Z-1253.1  _______________________________________________

                         SENATE BILL 6183

          _______________________________________________

State of Washington      55th Legislature     1998 Regular Session

By Senators Johnson and Roach

Read first time 01/12/98.  Referred to Committee on Law & Justice.

Regulating shareholder rights under the Washington business corporation act.

    AN ACT Relating to shares and distributions under the Washington business corporation act; and amending RCW 23B.06.010, 23B.06.020, and 23B.06.240.

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

    Sec. 1.  RCW 23B.06.010 and 1989 c 165 s 44 are each amended to read as follows:

    (1) The articles of incorporation must prescribe the classes of shares and the number of shares of each class that the corporation is authorized to issue.

    (a) If more than one class of shares is authorized, the  articles of incorporation must prescribe a distinguishing designation for each class, and, prior to the issuance of shares of a class, the preferences, limitations, voting powers, and relative rights of that class must be described in the articles of incorporation.

    (b) ((Any of the designations,)) Preferences, limitations, voting powers, or relative rights of or on any class or series of shares or the holders thereof may be made dependent upon facts ascertainable outside the articles of incorporation ((or of any amendment thereto, or outside the resolution or resolutions providing for the issuance of shares adopted by the board of directors pursuant to authority expressly vested in it by the corporation's articles of incorporation)), if the manner in which such facts shall operate on the ((designations,)) preferences, limitations, voting powers, or relative rights of such class or series ((is clearly and expressly)) of shares or the holders thereof is set forth in the articles of incorporation ((or in the resolution or resolutions providing for the issue of such shares adopted by the board of directors)).  "Facts ascertainable outside the articles of incorporation" includes, but is not limited to, the existence of any condition or the occurrence of any event, including, without limitation, a determination or action by any person or body, including the corporation, its board of directors, or an officer, employee, or agent of the corporation.

    (c) All shares of a class must have preferences, limitations, voting powers, and relative rights identical with those of other shares of the same class except to the extent otherwise permitted by (b) of this subsection or RCW 23B.06.020.

    (2) The articles of incorporation must authorize (a) one or more classes of shares that together have unlimited voting rights, and (b) one or more classes of shares, which may be the same class or classes as those with voting rights, that together are entitled to receive the net assets of the corporation upon dissolution.

    (3) The articles of incorporation may authorize one or more classes of shares that:

    (a) Have special, conditional, or limited voting rights, or no right to vote, except to the extent prohibited by this title;

    (b) Are redeemable or convertible as specified in the articles of incorporation (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, (iii) in a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic data or events;

    (c) Entitle the holders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative, or partially cumulative; or

    (d) Have preference over any other class of shares with respect to distributions, including dividends and distributions upon the dissolution of the corporation.

    (4) The description of the designations, preferences, limitations, and relative rights of share classes in subsection (3) of this section is not exhaustive.

    Sec. 2.  RCW 23B.06.020 and 1989 c 165 s 45 are each amended to read as follows:

    (1) If the articles of incorporation so provide, the board of directors may determine, in whole or part, the preferences, limitations, voting powers, and relative rights, within the limits set forth in RCW 23B.06.010(1)(b) and this section of (a) any class of shares before the issuance of any shares of that class, or (b) one or more series within a class, and designate the number of shares within that series, before the issuance of any shares of that series.

    (2) Each series of a class must be given a distinguishing designation.

    (3) All shares of a series must have preferences, limitations, voting powers, and relative rights identical with those of other shares of the same series ((and)), except to the extent otherwise ((provided in the description of the series, with those)) permitted by RCW 23B.06.010(1)(b).  All shares of a series must have preferences, limitations, voting powers, and relative rights identical with those of shares of other series of the same class, except to the extent otherwise provided in the description of the series.

    (4) Before issuing any shares of a class or series created under this section, the corporation must deliver to the secretary of state for filing articles of amendment, which are effective without shareholder action, that set forth:

    (a) The name of the corporation;

    (b) The text of the amendment determining the terms of the class or series of shares;

    (c) The date it was adopted; and

    (d) The statement that the amendment was duly adopted by the board of directors.

    (5) Unless the articles of incorporation provide otherwise, the board of directors may, after the issuance of shares of a series whose number it is authorized to designate, amend the resolution establishing the series to decrease, but not below the number of shares of such series then outstanding, the number of authorized shares of that series, by filing articles of amendment, which are effective without shareholder action, in the manner provided in subsection (4) of this section.

    Sec. 3.  RCW 23B.06.240 and 1989 c 165 s 52 are each amended to read as follows:

(1) Unless the articles of incorporation provide otherwise, a corporation may issue rights, options, or warrants for the purchase of shares of the corporation.  The board of directors shall determine the terms upon which the rights, options, or warrants are issued, their form and content, and the terms and conditions relating to their exercise, including the time or times, the conditions precedent, and the consideration for which ((the shares are to be issued)) and the holders by whom the rights, options, or warrants may be exercised.

(2) The terms of rights, options, or warrants, including the time or times, the conditions precedent, and the consideration for which and the holders by whom the rights, options, or warrants may be exercised, as well as their duration (a) may preclude or limit the exercise, transfer, or receipt of such rights, options, or warrants or invalidate or void any rights, options, or warrants and (b) may be made dependent upon facts ascertainable outside the documents evidencing them or outside the resolution or resolutions adopted by the board of directors creating such rights, options, or warrants if the manner in which those facts operate on the rights, options, or warrants or the holders thereof is clearly set forth in the documents or the resolutions.  "Facts ascertainable outside the documents evidencing them or outside the resolution or resolutions adopted by the board of directors creating such rights, options, or warrants" includes, but is not limited to, the existence of any condition or the occurrence of any event, including, without limitation, a determination or action by any person or body, including the corporation, its board of directors, or an officer, employee, or agent of the corporation.

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