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Sub. S. B. No. 110As Passed by the HouseAs Passed by the House
124th General Assembly | Regular Session | 2001-2002 |
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SENATORS Johnson, Hottinger, Amstutz, Oelslager
REPRESENTATIVES Willamowski, Seitz, Sulzer, Manning, Hagan, Evans, Schmidt, Buehrer, Hughes, Gilb, Lendrum, Widowfield, Damschroder, Cates
A BILL
To amend sections 1701.11, 1701.16, 1701.58, and
1701.71 of the Revised Code to restrict shareholder
removal of directors on a classified board of
directors of issuing public corporations to removal
for cause, to require in addition to existing law's
requirements that an amendment to declassify such a
board be with the approval of a majority of the
shares held by voting disinterested shareholders,
and to confirm the authority of directors to redeem
options.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1701.11, 1701.16, 1701.58, and
1701.71 of the Revised Code be amended to read as follows:
Sec. 1701.11. (A)(1) Regulations for the government of a
corporation, the conduct of its affairs, and the management of
its
property, consistent with law and the articles, may be
adopted in
any of the following ways: (a) Within ninety days after the corporation is formed, by
the
directors in accordance with section 1701.10 of the Revised
Code; (b) By the shareholders at a meeting held for that purpose,
by the affirmative vote of the holders of shares entitling them
to
exercise a majority of the voting power of the corporation on
the
proposal; (c) Without a meeting, by the written
consent of the holders
of shares entitling them to exercise two-thirds of the
voting
power of the corporation on the proposal. (2)
The
Except as otherwise provided in division (A)(4) of
this section, the regulations may be amended, or new regulations
may be
adopted, in
either of the following ways: (a) By the shareholders at a
meeting held for that purpose,
by the affirmative vote of the
holders of shares entitling them to
exercise a majority of the
voting power of the corporation on the
proposal; (b) Without a meeting, by the
written consent of the holders
of shares entitling them to
exercise two-thirds of the voting
power of the corporation on the
proposal. (3)
If
Except as otherwise provided in division (A)(4) of
this section, if the articles or
regulations that have been
adopted so provide or permit,
regulations may be adopted or
amended or new regulations may be adopted
by the affirmative vote
or written consent of the holders of shares entitling
them to
exercise a greater or lesser proportion but not less than a
majority
of the voting power of the corporation.
(4) Any amendment of regulations and any amended or new
regulations adopted by shareholders of an issuing public
corporation whose directors are classified pursuant to section
1701.57 of the Revised Code that would change or eliminate the
classification of directors shall be adopted by the shareholders
only at a meeting held for that purpose, by the affirmative vote
of holders of shares entitling them to exercise the voting power
of the corporation that is required for shareholders at a meeting
under division (A)(2)(a) or (3) of this section, and also by the
affirmative vote of the holders of a majority of disinterested
shares voted on the proposal determined as specified in division
(C)(9) of section 1704.01 of the Revised Code. (B) Without limiting the generality of the authority
described in division (A) of this section, the regulations may
include provisions with respect to all of the following: (1) The time and place for holding, the manner of and
authority for calling, giving notice of, and conducting, and the
requirements of a quorum for, meetings of shareholders; (2) The taking of a record of shareholders or the
temporary
closing of books against transfers of shares; (3) The number, classification, manner of fixing or
changing
the number, qualifications, term of office, and
compensation or
manner of fixing compensation, of directors; (4) The time and place for holding, the manner of and
authority for calling, giving notice of, and conducting, and the
requirements of a quorum for, meetings of the directors; (5) The appointment of an executive and other committees
of
the directors, and their authority; (6) The titles, qualifications, duties, term of office,
compensation or manner of fixing compensation, and the removal,
of
officers; (7) The terms on which new certificates for shares may be
issued in the place of lost, stolen, or destroyed certificates; (8) The manner in which and conditions upon which a
certificated security, and the conditions upon which an
uncertificated security, and the shares represented by a
certificated or uncertificated security, may be transferred,
restrictions on the right to transfer the shares, and
reservations
of liens on the shares; (9)(a) Restrictions on the transfer and the right to
transfer shares of either of the following: (i) An issuing public corporation to any person in a
control
share acquisition; (ii) A corporation with fifty or more shareholders to any
person in an acquisition that would be a control share
acquisition
if the corporation were an issuing public
corporation. (b) The restrictions on the transfer and the right to
transfer shares described in division (B)(9)(a)(i) and (ii) of
this section may include requirements and procedures for consent
to an acquisition of the shares by directors based on a
determination by
the directors of the best interests of the
corporation and its
shareholders, consent to an acquisition of the
shares by
shareholders, and
reasonable sanctions for a violation
of those requirements,
including the right of the corporation to
refuse to transfer, to
redeem, or to deny voting or other
shareholder rights appurtenant
to shares acquired in an
acquisition of the shares. (10) Defining, limiting, or regulating the exercise of the
authority of the corporation, the directors, the officers, or all
the shareholders. (C) The shareholders of a corporation may adopt and may
authorize the directors to adopt, either before or during an
emergency, as that term is defined in division (U) of section
1701.01 of the Revised Code, emergency regulations that
shall be
operative only during an emergency. The emergency regulations
may
include any provisions that are
authorized to be included in
regulations by divisions (A) and (B) of this section. In
addition, unless expressly prohibited by the articles or the
regulations, the emergency regulations may make any provision,
notwithstanding any different provisions in this chapter and
notwithstanding any
different
provisions in the articles or the
regulations that are not
expressly stated to be operative during
an emergency, that may be
practical or necessary with respect to
the following: (1) The time and place for holding, the manner of and
authority for calling, giving notice of, and conducting, and the
requirements of a quorum for, meetings of the directors; (2) The creation and appointment of an executive and other
committees of the directors and the delegation of authority to
the
committees by the board; (3) The creation, existence, and filling of vacancies,
including temporary vacancies, in the office of director; (4) The selection, by appointment, election, or otherwise,
of officers and other persons to serve as directors for a meeting
of the board in the absence from the meeting of one or more of
the
directors; (5) The creation, existence, and filling of vacancies,
including temporary vacancies, in any office; (6) The order of rank and the succession to the duties and
authority of officers. (D) If the regulations are amended or new regulations are
adopted, without a meeting of the shareholders, the secretary of
the corporation shall mail a copy of the amendment or the new
regulations to each shareholder who would have been entitled to
vote on the adoption of the amendment or the new regulations and
did not participate in the adoption of the amendment or the new
regulations. (E) No person dealing with the corporation shall be
charged
with constructive notice of the regulations. (F) Unless expressly prohibited by the articles or the
regulations or unless otherwise provided by the emergency
regulations, the following special rules shall be applicable
during an emergency notwithstanding any different provision
elsewhere in this
chapter: (1) Meetings of the directors may be called by any officer
or director. (2) Notice of the time and place of each meeting of the
directors shall be given to such of the directors as it may be
feasible to reach at the time and by the means of
communication,
written or oral, personal or mass, as may be practicable at the
time. (3) The director or directors present at any meeting of
the
directors that has been duly called and notice of which has
been
duly given shall constitute a quorum for the meeting, and,
in the
absence of one or more of the directors, the director or
directors
present may appoint one or more of the officers of the
corporation
directors for the meeting. (4) If none of the directors attends a meeting of the
directors that has been duly called and notice of which has been
duly given, the officers of the corporation who are present, not
exceeding three, in order of rank, shall be directors for the
meeting, shall constitute a quorum for the meeting, and may
appoint one or more of the other officers of the corporation
directors for the meeting. (5) If the chief executive officer dies, is missing, or
for
any other reason is temporarily or permanently incapable of
discharging the duties of the office, the next ranking
officer
who
is available shall assume the duties and authority of the
office
of the deceased, missing, or incapacitated chief executive
officer
until such time as the directors shall otherwise order. (6) The offices of secretary and treasurer shall be deemed
to be of equal rank, and, within the same office and as between
the offices of secretary and treasurer, rank shall be determined
by priority in time of the first election to the office or, if
two
or more persons have been first elected to the office
at the same
time, by seniority in age.
Sec. 1701.16. (A) Unless the articles otherwise provide,
a
corporation by its directors may grant options to subscribe for
or
to purchase shares of any authorized class at the times and on
the
terms that are set forth in the securities, or in the
contracts,
warrants or instruments that evidence the options,
which
contracts, warrants, or instruments may be transferable or
nontransferable and may be separable or inseparable from
securities, upon the following conditions: (1) If the shares are subject to preemptive rights and if
the options are not granted to shareholders in satisfaction of
their preemptive rights, the granting of the options must be
authorized by the vote or consent of the shareholders or holders
of shares of particular classes that then would be required to
waive or release such preemptive rights. The vote or consent
shall release the preemptive rights to the shares required to
satisfy the options if and when exercised. (2) If, at the time of granting the options, the
corporation
does not have authorized and unissued shares
sufficient to satisfy
the options if and when exercised, the
granting of the options
must be authorized by the vote of the
shareholders or holders of
shares of particular classes that then
would be required to adopt
an amendment to the articles for the
purpose of increasing the
authorized number of such shares, and
the shares required to be
issued upon the exercise of the options
shall be provided by an
amendment concurrently or thereafter
adopted by the shareholders
or the directors. (B)(1) The securities, contracts, warrants, or instruments
that evidence the options may contain any terms not repugnant to
law for the protection of the holders of the options, including,
but not limited to, the following: (a) Restrictions upon the authorization or issuance of
additional shares; (b) Provisions for the adjustment of the option price; (c) Provisions concerning rights in the event of
reorganization, merger, consolidation, or sale of the entire
assets of the corporation; (d) Provisions for the reservation of authorized but
unissued shares to satisfy the options; (e) Restrictions upon the declaration or payment of
dividends or distributions; (f) Conditions on the exercise
or redemption of the options,
including,
subject to the limitation specified in division (B)(2)
of this
section, conditions that preclude the holder or holders of
at
least a specified number or percentage of the outstanding
common
shares of a corporation from exercising
or redeeming the
options. (2) The express or implied authority conferred by division
(B)(1) of this section or any other section of this chapter for
securities, contracts, warrants, or instruments that evidence
options to contain a condition on the exercise
or redemption of
options that
precludes the holder or holders of at least a
specified number or
percentage of the outstanding common shares of
a corporation from
exercising
or redeeming options shall apply
only to the following: (a) A corporation that has issued and outstanding shares
listed on a national securities exchange or regularly quoted in
an
over-the-counter market by one or more members of a national
or
affiliated securities association; (b) A corporation that has adopted a close corporation
agreement pursuant to which options are granted, if the
securities, contracts, warrants, or instruments that evidence the
options contain a condition that precludes the holder or holders
of at least a specified number or percentage of the outstanding
common shares of that corporation from exercising
or redeeming the
options. (C) As used in this section, "securities" includes
obligations and shares of the corporation.
Sec. 1701.58. (A) The office of a director becomes vacant
if
he
the director dies or resigns. A resignation shall take
effect
immediately or at such other time as the director may
specify. (B) The directors may remove any director and thereby
create
a vacancy in the board: (1) If by order of court
he
the director has been found to
be
of
unsound mind, or if
he
the director is adjudicated a
bankrupt; (2) If within sixty days, or within such other period of
time as is prescribed in the articles or the regulations, from
the
date of
his
the director's election
he
the
director does not
qualify by accepting in
writing
his
the director's election to
such office or by acting
at a meeting of
the directors, and by
acquiring the qualifications specified in
the articles or the
regulations; or if, for such period as is
prescribed in the
articles or the regulations,
he
the director
ceases to hold
the
required qualifications. (C)
If
Except as otherwise provided in this division, if the
shareholders have a right to vote cumulatively
in the election of
directors, then, unless the articles or the
regulations expressly
provide that no director may be removed
from office or that
removal of directors requires a greater vote
than that specified
in this division, all the directors, all the
directors of a
particular class, or any individual director may
be removed from
office, without assigning any cause, by the vote
of the holders of
a majority of the voting power entitling them
to elect directors
in place of those to be removed, except that,
unless all the
directors, or all the directors of a particular
class, are
removed, no individual director shall be removed if
the votes of a
sufficient number of shares are cast against
his
the
director's
removal that, if cumulatively voted at an election of all the
directors, or all the directors of a particular class, as the
case
may be, would be sufficient to elect at least one director.
In the
case of an issuing public corporation whose directors are
classified pursuant to section 1701.57 of the Revised Code, the
shareholders may effect a removal under this division only for
cause.
(D) If the shareholders do not have the right to vote
cumulatively as a result of an amendment to the articles
permitted
by division (B)(10) of section 1701.69 of the Revised
Code, then,
unless the articles or the regulations expressly
provide that no
director may be removed from office or that
removal of directors
requires a greater vote than that specified
in this division, all
the directors, all the directors of a
particular class, or any
individual director may be removed from
office, without assigning
any cause, by the vote of the holders
of a majority of the voting
power entitling them to elect
directors in place of those to be
removed; except that in the case of an issuing public corporation
whose directors are classified pursuant to section 1701.57 of the
Revised Code, the shareholders may effect that removal only for
cause. (E) In case of any removal pursuant to division (C) or (D)
of this section, a new director may be elected at the same
meeting
for the unexpired term of each director removed. Failure
to elect
a director to fill the unexpired term of any director
removed is
deemed to create a vacancy in the board. (F) Unless the articles or the regulations otherwise
provide, the remaining directors, though less than a majority of
the whole authorized number of directors, may, by the vote of a
majority of their number, fill any vacancy in the board for the
unexpired term. Under this section, a vacancy exists if the
shareholders increase the authorized number of directors but fail
at the meeting at which such increase is authorized, or an
adjournment of that meeting, to elect the additional directors
provided for, or if the shareholders fail at any time to elect
the
whole authorized number of directors.
Sec. 1701.71. (A)(1) Except as otherwise provided in this
division or division (A)(2) of this section, the shareholders, at
a meeting held for that purpose, may adopt an amendment,
including
any amendment that could be adopted by the directors, by the
affirmative vote of the holders of shares entitling them to
exercise two-thirds of the voting power of the corporation on the
proposal or, if the articles provide or permit, by the
affirmative
vote of a greater or lesser proportion, but not less
than a
majority, of such voting power, and by the
affirmative
vote of the
holders of shares of any particular class that is
required by the
articles.
Any amendment that would change or eliminate the
classification of directors of an issuing public corporation whose
directors are classified pursuant to section 1701.57 of the
Revised Code shall be adopted by the shareholders only at a
meeting expressly held for that purpose, by the affirmative votes
required under this division, and also by the affirmative vote of
the holders of at least a majority of disinterested shares voted
on the proposal determined as specified in division (C)(9) of
section 1704.01 of the Revised Code. If, at the time an amendment
to
eliminate cumulative voting rights permitted by division
(B)(10)
of section 1701.69 of the Revised Code is acted upon by
the
shareholders, a corporation does not have issued and
outstanding
shares that are listed on a national securities
exchange or are
regularly quoted in an over-the-counter market by
one or more
members of a national or affiliated securities
association, that
amendment shall not be adopted if the votes of a
sufficient
number of shares are cast against the amendment that,
if
cumulatively voted at an election of all the directors, or all
the directors of a particular class, as the case may be, would at
the time the amendment is acted upon by the shareholders be
sufficient to elect at least one director. (2) Whenever under division (B) of this section the
holders
of shares of any particular class are entitled to vote as
a class
on the adoption of an amendment, the amendment, in
order to be
adopted, must receive the affirmative vote of the holders
of at
least two-thirds of the shares of that class or, if the articles
provide or permit, a
greater or lesser proportion, but not less
than a majority, of
the shares of that class. If the proposed
amendment would
authorize any particular corporate action that,
under any
applicable provision of law or under the existing
articles, could
be authorized only by or pursuant to a specified
vote of
shareholders, the amendment, in order to be adopted, must
receive the affirmative vote so specified. (B) Regardless of limitations or restrictions in the
articles on the voting rights of the shares of any class, the
holders of shares of a particular class, and in the cases
specified in divisions (B)(6), (7), and (8) of this section the
holders of shares of every class, shall be entitled to vote as a
class on the adoption of an amendment that does any of the
following: (1) Increases or decreases the par value of the issued
shares of the particular class; (2) Changes issued shares of the particular class, whether
with or without par value, into a lesser number of shares of the
same class or into the same or a different number of shares of
any
other class, with or without par value,
previously or then
authorized; (3) Changes the express terms, or adds express terms, of
the
shares of the particular class in any manner substantially
prejudicial to the holders of the shares; (4) Changes the express terms of issued shares of any
class
senior to the particular class in any manner substantially
prejudicial to the holders of shares of the particular class; (5) Authorizes shares of another class that are
convertible
into, or authorizes the conversion of shares of
another class
into, shares of the particular class, or authorizes
the directors
to fix or alter conversion rights of shares of
another class that
are convertible into shares of the particular
class; provided,
however, both of the following apply: (a) The failure to obtain the shareholders'
approval only
prevents the conversion of the shares until the shareholders'
approval is obtained and does not otherwise affect the
authorization or any other express terms of the shares; (b) The articles may provide that
no vote of the holders of
common shares, as a class, is required
in connection with the
authorization of shares of any class that
are convertible into
common shares. (6) Provides, in the case of an amendment described in
division (B)(1) or (2) of this section, that the stated capital
of
the corporation shall be reduced or eliminated as a result of
the
amendment, or provides, in the case of an amendment described
in
division (B)(5) of this section, that the stated capital of
the
corporation shall be reduced or eliminated upon the exercise
of
such conversion rights, provided that any reduction or
elimination
is consistent with section 1701.30 of the Revised
Code; (7) Changes substantially the purposes of the corporation,
or provides that a subsequent amendment to the
articles may be
adopted that changes substantially the purposes of the
corporation; (8) Changes a corporation into a nonprofit corporation. (C) An amendment that changes a corporation into a
nonprofit
corporation shall contain a statement of purposes
proper in the
case of a nonprofit corporation and a statement
that, after the
effective date of the amendment, the corporation
shall be subject
to the provisions of the Revised Code relating
to nonprofit
corporations. In the case of a corporation formed
on or after
June 9, 1927, the amendment also shall provide for
the
cancellation of all outstanding shares and the terms and
considerations, if any, for the cancellation. In the case
of a
corporation formed prior to June 9, 1927, the amendment may
provide for the cancellation of outstanding shares, but if
it does
not so provide, the amendment shall contain a provision
forbidding
the payment of dividends or distributions on any
shares after the
effective date of the amendment.
Section 2. That existing sections 1701.11, 1701.16, 1701.58,
and 1701.71 of the Revised Code are hereby repealed.
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