As Introduced

127th General Assembly Regular Session 2007-2008

H. B. No. 374

Representative Coley 

Cosponsors: Representatives McGregor, J., Wagoner, Huffman, Combs, Stebelton 

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A BILL

To amend sections 1701.04, 1701.55, 1701.58, 1701.69,

1

and 1701.76 of the Revised Code to allow the

2

original articles of incorporation to eliminate

3

cumulative voting in the election of directors, to

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remove restrictions for certain corporations

5

regarding the elimination of cumulative voting,

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and to exclude from the existing procedures for

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the sale of all or substantially all of the assets

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of a corporation the sale of those assets to the

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corporation's wholly owned subsidiaries.

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BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 1701.04, 1701.55, 1701.58, 1701.69,	11
and 1701.76 of the Revised Code be amended to read as follows:	12

Sec. 1701.04.  (A) Any person, singly or jointly with others,	13
and without regard to residence, domicile, or state of	14
incorporation, may form a corporation by signing and filing with	15
the secretary of state articles of incorporation that shall set	16
forth all of the following:	17

(1) The name of the corporation, which shall be in compliance	18
with division (A) of section 1701.05 of the Revised Code;	19

(2) The place in this state where the principal office of the	20
corporation is to be located;	21

(3) The authorized number and the par value per share of	22
shares with par value, and the authorized number of shares without	23
par value, except that the articles of a banking, safe deposit,	24
trust, or insurance corporation shall not authorize shares without	25
par value; the express terms, if any, of the shares; and, if the	26
shares are classified, the designation of each class, the	27
authorized number and par value per share, if any, of the shares	28
of each class, and the express terms of the shares of each class;	29

(4) If the corporation is to have an initial stated capital,	30
the amount of that stated capital.	31

(B) The articles also may set forth any of the following:

32

(1) The names of the individuals who are to serve as initial	33
directors;	34

(2) The purpose or purposes for which the corporation is	35
formed, but in the absence of a statement of the purpose or	36
purposes or except as expressly set forth in such statement, the	37
purpose for which any corporation is formed is to engage in any	38
lawful act or activity for which a corporation may be formed under	39
this chapter, and all lawful acts and activities of the	40
corporation are within the purposes of the corporation;	41

(3) Any lawful provision for the purpose of defining,	42
limiting, or regulating the exercise of the authority of the	43
corporation, the incorporators, the directors, the officers, the	44
shareholders, or the holders of any class of shares;	45

(4) Any provision that may be set forth in the regulations;

46

(5) A provision specifying the period of existence of the	47
corporation if it is to be otherwise than perpetual;	48

(6) Subject to division (C) of this section, anyA provision	49
eliminating the right of every shareholder to vote cumulatively in	50
the election of directors;	51

(7) Any additional provision permitted by this chapter.

52

(C) Original articles of a corporation may not set forth any	53
provision that eliminates the rights of shareholders under this	54
chapter to cumulate the voting power that they possess in the	55
election of directors.	56

(D) A written appointment of a statutory agent for the	57
purposes set forth in section 1701.07 of the Revised Code shall be	58
filed with the articles, unless the corporation belongs to one of	59
the classes mentioned in division (O) of that section.	60

(E)(D) The legal existence of the corporation begins upon the	61
filing of the articles or on a later date specified in the	62
articles that is not more than ninety days after filing, and,	63
unless the articles otherwise provide, its period of existence	64
shall be perpetual.	65

Sec. 1701.55.  (A) At a meeting of shareholders at which	66
directors are to be elected, only persons nominated as candidates	67
shall be eligible for election as directors.	68

(B) Unless the articles set forth alternative election	69
standards, at all elections of directors, the candidates receiving	70
the greatest number of votes shall be elected.	71

(C) Unless the articles are amended as permitted by division	72
(B)(10) of section 1701.69 of the Revised Code to provide that no	73
shareholder of a corporation may cumulate the shareholder's voting	74
power, each shareholder has the right to vote cumulatively if	75
notice in writing is given by any shareholder to the president, a	76
vice-president, or the secretary of a corporation, not less than	77
forty-eight hours before the time fixed for holding a meeting of	78
the shareholders for the purpose of electing directors if notice	79
of the meeting has been given at least ten days before the	80
meeting, and, if the ten days' notice has not been given, not less	81
than twenty-four hours before suchthe meeting time, that the	82
shareholder desires that the voting at such election shall be	83
cumulative, provided that an announcement of the giving of such	84
that notice is made upon the convening of the meeting by the	85
chairperson or secretary or by or on behalf of the shareholder	86
giving suchthe notice.	87

(D) Unless the articles are amended as permitted by division	88
(B)(10) of section 1701.69 of the Revised Code to provide that no	89
shareholder of a corporation may cumulate the shareholder's voting	90
power, each shareholder has the right, subject to the notice	91
requirements contained in division (C) of this section, to	92
cumulate the voting power the shareholder possesses and to give	93
one candidate as many votes as the number of directors to be	94
elected multiplied by the number of the shareholder's votes	95
equals, or to distribute the shareholder's votes on the same	96
principle among two or more candidates, as the shareholder sees	97
fit.	98

Sec. 1701.58.  (A) The office of a director becomes vacant if	99
the director dies or resigns. A resignation shall take effect	100
immediately or at such other time as the director may specify.	101

(B) The directors may remove any director and thereby create	102
a vacancy in the board:	103

(1) If by order of court the director has been found to be of	104
unsound mind, or if the director is adjudicated a bankrupt;	105

(2) If within sixty days, or within any other period of time	106
as is prescribed in the articles or the regulations, from the date	107
of the director's election the director does not qualify by	108
accepting in writing the director's election to that office or by	109
acting at a meeting of the directors, and by acquiring the	110
qualifications specified in the articles or the regulations; or	111
if, for such period as is prescribed in the articles or the	112
regulations, the director ceases to hold the required	113
qualifications.	114

(C) Except as otherwise provided in this division, if the	115
shareholders have athe right to vote cumulatively in the election	116
of directors, then, unless the articles, the regulations adopted	117
by the shareholders, or the regulations adopted by the directors	118
pursuant to division (A)(1) of section 1701.10 of the Revised Code	119
expressly provide that no director may be removed from office or	120
that removal of directors requires a greater vote than that	121
specified in this division, all the directors, all the directors	122
of a particular class, or any individual director may be removed	123
from office, without assigning any cause, by the vote of the	124
holders of a majority of the voting power entitling them to elect	125
directors in place of those to be removed, except that, unless all	126
the directors, or all the directors of a particular class, are	127
removed, no individual director shall be removed if the votes of a	128
sufficient number of shares are cast against the director's	129
removal that, if cumulatively voted at an election of all the	130
directors, or all the directors of a particular class, as the case	131
may be, would be sufficient to elect at least one director. In the	132
case of an issuing public corporation whose directors are	133
classified pursuant to section 1701.57 of the Revised Code, the	134
shareholders may effect a removal under this division only for	135
cause.	136

(D) If the shareholders do not have the right to vote	137
cumulatively as a result of an amendment to the articles permitted	138
by division (B)(10) of section 1701.69 of the Revised Codein the	139
election of directors, then, unless the articles, the regulations	140
adopted by the shareholders, or the regulations adopted by the	141
directors pursuant to division (A)(1) of section 1701.10 of the	142
Revised Code expressly provide that no director may be removed	143
from office or that removal of directors requires a greater vote	144
than that specified in this division, all the directors, all the	145
directors of a particular class, or any individual director may be	146
removed from office, without assigning any cause, by the vote of	147
the holders of a majority of the voting power entitling them to	148
elect directors in place of those to be removed; except that in	149
the case of an issuing public corporation whose directors are	150
classified pursuant to section 1701.57 of the Revised Code, the	151
shareholders may effect that removal only for cause.	152

(E) In case of any removal pursuant to division (C) or (D) of	153
this section, a new director may be elected at the same meeting	154
for the unexpired term of each director removed. Failure to elect	155
a director to fill the unexpired term of any director removed is	156
deemed to create a vacancy in the board.	157

(F) Unless the articles or the regulations otherwise provide,	158
the remaining directors, though less than a majority of the whole	159
authorized number of directors, may, by the vote of a majority of	160
their number, fill any vacancy in the board for the unexpired	161
term. Under this section, a vacancy exists if the shareholders	162
increase the authorized number of directors but fail at the	163
meeting at which such increase is authorized, or an adjournment of	164
that meeting, to elect the additional directors provided for, or	165
if the shareholders fail at any time to elect the whole authorized	166
number of directors.	167

Sec. 1701.69.  (A) The articles may be amended from time to	168
time in any respect if the articles as amended set forth all such	169
provisions as are required in, and, except for amendmentsan	170
amendment to the articles as described in divisionsdivision	171
(B)(10) and (11) of this section, only such provisions as may	172
properly be in, original articles filed at the time of adopting	173
the amendment, and, if a change in issued shares is to be made, or	174
if as the result of any amendment the stated capital of any class	175
of shares is to be created, increased, reduced, or eliminated,	176
then such provisions, not inconsistent with section 1701.30 of the	177
Revised Code, as are necessary to effect such change, or to effect	178
such creation, increase, reduction, or elimination of stated	179
capital.	180

(B) Without limiting the generality of the authority to amend	181
the articles, the articles may be amended to do any of the	182
following:	183

(1) Change the name of the corporation;

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(2) Change the place in this state where its principal office	185
is to be located;	186

(3) Change, enlarge, or diminish its purpose or purposes;

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(4) Increase or decrease the authorized number of shares of	188
any class;	189

(5) Authorize shares of a new class or classes;

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(6) Increase or decrease the par value of issued or unissued	191
shares with par value;	192

(7) Change issued or unissued shares of any class, whether	193
with or without par value, into the same or a different number of	194
shares of any class with or without par value, theretofore or then	195
authorized;	196

(8) Provide that, as a result of an amendment described in	197
division (B)(6), (7), or (11) of this section, the stated capital	198
of any class of shares shall be created, increased, reduced, or	199
eliminated, consistent with section 1701.30 of the Revised Code,	200
except that, in the case of any amendment to change the	201
corporation into a nonprofit corporation, the stated capital of	202
the corporation may be reduced or eliminated;	203

(9) Change any of the express terms of issued or unissued	204
shares of any class or series, which change may include the	205
discharge, adjustment, or elimination of rights to accrued	206
undeclared cumulative dividends or distributions on the shares of	207
such class or series;	208

(10) Eliminate the right of every shareholder to vote	209
cumulatively in the election of directors or to delete a provision	210
that eliminates that right, except that, if a corporation is	211
formed after the effective date of this amendment or if a	212
corporation that exists on the effective date of this amendment	213
does not have issued and outstanding shares that are listed on a	214
national securities exchange or are regularly quoted in an	215
over-the-counter market by one or more members of a national or	216
affiliated securities association, the articles may be amended to	217
eliminate the right of every shareholder to vote cumulatively in	218
the election of directors only upon compliance with both of the	219
following:	220

(a) Except as otherwise provided in this division in	221
connection with surviving corporations in mergers and new	222
corporations resulting from consolidations, the shareholder action	223
on the amendment to the articles shall not occur earlier than	224
ninety days after the effective date of this amendment or ninety	225
days after the date that the corporation was formed, whichever	226
date is later;	227

(b) A notice shall have been sent to the shareholders by	228
mail, overnight delivery service, or any other means of	229
communication authorized by the shareholder to whom the notice is	230
sent that states, in solid capital letters, that an effect of the	231
amendment to the articles will be to do both of the following:	232

(i) To permit a majority of a quorum of the voting power in	233
the election or removal of directors to elect or remove every	234
director;	235

(ii) To preclude a minority of a quorum of the voting power	236
in the election or removal of directors from electing or	237
preventing the removal of any director.	238

In the case of a surviving corporation as a result of a	239
merger or of a new corporation resulting from a consolidation, if	240
immediately prior to the merger or consolidation at least one of	241
the constituent corporations had issued and outstanding shares	242
listed on a national securities exchange or regularly quoted in an	243
over-the-counter market by one or more members of a national or	244
affiliated securities association, then the ninety-day limitation	245
prescribed in division (B)(10)(a) of this section does not apply	246
and the agreement of merger or consolidation, as adopted pursuant	247
to section 1701.78 or 1701.80 of the Revised Code, may eliminate,	248
subject to division (B)(10)(b) of this section, the right of every	249
shareholder to vote cumulatively in the election of directors. An	250
agreement of merger or consolidation that is so adopted and that	251
eliminates the right of every shareholder to vote cumulatively in	252
the election of directors shall be considered an amendment	253
permitted by this division.;	254

(11) Change a corporation into a nonprofit corporation;

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(12) Change any provision of the articles or add any	256
provision that may properly be included in the articles.	257

Sec. 1701.76.  (A)(1) Provided the provisions of Chapter	258
1704. of the Revised Code do not prevent the transaction from	259
being effected, a lease, sale, exchange, transfer, or other	260
disposition of all, or substantially all, of the assets, with or	261
without the good will, of a corporation, if not made in the usual	262
and regular course of its business, may be made upon the terms and	263
conditions and for the consideration, that may consist, in whole	264
or in part, of money or other property of any description,	265
including shares or other securities or promissory obligations of	266
any other corporation, domestic or foreign, that may be authorized	267
as follows:	268

(a) By the directors, either before or after authorization by	269
the shareholders as required in this section; and	270

(b) At a meeting of the shareholders held for that purpose,	271
by the affirmative vote of the holders of shares entitling them to	272
exercise two-thirds of the voting power of the corporation on the	273
proposal, or, if the articles so provide or permit, by the	274
affirmative vote of a greater or lesser proportion, but not less	275
than a majority, of the voting power, and by the affirmative vote	276
of the holders of shares of any particular class that is required	277
by the articles.	278

(2) At the shareholder meeting described in division	279
(A)(1)(b) of this section or at any subsequent shareholder	280
meeting, shareholders, by the same vote that is required to	281
authorize the lease, sale, exchange, transfer, or other	282
disposition of all, or substantially all, of the assets, with or	283
without the good will, of the corporation, may grant authority to	284
the directors to establish or amend any of the terms and	285
conditions of the transaction, except that the shareholders shall	286
not authorize the directors to do any of the following:	287

(a) Alter or change the amount or kind of shares, securities,	288
money, property, or rights to be received in exchange for the	289
assets;	290

(b) Alter or change to any material extent the amount or kind	291
of liabilities to be assumed in exchange for the assets;	292

(c) Alter or change any other terms and conditions of the	293
transaction if any of the alterations or changes, alone or in the	294
aggregate, would materially adversely affect the shareholders or	295
the corporation.	296

(3) Notice of the meeting of the shareholders described in	297
division (A)(1)(b) of this section shall be given to all	298
shareholders whether or not entitled to vote at the meeting and	299
shall be accompanied by a copy or summary of the terms of the	300
transaction.	301

(B) The corporation by its directors may abandon the	302
transaction under this section, subject to the contract rights of	303
other persons, if the power of abandonment is conferred upon the	304
directors either by the terms of the transaction or by the same	305
vote of shareholders and at the same meeting of shareholders as	306
that referred to in division (A)(1)(b) of this section or at any	307
subsequent meeting.	308

(C) Dissenting holders of shares of any class, whether or not	309
entitled to vote, shall be entitled to relief under section	310
1701.85 of the Revised Code.	311

(D) An action to set aside a conveyance by a corporation, on	312
the ground that any section of the Revised Code applicable to the	313
lease, sale, exchange, transfer, or other disposition of all, or	314
substantially all, of the assets of that corporation has not been	315
complied with, shall be brought within ninety days after that	316
transaction, or the action shall be forever barred.	317

(E) If a resolution of dissolution is adopted pursuant to	318
section 1701.86 of the Revised Code, the directors may dispose of	319
all, or substantially all, of the corporation's assets without the	320
necessity of a shareholders' authorization under this section.	321

(F) The terms and conditions of any transaction under this	322
section shall be subject to the limitations specified in section	323
2307.97 of the Revised Code.	324

(G) This section does not apply to the distribution, pursuant	325
to section 1701.33 of the Revised Code, to the shareholders of an	326
issuing public corporation of shares owned by the issuing public	327
corporation in one or more of its domestic or foreign subsidiary	328
corporations, unless either of the following applies:	329

(1) The former subsidiary is a party to one or more	330
agreements pursuant to which it is obligated to engage in an	331
additional transaction that, if the transaction were authorized	332
after the time at which the distribution becomes effective, would	333
require the approval of its shareholders.	334

(2) Immediately prior to the time at which the distribution	335
becomes effective, the issuing public corporation has more than	336
one class of shares outstanding.	337

(H) For purposes of this section only, the assets of a	338
corporation include the assets of any other entity that is wholly	339
owned, directly or indirectly, by the corporation. Unless	340
otherwise provided in the articles, this section does not apply to	341
any lease, sale, exchange, transfer, or other disposition of all,	342
or substantially all, of the assets of a corporation to any entity	343
that is wholly owned, directly or indirectly, by the corporation.	344

Section 2. That existing sections 1701.04, 1701.55, 1701.58,	345
1701.69, and 1701.76 of the Revised Code are hereby repealed.	346