6277-S

AN ACT Relating to corporations; amending RCW 24.03.030, 24.03.070, 24.03.265, 23B.08.080, 24.06.095, 24.06.110, 24.06.245, and 24.06.300; and adding a new section to chapter 24.06 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. RCW 24.03.030 and 1986 c 240 s 4 are each amended to read as follows:

A corporation subject to this chapter:

(1) Shall not have or issue shares of stock;

(2) Shall not make any disbursement of income to its members, directors, or officers;

(3) Shall not loan money or credit to its officers or directors;

(4) May pay compensation in a reasonable amount to its members, directors, or officers for services rendered;

(5) May confer benefits upon its members in conformity with its purposes; ((~~and~~))

(6) That has the authority through its articles of incorporation and bylaws to make and collect assessments on members where ownership of property is a condition of membership in the corporation or association or where the assessments are based on the value of all or part of the real property owned by members of the corporation, shall not make the assessments except where the assessments are approved by a majority vote of the members at an annual or special meeting held under RCW 24.03.075 and to which notice of the intent to adopt an assessment has been delivered to all of the members, who are entitled to vote, not less than ten days nor more than fifty days before the date of the meeting either personally or by mail; and

(7) Upon dissolution or final liquidation may make distributions to its members as permitted by this chapter, and no such payment, benefit, or distribution shall be deemed to be a dividend or a distribution of income.

Sec. 2. RCW 24.03.070 and 1991 c 72 s 43 are each amended to read as follows:

The initial bylaws of a corporation shall be adopted by its board of directors. The power to alter, amend, or repeal the bylaws or adopt new bylaws shall be vested in the board of directors unless otherwise provided in the articles of incorporation or the bylaws. The bylaws may contain any provisions for the regulation and management of the affairs of a corporation not inconsistent with law or the articles of incorporation. The bylaws of any corporation that has the authority through its articles of incorporation to make and collect assessments on members where ownership of property is a condition of membership in the corporation or association or where the assessments are based on the value of all or part of the real property owned by members of the corporation, shall include provisions, consistent with RCW 24.03.030(6), for voting on the assessments and notice of the annual or special meetings at which the assessments are to be considered and approved. The board may adopt emergency bylaws in the manner provided by RCW 23B.02.070.

Sec. 3. RCW 24.03.265 and 1986 c 240 s 39 are each amended to read as follows:

Superior courts shall have full power to liquidate the assets and affairs of a corporation:

(1) In an action by a member, director, or the attorney general when it is made to appear:

(a) That the directors are deadlocked in the management of the corporate affairs and that irreparable injury to the corporation is being suffered or is threatened by reason thereof, and either that the members are unable to break the deadlock or there are no members having voting rights; or

(b) That the acts of the directors or those in control of the corporation are illegal, oppressive or fraudulent; or

(d) A corporation has made, collected, or attempted to collect assessments on members where ownership of property is a condition of membership in the corporation or association or where the assessments are based on the value of all or part of the real property owned by members of the corporation without an express authority to make the assessments in its articles of incorporation or without proper notice or approval as required under RCW 24.03.030 and 24.03.080 or in violation of the provisions of its bylaws; or

(e) That the corporation is unable to carry out its purposes.

(2) In an action by a creditor:

(a) When the claim of the creditor has been reduced to judgment and an execution thereon has been returned unsatisfied and it is established that the corporation is insolvent; or

(b) When the corporation has admitted in writing that the claim of the creditor is due and owing and it is established that the corporation is insolvent.

(3) Upon application by a corporation to have its dissolution continued under the supervision of the court.

(4) When an action has been filed by the attorney general to dissolve a corporation under the provisions of this chapter and it is established that liquidation of its affairs should precede the entry of a decree of dissolution.

Proceedings under subsections (1), (2), or (3) of this section shall be brought in the county in which the registered office or the principal office of the corporation is situated.

It shall not be necessary to make directors or members parties to any ((~~such~~)) action or proceedings unless relief is sought against them personally.

Sec. 4. RCW 23B.08.080 and 1989 c 165 s 87 are each amended to read as follows:

(1) The shareholders may remove one or more directors with or without cause unless the articles of incorporation provide that directors may be removed only for cause.

(2) If a director is elected by holders of one or more authorized classes or series of shares, only the holders of those classes or series of shares may participate in the vote to remove the director.

(3) If cumulative voting is authorized, ((a)) and if less than the entire board is to be removed, no director may ((~~not~~)) be removed if the number of votes sufficient to elect the director under cumulative voting is voted against the director's removal. If cumulative voting is not authorized, a director may be removed only if the number of votes cast to remove the director exceeds the number of votes cast not to remove the director.

(4) A director may be removed by the shareholders only at a special meeting called for the purpose of removing the director and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director.

NEW SECTION. Sec. 5. A new section is added to chapter 24.06 RCW to read as follows:

A corporation or association subject to this chapter that has the authority through its articles of incorporation and bylaws to make and collect assessments on members where ownership of property is a condition of membership in the corporation or association or where the assessments are based on the value of all or part of the real property owned by members shall not make the assessments except where the assessments are approved by a majority vote of the members at an annual or special meeting held under RCW 24.06.100 and to which notice of the intent to adopt an assessment has been delivered to all of the members, who are entitled to vote, not less than ten days nor more than fifty days before the date of the meeting either personally or by mail.

Sec. 6. RCW 24.06.095 and 1970 ex.s. c 78 s 1 are each amended to read as follows:

The initial bylaws of a corporation shall be adopted by its board of directors. The power to alter, amend or repeal the bylaws or adopt new bylaws shall be vested in the board of directors unless otherwise provided in the articles of incorporation or the bylaws. The bylaws may contain any provisions for the regulation and management of the affairs of a corporation not inconsistent with law or the articles of incorporation((~~: PROVIDED, That~~)). Where the bylaws of an existing corporation prohibit voting by mail or by proxy or attorney-in-fact, and the quorum required by its bylaws for election of directors or transaction of other business has not been obtained at a shareholders' or members' meeting, for a period which includes at least two consecutive annual meeting dates, the board of directors shall have power to amend such bylaws to thereafter authorize voting by mail or by proxy or attorney-in-fact. The bylaws of any corporation that has the authority through its articles of incorporation to make and collect assessments on members where ownership of property is a condition of membership in the corporation or association or where the assessments are based on the value of all or part of the real property owned by members shall include provisions, consistent with section 5 of this act, for voting on the assessments and notice of the annual or special meetings at which the assessments are to be considered and acted upon.

Sec. 7. RCW 24.06.110 and 1969 ex.s. c 120 s 22 are each amended to read as follows:

The right of a class or classes of members or shareholders to vote may be limited, enlarged or denied to the extent specified in the articles of incorporation. Unless so limited, enlarged or denied, each member and each outstanding share of each class shall be entitled to one vote on each matter submitted to a vote of members or shareholders. No member of a class may acquire any interest which will entitle him to a greater vote than any other member of the same class.

A member or shareholder may vote in person or, unless the articles of incorporation or the bylaws otherwise provide, may vote by mail or by proxy executed in writing by the member or shareholder or by his duly authorized attorney-in-fact: PROVIDED, That no proxy shall be valid for more than eleven months from the date of its execution unless otherwise specified in the proxy.

The articles of incorporation may provide that whenever proposals or directors or officers are to be voted upon, such vote may be taken by mail if the name of each candidate and the text of each proposal to be so voted upon are set forth in a writing accompanying or contained in the notice of meeting. Persons voting by mail shall be deemed present for all purposes of quorum, count of votes and percentages of total voting power voting.

The articles of incorporation or the bylaws may provide that in all elections for directors every person entitled to vote shall have the right to cumulate his vote and to give one candidate a number of votes equal to his vote multiplied by the number of directors to be elected, or by distributing such votes on the same principle among any number of such candidates.

The articles of incorporation or the bylaws shall provide that whenever proposals to make and collect assessments are to be voted upon, the assessments must be approved by a majority vote of the members.

Sec. 8. RCW 24.06.245 and 1969 ex.s. c 120 s 49 are each amended to read as follows:

Any member or shareholder of a corporation shall have the right to dissent from any of the following corporate actions:

(1) Any plan of merger or consolidation to which the corporation is a party; or

(2) Any sale or exchange of all or substantially all of the property and assets of the corporation not made in the usual and regular course of its business, including a sale in dissolution, but not including a sale pursuant to an order of a court having jurisdiction in the premises or a sale for cash on terms requiring that all or substantially all of the net proceeds of sale be distributed to the shareholders in accordance with their respective interests within one year after the date of sale; or

(3) Any amendment to the articles of incorporation which changes voting or property rights of members or shareholders other than by changing the number of memberships or shares or classes of either thereof; or

(4) Any amendment to the articles of incorporation which reorganizes a corporation under the provisions of this chapter; or

(5) Any assessments on members where ownership of property is a condition of membership in the corporation or association or where the assessments are based on the value of all or part of the real property owned by members.

The provisions of this section shall not apply to the members or shareholders of the surviving corporation in a merger if such corporation is on the date of the filing of the articles of merger the owner of all the outstanding shares of the other corporations, domestic or foreign, which are parties to the merger, or if a vote of the members and shareholders of such corporation is not necessary to authorize such merger.

Sec. 9. RCW 24.06.300 and 1969 ex.s. c 120 s 60 are each amended to read as follows:

The superior court shall have full power to liquidate the assets and to provide for the dissolution of a corporation when:

(1) In any action by a member, shareholder or director it is made to appear that:

(a) The directors are deadlocked in the management of the corporate affairs and that irreparable injury to the corporation is being suffered or is threatened by reason thereof, and that the members or shareholders are unable to break the deadlock; or

(b) The acts of the directors or those in control of the corporation are illegal, oppressive, or fraudulent; or

(d) The corporation is unable to carry out its purposes; or

(e) The shareholders have failed, for a period which includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired or would have expired upon the election of their successors; or

(f) The corporation has made, collected, or attempted to collect assessments on members where ownership of property is a condition of membership in the corporation or association or where the assessments are based on the value of all or part of the real property owned by members without an express authority to make the assessments in its articles of incorporation or without proper notice or approval as required under section 5 of this act and RCW 24.06.105 or in violation of the provisions of its bylaws.

(2) In an action by a creditor:

(a) The claim of the creditor has been reduced to judgment and an execution thereon has been returned unsatisfied, and it is established that the corporation is insolvent; or

(b) The corporation has admitted in writing that the claim of the creditor is due and owing, and it is established that the corporation is insolvent.

(3) A corporation applies to have its dissolution continued under the supervision of the court.

(4) An action has been filed by the attorney general to dissolve the corporation and it is established that liquidation of its affairs should precede the entry of a decree of dissolution.

Proceedings under subsections (1), (2) or (3) of this section shall be brought in the county in which the registered office or the principal office of the corporation is situated.

It shall not be necessary to make directors, members or shareholders party to any such action or proceedings unless relief is sought against them personally.