f) Regardless of whether the articles of incorporation of a benefit corporation include a provision eliminating or limiting the personal liability of directors authorized by subdivision 2.02(b)(4) of this title, a benefit director shall not be personally liable for any act or omission taken in his or her official capacity as a benefit director unless the act or omission is not in good faith, involves intentional misconduct or a knowing violation of law, or involves a transaction from which the director directly or indirectly derived an improper personal benefit. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011; amended 2011, No. 146 (Adj. Sess.), § 1.)
§ 21.11. Standard of conduct for officers
(a) An officer of a benefit corporation shall consider the interests and factors described in subsection 21.09(a) of this title in the manner provided in that subsection when:
(A) the creation of general or specific public benefit by the benefit corporation; or
(B) any of the interests or factors referred to in subdivision 21.09(a)(1) of this title.
(b) The consideration of interests and factors in the manner described in subsection (a) of this section shall not constitute a violation of the fiduciary duty of an officer to the benefit corporation.
(c) An officer is not liable to the benefit corporation or any person entitled to bring a benefit enforcement proceeding under section 21.13 of this title for any action or failure to take action in his or her official capacity if the officer performed the duties of the position in compliance with section 8.41 of this title and with this section.
(d) An officer is not liable for the failure of a benefit corporation to create general or specific public benefit.
(e) An officer of a benefit corporation shall not have any duty to a person that is a beneficiary of the general or specific public benefit purposes of the benefit corporation arising only from the person's status as a beneficiary.
(f) The articles of incorporation of a benefit corporation may set forth a provision eliminating or limiting the liability of an officer to the benefit corporation or its shareholders for money damages for any action taken, or any failure to take any action, solely as an officer, based on a failure to discharge his or her own duties in accordance with this chapter, except liability for:
(1) the amount of a financial benefit received by an officer to which the officer is not entitled;
(2) an intentional or reckless infliction of harm on the benefit corporation or its shareholders; or
(3) an intentional or reckless criminal act. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011; amended 2011, No. 146 (Adj. Sess.), § 1.)
§ 21.12. Benefit officer
A benefit corporation may have an officer designated the "benefit officer" who shall have the authority and shall perform the duties in the management of the benefit corporation relating to the purpose of the corporation to create public benefit as set forth with respect to the office in the bylaws or, to the extent not inconsistent with the bylaws, prescribed with respect to the office by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties of the office. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011.)
§ 21.13. Right of action
(a) The duties of directors and officers under this chapter and the general and specific public benefit purposes of a benefit corporation may be enforced only in a benefit enforcement proceeding, and no person may bring such an action or claim against a benefit corporation or its directors or officers except as provided in this section.
(1) a shareholder that would otherwise be entitled to commence or maintain a proceeding in the right of the benefit corporation on any basis;
(3) a person or group of persons that owns beneficially or of record 10 percent or more of the equity interests in an entity of which the benefit corporation is a subsidiary; or
(4) such other persons as may be specified in the articles of incorporation of the benefit corporation.
(c) As used in this chapter, "benefit enforcement proceeding" means a claim or action against a director or officer for:
(1) failure to pursue the general public benefit purpose of the benefit corporation or any specific public benefit purpose set forth in its articles of incorporation; or
(2) violation of a duty or standard of conduct under this chapter. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011.)
§ 21.14. Annual benefit report
(a) A benefit corporation shall deliver to each shareholder, in a format approved by the directors, an annual benefit report, which shall include:
(1)(A) a statement of the specific goals or outcomes identified by the benefit corporation for creating general public benefit and any specific public benefit for the period of the benefit report;
(B) a description of the actions taken by the benefit corporation to attain the identified goals or outcomes and the extent to which the goals or outcomes were attained;
(C) a description of any circumstances that hindered the attainment of the identified goals or outcomes and the creation of general public benefit or any specific public benefit; and
(D) specific actions the benefit corporation can take to improve its social and environmental performance and attain the goals or outcomes identified for creating general public benefit and any specific public benefit;
(2) an assessment of the social and environmental performance of the benefit corporation prepared in accordance with a third-party standard that has been applied consistently with prior benefit reports or accompanied by an explanation of the reasons for any inconsistent application;
(3) a statement of specific goals or outcomes identified by the benefit corporation and approved by the shareholders for creating general public benefit and any specific public benefit for the period of the next benefit report;
(4) the name of each benefit director and the benefit officer, if any, and the address to which correspondence to each of them may be directed;
(5) the compensation paid by the benefit corporation during the year to each director in that capacity;
(6) the name of each person that owns beneficially or of record five percent or more of the shares of the benefit corporation; and
(7) the statement of a benefit director described in subsection 21.10(c) of this title.
(b) A benefit corporation shall annually deliver the benefit report 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.
(c) After reasonable opportunity for review, the shareholders of the benefit corporation shall approve or reject the annual benefit report by majority vote at the annual meeting of shareholders or at a special meeting held for that purpose.
(d) A benefit corporation shall post its most recent benefit report endorsed by its shareholders on the public portion of its website, if any, except that the compensation paid to directors and any financial or proprietary information included in the benefit report may be omitted from the benefit report as posted. If a benefit corporation does not have a public website, it shall deliver a copy of its most recent benefit report on demand and without charge to any person who requests a copy.
(e) If a benefit corporation is a close corporation that has dispensed with or restricted the discretion or powers of the board of directors, the annual benefit report shall describe the person or persons who exercise the powers, duties, and rights and have the immunities of the board of directors and the benefit director. (Added 2009, No. 113 (Adj. Sess.), § 1, eff. July 1, 2011; amended 2011, No. 146 (Adj. Sess.), § 1.)