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Meet Attorney Donald Simon

Attorney Donald Simon explains a few terms related to California’s benefit corporation legislation (AB 361) in the interview below. Simon is a Partner at Wendel Rosen Black & Dean LLP and co-author of AB 361–legislation that would create a new for-profit corporate form in the state for companies wishing to earn a profit while also creating a positive impact on the environment and community.

Watch the Interview

(quick tip, turn the sound all the way up.)

Terms to Know

You can see Innov8Social’s previous interview with Donald Simon–to learn the general features of AB 361 and why social entrepreneurs may choose it as a business structure.  In this interview, he addresses constituency statutes and how they relate to the benefit corporation legislation.
He also explains what the third-party standard is, and the role it will play in assessing a company’s impact on the community and environment. Finally, Simon lays out the supermajority shareholder requirement of AB 361.Simon also offers a few tips and suggestions to social entrepreneurs who are considering incorporating or reincorporating as a benefit corporation.

Shift in Business As UsualWhether you think of the move towards a greener economy as quick turn to consider more than a singular bottom line, or you view it as part of the gradual evolution of the way business is done–you will have noted a shift in business as usual.Former President Bill Clinton recently discussed the changing economy, and interconnected role of private and public sectors in an interview about jobs and the green economy.

And notably, California is not first on the scene of the benefit corporation party. In fact the first state to pass benefit corporation legislation was Maryland, followed by Vermont, Virginia, New Jersey, and Hawaii. Similar bills are proceeding through the legislative process in New York, Pennsylvania, North Carolina, Colorado, and of course, California.

The Update on AB 361

  
Despite the interview’s consideration of terms that will come into effect ‘once’ the bill is passed, in reality, there is no guarantee that AB 361 will become new law. It is currently awaiting Governor Jerry Brown’s review. You can read a full update on AB 361 here, and also learn how to support these efforts to enact legislation supporting social entrepreneurship.Related Posts:

If you have been following the news of AB 361–the CA bill that would create a new corporate form for social enterprise called a benefit corporation.  You may be wondering about the status of the bill.In Review

As a quick summary, AB 361 passed in a vote in the California Assembly on Monday August 29th 2011. It has been forwarded to Governor Jerry Brown’s Office for final approval.

The Update

After speaking with the office of Assemblymember Jared Huffman, sponsor of AB 361, the update is that Governor has until October 9, 2011 to make a final decision on the bill.

What You Can Do

Here are a few things that can make you a savvy social enterprise citizen and supporter.

1. Become better informed about AB 361. You can take a spin through a few of the recent posts on AB 361, visit Assemblymember Huffman’s page, or read about the policy and similar legislation that has passed in other states on the B Lab website.

2. Learn about other social enterprise initiatives in CA. Learn about the key features of AB 361 and SB 201—which would create flexible purpose corporations in California, and which is also at the Governor’s desk. The 2 bills are not mutually exclusive—i.e. they both can be passed.

3. Sign the Care2 petition in support of AB 361. You can read more about the petition and use the widget here. It is a quick and easy way to show your support.

4. Write a letter to Governor Brown’s office. With nearly a month of time on the clock, there is ample opportunity to get involved and write in your support for corporate structures for social enterprise. You can read a sample letter here.

If you have even skimmed the contents of this blog you likely know about AB 361, the California legislation that would create a new corporate form for social enterprise called a benefit corporation.

California map iconYou may not have heard of SB 201, however. It is a different bill that also proposes a new corporate form for social enterprise in California, called a flexible purpose corporation.
Note: it is great coincidence that there are 2 social enterprise bills heading to the Governor’s desk at the same time. Additionally, they are not mutually exclusive—i.e. both bills can be passed into law. In fact, arguably, the fact that there are 2 different social enterprise bills seem do twice as much to suggest that the time is ripe for legislation recognizing social enterprise in California.
Key Features of AB 361 (Benefit Corporations)
Read the full text of AB 361 here. Summaries of key features are numbered in bold, while text exactly or very closely mirroring the actual language of AB 361 is in italics.
1. Creates Benefit Corporations (benefit corps). This bill would authorize and regulate the formation and governance of a new form of corporate entity known as a benefit corporation. 
2. Existing corporations can become benefit corps with 2/3 shareholder vote. The bill would also permit an existing corporation to become a benefit corporation by amendment to its articles of
incorporation, as specified, adopted by at least a minimum status vote (2/3 of vote or greater if required by articles of incorporation) and would permit a corporation to become a benefit corporation through a merger, reorganization, or conversion, or domestic other business entity, as specified.
3. Benefit corps must create material positive impact on society and the environment, as determined by an independent 3rd-party standard.  The bill would provide that a benefit corporation may be formed for the purpose of creating general public benefit, defined as a material positive impact on society and the environment, taken as a whole, as assessed against a 3rd-party standard. 
       Third-party standard is a comprehensive assessment of the impact of the business developed by an entity that has no material financial relationship with the benefit corporation or any of its subsidiaries and  where: A) not more than 1/3 of members of the governing body of the entity are representatives of associations of businesses in a specific industry, businesses whose performance is assessed against the standard; and B) the entity is not materially financed by an association of business described in (A).     
       Additionally, the third-party standard must be developed by an entity  that accesses necessary and appropriate expertise to assess overall corporate social and environmental performance; and uses balanced multistakeholder approach, including a public comment period of at least 30 days to develop the standard. The following information on the 3rd party standard must be made publicly available: criteria considered when measuring the overall social and environmental performance.
4. Benefit corps may be formed to create a general public benefit and can also identify additional specific public benefit(s). The bill would also provide that a benefit corporation may identify one or
more specific public benefits as an additional purpose of the corporation. Examples of specific public benefit include: providing low-income/underserved individuals or communities with beneficial products/services, providing economic opportunity beyond creation of jobs, preserving the environment, improving human health, promoting arts, science, or advancement of knowledge, increasing capital to entities with a public benefit purpose, or another particular benefit to society or the environment.
5. Board members must consider multiple stakeholders (including shareholders, beneficiaries of the public benefit, the environment) when making business decisions. This bill would require directors to consider the impacts of any action or proposed action upon specified considerations, including, among others, the shareholders and employees, and of customers who are beneficiaries of the general or specific public benefit purposes, and the environment, and would allow directors to consider the impacts of those actions on, among other things, the resources, intent, and conduct of any person seeking to acquire control of the benefit corporation.
6. Certain reporting accounting and transparency formalities must be met. This bill would require the board of directors to prepare a specified statement relating to the public benefit purposes of the corporation.  The bill would require the benefit corporation to prepare an annual benefit report.
7. Duties of director/officer with regard to public benefit may only be enforced in a benefit enforcement proceeding. This bill would include provisions governing the fiduciary duty
and liability of an officer or director of a benefit corporation. The bill would provide that the duties of a director or officer, and the general, and any specific, public benefit purpose of a benefit corporation, may be enforced only in a benefit enforcement proceeding, as defined, that would be permitted to be commenced or maintained only as specified.
Additional Features:

8. Is part of a nation-wide effort to create benefit corporations in various states. As of writing this 6 states have passed benefit corporation legislation.
9. There is an option for a voluntary certification. B corporation is a voluntary certification which calls for many of the same features as a benefit corporation. A company can choose to be both/either a B corporation and a benefit corporation (if their state has passed legislation)
Key Features of SB 201 (Flexible Purpose Corporations)
Read the full text of SB 201 here. Summaries of key features are numbered in bold, while text exactly or very closely mirroring the actual language of AB 361 is in italics.
1. Creates Flexible Purpose Corporations (flexible purpose corps). This bill would enact the Corporate Flexibility Act of 2011 and would authorize and regulate the formation and operation of a new form of corporate entity known as a flexible purpose corporation.
2. Existing corps can become flexible purpose corps with 2/3 vote of shareholders. The bill would authorize existing corporations and other forms of business entities to merge into or convert into a  flexible purpose corporation upon completion of specified requirements, including approval of the transaction by a supermajority 2⁄3 vote of shareholders, or a greater vote if required in the articles, as specified.
3. Flexible purpose corps can convert to corp, non-profit, etc. The bill would also authorize a flexible purpose corporation to convert into a nonprofit corporation, a corporation, or a domestic other business entity, upon satisfaction of equivalent conditions.
4. Can provide dissenters’ rights of appraisal for shareholders. The bill would also provide dissenters’ rights of appraisal for shareholders voting against certain transactions, as specified.
5. Must list special purpose and complete corporate formalities. The bill would specify the required and permitted contents of articles of incorporation that a flexible purpose corporation would be required to  file with the Secretary of State, including the special purposes, in addition to any other lawful purpose, that the corporation shall engage in, which may include, but are not limited to, charitable and public purpose activities that could be carried out by a nonprofit public benefit corporation.
6. Requires managers/directors to specify objectives for assessing achievement of special purpose. Certain formalities related to accounting and transparency must be met. The bill would also require management and directors to specify objectives for measuring the impact of the flexible purpose corporation’s efforts relating to its special purpose, and to include an analysis of those efforts in annual reports, together with specified financial statements, to shareholders and would require specified information to be made publicly available, as specified.
The question of whether California will create a new corporate form to recognize socially responsible business will be answered soon. The bill (AB 361) has successfully made its way to Governor Jerry Brown’s desk for final review and approval.
care2.com logoAnd now Care2.com–an online community of over 16.5 million members committed to social, environmental, and animal welfare— is giving you a quick and easy way to show your support for California’s benefit corporation bill.

Sign the Care2 Petition Below to Show Your Support for AB 361

Go to Care2 petition for CA benefit corporation: http://www.thepetitionsite.com/takeaction/993/713/047/

Or use the widget below

window.Care2Widgets.add({rssPath:”http://www.thepetitionsite.com/xml/petitions/993/713/047/feed.swf”, adSize:”180×250″, publisherID:”1249″, borderColor: “#000000”, buttonColor: “#1aaca6″, grabbed:”0”});

Other Ways to Get Involved with California’s Benefit Corporation Bill

1. Send an email or letter of support to Governor Brown.  Read more on where to send  here

2. Keep up with the latest news on AB 361. Stay tuned to news from B Lab blog, or on any of the websites mentioned above, and right here on Innov8Social.

3.  Read the Official Fact sheet on AB 361.  Take a look at the official AB 361 fact sheet released by Assemblymember Huffman’s office. It contains information on the benefit corporation legislation, its background, requirements, as well as a partial list of supporters and opposition.

4. Get plugged in to the LinkedIn conversations on  AB 361. There have been a number of discussions started on LinkedIn regarding California’s benefit corporation legislation. Take a look here and here and share your thoughts. 

In a vote of 57-17*, AB 361—California bill that would create a new corporate form called benefit corporation—passed its concurrence vote in CA Assembly today.

It is now on the way to Governor Brown’s desk where it will be for 12 days or less for his review and signature.
This is a key time to express support for AB 361.  AB 361 support letters, calls, op-ed pieces, blogs, tweets, personal meetings, emails and faxes can be directed to Brian Putler, Deputy Legislative Secretary, Fax: 916-558-3177.
You can catch up on the progress of AB 361 as well as read a fact sheet about the bill through links on this recent post:

Read more about today’s vote in this press release from Assemblymember Huffman’s office.

AB 361 (Benefit Corporation) Passes CA Assembly (News Release)
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*Note: These numbers have been updated from the when the post was originally posted (50-14) to reflect the final official vote count.

This just in…with a vote of 23-7 AB 361–California legislation that would create a new corporate form called a benefit corporation– successfully passed through the California State Senate today. It is now bound for the State Assembly for a concurrence vote. With a majority vote in Assembly, it will proceed to Governor Jerry Brown for final approval and to be signed into law.There is still time to show your support for AB 361. Letters of support from your business or company can be sent to Governor Brown’s Office (see Governor Brown’s contact information), with a copy sent to the bill’s sponsor Assemblymember Jared Huffman (see Assemblymember Huffman’s Sacramento office contact information in the bottom left margin)If you are catching up on the benefit corporation legislation in California, here are a few posts that will walk you through what it’s all about and the journey thus far:The Story of AB 361 (Benefit Corporation) As Told Through Blog Posts:

Note: This post has been edited to update the final Senate Floor vote count on 8/22/11 (which was 23 Ayes, 7 Noes, 10 non-votes). The bill needed 21 votes to pass. 
Here is a recent fact Sheet prepared by Assemblymember Jared Huffman‘s office outlining AB 361—-California’s “benefit corporation” bill. Read below to learn key points about the bill.

Fact Sheet AB 361 (Benefit Corporations)
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To continue the conversation, you can contact your California state senator to support or comment on the bill.  Also, you can read more about the journey of AB 361 in this post that recaps the progress of California’s benefit corporation legislation.

California State CapitolIf you have been following the journey and progress of AB 361— California’s bill that would create a new corporate form for social entrepreneurship called a benefit corporation— from idea to law (see here for a rundown of recent posts), you may be wondering where AB 361 stands right now. And, if there is anything you can do to support this social innovation legislation.Good news, we have updates! And, there are a few simple ways to show your support and cast your ‘vote’ for policies designed for social innovation.

Nod by Senate Appropriations

As California Assemblymember Jared Huffman (the bill’s sponsor) noted in this brief interview taken in July 2011, AB 361 was awaiting final vote from the State Judiciary Committee and, on approval would  head to the State Senate Appropriations Committee.

AB 361 did pass State Judiciary and, most recently, was referred forward by the CA Senate Appropriations committee (as per CA Senate Rule 28.8) since the bill will not have a significant fiscal impact on the state budget.

Up Next: Senate Floor

As early as next week the California State Senate will review the benefit corporation bill in its second reading and will vote on it after a third reading.

Then: Back to State Assembly for Concurrence Vote

Once AB 361 passes in State Senate it will be sent over to the California State Assembly for a final vote, called a concurrence vote.

Finally: to the Governor’s Desk

Passing in the State Assembly, AB 361’s final stop will be Governor Jerry Brown’s desk for final review and signature.

Cast your “Vote” for AB 361

If you are a state resident, you can contact your California state senator and express your support for AB 361 and other legislation that reflects the changing paradigm of business—with the new emphasis on social entrepreneurship. You can mention that how entrepreneurs and consumers in California and specifically your district want options that enable corporations to incorporate not only to generate profit but to have a net positive impact on society.

You can read more about California’s benefit corporation legislation in this Fact Sheet for AB 361 released by Assemblymember Huffman’s office.

How do you get from idea to state law?

In following the journey of California’s AB 361 and the number of other bills across various states that would create (or have created) a new corporate form called a benefit corporation—learning the impetus for the legislation is often as interesting as

photo: votesmart.org

photo: votesmart.org

understanding the process.

And the story of California’s AB 361 is particularly interesting. You can watch California State Assemblymember for the 6th Assembly District Jared Huffman talk about the crowdsourcing origin of AB 361 and other key points of the bill below.

Assemblymember Huffman is the sponsor for AB 361, which was recently voted through the California State Senate Committee on Banking and Financial Institutions and also successfully passed through the State Judiciary Committee.

California Benefit Corporation Law, From a Legal Lens

How can new entrepreneurs, founders, social enterprises be ready for benefit corporation legislation? Why might new businesses opt to incorporate as a benefit corporation? What makes benefit corporation compelling—from a legal standpoint?

Meet Donald Simon, Attorney and Co-Author of AB 361

These are a few of the questions we asked Donald Simon, Attorney and Partner at Wendel Rosen Black & Dean and Co-Chair of the Legal Working Group. Simon is an environmental activist-turned attorney who has remained steadfast in his passion for conservation causes —having founded two 2 environmental non-profit organizations. He has been a lead attorney in drafting and advocating for AB 361.

We caught up with him after the California State Senate Judiciary Committee hearing on California’s benefit corporation legislation, AB 361.

Watch the Interview