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H. B. No. 374 As IntroducedAs Introduced
127th General Assembly | Regular Session | 2007-2008 |
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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.
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