Legislature(2017 - 2018)BELTZ 105 (TSBldg)
01/30/2018 01:00 PM LABOR & COMMERCE
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HB 124-BENEFIT CORPORATIONS 1:12:03 PM CHAIR COSTELLO announced the consideration of HB 124. [CSHB 124(FIN) was before the committee.] 1:12:22 PM REPRESENTATIVE SAM KITO III, Alaska State Legislature, Juneau, Alaska, sponsor of HB 124, stated that the purpose of the legislation is to modify Alaska's corporation structure to allow a corporation to add a beneficial component to its business. This allows owners and boards to take actions that positively impact their communities and business without fear of violating their fiduciary responsibility to shareholders. 1:15:10 PM CATLYN ELLIS, Staff, Representative Sam Kito III, Alaska State Legislature, Juneau, Alaska, explained that benefit corporations work towards two goals. They have the fiduciary responsibility to achieve the best profits for their shareholders while they incorporate public benefits and community improvement into their day-to-day business practices. A benefit corporation is protected by its legal framework and is taxed the same as other corporations. The business develops its own articles of incorporation and is held accountable through biannual reports to shareholders, the state, and the public. Failure to produce these reports could result in the Department of Commerce, Community and Economic Development (DCCED) dissolving the corporation. MS. ELLIS reported that 31 states have a similar designation for benefit corporations. She noted that a few Alaskan businesses have gone through the process of becoming certified through the international benefit corporation structure. This would work in tandem and provide statewide legal protection. 1:18:49 PM CHAIR COSTELLO asked if a business could form solely as a benefit corporation. MS. ELLIS answered yes, and an existing corporation could vote to convert to a benefit corporation SENATOR GARDNER asked 1) the genesis of the bill and if a business could form as a benefit corporation if the state doesn't participate by licensure, and 2) if a benefit corporation is subject to penalty if it fails to meet its beneficial goal but does meet its fiduciary responsibility to shareholders. REPRESENTATIVE KITO explained that the bill was originally requested by Alaskan businesses because state law prohibits a corporation from using the beneficial component without violating its fiduciary responsibility to shareholders. A benefit corporation must identify its beneficial use in the articles of incorporation and biannually report on its beneficial and fiduciary responsibility. The department will review the reports and he imagined the corporation would have the flexibility to scale up or down its beneficial use. MS. ELLIS cited Patagonia as an example of a beneficial corporation; the bylaws direct the corporation to deliver products that don't impact the community, but it isn't specific. She confirmed that Alaska businesses could form as a beneficial corporation, but they wouldn't have legal protection if shareholders said the corporation failed to meet its fiduciary responsibilities. CHAIR COSTELLO noted the individuals available to answer questions. 1:24:28 PM SENATOR MEYER asked for an example of an Alaska business that has formed as a beneficial corporation. MS. ELLIS said Arctic Solar Ventures in Anchorage is one of three businesses that have gone through the international certification process. SENATOR MEYER asked if the social benefit would be the solar panels. MS. ELLIS replied they listed environmental and social benefits in the bylaws. SENATOR MEYER asked how social benefit is defined and who makes the determination. MS. ELLIS replied the corporation makes the determination in its bylaws. SENATOR MICCICHE commented that citing Patagonia as an example isn't a good lead-off since it opposes many of the important industries in Alaska. He acknowledged the bottom-line benefit of the legislation was that the corporation identifies itself as a socially responsible entity. 1:26:22 PM CHAIR COSTELLO opened public testimony on HB 124 and closed it after ascertaining that no one wished to testify. 1:26:57 PM At ease 1:27:15 PM CHAIR COSTELLO reconvened the meeting and again opened public testimony on HB 124. Finding none, she closed it. SENATOR GARDNER pointed out that the supporting documents include a letter from a coffee company that talks about the social value of empowering indigenous farmers and helping them earn up to 50 percent more of the specialty coffee dollars. SENATOR MICCICHE reviewed the $22,500 DCCED fiscal note that does not have a negative impact to the state. He paraphrased the last paragraph of the analysis. "Corporation filing fees are General Fund/Program Receipts fund source 1005 GF/Prgm (DGF). Corporation filing fees are set in regulation per AS 10 and 32, and revenue in excess of authorized budgeted expenses reverts to the State of Alaska general fund." 1:29:39 PM SENATOR MICCICHE moved to report HB 124 from committee with individual recommendations and attached fiscal note(s). 1:29:52 PM CHAIR COSTELLO announced that without objection, CSHB 124(FIN) moved from the Senate Labor and Commerce Standing Committee.