A.R.S. tit. 10 ch. 22 — Arizona Revised Statutes Title 10 Chapter 22 — Benefit Corporations

A.R.S. § 10-2401 10-2401 - Application and effect of chapter 10-2401. Application and effect of chapter A. This chapter is applicable to all benefit corporations. B. The existence of a provision of this chapter does not of itself create an implication that a contrary or different rule of law is applicable to a business corporation that is not a benefit corporation. This chapter does not affect a statute or rule of law that is applicable to a business corporation that is not a benefit corporation. C. Except as otherwise provided in this chapter, chapters 1, 2, 3, 4, 5, 6, 7, 8, 10, 11, 12, 13, 14, 15, 16 and 17 of this title are generally applicable to all benefit corporations. The specific provisions of this chapter control over the general provisions of chapters 1 through 17 of this title. D. A benefit corporation may be subject simultaneously to this chapter and chapter 18 or 20 of this title. In that event, the provisions of this chapter control over chapter 18 or 20. E. A provision of the articles of incorporation or bylaws of a benefit corporation may not limit, be inconsistent with or supersede a provision of this chapter. F. The enumeration in this chapter of powers and interests of a benefit corporation does not imply that the powers and interests do not exist in or may not be considered by any other type of corporation, and unless provided otherwise in the articles of incorporation or bylaws or a resolution of the board of directors, any corporation formed under this title has the powers of a benefit corporation under this chapter and a director of any corporation formed under this title may consider any interests that may be considered by a director of a benefit corporation under this chapter in determining what is in the best interests of the corporation. A.R.S. § 10-2402 10-2402 - Definitions 10-2402. Definitions In this chapter, unless the context otherwise requires: 1. "Benefit corporation" means a corporation that both: (a) Has elected to become subject to this chapter. (b) The status of which as a benefit corporation has not been terminated. 2. "Benefit enforcement proceeding" means any claim or action for either of the following: (a) The failure of a benefit corporation to pursue or create general public benefit or a specific public benefit purpose set forth in its articles. (b) A violation of any obligation, duty or standard of conduct under this chapter. 3. "General public benefit" means a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard, from the business and operations of a benefit corporation. 4. "Minimum status vote" means: (a) In the case of a business corporation, in addition to any other required approval or vote, the satisfaction of the following conditions: (i) The shareholders of every class or series are entitled to vote as a separate voting group on the corporate action regardless of a limitation stated in the articles of incorporation or bylaws on the voting rights of any class or series. (ii) The corporate action is approved by vote of the shareholders of each class or series entitled to cast at least two-thirds of the votes that all shareholders of the class or series are entitled to cast on the action. (b) In the case of a domestic entity other than a business corporation, in addition to any other required approval, vote or consent, the satisfaction of the following conditions: (i) The holders of every class or series of equity interest in the entity that are entitled to receive a distribution of any kind from the entity are entitled to vote on or consent to the action regardless of any otherwise applicable limitation on the voting or consent rights of any class or series. (ii) The action is approved by vote or consent of the holders described in item (i) of this subdivision entitled to cast at least two-thirds of the votes or consents that all of those holders are entitled to cast on the action. 5. "Specific public benefit" includes: (a) Providing low-income or underserved individuals or communities with beneficial products or services. (b) Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business. (c) Protecting or restoring the environment. (d) Improving human health. (e) Promoting the arts, sciences or advancement of knowledge. (f) Increasing the flow of capital to entities with a purpose to benefit society or the environment. (g) Conferring any other particular benefit on society or the environment as specified in the benefit corporation's articles of incorporation. 6. "Subsidiary" means, in relation to a person, an entity in which the person owns beneficially or of record fifty per cent or more of the outstanding equity interests. 7. "Supermajority status vote" means: (a) For a business corporation, in addition to any other required approval or vote, the satisfaction of the following conditions: (i) The shareholders of every class or series are entitled to vote as a separate voting group on the corporate action regardless of a limitation stated in the articles of incorporation or bylaws on the voting rights of any class or series. (ii) The corporate action is approved by vote of the shareholders of each class or series entitled to cast at least three-fourths of the votes that all shareholders of the class or series are entitled to cast on the action. (b) For a domestic entity other than a business corporation, in addition to any other required approval, vote or consent, the satisfaction of the following conditions: (i) The holders of every class or series of equity interest in the entity that are entitled to receive a distribution of any kind from the entity are entitled to vote on or consent to the action regardless of any otherwise applicable limitation on the voting or consent rights of any class or series. (ii) The action is approved by vote or consent of the holders described in item (i) of this subdivision entitled to cast at least three-fourths of the votes or consents that all of those holders are entitled to cast on the action. 8. "Third-party standard" means a recognized standard for defining, reporting and assessing corporate social and environmental performance that is: (a) Comprehensive because it assesses the effect of a business and its operations on the interests listed in section 10-2431, subsection A, paragraph 1. (b) Developed by an entity that is not controlled by the benefit corporation. (c) Credible because it is developed by an entity that both: (i) Has access to necessary expertise to assess overall corporate social and environmental performance. (ii) Uses a balanced multistakeholder approach to develop the standard, including a reasonable public comment period. (d) Transparent because the following information is publicly available about the standard: (i) The criteria considered when measuring the overall social and environmental performance of a business. (ii) The relative weightings, if any, of those criteria. (e) Transparent because the following information is publicly available about the development and revision of the standard: (i) The identity of the directors, officers, material owners and governing body of the entity that developed and controls revisions to the standard. (ii) The process by which revisions to the standard and changes to the membership of the governing body are made. (iii) An accounting of the revenue and sources of financial support for the entity, with sufficient detail to disclose any relationships that could reasonably be considered to present a potential conflict of interest. A.R.S. § 10-2403 10-2403 - Incorporation of benefit corporation 10-2403. Incorporation of benefit corporation A benefit corporation shall be incorporated in accordance with chapter 2, article 1 of this title, except that its articles of incorporation must also state that it is a benefit corporation. A.R.S. § 10-2404 10-2404 - Election of benefit corporation status 10-2404. Election of benefit corporation status A. An existing business corporation may become a benefit corporation under this chapter by amending its articles of incorporation so that they contain, in addition to the requirements of section 10-202, a statement that the corporation is a benefit corporation. In order to be effective, the amendment must be adopted by at least the supermajority status vote. B. If an entity that is not a benefit corporation is a party to a merger or the acquired entity in a share exchange, and the surviving or acquired entity in the merger or share exchange is to be a benefit corporation, the plan of merger or share exchange must be adopted by at least the supermajority status vote. A.R.S. § 10-2405 10-2405 - Termination of benefit corporation status 10-2405. Termination of benefit corporation status A. A benefit 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 section 10-2403 or 10-2404 to be stated in the articles of a benefit corporation. In order to be effective, the amendment must be adopted by at least the minimum status vote. B. Any sale, lease, exchange or other disposition of all or substantially all of the assets of a benefit corporation, unless the transaction is in the usual and regular course of business, shall not be effective unless the transaction is approved by at least the minimum status vote. A.R.S. § 10-2406 10-2406 - Merger, interest exchange, conversion, domestication or division; definitions 10-2406. Merger, interest exchange, conversion, domestication or division; definitions A. A domestic benefit corporation may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapters 11 and 13 of this title and title 29, chapter 6. B. If a benefit corporation is to be created in a merger, a conversion, a domestication or a division, the formation of the corporation must otherwise comply with this chapter. C. If a merger, an interest exchange, a conversion, a domestication or a division would have the effect of terminating the status of a business corporation as a benefit corporation, the plan must be adopted by at least the minimum status vote in order to be effective. D. For the purposes of this section: 1. "Conversion" means a transaction authorized by title 29, chapter 6, article 4. 2. "Division" means a transaction authorized by title 29, chapter 6, article 6. 3. "Domestication" means a transaction authorized by title 29, chapter 6, article 5. 4. "Interest exchange" means a transaction authorized by title 29, chapter 6, article 3. 5. "Merger" means a transaction authorized by title 29, chapter 6, article 2. 6. "Plan" means a plan of merger, interest exchange, conversion, domestication or division. A.R.S. § 10-2421 10-2421 - Corporate purposes 10-2421. Corporate purposes A. A benefit corporation shall have a purpose of creating general public benefit. This purpose is in addition to its purpose under section 10-301. B. The articles of incorporation of a benefit corporation may identify one or more specific public benefits that it is the purpose of the benefit corporation to create in addition to its purposes under section 10-301 and subsection A of this section. The identification of a specific public benefit under this subsection does not limit the obligation of a benefit corporation under subsection A of this section. C. The creation of general public benefit and a specific public benefit under 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 the identification of a specific public benefit that it is the purpose of the benefit corporation to create. In order to be effective, the amendment must be adopted by at least the minimum status vote. E. A professional corporation that is a benefit corporation does not violate section 10-2211 by having the purpose to create general public benefit or a specific public benefit. A.R.S. § 10-2431 10-2431 - Standard of conduct for directors 10-2431. Standard of conduct for directors A. In discharging the duties of their respective positions 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: 1. Shall consider the effects of any action or inaction on: (a) The shareholders of the benefit corporation. (b) The employees and workforce of the benefit corporation, its subsidiaries and its suppliers. (c) The interests of customers as beneficiaries of the general public benefit or specific public benefit purposes of the benefit corporation. (d) Community and societal factors, including those of each community in which offices or facilities of the benefit corporation, its subsidiaries or its suppliers are located. (e) The local and global environment. (f) The short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by the continued independence of the benefit corporation. (g) The ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose. 2. May consider the interests referred to in section 10-2702 and other pertinent factors or the interests of any other group that they deem appropriate except that they do not have to give priority to the interests of a particular person or group referred to in 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 certain interests related to its accomplishment of its general public benefit purpose or of a specific public benefit purpose identified in its articles. B. The consideration of interests and factors in the manner required by subsection A of this section does not constitute a violation of section 10-830. C. Except as otherwise provided in this section, the standards of conduct and presumptions prescribed in chapter 8 of this title apply to directors of benefit corporations. D. Except as provided in the articles of incorporation or bylaws, a director is not personally liable for monetary damages for failure of the benefit corporation to pursue or create general public benefit or a specific public benefit. E. A director does not have a duty to a person that is a beneficiary of the general public benefit purpose or a specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary. A.R.S. § 10-2432 10-2432 - Standard of conduct for officers 10-2432. Standard of conduct for officers A. Each officer of a benefit corporation shall consider the interests and factors described in section 10-2431, subsection A, in the manner provided in that subsection, if both of the following apply: 1. The officer has discretion to act with respect to a matter. 2. It reasonably appears to the officer that the matter may have a material effect on the general public benefit or specific public benefit identified in the articles of incorporation of the benefit corporation. B. The consideration of interests and factors in the manner described in subsection A of this section does not constitute a violation of section 10-842. C. Except as otherwise provided in this section, the standards of conduct and presumptions prescribed in chapter 8 of this title apply to officers of benefit corporations. D. Except as provided in the articles of incorporation or bylaws, an officer is not personally liable for monetary damages for failure of the benefit corporation to pursue or create general public benefit or a specific public benefit. E. An officer does not have a duty to a person that is a beneficiary of the general public benefit purpose or the specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary. F. An officer who makes a business judgment in good faith fulfills the duty under this section if all of the following apply: 1. The officer is not interested in the subject of the business judgment. 2. The officer is informed with respect to the subject of the business judgment to the extent the officer reasonably believes to be appropriate under the circumstances. 3. The officer rationally believes that the business judgment is in the best interests of the benefit corporation. A.R.S. § 10-2433 10-2433 - Right of action 10-2433. Right of action A. Except in a benefit enforcement proceeding, a person may not bring an action or assert a claim against a benefit corporation or its directors or officers with respect to either of the following: 1. The failure to pursue or create general public benefit or a specific public benefit set forth in its articles of incorporation. 2. The violation of an obligation, duty or standard of conduct under this chapter. B. A benefit corporation is not liable for monetary damages under this chapter for any failure of the benefit corporation to pursue or create general public benefit or a specific public benefit. C. A benefit enforcement proceeding may be commenced or maintained only by either of the following: 1. Directly by the benefit corporation. 2. Derivatively in accordance with chapter 7, article 4 of this title by any of the following: (a) A person or group of persons that owns beneficially or of record at least two per cent of the total number of shares of all classes and series outstanding at the time of the act or omission that is the subject of the complaint. (b) A director. (c) A person or group of persons that owns beneficially or of record five per cent or more of the outstanding equity interests in an entity of which the benefit corporation is a subsidiary at the time of the act or omission that is the subject of the complaint. (d) Other persons as specified in the articles of incorporation or bylaws of the benefit corporation. D. For the purposes of this section, a person is the beneficial owner of shares or equity interests if the shares or equity interests are held in a voting trust or by a nominee on behalf of the beneficial owner. A.R.S. § 10-2441 10-2441 - Preparation of annual benefit report 10-2441. Preparation of annual benefit report A. A benefit corporation shall prepare an annual benefit report that includes all of the following: 1. A narrative description of: (a) The ways in which the benefit corporation pursued general public benefit during the year and the extent to which general public benefit was created. (b) Both: (i) The ways in which the benefit corporation pursued a specific public benefit that the articles of incorporation state is the purpose of the benefit corporation to create. (ii) The extent to which the specific public benefit was created. (c) Any circumstances that have hindered the benefit corporation in creating general public benefit or a specific public benefit. (d) The process and rationale for selecting or changing the third-party standard used to prepare the benefit report. 2. An assessment of the overall social and environmental performance of the benefit corporation against a third-party standard that is either of the following: (a) Applied consistently with any application of that standard in prior benefit reports. (b) Accompanied by an explanation of the reasons for either of the following: (i) Any inconsistent application. (ii) The change to that standard from the one used in the immediately prior report. 3. The compensation paid by the benefit corporation during the year to each director in the capacity of a director. 4. A statement of any connection between the organization that established the third-party standard, or its directors, its officers or any holder of five per cent or more of the governance interests in the organization and the benefit corporation or its directors, its officers or any holder of five per cent or more of the outstanding shares of the benefit corporation, or any other financial or governance relationship that might materially affect the credibility of the use of the third-party standard. B. Neither the benefit report nor the assessment of the performance of the benefit corporation in the benefit report required by subsection A, paragraph 2 of this section is required to be audited or certified by a third-party standards provider. A.R.S. § 10-2442 10-2442 - Availability of annual benefit report 10-2442. Availability of annual benefit report A. A benefit corporation shall send its annual benefit report to each shareholder: 1. Within one hundred twenty days following the end of the fiscal year of the benefit corporation. 2. At the same time the benefit corporation delivers any other annual report to its shareholders. B. A benefit corporation shall post all of its benefit reports on the public portion of its internet website, if any, except that the compensation paid to directors and financial or proprietary information included in the benefit reports may be omitted from the benefit reports as posted. C. If a benefit corporation does not have an internet website, the benefit corporation shall provide a copy of its most recent benefit report, without charge, to any person that requests a copy, except that the compensation paid to directors and financial or proprietary information included in the benefit report may be omitted from the copy of the benefit report provided. D. Concurrently with the delivery of the benefit report to shareholders under subsection A of this section, the benefit corporation shall deliver a copy of the benefit report to the Arizona corporation commission for filing, except that the compensation paid to directors and financial or proprietary information included in the benefit report may be omitted from the benefit report as delivered to the Arizona corporation commission.