Illinois enacts demographic reporting for public companies

Illinois House Bill 3394, approved by Gov. J.B. Pritzker on Aug. 27, 2019, amends the Business Corporation Act of 1983 (BCA) Section 14.05, addressing annual report requirements, and includes the addition of Section 8.12, Female and Minority Directors, requiring additional demographic reporting requirements for domestic and foreign corporations with principal executive offices located in Illinois.    

Corporations with principal executive offices in Illinois are required to report demographic information to the Secretary of State on its Annual Report as soon as possible and no later than Jan. 1, 2021. To the extent a foreign or domestic corporation which has its principal executive office in Illinois, is publicly held and has outstanding shares listed on a major U.S. stock exchange, the corporation is required to complete new Form BCA 8.12 which requires the corporation to provide the following information:

1. whether the corporation is a publicly held domestic or foreign corporation with its principal executive office located in Illinois;
2. where the corporation is a publicly held domestic or foreign corporation with its principal executive office located in Illinois, data on specific qualifications, skills and experience that the corporation considers for its board of directors, nominees for the board of directors and executive officers;
3. where the corporation is a publicly held domestic or foreign corporation with its principal executive offices located in Illinois, the self-identified gender of each member of its board of directors;
4. where the corporation is a publicly held domestic or foreign corporation with its principal executive office located in Illinois, whether each member of the corporation’s board of directors self-identifies as a minority person and, if so, which race or ethnicity to which the member belongs;
5. where the corporation is a publicly held domestic or foreign corporation with its principal executive offices located in Illinois, a description of the corporation’s process for identifying and evaluating nominees for the board of directors, including whether, and if so, how demographic diversity is considered;
6. where the corporation is a publicly held domestic or foreign corporation with its principal executive office located in Illinois, a description of the corporation’s process for identifying and appointing executive officers, including whether, and if so, how demographic diversity is considered; and
7. where the corporation is a publicly held domestic or foreign corporation with its principal executive office located in Illinois, a description of the corporation’s policies and practices for promoting diversity, equity and inclusion among its board of directors and executive officers.

Section BCA 8.12 also requires the Illinois Secretary of State to make the above information public and available to the University of Illinois for analysis to develop strategies promoting diversity among corporate executives. The University of Illinois will establish a rating system assessing the representation of women and minorities on corporate boards of directors. Among other items, the rating system will consider compliance with the new demographic reporting obligations, the corporation’s policies and practices for encouraging diversity in recruitment, board membership and executive appointments, and the demographic diversity of board seats and executive positions. Revised Form BCA 14.05, Annual Report, and the new Form BCA 8.12, Female and Minority Directors Report, are now available.

Businesses that may be subject to these new rules should speak to their counsel with questions on proper secretary of state filings and should reach out to their tax advisers to discuss other recent nuances and amendments to Illinois tax law.