HB 161 — Divestment From Companies That Boycott Israel.

GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 2017 H 21 HOUSE BILL 161 Committee Substitute Favorable 3/22/17 Short Title:

Representatives Ross, Szoka, Hardister, and W.

Richardson (Primary Sponsors).

For a complete list of sponsors, refer to the North Carolina General Assembly web site.

Pensions and Retirement February 22, 2017 A BILL TO BE ENTITLED AN ACT REQUIRING STATE DIVESTMENT FROM, AND PROHIBITING STATE AGENCIES FROM CONTRACTING WITH, COMPANIES THAT BOYCOTT ISRAEL.

and Whereas, North Carolina seeks to act to implement Congress's announced policy of "examining a company's promotion or compliance with unsanctioned boycotts, divestment from, or sanctions against Israel as part of its consideration in awarding grants and contracts and supports the divestment of State assets from companies that support or promote actions to boycott, divest from, or sanction Israel";

– Engaging in refusals to deal, terminating business activities, or taking actions that are intended to penalize, inflict economic harm, or otherwise limit commercial relations specifically with Israel, *H161-v-1* General Assembly Of North Carolina Session 2017 or persons or entities doing business in Israel or in Israeli-controlled territories.

This term does not apply to decisions made for ordinary business purposespurposes. or for actions with an economic impact of less than fifty million dollars ($50,000,000) in a 12-month period.

*H161-v-2* General Assembly Of North Carolina Session 2017 (2) Company.

– Any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all whollywholly-owned owned subsidiaries, majority-owned subsidiaries, parent companies, or affiliates of those entities or business associations.

(3) Investment.Direct holdings.

– ThisAll termpublicly hastraded securities of a company that are held directly in an actively managed account or fund in which the sameNorth meaningCarolina asRetirement G.S.System or State Treasurer owns all shares or interests.

147-86.57(3).(4) Indirect holdings.

(4)– RestrictedAll company.securities of a company that are held in an account or fund, such as a mutual fund, managed by one or more persons not employed by the State, in which North Carolina Retirement Systems or State Treasurer owns shares or interests together with other investors not subject to the provisions of this Article or that are held in an index fund.

(5) Restricted company.

(5)(6) State agency.

– Within 120 days of adoption of the policy, the State Treasurer shall develop and make publiclypublically available a list of companies it determines to be engaged in a boycott of Israel.

In the development of this list, the State Treasurer shall use any other state lists of restricted companies pursuant to similar laws and any federal informationsanctions orlists, guidance on companies that boycott Israel and any other credible information provided by nonprofit organizations, research firms, and governmental entities, and generally publicly available information.

The State Treasurer shall make every effort to avoid erroneously including a company on the list.

The notice shall specify that thecompany, company may be removed from the list if the company ceases its engagement in a boycott of Israel.Israel, may be removed from the list.

If a company had been engaged in a boycott of Israel but hasceases ceasedto theengage in that boycott, it must submit a written certification to the State Treasurer that the company will not reengage in a boycott of Israel for the duration of any Page 2 House Bill 161-First Edition General Assembly Of North Carolina Session 2017 business with the State.

– Upon completion of the initial list of restricted companies created pursuant to subdivision (1) of this subsection, the State Treasurer shall identify any restricted companies in which the Page 2 House Bill 161-Second Edition General Assembly Of North Carolina Session 2017 North Carolina Retirement Systems owns direct holdings and indirect holdings.

This updated list shall be made publiclypublically available and any updates shall be distributed to the North Carolina Retirement Systems.

(4) InvestmentsDirect holdings prohibited.

– Neither the North Carolina Retirement Systems nor the State Treasurer may investmake fundsdirect withinvestments ain company that is identified on a list created pursuant to subdivision (1) of this section as a company engaging in restricted investmentcompany. activities.

(5)Neither Existingthe investments.North Carolina Retirement Systems nor the State Treasurer may acquire securities of restricted companies as part of direct holdings.

–(5) AnyExisting existingdirect investmentholdings. with a company that is identified on a list created pursuant to subdivision (1) of this section as a company engaging in restricted activities must be divested within 180 days of the adoption of the policy.

(b)– NothingThe inNorth theCarolina policyRetirement orSystems inand thisthe ArticleState Treasurer shall requiresell, theredeem, Northdivest, Carolinaor Retirementwithdraw Systemsall ordirect theholdings Stateof Treasurerrestricted tocompany takeand actionshall unlessinstruct itall isinvestment determinedadvisors byto thesell, Stateredeem, Treasurer,divest, inor goodwithdraw faith,all thatdirect theholdings actionof isrestricted consistentcompanies, withwithin the90 fiduciarydays responsibilitiesafter ofa thecompany Retirementis Systemsplaced andon the State Treasurer.Treasurer's list of restricted companies.

(6) Indirect holdings permitted.

– The prohibitions under subdivision (3) of this subsection shall not apply to the North Carolina Retirement Systems' or the State Treasurer's indirect holdings or private market funds.

The State Treasurer shall submit a written request to the manager of each its investment funds.

The request shall identify restricted companies and request that the investment fund consider removing the investments in the restricted companies from the fund.

Written requests required under this subdivision must only be made once to each investment fund.

(b) With respect to the actions taken in compliance with subsection (a) of this section, including all good-faith determinations of restricted companies, the North Carolina Retirement Systems and the State Treasurer are exempt from any conflicting statutory or common law obligations, including any fiduciary duties and any obligations with respect to choice of asset managers, investment funds, or investments for the North Carolina Retirement Systems portfolio.

(b) Any contract entered into with a company that is identified as a restricted company atto the time of contract is void ab initio.

(c) UponExisting receivingcontracts informationwith thatrestricted acompanies companyshall thatbe wasallowed notto identifiedexpire asin aaccordance restrictedwith company at the timeterms of contract has later been identified as a restricted company, the Statecontract. agency shall review the information and offer the company an opportunity to respond.

If the company fails to demonstrate that the company should not have been identified as a restricted company within 90 days after notification by the State agency, then the State agency shall take action as may be appropriate and provided for by law, rule, or contract.

(d) Contracts in existence on October 1, 2017, with restricted companies shall be allowed to expire in accordance with the terms of the contract.

(a) G.S.

(b) If a company fails to meet the certification requirements under G.S.