model business corporation act

8/10/2019 Model Business Corporation Act

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I. CORPORATIONS

A. MODEL BUSINESS CORPORATION ACT

(with selected Official Comments)

Comments copyright aAmerican Bar Foundation and Lawand Business, Inc. reproduced with permission.

Contents

CHAPTER 1. GENERAL PROVISIONS

SUBCHAPTER A. SHORT TITLE AND RESERVATION OF POWER

Section Page

1.01 Short Title.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT

8 1.02 Reservation of Power to Amend or Repeal. TTTTTTTTTTTTTTTTTTT 8

SUBCHAPTER B. FILING DOCUMENTS

1.20 Requirements for Documents; Extrinsic Facts.TTTTTTTTTTTTTTTT 8

1.21 Forms.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 10 1.22 Filing, Service and Copying Fees.TTTTTTTTTTTTTTTTTTTTTTTTTTTT 11 1.23 Effective Time and Date of Document. TTTTTTTTTTTTTTTTTTTTTTT 12 1.24 Correcting Filed Document.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 12 1.25 Filing Duty of Secretary of State.TTTTTTTTTTTTTTTTTTTTTTTTTTTT 13 1.26 Appeal From Secretary of States Refusal to File Document. TTT 14 1.27 Evidentiary Effect of Copy of Filed Document. TTTTTTTTTTTTTTTT 14 1.28 Certificate of Existence. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 14

1.29 Penalty for Signing False Document. TTTTTTTTTTTTTTTTTTTTTTTT

15SUBCHAPTER C. SECRETARY OF STATE

1.30 Powers. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 15

SUBCHAPTER D. DEFINITIONS

1.40 Act Definitions. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 15

1.41 Notice.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 23 1.42 Number of Shareholders. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 24 1.44 Householding. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 24

CHAPTER 2. INCORPORATION

2.01 Incorporators. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 26

2.02 Articles of Incorporation. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 26 2.03 Incorporation. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 27 2.04 Liability for Preincorporation Transactions. TTTTTTTTTTTTTTTTTT 27 2.05 Organization of Corporation.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 29 2.06 Bylaws. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 30


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Section Page

2.07 Emergency Bylaws. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 30

CHAPTER 3. PURPOSES AND POWERS

3.01 Purposes. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 30

3.02 General Powers. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 31

3.03 Emergency Powers. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 32

3.04 Ultra Vires. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 32

CHAPTER 4. NAME

4.01 Corporate Name. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 33

4.02 Reserved Name. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 34

4.03 Registered Name. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 34

CHAPTER 5. OFFICE AND AGENT

5.01 Registered Office and Registered Agent.TTTTTTTTTTTTTTTTTTTTTT 35

5.02 Change of Registered Office or Registered Agent. TTTTTTTTTTTTT 35

5.03 Resignation of Registered Agent. TTTTTTTTTTTTTTTTTTTTTTTTTTTT 36

5.04 Service on Corporation.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 36

CHAPTER 6. SHARES AND DISTRIBUTIONS

SUBCHAPTER A. SHARES

6.01 Authorized Shares.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 37

6.02 Terms of Class or Series Determined by Board of Directors.TTTT 38

6.03 Issued and Outstanding Shares. TTTTTTTTTTTTTTTTTTTTTTTTTTTTT 38 6.04 Fractional Shares. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 39

SUBCHAPTER B. ISSUANCE OF SHARES

6.20 Subscription for Shares Before Incorporation. TTTTTTTTTTTTTTTT 39

6.21 Issuance of Shares.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 40

6.22 Liability of Shareholders. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 46

6.23 Share Dividends.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 47

6.24 Share Options.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 47

6.25 Form and Content of Certificates. TTTTTTTTTTTTTTTTTTTTTTTTTTT 49

6.26 Shares Without Certificates. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 49

6.27 Restriction on Transfer of Shares and Other Securities. TTTTTTT 50

6.28 Expense of Issue. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 51

SUBCHAPTER C. SUBSEQUENT ACQUISITION OF SHARES BY

SHAREHOLDERS AND CORPORATION

6.30 Shareholders Preemptive Rights. TTTTTTTTTTTTTTTTTTTTTTTTTTT 51

6.31 Corporations Acquisition of Its Own Shares. TTTTTTTTTTTTTTTTT 52


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MODEL BUSINESS CORPORATION ACT

SUBCHAPTER D. DISTRIBUTIONS

Section Page 6.40 Distributions to Shareholders.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 52

CHAPTER 7. SHAREHOLDERS

SUBCHAPTER A. MEETINGS7.01 Annual Meeting. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 60

7.02 Special Meeting. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 60 7.03 CourtOrdered Meeting.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 61 7.04 Action Without Meeting.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 61 7.05 Notice of Meeting. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 63 7.06 Waiver of Notice. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 64 7.07 Record Date. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 64 7.08 Conduct of the Meeting. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 64

SUBCHAPTER B. VOTING

7.20 Shareholders List for Meeting.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 66

7.21 Voting Entitlement of Shares.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 67 7.22 Proxies. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 67 7.23 Shares Held by Nominees. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 68 7.24 Corporations Acceptance of Votes. TTTTTTTTTTTTTTTTTTTTTTTTTT 69 7.25 Quorum and Voting Requirements for Voting Groups.TTTTTTTTT 70 7.26 Action by Single and Multiple Voting Groups. TTTTTTTTTTTTTTTT 70 7.27 Greater Quorum or Voting Requirements.TTTTTTTTTTTTTTTTTTTT 71 7.28 Voting for Directors; Cumulative Voting. TTTTTTTTTTTTTTTTTTTTT 71 7.29 Inspectors of Election.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 71

SUBCHAPTER C. VOTING TRUSTS AND AGREEMENTS7.30 Voting Trusts. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 73

7.31 Voting Agreements. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 73 7.32 Shareholder AgreementsTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 73

SUBCHAPTER D. DERIVATIVE PROCEEDINGS

7.40 Subchapter Definitions TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 82

7.41 Standing TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 83 7.42 DemandTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 84 7.43 Stay of Proceedings TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 86 7.44 Dismissal TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 86 7.45 Discontinuance or SettlementTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 91

7.46 Payment of ExpensesTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT

91 7.47 Applicability to Foreign Corporations TTTTTTTTTTTTTTTTTTTTTTTT 92SUBCHAPTER E. PROCEEDING TO APPOINT CUSTODIAN OR RE-

CEIVER7.48 Shareholder Action to Appoint Custodian or Receiver.TTTTTTTTT 93


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CHAPTER 8. DIRECTORS AND OFFICERS

SUBCHAPTER A. BOARD OF DIRECTORSSection Page 8.01 Requirement for and Functions of Board of Directors. TTTTTTTTT 94 8.02 Qualifications of Directors.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 97 8.03 Number and Election of Directors.TTTTTTTTTTTTTTTTTTTTTTTTTTT 97 8.04 Election of Directors by Certain Classes of Shareholders. TTTTTT 99 8.05 Terms of Directors Generally.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 99 8.06 Staggered Terms for Directors.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 100 8.07 Resignation of Directors. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 101 8.08 Removal of Directors by Shareholders. TTTTTTTTTTTTTTTTTTTTTTT 101 8.09 Removal of Directors by Judicial Proceeding. TTTTTTTTTTTTTTTTT 102 8.10 Vacancy on Board. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 103 8.11 Compensation of Directors. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 104

SUBCHAPTER B. MEETINGS ANDACTION OF THE BOARD

8.20 Meetings. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 104

8.21 Action Without Meeting.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 104 8.22 Notice of Meeting. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 104 8.23 Waiver of Notice. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 105 8.24 Quorum and Voting. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 105 8.25 Committees.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 106

SUBCHAPTER C. DIRECTORS8.30 Standards of Conduct for Directors.TTTTTTTTTTTTTTTTTTTTTTTTTT 109

8.31 Standards of Liability for Directors. TTTTTTTTTTTTTTTTTTTTTTTTT 120 8.33 Directors Liability for Unlawful Distributions. TTTTTTTTTTTTTTT 133

SUBCHAPTER D. OFFICERS

8.40 Officers. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 135

8.41 Functions of Officers. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 136 8.42 Standards of Conduct for Officers.TTTTTTTTTTTTTTTTTTTTTTTTTTT 136 8.43 Resignation and Removal of Officers. TTTTTTTTTTTTTTTTTTTTTTTT 139 8.44 Contract Rights of Officers. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 140

SUBCHAPTER E. INDEMNIFICATION8.50 Subchapter Definitions. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 140

8.51 Permissible Indemnification.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 141 8.52 Mandatory Indemnification. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 146

8.53 Advance for Expenses.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT

147 8.54 CourtOrdered Indemnification and Advance for Expenses.TTTT 148 8.55 Determination and Authorization of Indemnification. TTTTTTTTT 149 8.56 Indemnification of Officers. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 149 8.57 Insurance.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 150 8.58 Variation by Corporate Action; Application of Subchapter.TTTTT 150 8.59 Exclusivity of Subchapter. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 152


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SUBCHAPTER F. DIRECTORS CONFLICTINGINTEREST TRANSACTIONS

Section Page 8.60 Subchapter Definitions TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 156 8.61 Judicial ActionTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 163 8.62 Directors ActionTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 166 8.63 Shareholders Action TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 170

CHAPTER 9. DOMESTICATION AND CONVERSION

SUBCHAPTER A. PRELIMINARY PROVISIONS

9.01 Excluded Transactions TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 174

9.02 Required Approvals [Optional] TTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 174

SUBCHAPTER B. DOMESTICATION

9.20 Domestication TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 174

9.21 Action on a Plan of Domestication TTTTTTTTTTTTTTTTTTTTTTTTTTT 178 9.22 Articles of Domestication TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 181 9.23 Surrender of Charter Upon Domestication TTTTTTTTTTTTTTTTTTT 181 9.24 Effect of DomesticationTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 182 9.25 Abandonment of a DomesticationTTTTTTTTTTTTTTTTTTTTTTTTTTTT 184

SUBCHAPTER C. NONPROFIT CONVERSION

[OMITTED]

SUBCHAPTER D. FOREIGN NONPROFIT DOMESTICATION AND

CONVERSION

[OMITTED]

SUBCHAPTER E. ENTITY CONVERSION

9.50 Entity Conversion Authorized; Definitions TTTTTTTTTTTTTTTTTTT 185

9.51 Plan of Entity Conversion TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 188 9.52 Action on a Plan of Entity Conversion TTTTTTTTTTTTTTTTTTTTTTT 189 9.53 Articles of Entity ConversionTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 192 9.54 Surrender of Charter Upon Conversion TTTTTTTTTTTTTTTTTTTTTT 193 9.55 Effect of Entity Conversion TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 194 9.56 Abandonment of an Entity ConversionTTTTTTTTTTTTTTTTTTTTTTT 195

CHAPTER 10. AMENDMENT OF ARTICLES OF

INCORPORATION AND BYLAWS

SUBCHAPTER A. AMENDMENT OF ARTICLES

OF INCORPORATION

10.01 Authority to Amend. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 19610.02 Amendment Before Issuance of Shares. TTTTTTTTTTTTTTTTTTTTTT 19810.03 Amendment by Board of Directors and Shareholders.TTTTTTTTTT 198


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Section Page

10.04 Voting on Amendments by Voting Groups. TTTTTTTTTTTTTTTTTTT 200

10.05 Amendment by Board of Directors. TTTTTTTTTTTTTTTTTTTTTTTTTT 20310.06 Articles of Amendment. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 204

10.07 Restated Articles of Incorporation.TTTTTTTTTTTTTTTTTTTTTTTTTTT 20510.08 Amendment Pursuant to Reorganization. TTTTTTTTTTTTTTTTTTTT 206

10.09 Effect of Amendment. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 206

SUBCHAPTER B. AMENDMENT OF BYLAWS

10.20 Amendment by Board of Directors or Shareholders. TTTTTTTTTTT 207

10.21 Bylaw Increasing Quorum or Voting Requirement for Directors. 208

10.22 Bylaw Provisions Relating to the Election of Directors. TTTTTTTT 208

CHAPTER 11. MERGER AND SHARE EXCHANGES

11.01 Definitions.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 21211.02 Merger. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 213

11.03 Share Exchange.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 21711.04 Action on a Plan of Merger or Share Exchange.TTTTTTTTTTTTTTT 221

11.05 Merger Between Parent and Subsidiary or Between Subsidiar-

ies. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 225

11.06 Articles of Merger or Share Exchange. TTTTTTTTTTTTTTTTTTTTTTT 226

11.07 Effect of Merger or Share Exchange.TTTTTTTTTTTTTTTTTTTTTTTTT 22711.08 Abandonment of a Merger or Share Exchange.TTTTTTTTTTTTTTTT 230

CHAPTER 12. DISPOSITION OF ASSETS

12.01 Disposition of Assets Not Requiring Shareholder Approval. TTTT 23112.02 Shareholder Approval of Certain Dispositions. TTTTTTTTTTTTTTTT 232

CHAPTER 13. APPRAISAL RIGHTS

SUBCHAPTER A. RIGHT TO APPRAISAL AND

PAYMENT FOR SHARES

13.01 Definitions.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 236

13.02 Right to Appraisal. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 245

13.03 Assertion of Rights by Nominees and Beneficial Owners. TTTTTT 251

SUBCHAPTER B. PROCEDURE FOR EXERCISE OF APPRAISAL

RIGHTS

13.20 Notice of Appraisal Rights.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 25213.21 Notice of Intent to Demand Payment.TTTTTTTTTTTTTTTTTTTTTTTT 25413.22 Appraisal Notice and Form. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 25513.23 Perfection of Rights; Right to Withdraw. TTTTTTTTTTTTTTTTTTTTT 25713.24 Payment. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 25913.25 After-Acquired Shares. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 26013.26 Procedure if Shareholder Dissatisfied With Payment or Offer.TT 262


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SUBCHAPTER C. JUDICIAL APPRAISAL OF SHARES

Section Page13.30 Court Action. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 26213.31 Court Costs and Counsel Expenses.TTTTTTTTTTTTTTTTTTTTTTTTTT 264

SUBCHAPTER D. OTHER REMEDIES13.40 Other Remedies LimitedTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 265

CHAPTER 14. DISSOLUTION

SUBCHAPTER A. VOLUNTARY DISSOLUTION14.01 Dissolution by Incorporators or Initial Directors.TTTTTTTTTTTTTT 26714.02 Dissolution by Board of Directors and Shareholders. TTTTTTTTTT 26814.03 Articles of Dissolution. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 269

14.04 Revocation of Dissolution. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 27014.05 Effect of Dissolution. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 27114.06 Known Claims Against Dissolved Corporation.TTTTTTTTTTTTTTTT 27214.07 Other Claims Against Dissolved Corporation.TTTTTTTTTTTTTTTTT 27414.08 Court Proceedings.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 27414.09 Director Duties. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 276

SUBCHAPTER B. ADMINISTRATIVE DISSOLUTION14.20 Grounds for Administrative Dissolution. TTTTTTTTTTTTTTTTTTTTT 27714.21 Procedure for and Effect of Administrative Dissolution.TTTTTTTT 27714.22 Reinstatement Following Administrative Dissolution. TTTTTTTTT 27814.23 Appeal From Denial of Reinstatement.TTTTTTTTTTTTTTTTTTTTTTT 278

SUBCHAPTER C. JUDICIAL DISSOLUTION

14.30 Grounds for Judicial Dissolution.TTTTTTTTTTTTTTTTTTTTTTTTTTTT 27914.31 Procedure for Judicial Dissolution. TTTTTTTTTTTTTTTTTTTTTTTTTT 28214.32 Receivership or Custodianship.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 28314.33 Decree of Dissolution. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 28414.34 Election to Purchase in Lieu of DissolutionTTTTTTTTTTTTTTTTTTT 284

SUBCHAPTER D. MISCELLANEOUS14.40 Deposit With State Treasurer.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 286

CHAPTER 15. [FOREIGN CORPORATIONSOMITTED]

CHAPTER 16. RECORDS AND REPORTS

SUBCHAPTER A. RECORDS16.01 Corporate Records.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 28616.02 Inspection of Records by Shareholders.TTTTTTTTTTTTTTTTTTTTTTT 28716.03 Scope of Inspection Right. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 28816.04 CourtOrdered Inspection.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 289


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16.05 Inspection of Records by Directors. TTTTTTTTTTTTTTTTTTTTTTTTTT 290

16.06 Exception to Notice Requirement. TTTTTTTTTTTTTTTTTTTTTTTTTTT 291SUBCHAPTER B. REPORTS

16.20 Financial Statements for Shareholders. TTTTTTTTTTTTTTTTTTTTTT 29316.21 Annual Report for Secretary of State.TTTTTTTTTTTTTTTTTTTTTTTT 295

CHAPTER 17. TRANSITION PROVISIONS

17.01 Application to Existing Domestic Corporations. TTTTTTTTTTTTTTT 29617.02 Application to Qualified Foreign Corporations.TTTTTTTTTTTTTTTT 29617.03 Saving Provisions. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 29617.04 Severability.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 29617.05 Repeal. TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 297

17.06 Effective Date.TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 297

CHAPTER 1. GENERAL PROVISIONS

SUBCHAPTER A. SHORT TITLE ANDRESERVATION OF POWER

1.01 Short Title

This Act shall be known and may be cited as the [name of state]Business Corporation Act.

1.02 Reservation of Power to Amend or RepealThe [name of state legislature] has power to amend or repeal all or

part of this Act at any time and all domestic and foreign corporationssubject to this Act are governed by the amendment or repeal.

SUBCHAPTER B. FILING DOCUMENTS

1.20 Requirements for Documents; Extrinsic Facts

(a) A document must satisfy the requirements of this section, and ofany other section that adds to or varies these requirements, to beentitled to filing by the secretary of state.

(b) This Act must require or permit filing the document in the officeof the secretary of state.

(c) The document must contain the information required by thisAct. It may contain other information as well.

(d) The document must be typewritten or printed or, if electronical-ly transmitted, it must be in a format that can be retrieved or repro-duced in typewritten or printed form.


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MODEL BUSINESS CORPORATION ACT 1.20

(e) The document must be in the English language. A corporatename need not be in English if written in English letters or Arabic or

Roman numerals, and the certificate of existence required of foreigncorporations need not be in English if accompanied by a reasonablyauthenticated English translation.

(f) The document must be executed:

(1) by the chairman of the board of directors of a domestic orforeign corporation, by its president, or by another of its officers;

(2) if directors have not been selected or the corporation hasnot been formed, by an incorporator; or

(3) if the corporation is in the hands of a receiver, trustee, orother court-appointed fiduciary, by that fiduciary.

(g) The person executing the document shall sign it and state

beneath or opposite his signature his name and the capacity in which hesigns. The document may but need not contain a corporate seal, attesta-tion, an acknowledgement, or verification.

(h) If the secretary of state has prescribed a mandatory form for thedocument under section 1.21, the document must be in or on theprescribed form.

(i) The document must be delivered to the office of the secretary ofstate for filing. Delivery may be made by electronic transmission if andto the extent permitted by the secretary of state. If it is filed intypewritten or printed form and not transmitted electronically, thesecretary of state may require one exact or conformed copy to bedelivered with the document (except as provided in sections 5.03 and15.09).

(j) When the document is delivered to the office of the secretary ofstate for filing, the correct filing fee, and any franchise tax, license fee,or penalty required to be paid therewith by this Act or other law must bepaid or provision for payment made in a manner permitted by thesecretary of state.

(k) Whenever a provision of this Act permits any of the terms of aplan or a filed document to be dependent on facts objectively ascertain-able outside the plan or filed document, the following provisions apply:

(1) The manner in which the facts will operate upon the termsof the plan or filed document shall be set forth in the plan or fileddocument.

(2) The facts may include, but are not limited to:(i) any of the following that is available in a nationally

recognized news or information medium either in print orelectronically: statistical or market indices, market prices of anysecurity or group of securities, interest rates, currency exchangerates, or similar economic or financial data;


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CORPORATION LAW 1.20

(ii) a determination or action by any person or body, in-cluding the corporation or any other party to a plan or filed

document; or(iii) the terms of, or actions taken under, an agreement to

which the corporation is a party, or any other agreement ordocument.

(3) As used in this subsection:

(i) filed document means a document filed with the sec-retary of state under any provision of this Act except chapter 15or section 16.21; and

(ii) plan means a plan of domestication, nonprofit con-version, entity conversion, merger or share exchange.

(4) The following provisions of a plan or filed document may

not be made dependent on facts outside the plan or filed document:(i) The name and address of any person required in a filed

document.

(ii) The registered office of any entity required in a fileddocument.

(iii) The registered agent of any entity required in a fileddocument.

(iv) The number of authorized shares and designation ofeach class or series of shares.

(v) The effective date of a filed document.

(vi) Any required statement in a filed document of the date

on which the underlying transaction was approved or the man-ner in which that approval was given.

(5) If a provision of a filed document is made dependent on afact ascertainable outside of the filed document, and that fact is notascertainable by reference to a source described in subsection(k)(2)(i) or a document that is a matter of public record, or theaffected shareholders have not received notice of the fact from thecorporation, then the corporation shall file with the secretary ofstate articles of amendment setting forth the fact promptly after thetime when the fact referred to is first ascertainable or thereafterchanges. Articles of amendment under this subsection (k)(5) aredeemed to be authorized by the authorization of the original fileddocument or plan to which they relate and may be filed by the

corporation without further action by the board of directors or theshareholders.

1.21 Forms

(a) The secretary of state may prescribe and furnish on requestforms for: (1) an application for a certificate of existence, (2) a foreign


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corporations application for a certificate of authority to transact busi-ness in this state, (3) a foreign corporations application for a certificate

of withdrawal, and (4) the annual report. If the secretary of state sorequires, use of these forms is mandatory.

(b) The secretary of state may prescribe and furnish on requestforms for other documents required or permitted to be filed by this Actbut their use is not mandatory.

1.22 Filing, Service and Copying Fees

(a) The secretary of state shall collect the following fees when thedocuments described in this subsection are delivered to him for filing:

Document Fee

(1) Articles of incorporation $ .

(2) Application for use of indistinguishablename $ .

(3) Application for reserved name $ . (4) Notice of transfer of reserved name $ . (5) Application for registered name $ . (6) Application for renewal of registered name $ . (7) Corporations statement of change of regis-

tered agent or registered office or both $ . (8) Agents statement of change of registered

office for each affected corporation $ . not to exceed a total of $ .

(9) Agents statement of resignation No fee. (9A) Articles of domestication $ .

(9B) Articles of charter surrender $ . (9C) Articles of nonprofit conversion $ . (9D) Articles of domestication and conversion $ . (9E) Articles of entity conversion $ .(10) Amendment of articles of incorporation $ .(11) Restatement of articles of incorporation $ .

with amendment of articles $ .(12) Articles of merger or share exchange $ .(13) Articles of dissolution $ .(14) Articles of revocation of dissolution $ .(15) Certificate of administrative dissolution No fee.(16) Application for reinstatement following ad-

ministrative dissolution $ .

(17) Certificate of reinstatement No fee.(18) Certificate of judicial dissolution No fee.(19) Application for certificate of authority $ .(20) Application for amended certificate of au-

thority $ .(21) Application for certificate of withdrawal $ .


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Document Fee(21A) Application for transfer of authority $ .

(22) Certificate of revocation of authority totransact business No fee.

(23) Annual report $ .(24) Articles of correction $ .(25) Application for certificate of existence or

authorization $ .(26) Any other document required or permitted

to be filed by this Act. $ .

(b) The secretary of state shall collect a fee of $ each timeprocess is served on him under this Act. The party to a proceedingcausing service of process is entitled to recover this fee as costs if heprevails in the proceeding.

(c) The secretary of state shall collect the following fees for copyingand certifying the copy of any filed document relating to a domestic orforeign corporation:

(1) $ a page for copying; and

(2) $ for the certificate.

1.23 Effective Time and Date of Document

(a) Except as provided in subsection (b) and section 1.24(c), adocument accepted for filing is effective:

(1) at the date and time of filing , as evidenced by such meansas the secretary of state may use for the purpose of recording thedate and time of filing; or

(2) at the time specified in the document as its effective time onthe date it is filed.

(b) A document may specify a delayed effective time and date, and ifit does so the document becomes effective at the time and date specified.If a delayed effective date but no time is specified, the document iseffective at the close of business on that date. A delayed effective date fora document may not be later than the 90th day after the date it is filed.

1.24 Correcting Filed Document

(a) A domestic or foreign corporation may correct a document filedby the secretary of state if (1) the document contains an inaccuracy, or(2) the document was defectively executed, attested, sealed, verified or

acknowledged, or (3) the electronic transmission was defective.(b) A document is corrected:

(1) by preparing articles of correction that

(i) describe the document (including its filing date) or at-tach a copy of it to the articles,


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(ii) specify the inaccuracy or defect to be corrected, and

(iii) correct the inaccuracy or defect; and

(2) by delivering the articles to the secretary of state for filing.

(c) Articles of correction are effective on the effective date of thedocument they correct except as to persons relying on the uncorrecteddocument and adversely affected by the correction. As to those persons,articles of correction are effective when filed.

OFFICIAL COMMENT

Section 1.24 permits making corrections in filed documents without refilingthe entire document or submitting formal articles of amendment. This correctionprocedure has two advantages: (1) filing articles of correction may be lessexpensive than refiling the document or filing articles of amendment, and (2)

articles of correction do not alter the effective date of the underlying documentbeing corrected. Indeed, under section 1.24(c), even the correction relates back tothe original effective date of the document except as to persons relying on theoriginal document and adversely affected by the correction. As to these persons,the effective date of articles of correction is the date the articles are filed.

A document may be corrected either because it contains an inaccuracy orbecause it was defectively executed (including defects in optional forms ofexecution that do not affect the eligibility of the original document for filing). Inaddition, the document may be corrected if the electronic transmission wasdefective. This is intended to cover the situation where an electronic filing ismade but, due to a defect in transmission, the filed document is later discoveredto be inconsistent with the document intended to be filed. If no filing is madebecause of a defect in transmission, articles of correction may not be used tomake a retroactive filing. Therefore, a corporation making an electronic filing

should take steps to confirm that the filing was received by the secretary of state.

A provision in a document setting an effective date (section 1.23) may becorrected under this section, but the corrected effective date must comply withsection 1.23 measured from the date of the original filing of the document beingcorrected, i.e. it cannot be before the date of filing of the document or more than90 days thereafter.

1.25 Filing Duty of Secretary of State

(a) If a document delivered to the office of the secretary of state forfiling satisfies the requirements of section 1.20, the secretary of stateshall file it.

(b) The secretary of state files a document by recording it as filed on

the date and time of receipt. After filing a document, except as providedin sections 5.03 and 15.10, the secretary of state shall deliver to thedomestic or foreign corporation or its representative a copy of thedocument with an acknowledgement of the date and time of filing.

(c) If the secretary of state refuses to file a document, he shallreturn it to the domestic or foreign corporation or its representative


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within five days after the document was delivered, together with a brief,written explanation of the reason for his refusal.

(d) The secretary of states duty to file documents under this sectionis ministerial. His filing or refusing to file a document does not:

(1) affect the validity or invalidity of the document in whole orpart;

(2) relate to the correctness or incorrectness of informationcontained in the document;

(3) create a presumption that the document is valid or invalidor that information contained in the document is correct or incor-rect.

1.26 Appeal From Secretary of States Refusal to File Docu-ment

(a) If the secretary of state refuses to file a document delivered tohis office for filing, the domestic or foreign corporation may appeal therefusal within 30 days after the return of the document to the [name ordescribe] court [of the county where the corporationss principal office(or, if none in this state, its registered office) is or will be located] [of$ county]. The appeal is commenced by petitioning the court tocompel filing the document and by attaching to the petition the docu-ment and the secretary of states explanation of his refusal to file.

(b) The court may summarily order the secretary of state to file thedocument or take other action the court considers appropriate.

(c) The courts final decision may be appealed as in other civilproceedings.

1.27 Evidentiary Effect of Copy of Filed Document

A certificate from the secretary of state delivered with a copy of adocument filed by the secretary of state, is conclusive evidence that theoriginal document is on file with the secretary of state.

OFFICIAL COMMENT

The secretary of state may be requested to certify that a specific documenthas been filed with him upon payment of the fees specified in section 1.22(c).Section 1.27 provides that the certificate is conclusive evidence only that thedocument is on file. The limited effect of the certificate is consistent with theministerial filing obligation imposed on the secretary of state under the ModelAct. The certificate from the secretary of state, as well as the copy of the

document, may be delivered by electronic transmission.

1.28 Certificate of Existence

(a) Anyone may apply to the secretary of state to furnish a certifi-cate of existence for a domestic corporation or a certificate of authoriza-tion for a foreign corporation.


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section 16.21. If an amendment of the articles or any other docu-ment filed under this Act restates the articles in their entirety,

thenceforth the articles shall not include any prior documents.(2) Authorized shares means the shares of all classes a do-

mestic or foreign corporation is authorized to issue.

(3) Conspicuous means so written that a reasonable personagainst whom the writing is to operate should have noticed it. Forexample, printing in italics or boldface or contrasting color, ortyping in capitals or underlined, is conspicuous.

(4) Corporation, domestic corporation or domestic busi-ness corporation means a corporation for profit, which is not aforeign corporation, incorporated under or subject to the provisionsof this Act.

(5) Deliver or delivery means any method of delivery usedin conventional commercial practice, including delivery by hand,mail, commercial delivery, and electronic transmission.

(6) Distribution means a direct or indirect transfer of moneyor other property (except its own shares) or incurrence of indebted-ness by a corporation to or for the benefit of its shareholders inrespect of any of its shares. A distribution may be in the form of adeclaration or payment of a dividend; a purchase, redemption, orother acquisition of shares; a distribution of indebtedness; or other-wise.

(6A) Domestic unincorporated entity means an unincorporat-ed entity whose internal affairs are governed by the laws of thisstate.

(7) Effective date of notice is defined in section 1.41.

(7A) Electronic transmission or electronically transmittedmeans any process of communication not directly involving thephysical transfer of paper that is suitable for the retention, retrieval,and reproduction of information by the recipient.

(7B) Eligible entity means a domestic or foreign unincorpo-rated entity or a domestic or foreign nonprofit corporation.

(7C) Eligible interests means interests or memberships.

(8) Employee includes an officer but not a director. A di-rector may accept duties that make him also an employee.

(9) Entity includes a domestic and foreign business corpora-tion; domestic and foreign nonprofit corporation; estate; trust; do-mestic and foreign unincorporated entity;and state, United States,and foreign government.

(9A) The phrase facts objectively ascertainable outside of afiled document or plan is defined in section 1.20(k).


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(9AA) Expenses means reasonable expenses of any kind thatare incurred in connection with a matter.

(9B) Filing entity means an unincorporated entity that is of atype that is created by filing a public organic document.

(10) Foreign corporation means a corporation incorporatedunder a law other than the law of this state; which would be a

business corporation if incorporated under the laws of this state.

(10A) Foreign nonprofit corporation means a corporation in-corporated under a law other than the law of this state, which wouldbe a nonprofit corporation if incorporated under the laws of thisstate.

(10B) Foreign unincorporated entity means an unincorporat-ed entity whose internal affairs are governed by an organic law of a

jurisdiction other than this state.

(11) Governmental subdivision includes authority, county,district, and municipality.

(12) Includes denotes a partial definition.

(13) Individual means a natural person.

(13A) Interest means either or both of the following rightsunder the organic law of an unincorporated entity:

(i) the right to receive distributions from the entity eitherin the ordinary course or upon liquidation; or

(ii) the right to receive notice or vote on issues involving its

internal affairs, other than as an agent, assignee, proxy orperson responsible for managing its business and affairs.

(13B) Interest holder means a person who holds of record aninterest.

(14) Means denotes an exhaustive definition.

(14A) Membership means the rights of a member in a domes-tic or foreign nonprofit corporation.

(14B) Nonfiling entity means an unincorporated entity thatis of a type that is not created by filing a public organic document.

(14C) Nonprofit corporation or domestic nonprofit corpora-tion means a corporation incorporated under the laws of this state

and subject to the provisions of the [Model Nonprofit CorporationAct].

(15) Notice is defined in section 1.41.

(15A) Organic document means a public organic document ora private organic document.


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(15B) Organic law means the statute governing the internalaffairs of a domestic or foreign business or nonprofit corporation or

unincorporated entity.(15C) Owner liability means personal liability for a debt,

obligation or liability of a domestic or foreign business or nonprofitcorporation or unincorporated entity that is imposed on a person:

(i) solely by reason of the persons status as a shareholder,member or interest holder; or

(ii) by the articles of incorporation, bylaws or an organicdocument under a provision of the organic law of an entityauthorizing the articles of incorporation, bylaws or an organicdocument to make one or more specified shareholders, membersor interest holders liable in their capacity as shareholders,members or interest holders for all or specified debts, obli-

gations or liabilities of the entity.(16) Person includes an individual and an entity.

(17) Principal office means the office (in or out of this state)so designated in the annual report where the principal executiveoffices of a domestic or foreign corporation are located.

(17A) Private organic document means any document (otherthan the public organic document, if any) that determines theinternal governance of an unincorporated entity. Where a privateorganic document has been amended or restated, the term meansthe private organic document as last amended or restated.

(17B) Public organic document means the document, if any,that is filed of public record to create an unincorporated entity.Where a public organic document has been amended or restated, theterm means the public organic document as last amended or re-stated.

(18) Proceeding includes civil suit and criminal, administra-tive, and investigatory action.

(18A) Public corporation means a corporation that has shareslisted on a national securities exchange or regularly traded in amarket maintained by one or more members of a national securitiesassociation.

(19) Record date means the date established under chapter 6or 7 on which a corporation determines the identity of its sharehold-

ers and their shareholdings for purposes of this Act. The determina-tions shall be made as of the close of business on the record dateunless another time for doing so is specified when the record date isfixed.

(20) Secretary means the corporate officer to whom theboard of directors has delegated responsibility under section 8.40(c)


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for custody of the minutes of the meetings of the board of directorsand of the shareholders and for authenticating records of the corpo-

ration.(21) Shareholder means the person in whose name shares are

registered in the records of a corporation or the beneficial owner ofshares to the extent of the rights granted by a nominee certificate onfile with a corporation.

(22) Shares means the units into which the proprietary inter-ests in a corporation are divided.

(22A) Sign or signature includes any manual, facsimile,conformed or electronic signature.

(23) State, when referring to a part of the United States,includes a state and commonwealth (and their agencies and govern-

mental subdivisions) and a territory, and insular possession (andtheir agencies and governmental subdivisions) of the United States.

(24) Subscriber means a person who subscribes for shares ina corporation, whether before or after incorporation.

(24A) Unincorporated entity means an organization or artifi-cial legal person that either has a separate legal existence or has thepower to acquire an estate in real property in its own name and thatis not any of the following: a domestic or foreign business ornonprofit corporation, an estate, a trust, a state, the United States,or a foreign government. The term includes a general partnership,limited liability company, limited partnership, business trust, jointstock association and unincorporated nonprofit association.

(25) United States includes a district, authority, bureau,commission, department, and any other agency of the United States.

(26) Voting group means all shares of one or more classes orseries that under the articles of incorporation or this Act are entitledto vote and be counted together collectively on a matter at a meetingof shareholders. All shares entitled by the articles of incorporationor this Act to vote generally on the matter are for that purpose asingle voting group.

(27) Voting power means the current power to vote in theelection of directors.

OFFICIAL COMMENT

* * *

2. Corporation, Domestic Corporation, Domestic Business Corporation,Foreign Corporation and Foreign Business Corporation

Corporation, domestic corporation, domestic business corporation,foreign corporation, and foreign business corporation are defined in sections


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1.40(4) and (10). The word corporation, when used alone, refers only todomestic corporations. In a few instances, the phrase domestic corporation has

been used in order to contrast it with a foreign corporation. The phrasedomestic business corporation has been used on occasion to contrast it with adomestic nonprofit corporation.

* * *

4. Electronic Transmission

Electronic transmission or electronically transmitted includes bothcommunication systems which in the normal course produce paper, such astelegrams and facsimiles, as well as communication systems which transmit andpermit the retention of data which is then subject to subsequent retrieval andreproduction in written form. Electronic transmission is intended to be broadlyconstrued and include the evolving methods of electronic delivery, includingelectronic transmissions between computers via modem, as well as data storedand delivered on magnetic tapes or computer diskettes. The phrase is not

intended to include voice mail and other similar systems which do not automati-cally provide for the retrieval of data in printed or typewritten form.

5. Entity

The term entity, defined in section 1.40(9), appears in the definition ofperson in section 1.40(16) and is included to cover all types of artificialpersons. Estates and trusts and general partnerships are included even thoughthey may not, in some jurisdictions, be considered artificial persons. Trust, byitself, means a non-business trust, such as a traditional testamentary or intervivos trust.

The term entity is broader than the term unincorporated entity whichis defined in section 1.40(24A). See also the definitions of governmental subdivi-sion in section 1.40(11), state in section 1.40(23), and United States insection 1.40(25).

A form of co-ownership of property or sharing of returns from property thatis not a partnership under the Uniform Partnership Act (1997) will not be anunincorporated entity. In that connection, section 202(c) of the UniformPartnership Act (1997) provides, among other things, that:

In determining whether a partnership is formed, the following rules apply:

(1) Joint tenancy, tenancy in common, tenancy by the entireties, jointproperty, common property, or part ownership does not by itself establish a

partnership, even if the co-owners share profits made by the use of theproperty.

(2) The sharing of gross returns does not by itself establish a partner-ship, even if the persons sharing them have a joint or common right orinterest in property from which the returns are derived.

5.1 Expenses

The Act provides in a number of contexts that expenses relating to aproceeding incurred by a person shall or may be paid by another, throughindemnification or by court order in specific contexts. See sections 7.46, 7.48,

8.50(3), 8.53(a), 13.31(b) and (c), 14.32(e), 16.04(c) and 16.05(c). In all cases, theexpenses must be reasonable in the circumstances. The type or character of the


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expenses is not otherwise limited. Examples include such usual things as fees

and disbursements of counsel, experts of all kinds, and jury and similar litigation

consultants; travel, lodging, transcription, reproduction, photographic, video re-cording, communication, and delivery costs, whether included in the disburse-

ments of counsel, experts, or consultants, or directly incurred; court costs; and

premiums for posting required bonds.

Historically, before the inclusion in section 1.40 of the Act of the definition

of expenses, a number of the affected sections explicitly contained the phraseincluding counsel fees, or similar words, after expenses. The exclusion of

other elements of expenses was not intended in these sections (see the definition

of includes in subsection (12)). With the current universal definition, singling

out this one example of expenses in the statutory text was deemed unnecessaryand stylistically inconsistent. The current formulation, referring to expenses of

any kind and eliminating the example of counsel fees, also more clearly avoids

any possible incorrect negative inference that other elements of expenses, not

specified, might be excluded if one example were specified.

5.2 Membership

Membership is defined in section 1.40(14A) for purposes of this Act to

refer only to the rights of a member in a nonprofit corporation. Although the

owners of a limited liability company are generally referred to as members, for

purposes of this Act they are referred to as interest holders and what they ownin the limited liability company is referred to in this Act as an interest.

5.3 Organic Documents, Public Organic Documents, and Private Organic

Documents

The term organic documents in section 1.40(15A) includes both public

organic documents and private organic documents. The term public organicdocument includes such documents as the certificate of limited partnership of alimited partnership, the articles of organization or certificate of formation of alimited liability company, the deed of trust of a business trust and comparabledocuments, however denominated, that are publicly filed to create other types ofunincorporated entities. An election of limited liability partnership status is notof itself a public organic document because it does not create the underlyinggeneral or limited partnership filing the election, although the election may bemade part of the public organic document of the partnership by its organic law.The term private organic document includes such documents as a partnershipagreement of a general or limited partnership, an operating agreement of alimited liability company and comparable documents, however denominated, ofother types of unincorporated entities.

5.4 Owner Liability

The term owner liability is used in the context of provisions in chapters 9and 11 that preserve the personal liability of shareholders, members, andinterest holders when the entity in which they hold shares, memberships orinterests is the subject of a transaction under those chapters. The term includesonly liabilities that are imposed pursuant to statute on shareholders, members orinterest holders. Liabilities that a shareholder, member or interest holder incursby contract are not included. Thus, for example, if a states business corporationlaw were to make shareholders personally liable for unpaid wages, that liability


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would be an owner liability. If, on the other hand, a shareholder were to

guarantee payment of an obligation of a corporation, that liability would not be

an owner liability. The reason for excluding contractual liabilities from thedefinition of owner liability is because those liabilities are constitutionally

protected from impairment and thus do not need to be separately protected in

chapters 9 and 11.

5.5 Unincorporated Entity

The term unincorporated entity is a subset of the broader term entity.

There is some question as to whether a partnership subject to the Uniform

Partnership Act (1914) is an entity or merely an aggregation of its partners. That

question has been resolved by section 201 of the Uniform Partnership Act (1997),

which makes clear that a general partnership is an entity with its own separate

legal existence. Section 8 of the Uniform Partnership Act (1914) gives partner-

ships subject to it the power to acquire estates in real property and thus such a

partnership will be an unincorporated entity. As a result, all general partner-ships will be unincorporated entities regardless of whether the state in which

they are organized has adopted the new Uniform Partnership Act (1997).

The term unincorporated entity includes limited liability partnerships and

limited liability limited partnerships because those entities are forms of general

partnerships and limited partnerships, respectively, that have made the addition-

al required election claiming that status.

Section 4 of the Uniform Unincorporated Nonprofit Association Act gives an

unincorporated nonprofit association the power to acquire an estate in real

property and thus an unincorporated nonprofit association organized in a state

that has adopted that act will be an unincorporated entity. At common law, an

unincorporated nonprofit association was not a legal entity and did not have the

power to acquire real property. Most states that have not adopted the Uniform

Act have nonetheless modified the common law rule, but states that have not

adopted the Uniform Act should analyze whether they should modify the

definition of unincorporated entity to add an express reference to unincorpo-

rated nonprofit associations.

Business trust includes any trust carrying on a business, such as a

Massachusetts trust, real estate investment trust, or other common law or

statutory business trust. The term unincorporated entity expressly excludes

estates and trusts (i.e., trusts that are not business trusts), whether or not they

would be considered artificial persons under the governing jurisdictions law, to

make it clear that they are not eligible to participate in a conversion under

subchapter E of chapter 9 or a merger or share exchange under chapter 11.

9. Sign

The definition of sign or signature includes manual, facsimile, con-formed or electronic signatures. In this regard, it is intended that any manifesta-

tion of an intention to execute or authenticate a document will be accepted.

Electronic signatures are expected to encompass any methodology approved by

the secretary of state for purposes of verification of the authenticity of the

document. This could include a typewritten conformed signature or other elec-


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tronic entry in the form of a computer data compilation of any characters or

series of characters comprising a name intended to evidence authorization and

execution of a document.

* * *

12. Voting Power

Under section 1.40(27) the term voting power means the current power to

vote in the election of directors. Application of this definition turns on whether

the relevant shares carry the power to vote in the election of directors as of the

time for voting on the relevant transaction. If shares carry the power to vote in

the election of directors only under a certain contingency, as is often the case

with preferred stock, the shares would not carry voting power within the

meaning of section 1.40(27) unless the contingency has occurred, and only during

the period when the voting rights are in effect. Shares that carry the power to

vote for any directors as of the time to vote on the relevant transaction have the

current power to vote in the election of directors within the meaning of section1.40(27) even if the shares do not carry the power to vote for all directors.

1.41 Notice

(a) Notice under this Act must be in writing unless oral notice is

reasonable under the circumstances. Notice by electronic transmission is

written notice.

(b) Notice may be communicated in person; by mail or other method

of delivery; or by telephone, voice mail or other electronic means. If

these forms of personal notice are impracticable, notice may be commu-

nicated by a newspaper of general circulation in the area where publish-

ed, or by radio, television, or other form of public broadcast communica-tion.

(c) Written notice by a domestic or foreign corporation to its share-

holder, if in a comprehensible form, is effective (i) upon deposit in the

United States mail, if mailed postpaid and correctly addressed to the

shareholders address shown in the corporations current record of

shareholders, or (ii) when electronically transmitted to the shareholder

in a manner authorized by the shareholder.

(d) Written notice to a domestic or foreign corporation (authorized

to transact business in this state) may be addressed to its registered

agent at its registered office or to the secretary of the corporation at its

principal office shown in its most recent annual report or, in the case of

a foreign corporation that has not yet delivered an annual report, in itsapplication for a certificate of authority.

(e) Except as provided in subsection (c), written notice, if in a

comprehensible form, is effective at the earliest of the following:

(1) when received;


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(2) five days after its deposit in the United States Mail, ifmailed postpaid and correctly addressed;

(3) on the date shown on the return receipt, if sent by regis-

tered or certified mail, return receipt requested, and the receipt issigned by or on behalf of the addressee.

(f) Oral notice is effective when communicated if communicated in acomprehensible manner.

(g) If this Act prescribes notice requirements for particular circum-stances, those requirements govern. If articles of incorporation or bylawsprescribe notice requirements, not inconsistent with this section or otherprovisions of this Act, those requirements govern.

1.42 Number of Shareholders

(a) For purposes of this Act, the following identified as a sharehold-er in a corporations current record of shareholders constitutes oneshareholder:

(1) three or fewer co-owners;

(2) a corporation, partnership, trust, estate, or other entity;

(3) the trustees, guardians, custodians, or other fiduciaries of asingle trust, estate, or account.

(b) For purposes of this Act, shareholdings registered in substantial-ly similar names constitute one shareholder if it is reasonable to believethat the names represent the same person.

1.44 Householding(a) A corporation has delivered written notice or any other report or

statement under this Act, the articles of incorporation or the bylaws toall shareholders who share a common address if:

(1) The corporation delivers one copy of the notice, report orstatement to the common address;

(2) The corporation addresses the notice, report or statement tothose shareholders either as a group or to each of those shareholdersindividually or to the shareholders in a form to which each of thoseshareholders has consented; and

(3) Each of those shareholders consents to delivery of a single

copy of such notice, report or statement to the shareholders com-mon address.

Any such consent shall be revocable by any of such shareholders whodeliver written notice of revocation to the corporation. If such writtennotice of revocation is delivered, the corporation shall begin providingindividual notices, reports or other statements to the revoking share-


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holder no later than 30 days after delivery of the written notice of

revocation.

(b) Any shareholder who fails to object by written notice to thecorporation, within 60 days of written notice by the corporation of its

intention to send single copies of notices, reports or statements toshareholders who share a common address as permitted by subsection(a), shall be deemed to have consented to receiving such single copy atthe common address.

OFFICIAL COMMENT

The proxy rules under the Securities Exchange Act of 1934 permit publicly

held corporations to meet their obligation to deliver proxy statements and annual

reports to shareholders who share a common address by delivery of a single copy

of such materials to the common address under certain conditions. See 17 C.F.R. 240.14a3(e). This practice is known as householding. This section permits a

corporation comparable flexibility to household the written notice of shareholder

meetings as well as any other written notices, reports or statements required to

be delivered to shareholders under the Act, the corporations articles of incorpo-

ration or the corporations bylaws. Ability to household such notices, reports or

statements would not, of course, eliminate the practical necessity of delivering to

a common address sufficient copies of any accompanying document requiring

individual shareholder signature or other action, such as a proxy card or consent.

In order to meet the conditions of subsection (a), the written notice, report

or statement must be delivered to the common address. Address means a street

address, a post office box number, an electronic mail address, a facsimile

telephone number or another similar destination to which paper or electronic

transmission may be sent. The written notice, report or statement must also be

addressed to the shareholders who share that address either as a group (e.g.,

ABC Corporation Shareholders, Jane Doe and Household, or the Smith

Family) or to each of the shareholders individually (e.g., John Doe and Richard

Jones). Such shareholders must consent specifically to being addressed in any

other way than as a group or individually Finally, each shareholder at the

common address must have consented to household delivery either affirmatively

or implicitly by failure to object to the notice by the corporation permitted in

subsection (b). Affirmative consent may be by any reasonable means of written

or oral communication to the corporation or its agent. Implicit consent may only

be given by means of the notice permitted in subsection (b).

Whether consent is explicit or implicit, it is revocable at any time by a

shareholder by written notice delivered to the corporation. If such written notice

of revocation is delivered, the corporation shall provide individual notices,

reports or other statements to the revoking shareholder beginning no later than

30 days after delivery of the written revocation to the corporation.

In order to be effective, the written notice of intention to household notices,

reports or other statements permitted by subsection (b) must explain that

affirmative or implied consent may be revoked and the method for revoking.


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CHAPTER 2. INCORPORATION

2.01 IncorporatorsOne or more persons may act as the incorporator or incorporators of

a corporation by delivering articles of incorporation to the secretary ofstate for filing.

2.02 Articles of Incorporation

(a) The articles of incorporation must set forth:

(1) a corporate name for the corporation that satisfies therequirements of section 4.01;

(2) the number of shares the corporation is authorized to issue;

(3) the street address of the corporations initial registered

office and the name of its initial registered agent at that office; and

(4) the name and address of each incorporator.

(b) The articles of incorporation may set forth:

(1) the names and addresses of the individuals who are to serveas the initial directors;

(2) provisions not inconsistent with law regarding:

(i) the purpose or purposes for which the corporation isorganized;

(ii) managing the business and regulating the affairs of thecorporation;

(iii) defining, limiting, and regulating the powers of thecorporation, its board of directors, and shareholders;

(iv) a par value for authorized shares or classes of shares;

(v) the imposition of personal liability on shareholders forthe debts of the corporation to a specified extent and uponspecified conditions;

(3) any provision that under this Act is required or permitted tobe set forth in the bylaws;

(4) a provision eliminating or limiting the liability of a directorto the corporation or its shareholders for money damages for anyaction taken, or any failure to take any action, as a director, except

liability for (A) the amount of a financial benefit received by adirector to which he is not entitled; (B) an intentional infliction ofharm on the corporation or the shareholders; (C) a violation ofsection 8.33; or (D) an intentional violation of criminal law; and

(5) a provision permitting or making obligatory indemnificationof a director for liability (as defined in section 8.50(5)) to any person


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for any action taken, or any failure to take any action, as a directorexcept liability for (A) receipt of a financial benefit to which he is

not entitled, (B) an intentional infliction of harm on the corporationor its shareholders, (C) a violation of section 8.33, or (D) anintentional violation of criminal law.

(c) The articles of incorporation need not set forth any of thecorporate powers enumerated in this Act.

(d) Provisions of the articles of incorporation may be made depen-dent upon facts objectively ascertainable outside the articles of incorpo-ration in accordance with section 1.20(k).

2.03 Incorporation

(a) Unless a delayed effective date is specified, the corporate exis-tence begins when the articles of incorporation are filed.

(b) The secretary of states filing of the articles of incorporation isconclusive proof that the incorporators satisfied all conditions precedentto incorporation except in a proceeding by the state to cancel or revokethe incorporation or involuntarily dissolve the corporation.

2.04 Liability for Preincorporation Transactions

All persons purporting to act as or on behalf of a corporation,knowing there was no incorporation under this Act, are jointly andseverally liable for all liabilities created while so acting.

OFFICIAL COMMENT

Earlier versions of the Model Act, and the statutes of many states, have longprovided that corporate existence begins only with the acceptance of articles ofincorporation by the secretary of state. Many states also have statutes thatprovide expressly that those who prematurely act as or on behalf of a corporationare personally liable on all transactions entered into or liabilities incurred beforeincorporation. A review of recent case law indicates, however, that even in stateswith such statutes courts have continued to rely on common law concepts of defacto corporations, de jure corporations, and corporations by estoppel thatprovide uncertain protection against liability for preincorporation transactions.These cases caused a review of the underlying policies represented in earlierversions of the Model Act and the adoption of a slightly more flexible or relaxedstandard.

Incorporation under modern statutes is so simple and inexpensive that astrong argument may be made that nothing short of filing articles of incorpo-

ration should create the privilege of limited liability. A number of situations havearisen, however, in which the protection of limited liability arguably should berecognized even though the simple incorporation process established by modernstatutes has not been completed.

(1) The strongest factual pattern for immunizing participants frompersonal liability occurs in cases in which the participant honestly and


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reasonably but erroneously believed the articles had been filed. In Cransonv. International Business Machines Corp., 234 Md. 477, 200 A.2d 33 (1964),

for example, the defendant had been shown executed articles of incorpo-ration some months earlier before he invested in the corporation and becamean officer and director. He was also told by the corporations attorney thatthe articles had been filed, but in fact they had not been filed because of amix-up in the attorneys office. The defendant was held not liable on thecorporate obligation.

(2) Another class of cases, which is less compelling but in which theparticipants sometimes have escaped personal liability, involves the defen-dant who mails in articles of incorporation and then enters into a transac-tion in the corporate name; the letter is either delayed or the secretary ofstates office refuses to file the articles after receiving them or returns themfor correction. E.g., Cantor v. Sunshine Greenery, Inc., 165 N.J.Super. 411,398 A.2d 571 (1979). Many state filing agencies adopt the practice of treatingthe date of receipt as the date of issuance of the certificate even though

delays and the review process may result in the certificate being backdated.The finding of nonliability in cases of this second type can be considered anextension of this principle by treating the date of original mailing or originalfiling as the date of incorporation.

(3) A third class of cases in which the participants sometimes haveescaped personal liability involves situations where the third person hasurged immediate execution of the contract in the corporate name eventhough he knows that the other party has not taken any steps towardincorporating. E.g., Quaker Hill v. Parr, 148 Colo. 45, 364 P.2d 1056 (1961).

(4) In another class of cases the defendant has represented that acorporation exists and entered into a contract in the corporate name whenhe knows that no corporation has been formed, either because no attempthas been made to file articles of incorporation or because he has already

received rejected articles of incorporation from the filing agency. In thesecases, the third person has dealt solely with the corporation and has notrelied on the personal assets of the defendant. The imposition of personalliability in this class of cases, it has sometimes been argued, gives theplaintiff more than he originally bargained for. On the other hand, torecognize limited liability in this situation threatens to undermine theincorporation process, since one then may obtain limited liability by consis-tently conducting business in the corporate name. Most courts have imposedpersonal liability in this situation. E.g., Robertson v. Levy, 197 A.2d 443(D.C.App.1964).

(5) A final class of cases involves inactive investors who provide funds toa promoter with the instruction, Dont start doing business until youincorporate. After the promoter does start business without incorporating,attempts have been made, sometimes unsuccessfully, to hold the investorsliable as partners. E.g., Frontier Refining Co. v. Kunkels, Inc., 407 P.2d 880(Wyo.1965). One case held that the language of section 146 of the 1969Model Act [persons who assume to act as a corporation are liable forpreincorporation transactions] creates a distinction between active andinactive participants, makes only the former liable as partners, and therefore

relieves the latter of personal liability. Nevertheless, active participation


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(c) An organizational meeting may be held in or out of this state.

2.06 Bylaws

(a) The incorporators or board of directors of a corporation shalladopt initial bylaws for the corporation.

(b) The bylaws of a corporation may contain any provision formanaging the business and regulating the affairs of the corporation thatis not inconsistent with law or the articles of incorporation.

2.07 Emergency Bylaws

(a) Unless the articles of incorporation provide otherwise, the boardof directors of a corporation may adopt bylaws to be effective only in anemergency defined in subsection (d). The emergency bylaws, which are

subject to amendment or repeal by the shareholders, may make allprovisions necessary for managing the corporation during the emergen-cy, including:

(1) procedures for calling a meeting of the board of directors;

(2) quorum requirements for the meeting; and

(3) designation of additional or substitute directors.

(b) All provisions of the regular bylaws consistent with the emer-gency bylaws remain effective during the emergency. The emergencybylaws are not effective after the emergency ends.

(c) Corporate action taken in good faith in accordance with theemergency bylaws:

(1) binds the corporation; and

(2) may not be used to impose liability on a corporate director,officer, employee, or agent.

(d) An emergency exists for purposes of this section if a quorum ofthe corporations directors cannot readily be assembled because of somecatastrophic event.

CHAPTER 3. PURPOSES AND POWERS

3.01 Purposes

(a) Every corporation incorporated under this Act has the purpose

of engaging in any lawful business unless a more limited purpose is set

forth in the articles of incorporation.

(b) A corporation engaging in a business that is subject to regula-

tion under another statute of this state may incorporate under this Act

only if permitted by, and subject to all limitations of, the other statute.


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3.02 General Powers

Unless its articles of incorporation provide otherwise, every corpora-tion has perpetual duration and succession in its corporate name and hasthe same powers as an individual to do all things necessary or conve-nient to carry out its business and affairs, including without limitationpower:

(1) to sue and be sued, complain and defend in its corporatename;

(2) to have a corporate seal, which may be altered at will, andto use it, or a facsimile of it, by impressing or affixing it or in anyother manner reproducing it;

(3) to make and amend bylaws, not inconsistent with its articlesof incorporation or with the laws of this state, for managing the

business and regulating the affairs of the corporation;(4) to purchase, receive, lease, or otherwise acquire, and own,

hold, improve, use, and otherwise deal with, real or personal proper-ty, or any legal or equitable interest in property, wherever located;

(5) to sell, convey, mortgage, pledge, lease, exchange, and other-wise dispose of all or any part of its property;

(6) to purchase, receive, subscribe for, or otherwise acquire;own, hold, vote, use, sell, mortgage, lend, pledge, or otherwisedispose of; and deal in and with shares or other interests in, orobligations of, any other entity;

(7) to make contracts and guarantees, incur liabilities, borrow

money, issue its notes, bonds, and other obligations, (which may beconvertible into or include the option to purchase other securities ofthe corporation), and secure any of its obligations by mortgage orpledge of any of its property, franchises, or income;

(8) to lend money, invest and reinvest its funds, and receive andhold real and personal property as security for repayment;

(9) to be a promoter, partner, member, associate, or manager ofany partnership, joint venture, trust, or other entity;

(10) to conduct its business, locate offices, and exercise thepowers granted by this Act within or without this state;

(11) to elect directors and appoint officers, employees, and

agents of the corporation, define their duties, fix their compensation,and lend them money and credit;

(12) to pay pensions and establish pension plans, pensiontrusts, profit sharing plans, share bonus plans, share option plans,and benefit or incentive plans for any or all of its current or formerdirectors, officers, employees, and agents;


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(13) to make donations for the public welfare or for charitable,scientific, or educational purposes;

(14) to transact any lawful business that will aid governmentalpolicy;

(15) to make payments or donations, or do any other act, not

inconsistent with law, that furthers the business and affairs of thecorporation.

3.03 Emergency Powers

(a) In anticipation of or during an emergency defined in subsection(d), the board of directors of a corporation may:

(1) modify lines of succession to accommodate the incapacity of

any director, officer, employee, or agent; and

(2) relocate the principal office, designate alternative principaloffices or regional offices, or authorize the officers to do so.

(b) During an emergency defined in subsection (d), unless emergen-cy bylaws provide otherwise:

(1) notice of a meeting of the board of directors need be givenonly to those directors whom it is practicable to reach and may begiven in any practicable manner, including by publication and radio;and

(2) one or more officers of the corporation present at a meetingof the board of directors may be deemed to be directors for themeeting, in order of rank and within the same rank in order ofseniority, as necessary to achieve a quorum.

(c) Corporate action taken in good faith during an emergency underthis section to further the ordinary business affairs of the corporation:

(1) binds the corporation; and

(2) may not be used to impose liability on a corporate director,officer, employee, or agent.

(d) An emergency exists for purposes of this section if a quorum ofthe corporations directors cannot readily be assembled because of somecatastrophic event.

3.04 Ultra Vires

(a) Except as provided in subsection (b), the validity of corporate

action may not be challenged on the ground that the corporation lacks orlacked power to act.

(b) A corporations power to act may be challenged:

(1) in a proceeding by a shareholder against the corporation toenjoin the act;


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(2) in a proceeding by the corporation, directly, derivatively, orthrough a receiver, trustee, or other legal representative, against an

incumbent or former director, officer, employee, or agent of thecorporation; or

(3) in a proceeding by the Attorney General under section14.30.

(c) In a shareholders proceeding under subsection (b)(1) to enjoinan unauthorized corporate act, the court may enjoin or set aside the act,if equitable and if all affected persons are parties to the proceeding, andmay award damages for loss (other than anticipated profits) suffered bythe corporation or another party because of enjoining the unauthorizedact.

CHAPTER 4. NAME

4.01 Corporate Name

(a) A corporate name:

(1) must contain the word corporation, incorporated,company, or limited, or the abbreviation corp., inc., co.,or ltd., or words or abbreviations of like import in anotherlanguage; and

(2) may not contain language stating or implying that thecorporation is organized for a purpose other than that permitted bysection 3.01 and its articles of incorporation.

(b) Except as authorized by subsections (c) and (d), a corporate

name must be distinguishable upon the records of the secretary of statefrom:

(1) the corporate name of a corporation incorporated or author-ized to transact business in this state;

(2) a corporate name reserved or registered under section 4.02or 4.03;

(3) the fictitious name adopted by a foreign corporation author-ized to transact business in this state because its real name isunavailable; and

(4) the corporate name of a not-for-profit corporation incorpo-rated or authorized to transact business in this state.

(c) A corporation may apply to the secretary of state for authoriza-tion to use a name that is not distinguishable upon his records from oneor more of the names described in subsection (b). The secretary of stateshall authorize use of the name applied for if:

(1) the other corporation consents to the use in writing andsubmits an undertaking in form satisfactory to the secretary of state


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to change its name to a name that is distinguishable upon therecords of the secretary of state from the name of the applying

corporation; or(2) the applicant delivers to the secretary of state a certified

copy of the final judgment of a court of competent jurisdictionestablishing the applicants right to use the name applied for in this

state.

(d) A corporation may use the name (including the fictitious name)of another domestic or foreign corporation that is used in this state if theother corporation is incorporated or authorized to transact business inthis state and the proposed user corporation:

(1) has merged with the other corporation;

(2) has been formed by reorganization of the other corporation;

or(3) has acquired all or substantially all of the assets, including

the corporate name, of the other corporation.

(e) This Act does not control the use of fictitious names.

4.02 Reserved Name

(a) A person may reserve the exclusive use of a corporate name,including a fictitious name for a foreign corporation whose corporatename is not available, by delivering an application to the secretary ofstate for filing. The application must set forth the name and address ofthe applicant and the name proposed to be reserved. If the secretary ofstate finds that the corporate name applied for is available, he shall

reserve the name for the applicants exclusive use for a nonrenewable120day period.

(b) The owner of a reserved corporate name may transfer thereservation to another person by delivering to the secretary of state asigned notice of the transfer that states the name and address of thetransferee.

4.03 Registered Name

(a) A foreign corporation may register its corporate name, or itscorporate name with any addition required by section 15.06, if the nameis distinguishable upon the records of the secretary of state from thecorporate names that are not available under section 4.01(b).

(b) A foreign corporation registers its corporate name, or its corpo-rate name with any addition required by section 15.06, by delivering tothe secretary of state for filing an application:

(1) setting forth its corporate name, or its corporate name withany addition required by section 15.06, the state or country and date


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of its incorporation, and a brief description of the nature of thebusiness in which it is engaged; and

(2) accompanied by a certificate of existence (or a document ofsimilar import) from the state or country of incorporation.

(c) The name is registered for the applicants exclusive use upon theeffective date of the application.

(d) A foreign corporation whose registration is effective may renewit for successive years by delivering to the secretary of state for filing arenewal application, which complies with the requirements of subsection(b), between October 1 and December 31 of the preceding year. Therenewal application renews the registration for the following calendaryear.

(e) A foreign corporation whose registration is effective may thereaf-

ter qualify as a foreign corporation under the registered name or consentin writing to the use of that name by a corporation thereafter incorporat-ed under this Act or by another foreign corporation thereafter author-ized to transact business in this state. The registration terminates whenthe domestic corporation is incorporated or the foreign corporationqualifies or consents to the qualification of another foreign corporationunder the registered name.

CHAPTER 5. OFFICE AND AGENT

5.01 Registered Office and Registered Agent

Each corporation must continuously maintain in this state:

(1) a registered office that may be the same as any of its placesof business; and

(2) a registered agent, who may be:

(i) an individual who resides in this state and whose busi-ness office is identical with the registered office;

(ii) a domestic corporation or not-for-profit domestic corpo-ration whose business office is identical with the registeredoffice; or

(iii) a foreign corporation or not-for-profit foreign corpora-tion authorized to transact business in this state whose businessoffice is identical with the registered office.

5.02 Change of Registered Office or Registered Agent

(a) A corporation may change its registered office or registeredagent by delivering to the secretary of state for filing a statement ofchange that sets forth:

(1) the name of the corporation,


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(2) the street address of its current registered office;

(3) if the current registered office is to be changed, the street

address of the new registered office;

(4) the name of its current registered agent;

(5) if the current registered agent is to be changed, the name ofthe new registered agent and the new agents written consent(either on the statement or attached to it) to the appointment; and

(6) that after the change or changes are made, the streetaddresses of its registered office and the business office of itsregistered agent will be identical.

(b) If a registered agent changes the street address of his businessoffice, he may change the street address of the registered office of anycorporation for which he is the registered agent by notifying the corpora-

tion in writing of the change and signing (either manually or in facsimi-le) and delivering to the secretary of state for filing a statement thatcomplies with the requirements of subsection (a) and recites that thecorporation has been notified of the change.

5.03 Resignation of Registered Agent

(a) A registered agent may resign his agency appointment by sign-ing and delivering to the secretary of state for filing the signed originaland two exact or conformed copies of a statement of resignation. Thestatement may include a statement that the registered office is alsodiscontinued.

(b) After filing the statement the secretary of state shall mail onecopy to the registered office (if not discontinued) and the other copy to

the corporation at its principal office.

(c) The agency appointment is terminated, and the registered officediscontinued if so provided, on the 31st day after the date on which thestatement was filed.

5.04 Service on Corporation

(a) A corporations registered agent is the corporations agent forservice of process, notice, or demand required or permitted by law to beserved on the corporation.

(b) If a corporation has no registered agent, or the agent cannotwith reasonable diligence be served, the corporation may be served byregistered or certified mail, return receipt requested, addressed to the

secretary of the corporation at its principal office. Service is perfectedunder this subsection at the earliest of:

(1) the date the corporation receives the mail;

(2) the date shown on the return receipt, if signed on behalf ofthe corporation; or


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(3) five days after its deposit in the United States Mail, asevidenced by the postmark, if mailed postpaid and correctly ad-

dressed.(c) This section does not prescribe the only means, or necessarily

the required means, of serving a corporation.

CHAPTER 6. SHARES AND DISTRIBUTIONS

SUBCHAPTER A. SHARES

6.01 Authorized Shares

(a) The articles of incorporation must set forth any classes of sharesand series of shares within a class, and the number of shares of eachclass and