AN ACT Relating to
amending provisions regarding significant business transactions in the
Washington business corporation act; amending RCW 23B.19.020, 23B.19.030,
23B.19.040, 23B.01.400, and 23B.02.020; and repealing RCW 23B.17.020.
BE IT ENACTED BY THE LEGISLATURE
OF THE STATE OF WASHINGTON:
Sec. 1. RCW 23B.19.020 and 1989
c 165 s 198 are each amended to read as follows:
The definitions in this
section apply throughout this chapter.
(1) "Acquiring
person" means a person or group of persons, other than the target
corporation or a subsidiary of the target corporation, who beneficially owns
ten percent or more of the outstanding voting shares of the target
corporation. The term "acquiring person" does not include a person
who (a) beneficially ((owns)) owned ten percent or more of the
outstanding voting shares of the target corporation on March 23, 1988; (b)
acquires its shares by gift, inheritance, or in a transaction in which no
consideration is exchanged; ((or)) (c) exceeds the ten percent threshold
as a result of action taken solely by the target corporation, such as
redemption of shares, unless that person, by its own action, acquires
additional shares of the target corporation; (d) beneficially was the owner
of ten percent or more of the outstanding voting shares prior to the time the
target corporation had a class of voting shares registered with the securities
and exchange commission pursuant to section 12 or 15 of the exchange act; or
(e) beneficially was the owner of ten percent or more of the outstanding voting
shares prior to the time the target corporation amended its articles of
incorporation to provide that the corporation shall be subject to the
provisions of this chapter. An agent, bank, broker, nominee, or trustee
for another person, if the other person is not an acquiring person, who acts in
good faith and not for the purpose of circumventing this chapter, is not an
acquiring person. For the purpose of determining whether a person is an
acquiring person, the number of voting shares of the target corporation that
are outstanding shall include shares beneficially owned by the person through
application of subsection (4) of this section, but shall not include any other
unissued voting shares of the target corporation which may be issuable pursuant
to any agreement, arrangement, or understanding; or upon exercise of conversion
rights, warrants, or options; or otherwise.
(2)
"Affiliate" means a person who directly or indirectly controls, or is
controlled by, or is under common control with, a person.
(3) "Announcement
date," when used in reference to any significant business transaction,
means the date of the first public announcement of the final, definitive
proposal for such a significant business transaction.
(4)
"Associate" means (a) a domestic or foreign corporation or
organization of which a person is an officer, director, member, or
partner or in which a person performs a similar function; (b) a direct or
indirect beneficial owner of ten percent or more of any class of equity
securities of a person; (c) a trust or estate in which a person has a
beneficial interest or as to which a person serves as trustee or in a similar
fiduciary capacity; and (d) ((if having the same residence as a person, the
person's relative, spouse, or spouse's relative)) the spouse or a parent
or sibling of a person or a child, grandchild, sibling, parent, or spouse of
any thereof, of a person or an individual having the same home as a person.
(((4))) (5)
"Beneficial ownership," when used with respect to any shares, means
ownership by a person:
(a) Who, individually
or with or through any of its affiliates or associates, beneficially owns such
shares, directly or indirectly; or
(b) Who, individually
or with or through any of its affiliates or associates, has (i) the right to
acquire the shares, whether the right is exercisable immediately or only after
the passage of time, pursuant to any agreement, arrangement, or understanding,
whether or not in writing, or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise. A person is not the beneficial
owner of shares tendered pursuant to a tender or exchange offer made by the
person or any of the person's affiliates or associates until the tendered
shares are accepted for purchase or exchange; or (ii) the right to vote the
shares pursuant to any agreement, arrangement, or understanding, whether or not
in writing. A person is not the beneficial owner of any shares under (b)(ii)
of this subsection if the agreement, arrangement, or understanding to vote the
shares arises solely from a revocable proxy or consent given in response to a
proxy or consent solicitation made in accordance with the applicable rules and
regulations under the exchange act and is not then reportable on schedule 13D
under the exchange act, or any comparable or successor report; or
(c) Who has any
agreement, arrangement, or understanding, whether or not in writing, for the
purpose of acquiring, holding, voting, except voting pursuant to a revocable
proxy or consent as described in (b)(ii) of this subsection, or disposing of
the shares with any other person who beneficially owns, or whose affiliates or
associates beneficially own, directly or indirectly, the shares.
(((5))) (6)
"Common shares" means any shares other than preferred shares.
(7)
"Consummation date," with respect to any significant business
transaction, means the date of consummation of such a significant business
transaction, or, in the case of a significant business transaction as to which
a shareholder vote is taken, the later of the business day prior to the vote or
twenty days prior to the date of consummation of such a significant business
transaction.
(8)
"Control," "controlling," "controlled by," and
"under common control with," means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting shares, by
contract, or otherwise. A person's beneficial ownership of ten percent or more
of a domestic or foreign corporation's outstanding voting shares shall create a
rebuttable presumption that such person has control of such
corporation. However, a person does not have control of a domestic or foreign
corporation if the person holds voting shares, in good faith and not for the
purpose of circumventing this chapter, as an agent, bank, broker, nominee,
custodian, or trustee for one or more beneficial owners who do not individually
or as a group have control of such corporation.
(((6))) (9)
"Domestic corporation" means an issuer of voting shares which is
organized under chapter 23B.02 RCW or any predecessor provision.
(10)
"Exchange act" means the federal securities exchange act of 1934, as
amended.
(((7))) (11)
"Market value," in the case of property other than cash or shares,
means the fair market value of the property on the date in question as
determined by the board of directors of the target corporation in good faith.
(((8))) (12)
"Person" means an individual, domestic or foreign corporation,
partnership, trust, unincorporated association, or other entity; an affiliate
or associate of any such person; or any two or more persons acting as a
partnership, syndicate, or other group for the purpose of acquiring, holding,
or dispersing of securities of a domestic or foreign corporation.
(((9))) (13)
"Preferred shares" means any class or series of shares of a target
corporation which under the bylaws or articles of incorporation of such a corporation
is entitled to receive payment of dividends prior to any payment of dividends
on some other class or series of shares, or is entitled in the event of any
voluntary liquidation, dissolution, or winding up of the target corporation to
receive payment or distribution of a preferential amount before any payments or
distributions are received by some other class or series of shares.
(14)
"Shares" means any:
(a) Shares or
similar security, any certificate of interest, any participation in any profit sharing
agreement, any voting trust certificate, or any certificate of deposit for
shares; and
(b) Security
convertible, with or without consideration, into shares, or any warrant, call,
or other option or privilege of buying shares without being bound to do so, or
any other security carrying any right to acquire, subscribe to, or purchase
shares.
(15)
"Significant business transaction" means:
(a) A merger, share
exchange, or consolidation of a target corporation or a subsidiary of a
target corporation with (i) an acquiring person, or (ii) any other domestic or
foreign corporation which is, or after the merger, share exchange, or
consolidation would be, an affiliate or associate of the acquiring person;
(b) A sale, lease,
exchange, mortgage, pledge, transfer, or other disposition or encumbrance,
whether in one transaction or a series of transactions, to or with an acquiring
person or an affiliate or associate of an acquiring person of assets of a
target corporation or a subsidiary of a target corporation (i) having an
aggregate market value equal to five percent or more of the aggregate market
value of all the assets, determined on a consolidated basis, of the target
corporation, (ii) having an aggregate market value equal to five percent or
more of the aggregate market value of all the outstanding shares of the target
corporation, or (iii) representing five percent or more of the earning power or
net income, determined on a consolidated basis, of the target corporation;
(c) The termination,
while the corporation has an acquiring person and as a result of the acquiring
person's acquisition of ten percent or more of the shares of the corporation,
of five percent or more of the employees of the target corporation or its
subsidiaries employed in this state, whether at one time or over the five-year
period following the share acquisition ((date)) time. For the
purposes of (c) of this subsection, a termination other than an employee's
death or disability or bona fide voluntary retirement, transfer, resignation, termination
for cause under applicable common law principles, or leave of absence shall
be presumed to be a termination resulting from the acquiring person's
acquisition of shares, which presumption ((may be rebutted by clear and
convincing evidence)) is rebuttable. A bona fide voluntary transfer
of employees between the target corporation and its subsidiaries or between its
subsidiaries is not a termination for the purposes of (c) of this subsection;
(d) The issuance,
transfer, or redemption by a target corporation or a subsidiary of a target
corporation, whether in one transaction or a series of transactions, of shares
or of options, warrants, or rights to acquire shares of a target corporation or
a subsidiary of a target corporation to or beneficially owned by an acquiring
person or an affiliate or associate of an acquiring person except pursuant to
the exercise of warrants or rights to purchase shares offered, or a dividend,
distribution, or redemption paid or made pro rata to, all shareholders or holders
of options, warrants, or rights to acquire shares of the target corporation,
and except for involuntary redemptions permitted by the target corporation's
charter or by the law of this state or the state of incorporation;
(e) The ((adoption
of a plan or proposal for the sale of assets,)) liquidation((,)) or
dissolution of a target corporation proposed by, or pursuant to an agreement,
arrangement, or understanding, whether or not in writing, with an acquiring
person or an affiliate or associate of an acquiring person;
(f) A reclassification
of securities, including, without limitation, any ((stock)) shares
split, ((stock)) shares dividend, or other distribution of ((stock))
shares in respect of stock, or any reverse ((stock)) shares
split, or recapitalization of a target corporation, or a merger or
consolidation of a target corporation with a subsidiary of the target
corporation, or any other transaction, whether or not with or into or otherwise
involving an acquiring person, proposed by, or pursuant to an agreement,
arrangement, or understanding, whether or not in writing, with an acquiring
person or an affiliate or associate of an acquiring person, that has the
effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of a class or series of voting shares or securities
convertible into voting shares of a target corporation or a subsidiary of the
target corporation that is directly or indirectly owned by an acquiring person
or an affiliate or associate of an acquiring person, except as a result of
immaterial changes due to fractional share adjustments; or
(g) A receipt by an
acquiring person or an affiliate or associate of an acquiring person of the
benefit, directly or indirectly, except proportionately as a shareholder of a
target corporation, of loans, advances, guarantees, pledges, or other financial
assistance or tax credits or other tax advantages provided by or through a
target corporation((; or
(h) An agreement,
contract, or other arrangement providing for any of the transactions in this
subsection)).
(((10))) (16)"Share
acquisition ((date)) time" means the ((date on)) time
at which a person first becomes an acquiring person of a target
corporation.
(((11))) (17)
"Subsidiary" means a domestic or foreign corporation that has a
majority of its outstanding voting shares owned, directly or indirectly, by
another domestic or foreign corporation.
(((12))) (18)
"Tangible assets" means tangible real and personal property of all
kinds. It shall also include leasehold interests in tangible real and personal
property.
(((13))) (19)
"Target corporation" means:
(a) Every domestic
corporation ((organized under chapter 23B.02 RCW or any predecessor
provision if, as of the share acquisition date, the corporation's principal
executive office is located in the state and either a majority of the
corporation's employees, together with those of its subsidiaries, are residents
of the state or the corporation, together with its subsidiaries, employs more
than one thousand residents of the state)), if:
(i) The corporation
has a class of voting shares registered with the securities and exchange
commission pursuant to section 12 or 15 of the exchange act; or
(ii) The
corporation's articles of incorporation have been amended to provide that such
a corporation shall be subject to the provisions of this chapter, if the
corporation did not have a class of voting shares registered with the
securities and exchange commission pursuant to section 12 or 15 of the exchange
act on the effective date of that amendment; and
(b) Every foreign
corporation required to have a certificate of authority to transact business in
this state pursuant to chapter 23B.15 RCW, if((, as of the share acquisition
date)):
(i) The corporation
has a class of voting shares registered with the securities and exchange
commission pursuant to section 12 or 15 of the exchange act;
(ii) The
corporation's principal executive office is located in the state;
(((ii))) (iii)
The corporation has: (A) More than ten percent of its shareholders of record
resident in the state; or (B) more than ten percent of its shares owned of
record by state residents; or (C) one thousand or more shareholders of record
resident in the state;
(((iii))) (iv)
A majority of the corporation's employees, together with those of its
subsidiaries, are residents of the state or the corporation, together with its
subsidiaries, employs more than one thousand residents of the state; and
(((iv))) (v)
A majority of the corporation's tangible assets, together with those of its
subsidiaries, measured by market value, are located in the state or the
corporation, together with its subsidiaries, has more than fifty million
dollars' worth of tangible assets located in the state.
For purposes of this
subsection, the record date for determining the percentages and numbers of
shareholders and shares shall be the last shareholder record date before the
event requiring that the determination be made. A shareholder record date
shall be determined pursuant to ((RCW 23B.07.070 for a domestic corporation
and)) the comparable provision to RCW 23B.07.070 of the law of the
state in which a foreign corporation is incorporated. If a shareholder record
date has not been fixed by the board of directors within the preceding four
months, the determination shall be made as of the end of the ((domestic or
foreign)) corporation's most recent fiscal quarter.
The residence of each
shareholder is presumed to be the address appearing in the records of the ((domestic
or foreign)) corporation. Shares held of record by brokers or nominees
shall be disregarded for purposes of calculating the percentages and numbers
specified in this subsection. Shares of a ((domestic or foreign))
corporation allocated to the account of an employee or former employee or
beneficiaries of employees or former employees of a ((domestic or foreign))
corporation and held in a plan that is qualified under section 401(a) of the
federal internal revenue code of 1986, as amended, and is a defined
contribution plan within the meaning of section 414(i) of the code shall be
deemed, for the purposes of this subsection, to be held of record by the
employee to whose account such shares are allocated.
A domestic or foreign
corporation shall be deemed to be a target corporation if the domestic or
foreign corporation's failure to satisfy the requirements of this subsection is
caused by the action of, or is the result of a proposal by, an acquiring person
or affiliate or associate of an acquiring person.
(20) "Voting
shares" means shares of a corporation entitled to vote generally in the
election of directors.
Sec. 2. RCW 23B.19.030 and 1989
c 165 s 199 are each amended to read as follows:
This chapter does not
apply to((:
(1) A significant
business transaction of a target corporation that does not have a class of
voting stock registered with the securities and exchange commission pursuant to
section 12 of the exchange act [15 U.S.C. Sec. 78L]; or
(2))) a significant business transaction of a
target corporation with an acquiring person of the target corporation which
became an acquiring person inadvertently, if the acquiring person (((a)))
(1) as soon as practicable, divests itself of a sufficient amount of the
voting shares of the target corporation so that it no longer is the beneficial
owner, directly or indirectly, of ten percent or more of the outstanding voting
shares of the target corporation, and (((b))) (2) would not at
any time within the five-year period preceding the announcement date ((of
the first public announcement)) of the significant business transaction
have been an acquiring person but for the inadvertent acquisition.
Sec. 3. RCW 23B.19.040 and 1989
c 165 s 200 are each amended to read as follows:
(1)(a) Notwithstanding
((any provision of this title)) anything to the contrary contained in
this title, except under subsection (2) of this section and RCW 23B.19.030,
a target corporation shall not engage in any significant business transaction
for a period of five years following the acquiring person's share acquisition
((date)) time unless the significant business transaction or the
purchase of shares made by the acquiring person ((on the share acquisition
date)) is approved prior to the acquiring person's share acquisition ((date))
time by a majority of the members of the board of directors of the
target corporation.
(b) If a good faith
proposal for a significant business transaction is made in writing to the board
of directors of the target corporation prior to the significant business
transaction or prior to the share acquisition ((date)) time, the
board of directors shall respond in writing, within thirty days or such shorter
period, if any, as may be required by the exchange act setting forth its
reasons for its decision regarding the proposal. If a good faith proposal to
purchase shares is made in writing to the board of directors of the target
corporation, the board of directors, unless it responds affirmatively in
writing within thirty days or a shorter period, if any, as may be required by
the exchange act shall be deemed to have disapproved such share purchase.
(2) Notwithstanding
anything to the contrary contained in this title, except under subsection (1)
of this section and RCW 23B.19.030, a target corporation shall not engage at
any time in any significant business transaction with any acquiring person of
such a corporation other than a significant business transaction that meets all
of the following conditions:
(a) The aggregate
amount of the cash and the market value as of the consummation date of
consideration other than cash to be received per share by holders of
outstanding common shares of such a target corporation in a significant
business transaction is at least equal to the higher of the following:
(i) The highest per
share price paid by such an acquiring person at a time when the person was the
beneficial owner, directly or indirectly, of five percent or more of the
outstanding voting shares of a target corporation, for any shares of common
shares of the same class or series acquired by it: (A) Within the five-year
period immediately prior to the announcement date with respect to a significant
business transaction; or (B) within the five-year period immediately prior to,
or in, the transaction in which the acquiring person became an acquiring
person, whichever is higher plus, in either case, interest compounded annually
from the earliest date on which the highest per share acquisition price was
paid through the consummation date at the rate for one-year United States
treasury obligations from time to time in effect; less the aggregate amount of
any cash dividends paid, and the market value of any dividends paid other than
in cash, per share of common shares since the earliest date, up to the amount
of the interest; and
(ii) The market
value per share of common shares on the announcement date with respect to a
significant business transaction or on the date of the acquiring person's share
acquisition time, whichever is higher; plus interest compounded annually from
such a date through the consummation date at the rate for one-year United States
treasury obligations from time to time in effect; less the aggregate amount of
any cash dividends paid, and the market value of any dividends paid other than
in cash, per share of common shares since the date, up to the amount of the
interest.
(b) The aggregate
amount of the cash and the market value as of the consummation date of
consideration other than cash to be received per share by holders of
outstanding shares of any class or series of shares, other than common shares,
of the target corporation is at least equal to the highest of the following,
whether or not the acquiring person has previously acquired any shares of such
a class or series of shares:
(i) The highest per
share price paid by an acquiring person at a time when the person was the beneficial
owner, directly or indirectly, of five percent or more of the outstanding
voting shares of a resident domestic corporation, for any shares of the same
class or series of shares acquired by it: (A) Within the five-year period
immediately prior to the announcement date with respect to a significant
business transaction; or (B) within the five-year period immediately prior to,
or in, the transaction in which the acquiring person became an acquiring
person, whichever is higher; plus, in either case, interest compounded annually
from the earliest date on which the highest per share acquisition price was
paid through the consummation date at the rate for one-year United States
treasury obligations from time to time in effect; less the aggregate amount of any
cash dividends paid, and the market value of any dividends paid other than in
cash, per share of the same class or series of shares since the earliest date,
up to the amount of the interest;
(ii) The highest
preferential amount per share to which the holders of shares of the same class
or series of shares are entitled in the event of any voluntary liquidation,
dissolution, or winding up of the target corporation, plus the aggregate amount
of any dividends declared or due as to which the holders are entitled prior to
payment of dividends on some other class or series of shares, unless the
aggregate amount of the dividends is included in the preferential amount; and
(iii) The market
value per share of the same class or series of shares on the announcement date
with respect to a significant business transaction or on the date of the
acquiring person's share acquisition time, whichever is higher; plus interest
compounded annually from such a date through the consummation date at the rate
for one-year United States treasury obligations from time to time in effect;
less the aggregate amount of any cash dividends paid and the market value of
any dividends paid other than in cash, per share of the same class or series of
shares since the date, up to the amount of the interest.
(c) The
consideration to be received by holders of a particular class or series of
outstanding shares, including common shares, of the target corporation in a
business combination is in cash or in the same form as the acquiring person has
used to acquire the largest number of shares of the same class or series of
shares previously acquired by the person, and the consideration shall be
distributed promptly.
(3) Subsection (2)
of this section does not apply to a target corporation that on the effective
date of this act had a provision in its articles of incorporation, adopted
under RCW 23B.17.020(3)(d), expressly electing not to be covered under RCW
23B.17.020, which is repealed by section 6 of this act.
(4) A ((target
corporation that engages in a)) significant business transaction that ((violates))
is made in violation of subsection (1) or (2) of this section and
that is not exempt under RCW ((23B.19.010 shall have its certificate of
incorporation or certificate of authority to transact business in this state
revoked under RCW 23B.14.200 or 23B.15.300 for domestic or foreign target
corporations, respectively. In addition, such significant transaction shall be))
23B.19.030 is void.
Sec. 4. RCW 23B.01.400 and 1995
c 47 s 1 are each amended to read as follows:
Unless the context
clearly requires otherwise, the definitions in this section apply throughout
this title.
(1) "Articles of
incorporation" include amended and restated articles of incorporation and
articles of merger.
(2) "Authorized
shares" means the shares of all classes a domestic or foreign corporation
is authorized to issue.
(3)
"Conspicuous" means so written that a reasonable person against whom
the writing is to operate should have noticed it. For example, printing in
italics or boldface or contrasting color, or typing in capitals or underlined,
is conspicuous.
(4)
"Corporation" or "domestic corporation" means a corporation
for profit, which is not a foreign corporation, incorporated under or subject
to the provisions of this title.
(5) "Deliver"
includes (a) mailing and (b) for purposes of delivering a demand, consent, or
waiver to the corporation or one of its officers, transmission by facsimile
equipment.
(6) "Distribution"
means a direct or indirect transfer of money or other property, except its own
shares, or incurrence of indebtedness by a corporation to or for the benefit of
its shareholders in respect to any of its shares. A distribution may be in the
form of a declaration or payment of a dividend; a distribution in partial or
complete liquidation, or upon voluntary or involuntary dissolution; a purchase,
redemption, or other acquisition of shares; a distribution of indebtedness; or
otherwise.
(7) "Effective
date of notice" has the meaning provided in RCW 23B.01.410.
(8)
"Employee" includes an officer but not a director. A director may
accept duties that make the director also an employee.
(9) "Entity"
includes a corporation and foreign corporation, not-for-profit corporation,
profit and not-for-profit unincorporated association, business trust, estate,
partnership, trust, and two or more persons having a joint or common economic
interest, and the state, United States, and a foreign government.
(10) "Foreign corporation"
means a corporation for profit incorporated under a law other than the law of
this state.
(11) "Foreign
limited partnership" means a partnership formed under laws other than of
this state and having as partners one or more general partners and one or more
limited partners.
(12) "Governmental
subdivision" includes authority, county, district, and municipality.
(13)
"Includes" denotes a partial definition.
(14)
"Individual" includes the estate of an incompetent or deceased
individual.
(15) "Limited
partnership" or "domestic limited partnership" means a
partnership formed by two or more persons under the laws of this state and
having one or more general partners and one or more limited partners.
(16) "Means"
denotes an exhaustive definition.
(17) "Notice"
has the meaning provided in RCW 23B.01.410.
(18) "Person"
includes an individual and an entity.
(19) "Principal
office" means the office, in or out of this state, so designated in the
annual report where the principal executive offices of a domestic or foreign
corporation are located.
(20)
"Proceeding" includes civil suit and criminal, administrative, and
investigatory action.
(21) "Public
company" means a corporation that has a class of shares registered with
the federal securities and exchange commission pursuant to section 12 or 15
of the securities exchange act of 1934, or section 8 of the investment company
act of 1940, or any successor statute((, and that has more than three
hundred holders of record of its shares)).
(22) "Record
date" means the date established under chapter 23B.07 RCW on which a
corporation determines the identity of its shareholders and their shareholdings
for purposes of this title. The determinations shall be made as of the close
of business on the record date unless another time for doing so is specified
when the record date is fixed.
(23)
"Secretary" means the corporate officer to whom the board of
directors has delegated responsibility under RCW 23B.08.400(3) for custody of
the minutes of the meetings of the board of directors and of the shareholders
and for authenticating records of the corporation.
(24) "Shares"
means the units into which the proprietary interests in a corporation are
divided.
(25)
"Shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial owner of shares to the extent of
the rights granted by a nominee certificate on file with a corporation.
(26) "State,"
when referring to a part of the United States, includes a state and
commonwealth, and their agencies and governmental subdivisions, and a territory
and insular possession, and their agencies and governmental subdivisions, of
the United States.
(27)
"Subscriber" means a person who subscribes for shares in a
corporation, whether before or after incorporation.
(28) "United
States" includes a district, authority, bureau, commission, department,
and any other agency of the United States.
(29) "Voting
group" means all shares of one or more classes or series that under the
articles of incorporation or this title are entitled to vote and be counted
together collectively on a matter at a meeting of shareholders. All shares
entitled by the articles of incorporation or this title to vote generally on
the matter are for that purpose a single voting group.
Sec. 5. RCW 23B.02.020 and 1994 c
256 s 27 are each amended to read as follows:
(1) The articles of
incorporation must set forth:
(a) A corporate name
for the corporation that satisfies the requirements of RCW 23B.04.010;
(b) The number of
shares the corporation is authorized to issue in accordance with RCW
23B.06.010 and 23B.06.020;
(c) The street address
of the corporation's initial registered office and the name of its initial
registered agent at that office in accordance with RCW 23B.05.010; and
(d) The name and
address of each incorporator in accordance with RCW 23B.02.010.
(2) The articles of
incorporation or bylaws must either specify the number of directors or specify
the process by which the number of directors will be fixed, unless the articles
of incorporation dispense with a board of directors pursuant to RCW 23B.08.010.
(3) Unless its articles
of incorporation provide otherwise, a corporation is governed by the following
provisions:
(a) The board of
directors may adopt bylaws to be effective only in an emergency as provided by
RCW 23B.02.070;
(b) A corporation has
the purpose of engaging in any lawful business under RCW 23B.03.010;
(c) A corporation has
perpetual existence and succession in its corporate name under RCW 23B.03.020;
(d) A corporation has
the same powers as an individual to do all things necessary or convenient to
carry out its business and affairs, including itemized powers under RCW
23B.03.020;
(e) All shares are of
one class and one series, have unlimited voting rights, and are entitled to
receive the net assets of the corporation upon dissolution under RCW
23B.06.010 and 23B.06.020;
(f) If more than one
class of shares is authorized, all shares of a class must have preferences,
limitations, and relative rights identical to those of other shares of the same
class under RCW 23B.06.010;
(g) If the board of
directors is authorized to designate the number of shares in a series, the
board may, after the issuance of shares in that series, reduce the number of
authorized shares of that series under RCW 23B.06.020;
(h) The board of
directors must authorize any issuance of shares under RCW 23B.06.210;
(i) Shares may be
issued pro rata and without consideration to shareholders under RCW 23B.06.230;
(j) Shares of one class
or series may not be issued as a share dividend with respect to another class
or series, unless there are no outstanding shares of the class or series to be
issued, or a majority of votes entitled to be cast by such class or series
approve as provided in RCW 23B.06.230;
(k) A corporation may
issue rights, options, or warrants for the purchase of shares of the
corporation under RCW 23B.06.240;
(l) A shareholder has,
and may waive, a preemptive right to acquire the corporation's unissued shares
as provided in RCW 23B.06.300;
(m) Shares of a
corporation acquired by it may be reissued under RCW 23B.06.310;
(n) The board may
authorize and the corporation may make distributions not prohibited by statute
under RCW 23B.06.400;
(o) The preferential
rights upon dissolution of certain shareholders will be considered a liability
for purposes of determining the validity of a distribution under RCW
23B.06.400;
(p) Unless this title
requires otherwise, the corporation is required to give notice only to
shareholders entitled to vote at a meeting and the notice for an annual meeting
need not include the purpose for which the meeting is called under RCW
23B.07.050;
(q) A corporation that
is a public company shall hold a special meeting of shareholders if the
holders of at least ten percent of the votes entitled to be cast on any issue
proposed to be considered at the meeting demand a meeting under RCW 23B.07.020;
(r) Subject to
statutory exceptions, each outstanding share, regardless of class, is entitled
to one vote on each matter voted on at a shareholders' meeting under RCW
23B.07.210;
(s) A majority of the
votes entitled to be cast on a matter by a voting group constitutes a quorum,
unless the title provides otherwise under RCW 23B.07.250 and 23B.07.270;
(t) Action on a matter,
other than election of directors, by a voting group is approved if the votes
cast within the voting group favoring the action exceed the votes cast opposing
the action, unless this title requires a greater number of affirmative votes
under RCW 23B.07.250;
(u) All shares of one
or more classes or series that are entitled to vote will be counted together
collectively on any matter at a meeting of shareholders under RCW 23B.07.260;
(v) Directors are
elected by cumulative voting under RCW 23B.07.280;
(w) Directors are
elected by a plurality of votes cast by shares entitled to vote under RCW
23B.07.280;
(x) A corporation must
have a board of directors under RCW 23B.08.010;
(y) All corporate
powers must be exercised by or under the authority of, and the business and
affairs of the corporation managed under the direction of, its board of
directors under RCW 23B.08.010;
(z) The shareholders
may remove one or more directors with or without cause under RCW 23B.08.080;
(aa) A vacancy on the
board of directors may be filled by the shareholders or the board of directors
under RCW 23B.08.100;
(bb) A corporation
shall indemnify a director who was wholly successful in the defense of any
proceeding to which the director was a party because the director is or was a
director of the corporation against reasonable expenses incurred by the
director in connection with the proceeding under RCW 23B.08.520;
(cc) A director of a
corporation who is a party to a proceeding may apply for indemnification of
reasonable expenses incurred by the director in connection with the proceeding
to the court conducting the proceeding or to another court of competent
jurisdiction under RCW 23B.08.540;
(dd) An officer of the
corporation who is not a director is entitled to mandatory indemnification under
RCW 23B.08.520, and is entitled to apply for court-ordered indemnification
under RCW 23B.08.540, in each case to the same extent as a director under RCW
23B.08.570;
(ee) The corporation
may indemnify and advance expenses to an officer, employee, or agent of the
corporation who is not a director to the same extent as to a director under RCW
23B.08.570;
(ff) A corporation may
indemnify and advance expenses to an officer, employee, or agent who is not a
director to the extent, consistent with law, that may be provided by its
articles of incorporation, bylaws, general or specific action of its board of
directors, or contract under RCW 23B.08.570;
(gg) A corporation's
board of directors may adopt certain amendments to the corporation's articles
of incorporation without shareholder action under RCW 23B.10.020;
(hh) Unless the title
or the board of directors require a greater vote or a vote by voting groups,
an amendment to the corporation's articles of incorporation must be approved
by each voting group entitled to vote on the proposed amendment by two‑thirds,
or, in the case of a public company, a majority, of all the votes entitled to
be cast by that voting group under RCW 23B.10.030;
(ii) A corporation's
board of directors may amend or repeal the corporation's bylaws unless this
title reserves this power exclusively to the shareholders in whole or in part,
or unless the shareholders in amending or repealing a bylaw provide expressly that
the board of directors may not amend or repeal that bylaw under RCW 23B.10.200;
(jj) Unless this title
or the board of directors require a greater vote or a vote by voting groups, a
plan of merger or share exchange must be approved by each voting group entitled
to vote on the merger or share exchange by two-thirds of all the votes entitled
to be cast by that voting group under RCW 23B.11.030;
(kk) Approval by the
shareholders of the sale, lease, exchange, or other disposition of all, or
substantially all, the corporation's property in the usual and regular course
of business is not required under RCW 23B.12.010;
(ll) Approval by the
shareholders of the mortgage, pledge, dedication to the repayment of
indebtedness, or other encumbrance of any or all of the corporation's property,
whether or not in the usual and regular course of business, is not required
under RCW 23B.12.010;
(mm) Unless the board
of directors requires a greater vote or a vote by voting groups, a sale,
lease, exchange, or other disposition of all or substantially all of the
corporation's property, other than in the usual and regular course of business,
must be approved by each voting group entitled to vote on such transaction by
two-thirds of all votes entitled to be cast by that voting group under RCW
23B.12.020; and
(nn) Unless the board
of directors requires a greater vote or a vote by voting groups, a proposal to
dissolve must be approved by each voting group entitled to vote on the
dissolution by two-thirds of all votes entitled to be cast by that voting group
under RCW 23B.14.020((; and
(oo) A corporation
with fewer than three hundred holders of record of its shares does not require
special approval of interested shareholder transactions under RCW 23B.17.020)).
(4) Unless its articles
of incorporation or its bylaws provide otherwise, a corporation is governed by
the following provisions:
(a) The board of
directors may authorize the issuance of some or all of the shares of any or all
of the corporation's classes or series without certificates under RCW
23B.06.260;
(b) A corporation that
is not a public company shall hold a special meeting of shareholders if the
holders of at least ten percent of the votes entitled to be cast on any issue
proposed to be considered at the meeting demand a meeting under RCW 23B.07.020;
(c) A director need not
be a resident of this state or a shareholder of the corporation under RCW
23B.08.020;
(d) The board of
directors may fix the compensation of directors under RCW 23B.08.110;
(e) Members of the
board of directors may participate in a meeting of the board by any means of
similar communication by which all directors participating can hear each other
during the meeting under RCW 23B.08.200;
(f) Action permitted or
required by this title to be taken at a board of directors' meeting may be
taken without a meeting if action is taken by all members of the board under
RCW 23B.08.210;
(g) Regular meetings of
the board of directors may be held without notice of the date, time, place, or
purpose of the meeting under RCW 23B.08.220;
(h) Special meetings of
the board of directors must be preceded by at least two days' notice of the
date, time, and place of the meeting, and the notice need not describe the
purpose of the special meeting under RCW 23B.08.220;
(i) A quorum of a board
of directors consists of a majority of the number of directors under RCW
23B.08.240;
(j) If a quorum is
present when a vote is taken, the affirmative vote of a majority of directors
present is the act of the board of directors under RCW 23B.08.240;
(k) A board of
directors may create one or more committees and appoint members of the board
of directors to serve on them under RCW 23B.08.250; and
(l) Unless approved by
the shareholders, a corporation may indemnify, or make advances to, a director
for reasonable expenses incurred in the defense of any proceeding to which the
director was a party because of being a director only to the extent such action
is consistent with RCW 23B.08.500 through 23B.08.580.
(5) The articles of
incorporation may contain the following provisions:
(a) The names and
addresses of the individuals who are to serve as initial directors;
(b) The par value of
any authorized shares or classes of shares;
(c) Provisions not
inconsistent with law related to the management of the business and the
regulation of the affairs of the corporation;
(d) Any provision that
under this title is required or permitted to be set forth in the bylaws;
(e) Provisions not
inconsistent with law defining, limiting, and regulating the powers of the
corporation, its board of directors, and shareholders;
(f) If the articles of
incorporation authorize dividing shares into classes, the election of all or a
specified number of directors may be effected by the holders of one or more
authorized classes of shares under RCW 23B.08.040;
(g) The terms of
directors may be staggered under RCW 23B.08.060;
(h) Shares may be
redeemable or convertible (i) at the option of the corporation, the
shareholder, or another person, or upon the occurrence of a designated event;
(ii) for cash, indebtedness, securities, or other property; or (iii) in a
designated amount or in an amount determined in accordance with a designated
formula or by reference to extrinsic data or events under RCW 23B.06.010; and
(i) A director's
personal liability to the corporation or its shareholders for monetary damages
for conduct as a director may be eliminated or limited under RCW 23B.08.320.
(6) The articles of
incorporation or the bylaws may contain the following provisions:
(a) A restriction on
the transfer or registration of transfer of the corporation's shares under RCW
23B.06.270;
(b) Shareholders may
participate in a meeting of shareholders by any means of communication by which
all persons participating in the meeting can hear each other under RCW
23B.07.080;
(c) A quorum of the
board of directors may consist of as few as one-third of the number of
directors under RCW 23B.08.240;
(d) If the corporation
is registered as an investment company under the investment company act of
1940, a provision limiting the requirement to hold an annual meeting of
shareholders as provided in RCW 23B.07.010(2); and
(e) If the corporation
is registered as an investment company under the investment company act of
1940, a provision establishing terms of directors which terms may be longer
than one year as provided in RCW 23B.05.050.
(7) The articles of
incorporation need not set forth any of the corporate powers enumerated in this
title.
NEW SECTION. Sec.
6. RCW 23B.17.020 and 1989 c 165 s 189 are
each repealed.
