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Am. S. B. No. 202 As Reported by the Senate Civil Justice CommitteeAs Reported by the Senate Civil Justice Committee
130th General Assembly | Regular Session | 2013-2014 |
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Cosponsors:
Senators Seitz, Coley
A BILL
To amend sections 1701.01, 1701.11, 1701.71, 1704.01,
and 1704.05 of the Revised Code to provide
exceptions to the applicability of the Control
Share Acquisition Act, to require board approval
for Act opt-out amendments of a corporation's
regulations or articles of incorporation, and to
apply a three-year look-back period to ownership
of shares for purposes of determining
applicability of certain shareholder transaction
laws.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1701.01, 1701.11, 1701.71, 1704.01,
and 1704.05 of the Revised Code be amended to read as follows:
Sec. 1701.01. As used in sections 1701.01 to 1701.98 of the
Revised Code, unless the context otherwise requires:
(A) "Corporation" or "domestic corporation" means a
corporation for profit formed under the laws of this state.
(B) "Foreign corporation" means a corporation for profit
formed under the laws of another state, and "foreign entity" means
an entity formed under the laws of another state.
(C) "State" means the United States; any state, territory,
insular possession, or other political subdivision of the United
States, including the District of Columbia; any foreign country or
nation; and any province, territory, or other political
subdivision of such foreign country or nation.
(D) "Articles" includes original articles of incorporation,
certificates of reorganization, amended articles, and amendments
to any of these, and, in the case of a corporation created before
September 1, 1851, the special charter and any amendments to it
made by special act of the general assembly or pursuant to general
law.
(E) "Incorporator" means a person who signed the original
articles of incorporation.
(F) "Shareholder" means a person whose name appears on the
books of the corporation as the owner of shares of the
corporation. Unless the articles, the regulations adopted by the
shareholders, the regulations adopted by the directors pursuant to
division (A)(1) of section 1701.10 of the Revised Code, or the
contract of subscription otherwise provides, "shareholder"
includes a subscriber to shares, whether the subscription is
received by the incorporators or pursuant to authorization by the
directors, and such shares shall be deemed to be outstanding
shares.
(G) "Person" includes, without limitation, a natural person,
a corporation, whether nonprofit or for profit, a partnership, a
limited liability company, an unincorporated society or
association, and two or more persons having a joint or common
interest.
(H) The location of the "principal office" of a corporation
is the place named as the principal office in its articles.
(I) The "express terms" of shares of a class are the
statements expressed in the articles with respect to such shares.
(J) Shares of a class are "junior" to shares of another class
when any of their dividend or distribution rights are subordinate
to, or dependent or contingent upon, any right of, or dividend on,
or distribution to, shares of such other class.
(K) "Treasury shares" means shares belonging to the
corporation and not retired that have been either issued and
thereafter acquired by the corporation or paid as a dividend or
distribution in shares of the corporation on treasury shares of
the same class; such shares shall be deemed to be issued, but they
shall not be considered as an asset or a liability of the
corporation, or as outstanding for dividend or distribution,
quorum, voting, or other purposes, except, when authorized by the
directors, for dividends or distributions in authorized but
unissued shares of the corporation of the same class.
(L) To "retire" a share means to restore it to the status of
an authorized but unissued share.
(M) "Redemption price of shares" means the amount required by
the articles to be paid on redemption of shares.
(N) "Liquidation price" means the amount or portion of assets
required by the articles to be distributed to the holders of
shares of any class upon dissolution, liquidation, merger, or
consolidation of the corporation, or upon sale of all or
substantially all of its assets.
(O) "Insolvent" means that the corporation is unable to pay
its obligations as they become due in the usual course of its
affairs.
(P) "Parent corporation" or "parent" means a domestic or
foreign corporation that owns and holds of record shares of
another corporation, domestic or foreign, entitling the holder of
the shares at the time to exercise a majority of the voting power
in the election of the directors of the other corporation without
regard to voting power that may thereafter exist upon a default,
failure, or other contingency; "subsidiary corporation" or
"subsidiary" means a domestic or foreign corporation of which
another corporation, domestic or foreign, is the parent.
(Q) "Combination" means a transaction, other than a merger or
consolidation, wherein either of the following applies:
(1) Voting shares of a domestic corporation are issued or
transferred in consideration in whole or in part for the transfer
to itself or to one or more of its subsidiaries, domestic or
foreign, of all or substantially all the assets of one or more
corporations, domestic or foreign, with or without good will or
the assumption of liabilities;
(2) Voting shares of a foreign parent corporation are issued
or transferred in consideration in whole or in part for the
transfer of such assets to one or more of its domestic
subsidiaries.
"Transferee corporation" in a combination means the
corporation, domestic or foreign, to which the assets are
transferred, and "transferor corporation" in a combination means
the corporation, domestic or foreign, transferring such assets and
to which, or to the shareholders of which, the voting shares of
the domestic or foreign corporation are issued or transferred.
(R) "Majority share acquisition" means the acquisition of
shares of a corporation, domestic or foreign, entitling the holder
of the shares to exercise a majority of the voting power in the
election of directors of such corporation without regard to voting
power that may thereafter exist upon a default, failure, or other
contingency, by either of the following:
(1) A domestic corporation in consideration in whole or in
part, for the issuance or transfer of its voting shares;
(2) A domestic or foreign subsidiary in consideration in
whole or in part for the issuance or transfer of voting shares of
its domestic parent.
(S) "Acquiring corporation" in a combination means the
domestic corporation whose voting shares are issued or transferred
by it or its subsidiary or subsidiaries to the transferor
corporation or corporations or the shareholders of the transferor
corporation or corporations; and "acquiring corporation" in a
majority share acquisition means the domestic corporation whose
voting shares are issued or transferred by it or its subsidiary in
consideration for shares of a domestic or foreign corporation
entitling the holder of the shares to exercise a majority of the
voting power in the election of directors of such corporation.
(T) When used in connection with a combination or a majority
share acquisition, "voting shares" means shares of a corporation,
domestic or foreign, entitling the holder of the shares to vote at
the time in the election of directors of such corporation without
regard to voting power which may thereafter exist upon a default,
failure, or other contingency.
(U) "An emergency" exists when the governor, or any other
person lawfully exercising the power and discharging the duties of
the office of governor, proclaims that an attack on the United
States or any nuclear, atomic, or other disaster has caused an
emergency for corporations, and such an emergency shall continue
until terminated by proclamation of the governor or any other
person lawfully exercising the powers and discharging the duties
of the office of governor.
(V) "Constituent corporation" means an existing corporation
merging into or into which is being merged one or more other
entities in a merger or an existing corporation being consolidated
with one or more other entities into a new entity in a
consolidation, whether any of the entities is domestic or foreign,
and "constituent entity" means any entity merging into or into
which is being merged one or more other entities in a merger, or
an existing entity being consolidated with one or more other
entities into a new entity in a consolidation, whether any of the
entities is domestic or foreign.
(W) "Surviving corporation" means the constituent domestic or
foreign corporation that is specified as the corporation into
which one or more other constituent entities are to be or have
been merged, and "surviving entity" means the constituent domestic
or foreign entity that is specified as the entity into which one
or more other constituent entities are to be or have been merged.
(X) "Close corporation agreement" means an agreement that
satisfies the three requirements of division (A) of section
1701.591 of the Revised Code.
(Y) "Issuing public corporation" means a domestic corporation
with fifty or more shareholders that has its principal place of
business, its principal executive offices, assets having
substantial value, or a substantial percentage of its assets
within this state, and as to which no valid close corporation
agreement exists under division (H) of section 1701.591 of the
Revised Code.
(Z)(1) "Control share acquisition" means the acquisition,
directly or indirectly, by any person of shares of an issuing
public corporation that, when added to all other shares of the
issuing public corporation in respect of which the person may
exercise or direct the exercise of voting power as provided in
this division, would entitle the person, immediately after the
acquisition, directly or indirectly, alone or with others, to
exercise or direct the exercise of the voting power of the issuing
public corporation in the election of directors within any of the
following ranges of such voting power:
(a) One-fifth or more but less than one-third of such voting
power;
(b) One-third or more but less than a majority of such voting
power;
(c) A majority or more of such voting power.
A bank, broker, nominee, trustee, or other person that
acquires shares in the ordinary course of business for the benefit
of others in good faith and not for the purpose of circumventing
section 1701.831 of the Revised Code shall, however, be deemed to
have voting power only of shares in respect of which such person
would be able, without further instructions from others, to
exercise or direct the exercise of votes on a proposed control
share acquisition at a meeting of shareholders called under
section 1701.831 of the Revised Code.
(2) The acquisition by any person of any shares of an issuing
public corporation does not constitute a control share acquisition
for the purpose of section 1701.831 of the Revised Code if the
acquisition was or is consummated in, results from, or is the
consequence of any of the following circumstances:
(a) Prior to November 19, 1982;
(b) Pursuant to a contract existing prior to November 19,
1982;
(c) By bequest or inheritance, by operation of law upon the
death of an individual, or by any other transfer without valuable
consideration, including a gift, that is made in good faith and
not for the purpose of circumventing section 1701.831 of the
Revised Code;
(d) Pursuant to the satisfaction of a pledge or other
security interest created in good faith and not for the purpose of
circumventing section 1701.831 of the Revised Code;
(e) Pursuant to a merger or consolidation adopted, or a
combination or majority share acquisition authorized, by vote of
the shareholders of the issuing public corporation in compliance
with section 1701.78, 1701.781, 1701.79, 1701.791, or 1701.83 of
the Revised Code, or pursuant to a merger adopted in compliance
with section 1701.802 of the Revised Code;
(f) The person's being entitled, immediately thereafter, to
exercise or direct the exercise of voting power of the issuing
public corporation in the election of directors within the same
range theretofore attained by that person either in compliance
with the provisions of section 1701.831 of the Revised Code or as
a result solely of the issuing public corporation's purchase of
shares issued by it;
(g) The person's being engaged in business as an underwriter
of securities who acquires the shares directly from the issuing
public corporation or an affiliate or associate of the issuing
public corporation through its participation in good faith in a
firm commitment underwriting registered under the "Securities Act
of 1933," 15 U.S.C. 77a et seq., and not for the purpose of
circumventing section 1701.831 of the Revised Code.
The acquisition by any person of shares of an issuing public
corporation in a manner described under division (Z)(2) of this
section shall be deemed a control share acquisition authorized
pursuant to section 1701.831 of the Revised Code within the range
of voting power under division (Z)(1)(a), (b), or (c) of this
section that such person is entitled to exercise after the
acquisition, provided, in the case of an acquisition in a manner
described under division (Z)(2)(c) or (d) of this section, the
transferor of shares to such person had previously obtained any
authorization of shareholders required under section 1701.831 of
the Revised Code in connection with the transferor's acquisition
of shares of the issuing public corporation.
(3) The acquisition of shares of an issuing public
corporation in good faith and not for the purpose of circumventing
section 1701.831 of the Revised Code from any person whose control
share acquisition previously had been authorized by shareholders
in compliance with section 1701.831 of the Revised Code, or from
any person whose previous acquisition of shares of an issuing
public corporation would have constituted a control share
acquisition but for division (Z)(2) or (3) of this section, does
not constitute a control share acquisition for the purpose of
section 1701.831 of the Revised Code unless such acquisition
entitles the person making the acquisition, directly or
indirectly, alone or with others, to exercise or direct the
exercise of voting power of the corporation in the election of
directors in excess of the range of voting power authorized
pursuant to section 1701.831 of the Revised Code, or deemed to be
so authorized under division (Z)(2) of this section.
(AA) "Acquiring person" means any person who has delivered an
acquiring person statement to an issuing public corporation
pursuant to section 1701.831 of the Revised Code.
(BB) "Acquiring person statement" means a written statement
that complies with division (B) of section 1701.831 of the Revised
Code.
(CC)(1) "Interested shares" means the shares of an issuing
public corporation in respect of which any of the following
persons may exercise or direct the exercise of the voting power of
the corporation in the election of directors:
(b) Any officer of the issuing public corporation elected or
appointed by the directors of the issuing public corporation;
(c) Any employee of the issuing public corporation who is
also a director of such corporation;
(d) Any person that acquires such shares for valuable
consideration during the period beginning with the date of the
first public disclosure of a proposal for, or expression of
interest in, a control share acquisition of the issuing public
corporation; a transaction pursuant to section 1701.76, 1701.78,
1701.781, 1701.79, 1701.791, 1701.83, or 1701.86 of the Revised
Code that involves the issuing public corporation or its assets;
or any action that would directly or indirectly result in a change
in control of the issuing public corporation or its assets, and
ending on the record date established by the directors pursuant to
section 1701.45 and division (D) of section 1701.831 of the
Revised Code, if either of the following applies:
(i) The aggregate consideration paid or given by the person
who acquired the shares, and any other persons acting in concert
with the person, for all such shares exceeds two hundred fifty
thousand dollars;
(ii) The number of shares acquired by the person who acquired
the shares, and any other persons acting in concert with the
person, exceeds one-half of one per cent of the outstanding shares
of the corporation entitled to vote in the election of directors.
(e) Any person that transfers such shares for valuable
consideration after the record date described in division
(CC)(1)(d) of this section as to shares so transferred, if
accompanied by the voting power in the form of a blank proxy, an
agreement to vote as instructed by the transferee, or otherwise.
(2) If any part of this division is held to be illegal or
invalid in application, the illegality or invalidity does not
affect any legal and valid application thereof or any other
provision or application of this division or section 1701.831 of
the Revised Code that can be given effect without the invalid or
illegal provision, and the parts and applications of this division
are severable.
(DD) "Certificated security" and "uncertificated security"
have the same meanings as in section 1308.01 of the Revised Code.
(EE) "Entity" means any of the following:
(1) A for profit corporation existing under the laws of this
state or any other state;
(2) Any of the following organizations existing under the
laws of this state, the United States, or any other state:
(a) A business trust or association;
(b) A real estate investment trust;
(d) An unincorporated business or for profit organization,
including a general or limited partnership;
(e) A limited liability company;
(f) A nonprofit corporation.
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,
amended, or repealed in any of the following ways:
(a) Within ninety days after the corporation is formed, by
the directors in accordance with division (A)(1) of 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, or if the articles or regulations that have been adopted
so provide, by the affirmative vote of the holders entitling them
to exercise a greater proportion than 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, or if the articles or
regulations that have been adopted so provide or permit, by the
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 on the proposal;
(d) If and to the extent that the articles or regulations so
provide or permit and unless a provision of the Revised Code
reserves such authority to shareholders, by the directors,
provided that no provision or permission in the articles or
regulations may divest shareholders of the power, or limit the
shareholders' power, to adopt, amend, or repeal regulations.
(2) 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 only by the
shareholders 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)(1)(b) 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.
(3) Any amendment of regulations and any amended or new
regulations adopted by shareholders of an issuing public
corporation that would provide that section 1701.831 of the
Revised Code does not apply to control share acquisitions of
shares of the issuing public corporation shall be adopted:
(a) Upon the recommendation by the affirmative vote of a
majority of the authorized number of directors of the issuing
public corporation in favor of such amendment or new regulation;
and
(b) By the shareholders 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)(1)(b) of this
section.
(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 place, if any, and time 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 place, if any, and time 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, or the officers;
(11) Defining, limiting, or regulating the exercise of the
authority of the shareholders; provided, that any amendment of the
regulations that would change or eliminate any such provision
shall be adopted only by 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 place, if any, and time 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)(1) Unless the corporation complies with division (D)(2)
of this section, if the regulations are amended or new regulations
are adopted other than by the shareholders at a meeting held for
that purpose, the secretary of the corporation shall send a copy
of the amendment or the new regulations by mail, overnight
delivery service, or any other means of communication authorized
by the shareholder to whom a copy of the amendment or new
regulations is sent, to each shareholder of record as of the date
of the adoption of the amendment or the new regulations.
(2) Any corporation that files periodic reports with the
United States securities and exchange commission pursuant to
section 13 of the "Securities Exchange Act of 1934," 48 Stat. 881,
15 U.S.C. 78m, as amended, or section 15(d) of the "Securities
Exchange Act of 1934," 48 Stat. 881, 15 U.S.C. 78o(d), as amended,
may satisfy the notice to shareholders of record requirement of
division (D)(1) of this section by including a copy of the
amendment or the new regulations in a report filed in accordance
with those sections within twenty days after 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 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. 1701.71. (A)(1)(a) Except as otherwise provided in this
division divisions (A)(1)(b), (c), and (d) of this section 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
(b) 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 (A)(1)(a) of this section, 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
(c) Any amendment that would provide that section 1701.831 of
the Revised Code does not apply to control share acquisitions of
shares of an issuing public corporation shall be adopted:
(i) Upon the recommendation by the affirmative vote of a
majority of the authorized number of directors of the issuing
public corporation in favor of such amendment; and
(ii) By the shareholders only at a meeting expressly held for
the purpose, by the affirmative votes required under division
(A)(1)(a) of this section.
(d) 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, except in the case of an amendment to the
articles adopted by the directors pursuant to division (B)(10) of
section 1701.70 of the Revised Code;
(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.
Sec. 1704.01. As used in this chapter, unless the context
otherwise requires:
(A) "Corporation," "domestic corporation," "foreign
corporation," "state," "articles," "shareholder," "person,"
"principal office," "express terms," "treasury shares," "parent
corporation," "parent," "subsidiary corporation," "subsidiary,"
"combination," "transferee corporation," "majority share
acquisition," "acquiring corporation," "voting shares" when used
in connection with a combination or majority share acquisition,
"constituent corporation," "surviving corporation," "close
corporation agreement," and "issuing public corporation" have the
same meanings as in section 1701.01 of the Revised Code.
(B) "Chapter 1704. transaction" means any of the following:
(1) A merger, consolidation, combination, or majority share
acquisition between or involving an issuing public corporation or
any subsidiary of an issuing public corporation and any of the
following:
(a) An interested shareholder;
(b) A person, partnership, corporation, or other entity,
however organized, whether or not it is an interested shareholder,
that is, or after the merger, consolidation, combination, or
majority share acquisition would be, an affiliate or associate of
an interested shareholder.
(2)(a) Subject to the exception in division (B)(2)(b) of this
section, a purchase, lease, sale, distribution, dividend,
exchange, mortgage, pledge, transfer, or other disposition of
assets, directly or indirectly owned or controlled by the issuing
public corporation, by, to, with, or for the benefit of an
interested shareholder or an affiliate or associate of an
interested shareholder in one or more transactions, if, in any of
those transactions, the assets meet any of the following
conditions:
(i) The assets have an aggregate fair market value equal to
at least five per cent of the aggregate fair market value of all
the assets, determined on a consolidated basis, of the issuing
public corporation;
(ii) The assets have an aggregate fair market value equal to
at least five per cent of the aggregate fair market value of all
the outstanding shares of the issuing public corporation;
(iii) The assets represent at least ten per cent of the
earning power or income of the issuing public corporation,
determined on a consolidated after-tax basis and after excluding
any transaction other than in the ordinary course of business.
(b) One or more transactions in the ordinary course of
business of an issuing public corporation on terms no more
favorable to the interested shareholder than those acceptable to
third parties, as shown by contemporaneous transactions, is not a
Chapter 1704. transaction under division (B)(2)(a) of this
section.
(3)(a) Subject to the exception in division (B)(3)(b) of this
section, a purchase, lease, sale, exchange, transfer, or other
disposition of assets directly or indirectly owned or controlled
by the interested shareholder or an affiliate or associate of the
interested shareholder, by, to, with, or for the benefit of the
issuing public corporation in one or more transactions, if, in any
of those transactions, the assets meet any of the conditions set
forth in division (B)(2)(a)(i), (ii), or (iii) of this section.
(b) One or more transactions in the ordinary course of
business of an issuing public corporation on terms no more
favorable to the interested shareholder than those acceptable to
third parties, as shown by contemporaneous transactions, is not a
Chapter 1704. transaction under division (B)(3)(a) of this
section.
(4) The issuance or transfer to an interested shareholder or
an associate or affiliate of an interested shareholder of any
shares, or of any rights to acquire shares, of the issuing public
corporation or a subsidiary of the issuing public corporation by
the issuing public corporation or a subsidiary of the issuing
public corporation, in one or more transactions, if the shares, or
the rights, have an aggregate fair market value equal to at least
five per cent of the aggregate fair market value of all the
outstanding shares of the issuing public corporation and if the
shares, or the rights, are not issued or transferred pursuant to
the exercise of warrants, rights, or options to purchase that have
been issued, or pursuant to a dividend paid or a distribution
made, proportionately to all shareholders of the issuing public
corporation.
(5) The adoption of a plan or proposal for the dissolution,
winding up of the affairs, or liquidation of the issuing public
corporation that is proposed by, on behalf of, or pursuant to a
written or unwritten agreement, arrangement, or understanding with
an interested shareholder or an affiliate or associate of an
interested shareholder.
(6) Any of the following, if the direct or indirect effect is
to increase the proportionate share of the outstanding shares of
the issuing public corporation or a subsidiary of the issuing
public corporation beneficially owned by an interested shareholder
or an affiliate or associate of an interested shareholder, unless
the increase is the result of immaterial changes due to fractional
share adjustments:
(a) A reclassification of securities, including a share
split, a share dividend or other distribution of shares, or a
reverse share split;
(b) A recapitalization of the issuing public corporation;
(c) A merger, consolidation, combination, or majority share
acquisition between or involving the issuing public corporation
and a subsidiary of the issuing public corporation;
(d) Any other transaction, whether or not with, into, or
involving the interested shareholder, that is proposed by, on
behalf of, or pursuant to a written or unwritten agreement,
arrangement, or understanding with the interested shareholder or
an affiliate or associate of the interested shareholder.
(7) Receipt by an interested shareholder or an affiliate or
associate of an interested shareholder of the direct or indirect
benefit of a loan, advance, pension or any other employee benefit
plan termination, guarantee, pledge, mortgage, security agreement,
financing statement, deed of trust, or other financial assistance,
or a tax credit or other tax advantage, provided by or through the
issuing public corporation or any subsidiary of the issuing public
corporation unless the interested shareholder receives the benefit
proportionately as a holder of shares of the issuing public
corporation.
(C) When used in connection with a Chapter 1704. transaction:
(1) "Affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, is
under common control with, or acts in concert with, a specified
person.
(2) "Announcement date" means the date of the first public
announcement of a definitive proposal for a Chapter 1704.
transaction.
(3) "Associate" of a person means any of the following:
(a) A corporation, partnership, or other entity, however
organized, of which the person is an officer, director, or partner
or is the beneficial owner of shares entitling that person to
exercise at least ten per cent of the voting power in the election
of the directors or other governing body of that corporation,
partnership, or other entity;
(b) A trust or other estate, including any employee stock
ownership or benefit plan, however designated, in which the person
has a substantial beneficial interest or as to which the person
serves as trustee or in a similar fiduciary capacity;
(c) A relative or spouse of the person, or a relative of the
spouse of the person, who has the same principal residence as the
person.
(4) "Beneficial owner" of shares means a person who, with
respect to particular shares, meets any of the following
conditions:
(a) The person directly or indirectly, alone or with others,
including affiliates or associates of that person, beneficially
owns the shares;
(b) The person directly or indirectly, alone or with others,
including affiliates or associates of that person, has the right,
whether exercisable immediately or only after the passage of time,
conditionally, unconditionally, or otherwise, to acquire the
shares pursuant to a written or unwritten agreement, arrangement,
or understanding or upon the exercise of conversion rights,
exchange rights, warrants, calls, options, or otherwise;
(c) The person directly or indirectly, alone or with others,
including affiliates or associates of that person, has the right
to vote or direct the voting of the shares pursuant to a written
or unwritten agreement, arrangement, or understanding;
(d) The person has a written or unwritten agreement,
arrangement, or understanding with another person who is directly
or indirectly a beneficial owner, or whose affiliates or
associates are direct or indirect beneficial owners, of the
shares, if the agreement, arrangement, or understanding is for the
purpose of the first person's or the other person's acquiring,
holding, disposing of, voting, or directing the voting of the
shares to or for the benefit of the first person. A bank, broker,
nominee, trustee, or other person who acquires shares for the
benefit of others in the ordinary course of business in good faith
and not for the purpose of circumventing the provisions of this
chapter shall, however, be deemed to be the beneficial owner only
of shares in respect of which that person, without further
instruction from others, holds voting power.
(5) "Consummation date" means the date on which consummation
of a Chapter 1704. transaction occurs.
(6) "Control," "controlled by," or "under common control
with" refers to the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a person, whether through the exercise of or the
ability to exercise voting power, by contract, or otherwise,
except that "control" of a corporation is not established for
purposes of this division if a person, in good faith and not for
the purpose of circumventing the provisions of this chapter, holds
voting power as an agent, custodian, bank, broker, nominee, or
trustee for one or more beneficial owners who do not individually
or as a group have control of the corporation.
(7) "Exchange Act" means the "Securities Exchange Act of
1934," 48 Stat. 881, 15 U.S.C.A. 78a-78jj, as amended, and any
successor or replacement legislation and amendments to the
successor or replacement legislation.
(8) "Interested shareholder," with respect to an issuing
public corporation, means a person other than the issuing public
corporation, a subsidiary of that issuing public corporation, any
employee stock ownership or benefit plan of the issuing public
corporation or a subsidiary of that issuing public corporation, or
any trustee or fiduciary with respect to any such plan acting in
such capacity who is meets either of the following criteria:
(a) Is the beneficial owner of a sufficient number of shares
of the issuing public corporation that, when added to all other
shares of the issuing public corporation in respect of which that
person may exercise or direct the exercise of voting power, would
entitle that person, directly or indirectly, alone or with others,
including affiliates and associates of that person, to exercise or
direct the exercise of ten per cent of the voting power of the
issuing public corporation in the election of directors after
taking into account all of that person's beneficially owned shares
that are not currently outstanding;
(b) At any time within the three-year period immediately
prior to the date on which it is sought to be determined whether
the person is an interested shareholder, was the beneficial owner
of a sufficient number of shares of the issuing public corporation
that, when added to all other shares of the issuing public
corporation in respect of which that person may have exercised or
directed the exercise of voting power at the time it beneficially
owned such shares, entitled that person, directly or indirectly,
alone or with others, including affiliates and associates of that
person, to exercise or direct the exercise of ten per cent of the
voting power of the issuing public corporation in election of
directors after taking into account all of the person's
beneficially owned shares that were not, at the time it
beneficially owned such shares, currently outstanding.
(9) "Disinterested shares" means voting shares beneficially
owned by any person not an interested shareholder or an affiliate
or associate of an interested shareholder.
(10) "Share acquisition date," with respect to any person,
means the date on which that person first becomes an interested
shareholder of an issuing public corporation.
(11) "Voting shares" means shares of a domestic or foreign
corporation, entitling the holder of the shares to vote at the
time in the election of directors of the corporation without
regard to the voting power represented by shares that thereafter
may exist upon a default, failure, or other contingency.
Sec. 1704.05. This chapter does not apply to any of the
following:
(A) A Chapter 1704. transaction if on the interested
shareholder's share acquisition date, the issuing public
corporation, other than a bank as defined in section 1101.01 of
the Revised Code, did not have a class of voting shares registered
or traded on a national securities exchange or registered under
section 12(g) of the Exchange Act or was not required to file
periodic reports and information pursuant to section 15(d) of the
Exchange Act.
(B)(1) A Chapter 1704. transaction if the interested
shareholder was an interested shareholder on the date immediately
preceding the effective date of this section; except that this
chapter shall apply, and the share acquisition date shall be the
date, when the interested shareholder increases its beneficial
ownership of voting power of the issuing public corporation to a
proportion in excess of the proportion of voting power that the
interested shareholder beneficially owned on the date immediately
preceding the effective date of this section unless the interested
shareholder's subsequent increase in beneficial ownership results
from or is the consequence of any of the following circumstances:
(a) The increase is by bequest or inheritance, by operation
of law upon the death of any individual, or by any other transfer
without valuable consideration, including a gift, that is made in
good faith and not for the purpose of circumventing the provisions
of this chapter;
(b) The increase is pursuant to the satisfaction of a pledge
or other security interest created in good faith and not for the
purpose of circumventing the provisions of this chapter;
(c) The increase is the result solely of the purchase by the
issuing public corporation of shares issued by it;
(d) The increase is in accordance with approval by the
directors of the issuing public corporation before the increase
occurred.
(2) If this chapter would have applied to the increase of
beneficial ownership described in division (B)(1) of this section
but for the application of an exception described in division
(B)(1)(a), (b), (c), or (d) of this section, this chapter shall
apply if the interested shareholder's subsequent increase in its
proportion of beneficial ownership is not the result or a
consequence of any of the circumstances described in division
(B)(1)(a), (b), (c), or (d) of this section.
(C) A Chapter 1704. transaction if the interested shareholder
was an interested shareholder on the date immediately preceding
the effective date of this section and inadvertently increases its
beneficial ownership of voting power of the issuing public
corporation to a proportion in excess of the proportion of voting
power that the interested shareholder beneficially owned on the
date immediately preceding the effective date of this section,
provided that, as soon as practicable, the interested shareholder
divests itself of beneficial ownership of a sufficient number of
voting shares of the issuing public corporation that the
interested shareholder is no longer the beneficial owner of a
proportion of voting power in excess of the proportion of voting
power that the interested shareholder beneficially owned on the
date immediately preceding the effective date of this section.
(D)(1) A Chapter 1704. transaction if a person becomes an
interested shareholder through an acquisition of voting shares
that resulted from or was the consequence of any of the
circumstances described in division (B)(1)(a), (b), (c), or (d) of
this section, except that this chapter shall apply, and the share
acquisition date shall be the date, when the interested
shareholder increases its beneficial ownership of voting power of
the issuing public corporation to a proportion in excess of the
proportion of voting power that the interested shareholder
beneficially owned on the date on which it became an interested
shareholder unless the interested shareholder's subsequent
increase in beneficial ownership results from or is a consequence
of any of the circumstances described in division (B)(1)(a), (b),
(c), or (d) of this section.
(2) If this chapter would have applied to the acquisition of
voting shares described in division (D)(1) of this section but for
the application of an exception described in division (B)(1)(a),
(b), (c), or (d) of this section, this chapter shall apply if the
interested shareholder's subsequent increase in its proportion of
beneficial ownership is not the result or a consequence of any of
the circumstances described in division (B)(1)(a), (b), (c), or
(d) of this section.
(E) A Chapter 1704. transaction if a person became an
interested shareholder inadvertently, provided that, as soon as
practicable, the person divests itself of beneficial ownership of
a sufficient number of voting shares of the issuing public
corporation that the person no longer is an interested
shareholder.
(F)(1) Subject to division (F)(2) of this section, a Chapter
1704. transaction if the original articles of the issuing public
corporation state, or if the articles of the issuing public
corporation have been amended in compliance with the provisions of
section 1701.70, 1701.71, or 1701.72 of the Revised Code to state,
by specific reference to this chapter, that this chapter does not
apply to the corporation and if any of the following applies:
(a) The corporation had fewer than fifty shareholders or was
not an issuing public corporation when the statement initially was
set forth in the articles.
(b) No shareholder of the corporation qualified as an
interested shareholder when the statement was initially set forth
in the articles.
(c) The statement was contained in an amendment to the
articles and the amendment was approved, upon the recommendation
by the affirmative vote of a majority of the authorized number of
directors of the corporation in favor of such amendment, by the
holders of two-thirds of all outstanding shares of the corporation
entitled to vote in the election of directors and by the holders
of two-thirds of all outstanding disinterested shares of the
acquiring public corporation entitled to vote in the election of
directors.
(2) If, however, a Chapter 1704. transaction would have been
prohibited but for the adoption of an amendment to the articles in
compliance with division (F)(1)(b) or (c) of this section, the
issuing public corporation shall not engage in a Chapter 1704.
transaction for twelve months following the adoption of the
amendment; in addition, if this chapter would have applied to a
person who became an interested shareholder prior to the adoption
of such an amendment, this chapter shall continue to apply to a
Chapter 1704. transaction between the issuing public corporation
and the interested shareholder as if the amendment had not been
adopted.
(G) A Chapter 1704. transaction between an acquiring public
corporation and any employee benefit plan, or any trust under any
employee benefit plan, established by the issuing public
corporation, and any distribution or payment made by the employee
benefit plan or trust to any beneficiary.
(H) A Chapter 1704. transaction that involves any acquisition
of securities of an issuing public corporation pursuant to an
employee stock option plan, an employee stock purchase plan, an
employee stock bonus plan, an employee stock ownership plan, or
any similar plan designed to benefit one or more employees
established by the issuing public corporation, provided the
acquisition of the securities and the establishment of, any
amendment to, and the administration of the plan are in good faith
and not for the purpose of circumventing the provisions of this
chapter.
(I) A Chapter 1704. transaction that involves compensation
directly or indirectly received by a director, officer, employee,
agent, or independent contractor of an issuing public corporation
in return for services rendered or to be rendered to the issuing
public corporation, provided the payment of the compensation and
the services rendered, or to be rendered, are in good faith and
not for the purpose of circumventing the provisions of this
chapter.
(J) A Chapter 1704. transaction that involves any loan of
money or property of an issuing public corporation to a director,
officer, employee, agent, or independent contractor of the issuing
public corporation, provided the loan is designed to encourage the
rendering of needed, valuable, and efficient services to the
issuing public corporation and provided the loan is made and the
services are rendered, or are to be rendered, in good faith and
not for the purpose of circumventing the provisions of this
chapter.
(K) A Chapter 1704. transaction in which an issuing public
corporation makes a loan of money or other property to, guarantees
any loan of money or other property to, or guarantees any
obligation of, an employee stock ownership plan, as defined in
Section 4975(e)(7) of the "Internal Revenue Code of 1986," 68A
Stat. 3, 26 U.S.C.A. 1, as amended, of the issuing public
corporation.
Section 2. That existing sections 1701.01, 1701.11, 1701.71,
1704.01, and 1704.05 of the Revised Code are hereby repealed.
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