House Committee on Economic and Business Development (05/08/2012)

Final
STAFF SUMMARY OF MEETING

HOUSE COMMITTEE ON ECONOMIC AND BUSINESS DEVELOPMENT

Date:	05/08/2012	ATTENDANCE

Time:	12:44 PM to 01:58 PM	Balmer	*
		Holbert	X
Place:	HCR 0107	Miklosi	X
		Priola	*
This Meeting was called to order by		Singer	X
	Representative Liston	Soper	X
		Swerdfeger	X
This Report was prepared by		Szabo	X
	Dave DeNovellis	Tyler	X
		Williams A.	X
		Wilson	X
		Swalm	X
		Liston	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
SB12-182		Referred to Appropriations

12:45 PM -- Senate Bill 12-182

Representative Liston, chair, called the meeting to order.

Representative Massey, prime sponsor, presented Senate Bill 12-182, concerning benefit corporations. The bill creates the "Invest in Colorado Act" and establishes the requirements for a corporation to be created as, or elect to become, a benefit corporation. A benefit corporation must identify its corporate purpose as promoting a specific public benefit such as improving human health, preserving the environment, or providing low-income individuals with beneficial products or services. In addition, a benefit corporation must consider how corporate decisions affect its employees, the community, and environment. The social and environmental performance of a benefit corporation must be measured using third-party standards and reported to shareholders and the Secretary of State.

When a benefit corporation is formed as a new business, it must state that it is a benefit corporation in its articles of incorporation. An existing business can elect to become a benefit corporation by amending its articles of incorporation. A shareholder is entitled to dissent and obtain payment of the fair market value of the shareholder's shares in the event of a corporation merger, conversion, or election to become or cease to be a benefit corporation. If a benefit corporation is also a charitable organization and intends to solicit contributions other than the offer or sale of a security of the benefit corporation, it must comply with the obligations of the Colorado Charitable Solicitations Act (CCSA). Further, the offer or sale of a security of a benefit corporation is not a solicitation for purposes of the CCSA if it complies with the Colorado Securities Act.

Representative Massey responded to questions from Representative Balmer regarding what the bill includes and excludes as a public benefit. He stated that the list was meant to be as inclusive as possible and that nothing in the bill precludes other benefits that are not on the list. Representative Massey said that he is open to expanding the public benefits as Representative Balmer sees fit. Representative Wilson read a part of the bill that he believes is a catch-all that gives "public benefit" a broad definition.

The following people testified:

12:52 PM -- Scott Gessler, Colorado Secretary of State, testified against the bill. He stated it will cost $53,000 to implement. Mr. Gessler gave examples of states that have passed similar legislation and the number of benefit corporations that have registered. He stated that because it is used infrequently, fees will be between $5,000-$10,000. Mr. Gessler said that his second concern is fraud. He said bill creates situation rife with potential for fraud that companies can mix private profit and charitable work. He said he is also concerned about third-party certification and he believes the bill outsources critical government functions to a third party to decide who gets government money. Mr. Gessler stated that he strongly opposes bill. He responded to questions from Representative Swalm and said that he is unaware of any cases of fraud in other states and that there are only about 40 registered benefit corporations nationwide.

01:05 PM

Mr. Gessler continued to respond to questions from the committee. He stated that benefit corporations would not necessarily be subject to statutes that other types of entities must follow. Mr. Gessler said he was also unsure how the federal Internal Revenue Service (IRS) would regulate benefit corporations.

01:09 PM -- John Moye, representing Colorado Bar Association (CBA), testified against the bill. He stated that he is in favor of corporations that provide public benefit and there are current laws that support that. Mr. Moye stated that the bill is confusing and inconsistent with other corporate statutes. He stated that the CBA would not recommend clients apply to become a benefit corporation. Mr. Moye said that the CBA would be happy to work on a bill that creates benefit corporations that is more suitable than this one. He passed out a handout addressing the CBA's position on the bill (Attachment A).

01:15 PM -- Auden Schendler, representing Aspen Skiing Company, testified in support of the bill. He stated that it is difficult to retain employees and customers in the skiing industry and that the bill would create another tool to make Colorado corporations more attractive to employees and customers who are socially conscious. Mr. Schendler responded to Representative Balmer and said that currently, there is no way for a Colorado company to be certified as a public benefit company.

01:25 PM

Mr. Schendler continued to respond to questions from the committee. Representatives Priola and Balmer stated that they were worried that the people would start choosing what benefits are good and what benefits are bad. Representative Priola said it was hypothetically possible that snowboarders could decide that skiing is not a public benefit. Representative Balmer stated that he was worried that the third party certification could be used to declare that football was not a public benefit.

01:27 PM -- Seth Henry, representing himself as a business lawyer in Colorado, testified in support of the bill. He stated that with respect to Mr. Gessler's comments, similar legislation regarding benefit corporations in other states is only a few months old, not years, so the sample size is expectedly small. Mr. Henry said that there is nothing in the bill that prohibits the Secretary of State from investigating corporations suspected of fraud and from applying current statutes regarding corporate fraud. He stated that the accounting industry shows the precedent for government and industry using third-party standards. Mr. Henry responded to Representative Balmer's concerns and stated that the bill requires objective and measurable criteria be used to make a standard that is independent and transparent and he gave some examples of standards for benefit corporations that currently exist.

01:40 PM

Mr. Henry continued to respond to questions from the committee. He responded to questions from Representative Liston and said that he has many years of experience with corporate law.

01:43 PM

Representative Massey concluded his presentation on Senate Bill 12-182. The committee members continued to discuss their views on the bill.


BILL:	SB12-182
TIME:	01:57:25 PM
MOVED:	Miklosi
MOTION:	Refer Senate Bill 12-182 to the Committee on Appropriations. The motion passed on a vote of 11-2.
SECONDED:	Williams A.
		VOTE
	Balmer	No
	Holbert	Yes
	Miklosi	Yes
	Priola	Yes
	Singer	Yes
	Soper	Yes
	Swerdfeger	Yes
	Szabo	Yes
	Tyler	Yes
	Williams A.	Yes
	Wilson	Yes
	Swalm	Yes
	Liston	No
Final YES: 11 NO: 2 EXC: 0 ABS: 0 FINAL ACTION: PASS

01:58 PM

The committee adjourned.