STAND. COM. REP. NO. 161

 

Honolulu, Hawaii

                  

 

RE:    S.B. No. 298

       S.D. 1

 

 

 

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

 

Sir:

 

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 298 entitled:

 

"A BILL FOR AN ACT RELATING TO BUSINESS REGULATION,"

 

begs leave to report as follows:

 

     The purpose and intent of this measure is to authorize the formation of sustainable benefit corporations, a form of private business corporation that offers entrepreneurs and investors the option to build and invest in enterprises that operate in a socially and environmentally responsible manner.

 

Your Committee finds that under general principles of corporate organization, the directors of a corporation have a singular and enforceable duty to maximize shareholder profits.  Your Committee further finds that this duty may prevent entrepreneurs and investors from achieving their own goals of establishing and investing in private enterprises that serve social or environmental purposes in addition to pursuing profits.  Your Committee finds that several other states have responded to market demand for opportunities to pursue good corporate citizenship by authorizing the formation of corporate entities that may be governed according to principles other than pure profit motive.  Your Committee notes that the corporate structure authorized by this measure is a voluntary designation that preserves the private nature of corporations that choose it and relies on the governing structure of the corporation itself for enforcement.  Finally, your Committee finds that authorizing the formation of sustainable benefit corporations in this State will help to diversify Hawaii's economy by attracting entrepreneurship and investment in innovative businesses and emerging industries.

 

     Your Committee has amended this measure by deleting its contents and replacing them with provisions to authorize the establishment of sustainable business corporations within this State, specifically:

 

     (1)  A statement of the purpose of the measure and related legislative findings;

 

     (2)  Definitions of relevant terms;

 

     (3)  Requirements for the formation of a sustainable business corporation, including the applicability of the organizational requirements for domestic corporations found in chapter 414, Hawaii Revised Statutes;

 

     (4)  Procedures for an existing domestic corporation to elect to become a sustainable business corporation;

 

     (5)  Procedures for the termination of a corporation's status as a sustainable business corporation;

 

     (6)  Requirements for the corporate purpose of a sustainable business corporation;

 

     (7)  Requirements for standards of conduct for the board of directors of a sustainable business corporation, including requirements to consider the effects of actions of the sustainable business corporation on shareholders, employees, beneficiaries, the community, the environment, and the sustainable business corporation;

 

     (8)  Requirements for the election and duties of a benefit director charged with overseeing internal corporate enforcement of the requirements imposed on a sustainable business corporation;

 

     (9)  Requirements for standards of conduct for officers of a sustainable business corporation including requirements to consider the effects of actions of the sustainable business corporation on shareholders, employees, beneficiaries, the community, the environment, and the sustainable business corporation;

 

     (10) Authorization for the appointment by a sustainable business corporation of a benefit officer with the duty to manage the activities of the sustainable business corporation in creating the general or specific public benefit provided in the bylaws or by the board of directors of the sustainable business corporation;

 

     (11) Authorization of a private right of action by the sustainable business corporation or its shareholders or directors, persons with an equity interest, and other persons authorized by its articles or bylaws to enforce the provisions of this measure;

 

     (12) Requirements for an annual report to shareholders, the Department of Commerce and Consumer Affairs, and the public; and

 

     (13) Authorization for the Department of Commerce and Consumer Affairs to adopt rules pursuant to chapter 91, Hawaii Revised Statutes, for the administration of this measure.

 

     Prior to amending this measure, a proposed S.D. 1 was prepared and made available for public review.

 

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 298, as amended herein, and recommends that it be recommitted to the Committee on Commerce and Consumer Protection, in the form attached hereto as S.B. No. 298, S.D. 1, for further consideration.

 

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,

 

 

 

____________________________

ROSALYN H. BAKER, Chair