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Signed Into CA Law: AB 361 (Benefit Corporations) & SB 201 (Flexible Purpose Corporations)

California Capitol Building ceilingIn reviewing the last batch of the nearly 600 bills that he had to process, California Governor Jerry Brown signed into law both social innovation bills—just in time for the midnight deadline on October 10th, 2011.Both AB 361 (benefit corporations) and SB 201 (flexible purpose corporations) which create new legal structures for social enterprise are now officially California law.You can read the key points of each bill here.Read the official legislative update from the Governor’s office here.

California is #6

The passage of the benefit corporation legislation makes California the 6th state to recognize a new form of corporation that is for-profit and committed to creating a positive impact on society and the environment. California joins Maryland, Vermont, Hawaii, Virginia, and New Jersey in the benefit corporation club.

A Look Back

If you have been following the benefit corporation legislation movement on the B Corporation public policy page, here on Innov8Social, or on any number of sites following the developments, you may have been awaiting the midnight decision.

You can catch up on the progress of AB 361 in California:

  
A Look Ahead
   
Non-urgent bills such AB 361 and SB 201 signed into law will become effective January 1st, 2012. Until then, social entrepreneurs interested in becoming among the first benefit corporations in California, can use the time to decide which legal structure is the best fit, and become prepared to meet the various requirements.
Attorney Donald Simon shares some tips on how a company can get ready for benefit corporation certification or re-certification as a benefit corporation in these two videos:

Attorney Donald Simon Defines 3 Terms Related to AB 361 (Benefit Corporations) [VIDEO]

Attorney Donald Simon’s Q & A on California Benefit Corporation Legislation [VIDEO]

 

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Attorney Donald Simon Defines 3 Terms Related to AB 361 (Benefit Corporations) [VIDEO]

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:

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Attorney Donald Simon’s Q & A on California Benefit Corporation Legislation [VIDEO]

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

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California Senate Judiciary Votes AB 361 Forward, 4-0

Now it’s the Judiciary Committee’s Turn

california state capitolAs you may recall, last week AB 361— the California bill that would create a new corporate form called a benefit corporation— was presented by sponsor Assemblymember Jared Huffman and witnesses (including certified B corporations, attorneys, and investors) at the California State Senate Committee on Banking and Financial Institutions. It marched forward from there with a resounding vote of 5-1.

The next stop was the Senate Judiciary Committee which heard arguments for AB 361 on July 5th 2011.

How did it go?

With many many more bills on the docket this time around, Senator Noreen Evans— Moderator for the Judiciary Committee– warned early on that argument and testimony for all bills would be kept brief.  When AB 361 was presented, Assemblymember Huffman once again introduced the legislation and outlined his three-prong argument for the bill.

Attorney Donald Simon testified to the legal structure and rationale behind AB 361, emphasizing the reaching effect it could have by creating a unique reason for entrepreneurs and founders to opt to incorporate in California instead of other states, in order to be able to be registered as a benefit corporation. He also provided counter-arguments to opposing concerns—emphasizing the complementary relationship that b corporations have already demonstrated to have with non-profit sector.

A number of certified B corporations and supporters (Innov8Social included!) also provided ‘me too’ testimony.

Opposition to AB 361 also voiced their concerns that California may not yet be ready for a new corporate form for socially responsible business and/or availability of other hybrid structures and potential opposition from California non-profit organizations.


How did the Judiciary Committee vote?

In a vote of 3-0 the bill was dubbed ‘on call’ — to be forwarded to Senate Committee members who were absent at the time of the vote.

By the following day, the final vote was in: 4-0 with one abstaining vote. AB 361 moves forward.

Is there video of the hearing?

Calchannel.com streams State Assembly and Committee hearing sessions online. You can find the Judiciary Committee testimony here: http://www.calchannel.com/channel/viewvideo/2810.

Keep a lookout around 1:30 for the beginning of AB 361 argument.


What’s next for AB 361?

Next is the Senate Appropriations Committee in August after the summer recess, followed by the Floor of the State Senate, then back to Assembly, and then to Governor Brown’s desk. That is the path that AB 361 will have to successfully follow to become California Law.

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