19.0151.01000
Sixty-sixth
Legislative Assembly HOUSE BILL NO. 1466
of North Dakota
Introduced by
Representatives Mock, Keiser, Klemin, Lefor, O'Brien, Satrom
Senators Bakke, Klein, Kreun, Meyer, J. Roers, Unruh
1 A BILL for an Act to create and enact chapter 10-37 of the North Dakota Century Code, relating
2 to North Dakota public benefit corporations.
3 BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
4 SECTION 1. Chapter 10-37 of the North Dakota Century Code is created and enacted as
5 follows:
6 10-37-01. Citation.
7 This chapter may be cited as the "North Dakota Public Benefit Corporation Act."
8 10-37-02. Definitions.
9 For the purposes of this chapter, unless the context otherwise requires:
10 1. "General benefit corporation" means a public benefit corporation that elects in its
11 articles to pursue general public benefit and which may state in its articles a specific
12 public benefit purpose it elects to pursue.
13 2. "General public benefit" means a net material positive impact from the business and
14 operations of a general benefit corporation on society, the environment, and the
15 well-being of present and future generations.
16 3. "Independent" means having no material relationship with a public benefit corporation
17 or a parent, subsidiary, or other affiliate of a public benefit corporation.
18 4. "Minimum status vote" means that the shareholders shall take action by the affirmative
19 vote of the holders of at least two-thirds of all the issued and outstanding shares.
20 5. "Organization" means whether domestic or foreign, a corporation, limited liability
21 company, general partnership, limited partnership, limited liability partnership, limited
22 liability limited partnership, or any other person subject to a governing statute, but
23 excludes any:
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1 a. Nonprofit corporation, whether a domestic nonprofit corporation incorporated
2 under chapter 10-33 or a foreign nonprofit corporation incorporated in another
3 jurisdiction; or
4 b. Nonprofit limited liability company whether a domestic nonprofit limited liability
5 company organized under chapter 10-36 or a foreign nonprofit limited liability
6 company organized in another jurisdiction.
7 6. "Public benefit corporation" means a corporation formed under chapter 10-19.1:
8 a. Which has elected to become subject to this chapter; and
9 b. The status of which as a public benefit corporation has not been terminated or
10 revoked.
11 7. "Specific benefit corporation" means a public benefit corporation that states in its
12 articles a specific public benefit purpose it elects to pursue, but does not include a
13 general benefit corporation that states in its articles a specific public benefit purpose it
14 elects to pursue.
15 8. "Specific public benefit" means one or more positive impacts, or reduction of a
16 negative impact, on specified categories of individuals, entities, communities, or
17 interests, other than shareholders in their capacity as shareholders, as enumerated in
18 the articles of a public benefit corporation.
19 9. "Third-party standard" means a publicly available standard or guideline for defining,
20 reporting, and assessing the performance of a business enterprise as a social or
21 benefit corporation which is:
22 a. Promulgated by an individual or an organization; and
23 b. Independent of the public benefit corporation.
24 10-37-03. Application and effect of chapter.
25 1. This chapter applies to all public benefit corporations.
26 2. Chapter 10-19.1 applies to all public benefit corporations and all statutes and rules of
27 law that apply to a corporation formed under chapter 10-19.1 also apply to a public
28 benefit corporation. If chapter 10-19.1 conflicts with sections 10-37-01 through
29 10-37-10, sections 10-37-01 through 10-37-10 govern. This chapter does not affect a
30 statute or rule of law that applies to a corporation formed under chapter 10-19.1 which
31 is not a public benefit corporation.
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1 3. A provision of the articles, shareholder control agreement or bylaws of a public benefit
2 corporation may not limit, be inconsistent with, or supersede a provision of this
3 chapter.
4 10-37-04. Incorporation of a public benefit corporation.
5 1. A public benefit corporation must be incorporated in accordance with chapter 10-19.1,
6 and its articles must state the public benefit corporation is a:
7 a. General benefit corporation;
8 b. General benefit corporation that also elects to pursue a specific public benefit
9 purpose as stated in its articles; or
10 c. A specific benefit corporation that elects to pursue a specific public benefit
11 purpose as stated in its articles.
12 2. Other than subdivision b of subsection 1 of section 10-19.1-13, a public benefit
13 corporation name must comply with the requirements of section 10-19.1-13 and with
14 respect to:
15 a. A general benefit corporation contain the words "general benefit corporation"; and
16 b. A specific benefit corporation contain the words "specific benefit corporation".
17 10-37-05. Election of public benefit corporation status.
18 1. In accordance with the procedures stated in chapter 10-19.1 and with approval by the
19 minimum status vote, an existing corporation formed under chapter 10-19.1 may elect
20 to become a public benefit corporation under this chapter by amending its articles to
21 meet the requirements of section 10-37-04.
22 2. a. This subsection applies if:
23 (1) An organization, other than a nonprofit corporation or nonprofit limited
24 liability company, which is not a public benefit corporation is a party to a
25 merger, exchange, or conversion, or a transfer in accordance with section
26 10-19.1-96; and
27 (2) The surviving organization in the merger, the acquiring organization in an
28 exchange, the converted organization in the conversion, or the transferee is
29 to be a public benefit corporation.
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1 b. If this subsection applies, the transfer or the plan of merger, exchange, or
2 conversion must be adopted in accordance with the procedures stated in chapter
3 10-19.1 and with approval by the minimum status vote.
4 3. A shareholder of a corporation or the member of a limited liability company may
5 dissent from and obtain payment for the fair value of the shares of the shareholder or
6 the membership interests of the member pursuant to sections 10-19.1-87 and
7 10-19.1-88, or section 10-32.1-33, in the event of an election of public benefit
8 corporation status pursuant to this section.
9 10-37-06. Termination of public benefit corporation status.
10 1. In accordance with the procedures stated in chapter 10-19.1 and with approval by the
11 minimum status vote, a public benefit corporation may terminate its status as a public
12 benefit corporation and cease to be subject to this chapter by amending its articles to
13 delete the requirements of subsection 1 of section 10-37-04 and change its name to
14 remove the information required by subsection 2 of section 10-37-04.
15 2. If a merger, exchange, conversion, or transfer would have the effect of terminating the
16 status of a public benefit corporation under this chapter, the transfer or the plan of
17 merger, exchange, or conversion must be approved by the minimum status vote.
18 3. A shareholder of a public benefit corporation may dissent from and obtain payment for
19 the fair value of the shares of the shareholder pursuant to sections 10-19.1-87 and
20 10-19.1-88 in the event of a termination of public benefit corporation status pursuant to
21 this section.
22 4. A public benefit corporation that terminates its status as provided in this section may
23 not elect to become a public benefit corporation under this chapter until three years
24 have passed since the effective date of termination or revocation.
25 10-37-07. Public benefit corporation purposes.
26 1. A general benefit corporation has a purpose of pursuing general public benefit. A
27 general benefit corporation also may state in its articles one or more specific public
28 benefit purposes the general benefit corporation elects to pursue. Purposes under this
29 section are in addition to the purposes under section 10-19.1-08.
30 2. A specific benefit corporation has a purpose of pursuing one or more specific public
31 benefit purposes stated in its articles. Purposes under this subsection are in addition
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1 to the purposes under section 10-19.1-08. The election to pursue a specific public
2 benefit purpose under this subsection does not require a specific benefit corporation to
3 pursue general public benefit under subsection 1.
4 3. In accordance with the procedures stated in chapter 10-19.1 and with approval by the
5 minimum status vote, a general benefit corporation or a specific benefit corporation
6 may amend its articles to add, amend, or delete a specific public benefit purpose
7 unless the amendment would cause a termination of public benefit corporation status
8 under section 10-37-06.
9 10-37-08. Standard of conduct for directors.
10 1. In discharging the duties of the position of director of a general benefit corporation, a
11 director:
12 a. Shall consider the effects of any proposed, contemplated, or actual conduct on:
13 (1) The ability of the general benefit corporation to pursue general public
14 benefit;
15 (2) If the articles also state a specific public benefit purpose, the ability of the
16 general benefit corporation to pursue its specific public benefit; and
17 (3) The interests of the constituencies stated in subsection 6 of section
18 10-19.1-50, including the pecuniary interests of its shareholders; and
19 b. May not give regular, presumptive, or permanent priority to:
20 (1) The pecuniary interests of the shareholders; or
21 (2) Any other interest or consideration unless the articles identify the interest or
22 consideration as having priority.
23 2. In discharging the duties of the position of director of a specific benefit corporation, a
24 director:
25 a. Shall consider the effects of any proposed, contemplated, or actual conduct on:
26 (1) The pecuniary interest of its shareholders; and
27 (2) The ability of the specific benefit corporation to pursue its specific public
28 benefit purpose;
29 b. May consider the interests of the constituencies stated in subsection 6 of section
30 10-19.1-50; and
31 c. May not give regular, presumptive, or permanent priority to:
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1 (1) The pecuniary interests of the shareholders; or
2 (2) Any other interest or consideration unless the articles identify the interest or
3 consideration as having priority.
4 3. A director who performs the duties of a director stated in subsections 1 and 2 is not
5 liable by reason of being or having been a director of a public benefit corporation.
6 4. The conduct and liability of a director of a public benefit corporation is subject to
7 subsections 1, 2, 4, and 5 of section 10-19.1-50.
8 5. The articles of a public benefit corporation may include a provision that any
9 disinterested failure to satisfy subsection 1 or 2, for purposes of this section or
10 subsection 5 of section 10-19.1-50, does not constitute a breach of the duty of loyalty.
11 10-37-09. Right of action.
12 1. a. No person other than a shareholder may assert a claim under this chapter or
13 chapter 10-19.1 against a public benefit corporation, its directors, or its officers on
14 account of the failure of the director or officer of the public benefit corporation to
15 pursue or create general public benefit or a specific public benefit.
16 b. A public benefit corporation is not liable for monetary damages under this chapter
17 for any failure of the public benefit corporation to pursue or create general public
18 benefit or a specific public benefit.
19 2. In addition to the grounds for relief stated in subdivision b of subsection 1 of section
20 10-19.1-115, a court may grant relief under this chapter when:
21 a. Directors or those in control of a public benefit corporation have breached the
22 duties stated in section 10-37-08 to a substantial extent and in a sustained
23 manner; or
24 b. The public benefit corporation has for an unreasonably long period of time failed
25 to pursue:
26 (1) In the case of a general benefit corporation:
27 (a) General public benefit; or
28 (b) Any specific public benefit purpose stated in its articles; and
29 (2) In the case of a specific benefit corporation, any specific public benefit
30 purpose stated in its articles.
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1 3. a. In an action under this chapter, in addition to granting any other equitable relief
2 the court deems just and reasonable in the circumstances, the court may:
3 (1) Order the public benefit corporation to terminate its status as a public
4 benefit corporation pursuant to subsection 1 of section 10-37-06;
5 (2) Remove one or more directors from the board of directors of the public
6 benefit corporation and determine whether the vacancy will be filled:
7 (a) As provided in section 10-19.1-42; or
8 (b) By court appointment, with the appointee to serve only until a qualified
9 successor is elected by the shareholders at the next regular or special
10 meeting of the shareholders;
11 (3) Appoint a receiver of the public benefit corporation to:
12 (a) Wind up and liquidate the activities and business of the public benefit
13 corporation; or
14 (b) Carry on the business and activities of the public benefit corporation in
15 a manner consistent with this chapter.
16 b. Subdivision a does not imply any limitations on the relief available in a
17 proceeding brought under section 10-19.1-115 without reference to this chapter.
18 10-37-10. Annual report.
19 Each public benefit corporation and each foreign public benefit corporation authorized to
20 transact business in this state shall file an annual report and be subject to section 10-19.1-146.
21 Additionally, the annual report must include:
22 1. For a specific benefit corporation:
23 a. A narrative description of:
24 (1) The ways in which the corporation pursued and created the specific public
25 benefit stated in its articles or certificate of authority application;
26 (2) The extent to which that specific public benefit purpose was pursued and
27 created; and
28 (3) Any circumstances that hindered efforts to pursue or create the specific
29 public benefit.
30 b. A certification that its board of directors has reviewed and approved the report.
31 2. For a general benefit corporation:
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1 a. A certification that its board of directors has:
2 (1) Chosen the third-party standard designated pursuant to paragraph 1 of
3 subdivision b;
4 (2) Determined the organization that promulgated the third-party standard is
5 independent; and