130th Ohio General Assembly
The online versions of legislation provided on this website are not official. Enrolled bills are the final version passed by the Ohio General Assembly and presented to the Governor for signature. The official version of acts signed by the Governor are available from the Secretary of State's Office in the Continental Plaza, 180 East Broad St., Columbus.

H. B. No. 374  As Introduced
As Introduced

127th General Assembly
Regular Session
2007-2008
H. B. No. 374


Representative Coley 

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



A BILL
To amend sections 1701.04, 1701.55, 1701.58, 1701.69, and 1701.76 of the Revised Code to allow the original articles of incorporation to eliminate cumulative voting in the election of directors, to remove restrictions for certain corporations regarding the elimination of cumulative voting, and to exclude from the existing procedures for the sale of all or substantially all of the assets of a corporation the sale of those assets to the corporation's wholly owned subsidiaries.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1701.04, 1701.55, 1701.58, 1701.69, and 1701.76 of the Revised Code be amended to read as follows:
Sec. 1701.04.  (A) Any person, singly or jointly with others, and without regard to residence, domicile, or state of incorporation, may form a corporation by signing and filing with the secretary of state articles of incorporation that shall set forth all of the following:
(1) The name of the corporation, which shall be in compliance with division (A) of section 1701.05 of the Revised Code;
(2) The place in this state where the principal office of the corporation is to be located;
(3) The authorized number and the par value per share of shares with par value, and the authorized number of shares without par value, except that the articles of a banking, safe deposit, trust, or insurance corporation shall not authorize shares without par value; the express terms, if any, of the shares; and, if the shares are classified, the designation of each class, the authorized number and par value per share, if any, of the shares of each class, and the express terms of the shares of each class;
(4) If the corporation is to have an initial stated capital, the amount of that stated capital.
(B) The articles also may set forth any of the following:
(1) The names of the individuals who are to serve as initial directors;
(2) The purpose or purposes for which the corporation is formed, but in the absence of a statement of the purpose or purposes or except as expressly set forth in such statement, the purpose for which any corporation is formed is to engage in any lawful act or activity for which a corporation may be formed under this chapter, and all lawful acts and activities of the corporation are within the purposes of the corporation;
(3) Any lawful provision for the purpose of defining, limiting, or regulating the exercise of the authority of the corporation, the incorporators, the directors, the officers, the shareholders, or the holders of any class of shares;
(4) Any provision that may be set forth in the regulations;
(5) A provision specifying the period of existence of the corporation if it is to be otherwise than perpetual;
(6) Subject to division (C) of this section, any A provision eliminating the right of every shareholder to vote cumulatively in the election of directors;
(7) Any additional provision permitted by this chapter.
(C) Original articles of a corporation may not set forth any provision that eliminates the rights of shareholders under this chapter to cumulate the voting power that they possess in the election of directors.
(D) A written appointment of a statutory agent for the purposes set forth in section 1701.07 of the Revised Code shall be filed with the articles, unless the corporation belongs to one of the classes mentioned in division (O) of that section.
(E)(D) The legal existence of the corporation begins upon the filing of the articles or on a later date specified in the articles that is not more than ninety days after filing, and, unless the articles otherwise provide, its period of existence shall be perpetual.
Sec. 1701.55.  (A) At a meeting of shareholders at which directors are to be elected, only persons nominated as candidates shall be eligible for election as directors.
(B) Unless the articles set forth alternative election standards, at all elections of directors, the candidates receiving the greatest number of votes shall be elected.
(C) Unless the articles are amended as permitted by division (B)(10) of section 1701.69 of the Revised Code to provide that no shareholder of a corporation may cumulate the shareholder's voting power, each shareholder has the right to vote cumulatively if notice in writing is given by any shareholder to the president, a vice-president, or the secretary of a corporation, not less than forty-eight hours before the time fixed for holding a meeting of the shareholders for the purpose of electing directors if notice of the meeting has been given at least ten days before the meeting, and, if the ten days' notice has not been given, not less than twenty-four hours before such the meeting time, that the shareholder desires that the voting at such election shall be cumulative, provided that an announcement of the giving of such that notice is made upon the convening of the meeting by the chairperson or secretary or by or on behalf of the shareholder giving such the notice.
(D) Unless the articles are amended as permitted by division (B)(10) of section 1701.69 of the Revised Code to provide that no shareholder of a corporation may cumulate the shareholder's voting power, each shareholder has the right, subject to the notice requirements contained in division (C) of this section, to cumulate the voting power the shareholder possesses and to give one candidate as many votes as the number of directors to be elected multiplied by the number of the shareholder's votes equals, or to distribute the shareholder's votes on the same principle among two or more candidates, as the shareholder sees fit.
Sec. 1701.58.  (A) The office of a director becomes vacant if 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 the director has been found to be of unsound mind, or if the director is adjudicated a bankrupt;
(2) If within sixty days, or within any other period of time as is prescribed in the articles or the regulations, from the date of the director's election the director does not qualify by accepting in writing the director's election to that 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, the director ceases to hold the required qualifications.
(C) Except as otherwise provided in this division, if the shareholders have a the right to vote cumulatively in the election of directors, then, unless the articles, the regulations adopted by the shareholders, or the regulations adopted by the directors pursuant to division (A)(1) of section 1701.10 of the Revised Code 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 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 in the election of directors, then, unless the articles, the regulations adopted by the shareholders, or the regulations adopted by the directors pursuant to division (A)(1) of section 1701.10 of the Revised Code 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. 1701.69.  (A) The articles may be amended from time to time in any respect if the articles as amended set forth all such provisions as are required in, and, except for amendments an amendment to the articles as described in divisions division (B)(10) and (11) of this section, only such provisions as may properly be in, original articles filed at the time of adopting the amendment, and, if a change in issued shares is to be made, or if as the result of any amendment the stated capital of any class of shares is to be created, increased, reduced, or eliminated, then such provisions, not inconsistent with section 1701.30 of the Revised Code, as are necessary to effect such change, or to effect such creation, increase, reduction, or elimination of stated capital.
(B) Without limiting the generality of the authority to amend the articles, the articles may be amended to do any of the following:
(1) Change the name of the corporation;
(2) Change the place in this state where its principal office is to be located;
(3) Change, enlarge, or diminish its purpose or purposes;
(4) Increase or decrease the authorized number of shares of any class;
(5) Authorize shares of a new class or classes;
(6) Increase or decrease the par value of issued or unissued shares with par value;
(7) Change issued or unissued shares of any class, whether with or without par value, into the same or a different number of shares of any class with or without par value, theretofore or then authorized;
(8) Provide that, as a result of an amendment described in division (B)(6), (7), or (11) of this section, the stated capital of any class of shares shall be created, increased, reduced, or eliminated, consistent with section 1701.30 of the Revised Code, except that, in the case of any amendment to change the corporation into a nonprofit corporation, the stated capital of the corporation may be reduced or eliminated;
(9) Change any of the express terms of issued or unissued shares of any class or series, which change may include the discharge, adjustment, or elimination of rights to accrued undeclared cumulative dividends or distributions on the shares of such class or series;
(10) Eliminate the right of every shareholder to vote cumulatively in the election of directors or to delete a provision that eliminates that right, except that, if a corporation is formed after the effective date of this amendment or if a corporation that exists on the effective date of this amendment 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, the articles may be amended to eliminate the right of every shareholder to vote cumulatively in the election of directors only upon compliance with both of the following:
(a) Except as otherwise provided in this division in connection with surviving corporations in mergers and new corporations resulting from consolidations, the shareholder action on the amendment to the articles shall not occur earlier than ninety days after the effective date of this amendment or ninety days after the date that the corporation was formed, whichever date is later;
(b) A notice shall have been sent to the shareholders by mail, overnight delivery service, or any other means of communication authorized by the shareholder to whom the notice is sent that states, in solid capital letters, that an effect of the amendment to the articles will be to do both of the following:
(i) To permit a majority of a quorum of the voting power in the election or removal of directors to elect or remove every director;
(ii) To preclude a minority of a quorum of the voting power in the election or removal of directors from electing or preventing the removal of any director.
In the case of a surviving corporation as a result of a merger or of a new corporation resulting from a consolidation, if immediately prior to the merger or consolidation at least one of the constituent corporations had 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, then the ninety-day limitation prescribed in division (B)(10)(a) of this section does not apply and the agreement of merger or consolidation, as adopted pursuant to section 1701.78 or 1701.80 of the Revised Code, may eliminate, subject to division (B)(10)(b) of this section, the right of every shareholder to vote cumulatively in the election of directors. An agreement of merger or consolidation that is so adopted and that eliminates the right of every shareholder to vote cumulatively in the election of directors shall be considered an amendment permitted by this division.;
(11) Change a corporation into a nonprofit corporation;
(12) Change any provision of the articles or add any provision that may properly be included in the articles.
Sec. 1701.76.  (A)(1) Provided the provisions of Chapter 1704. of the Revised Code do not prevent the transaction from being effected, a lease, sale, exchange, transfer, or other disposition of all, or substantially all, of the assets, with or without the good will, of a corporation, if not made in the usual and regular course of its business, may be made upon the terms and conditions and for the consideration, that may consist, in whole or in part, of money or other property of any description, including shares or other securities or promissory obligations of any other corporation, domestic or foreign, that may be authorized as follows:
(a) By the directors, either before or after authorization by the shareholders as required in this section; and
(b) At a meeting of the shareholders held for that purpose, 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 so provide or permit, by the affirmative vote of a greater or lesser proportion, but not less than a majority, of the voting power, and by the affirmative vote of the holders of shares of any particular class that is required by the articles.
(2) At the shareholder meeting described in division (A)(1)(b) of this section or at any subsequent shareholder meeting, shareholders, by the same vote that is required to authorize the lease, sale, exchange, transfer, or other disposition of all, or substantially all, of the assets, with or without the good will, of the corporation, may grant authority to the directors to establish or amend any of the terms and conditions of the transaction, except that the shareholders shall not authorize the directors to do any of the following:
(a) Alter or change the amount or kind of shares, securities, money, property, or rights to be received in exchange for the assets;
(b) Alter or change to any material extent the amount or kind of liabilities to be assumed in exchange for the assets;
(c) Alter or change any other terms and conditions of the transaction if any of the alterations or changes, alone or in the aggregate, would materially adversely affect the shareholders or the corporation.
(3) Notice of the meeting of the shareholders described in division (A)(1)(b) of this section shall be given to all shareholders whether or not entitled to vote at the meeting and shall be accompanied by a copy or summary of the terms of the transaction.
(B) The corporation by its directors may abandon the transaction under this section, subject to the contract rights of other persons, if the power of abandonment is conferred upon the directors either by the terms of the transaction or by the same vote of shareholders and at the same meeting of shareholders as that referred to in division (A)(1)(b) of this section or at any subsequent meeting.
(C) Dissenting holders of shares of any class, whether or not entitled to vote, shall be entitled to relief under section 1701.85 of the Revised Code.
(D) An action to set aside a conveyance by a corporation, on the ground that any section of the Revised Code applicable to the lease, sale, exchange, transfer, or other disposition of all, or substantially all, of the assets of that corporation has not been complied with, shall be brought within ninety days after that transaction, or the action shall be forever barred.
(E) If a resolution of dissolution is adopted pursuant to section 1701.86 of the Revised Code, the directors may dispose of all, or substantially all, of the corporation's assets without the necessity of a shareholders' authorization under this section.
(F) The terms and conditions of any transaction under this section shall be subject to the limitations specified in section 2307.97 of the Revised Code.
(G) This section does not apply to the distribution, pursuant to section 1701.33 of the Revised Code, to the shareholders of an issuing public corporation of shares owned by the issuing public corporation in one or more of its domestic or foreign subsidiary corporations, unless either of the following applies:
(1) The former subsidiary is a party to one or more agreements pursuant to which it is obligated to engage in an additional transaction that, if the transaction were authorized after the time at which the distribution becomes effective, would require the approval of its shareholders.
(2) Immediately prior to the time at which the distribution becomes effective, the issuing public corporation has more than one class of shares outstanding.
(H) For purposes of this section only, the assets of a corporation include the assets of any other entity that is wholly owned, directly or indirectly, by the corporation. Unless otherwise provided in the articles, this section does not apply to any lease, sale, exchange, transfer, or other disposition of all, or substantially all, of the assets of a corporation to any entity that is wholly owned, directly or indirectly, by the corporation.
Section 2. That existing sections 1701.04, 1701.55, 1701.58, 1701.69, and 1701.76 of the Revised Code are hereby repealed.
Please send questions and comments to the Webmaster.
© 2019 Legislative Information Systems | Disclaimer