BILL REQ. #:  Z-0253.3 

Read first time 01/15/2003.   Referred to Committee on Judiciary.

     AN ACT Relating to the Washington business corporation act; amending RCW 23B.07.260, 23B.10.020, 23B.10.030, 23B.10.040, 23B.11.030, 23B.12.020, 23B.13.020, and 23B.14.020; adding a new section to chapter 23B.01 RCW; and adding a new section to chapter 23B.11 RCW.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 23B.01 RCW to read as follows:
     (1) A corporation has provided notice or any other record to shareholders of record who share a common address if all of the following requirements are met:
     (a) The corporation delivers the notice or other record to the common address;
     (b) The corporation addresses the notice or other record to the shareholders who share that address either as a group or to each of the shareholders individually; and
     (c) Each shareholder consents in a record to delivery of a single copy of such a notice or other record to the shareholders' common address, and the corporation notifies each shareholder of the duration of that shareholder's consent, and explains the manner by which the shareholder can revoke the consent.
     (2) For purposes of this section, "address" means a street address, a post office box number, a facsimile telephone number, a common address, location, or system for electronic transmissions, or another similar destination to which records are delivered.
     (3) If a shareholder revokes consent to delivery of a single copy of any notice or other record to a common address, or notifies the corporation that the shareholder wishes to receive an individual copy of any notice or other record, the corporation shall begin sending individual copies to that shareholder within thirty days after the corporation receives the revocation of consent or notice.
     (4) Prior to the delivery of notice by electronic transmission to a common address, location, or system for electronic transmissions under this section, each shareholder consenting to receive notice under this section must also have consented to the receipt of notices by electronic transmission as provided in RCW 23B.01.410.

Sec. 2   RCW 23B.07.260 and 1989 c 165 s 74 are each amended to read as follows:
     (1) If the articles of incorporation or this title provide for voting ((by)) on a matter by all shares entitled to vote thereon, voting together as a single voting group ((on a matter)) and do not provide for separate voting by any other voting group or groups with respect to that matter, action on that matter is taken when voted upon by that single voting group as provided in RCW 23B.07.250.
     (2) If the articles of incorporation or this title provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups ((counted separately)) as provided in RCW 23B.07.250. ((Action may be taken by one voting group on a matter even though no action is taken by another voting group entitled to vote on the matter.))

Sec. 3   RCW 23B.10.020 and 1989 c 165 s 121 are each amended to read as follows:
     Unless the articles of incorporation provide otherwise, a corporation's board of directors may adopt one or more amendments to the corporation's articles of incorporation without shareholder action:
     (1) If the corporation has only one class of shares outstanding, to provide, change, or eliminate any provision with respect to the par value of any class of shares;
     (2) To delete the names and addresses of the initial directors;
     (3) To delete the name and address of the initial registered agent or registered office, if a statement of change is on file with the secretary of state;
     (4) If the corporation has only one class of shares outstanding, solely to:
     (a) Effect a forward split of, or change the number of authorized shares of that class in proportion to ((effectuate)) a forward split of, or stock dividend in, the corporation's ((own)) outstanding shares((, or solely to do so and to change the number of authorized shares in proportion thereto)); or
     (b) Effect a reverse split of the corporation's outstanding shares and the number of authorized shares of that class in the same proportions;
     (5) To change the corporate name; or
     (6) To make any other change expressly permitted by this title to be made without shareholder action.

Sec. 4   RCW 23B.10.030 and 1989 c 165 s 122 are each amended to read as follows:
     (1) A corporation's board of directors may propose one or more amendments to the articles of incorporation for submission to the shareholders.
     (2) For the amendment to be adopted:
     (a) The board of directors must recommend the amendment to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the amendment; and
     (b) The shareholders entitled to vote on the amendment must approve the amendment as provided in subsection (5) of this section.
     (3) The board of directors may condition its submission of the proposed amendment on any basis, including the affirmative vote of holders of a specified percentage of shares held by any group of shareholders not otherwise entitled under this title or the articles of incorporation to vote as a separate voting group on the proposed amendment.
     (4) The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting in accordance with RCW 23B.07.050. The notice of meeting must also state that the purpose, or one of the purposes, of the meeting is to consider the proposed amendment and contain or be accompanied by a copy of the amendment.
     (5) ((Unless this title, the articles of incorporation, or)) In addition to any other voting conditions imposed by the board of directors((, acting pursuant to)) under subsection (3) of this section, ((require a greater vote or a vote by voting groups,)) the amendment to be adopted must be approved ((by each voting group entitled to vote thereon)) by two-thirds, or, in the case of a public company, a majority, of the voting group comprising all the votes entitled to be cast ((by that voting group)) on the proposed amendment, and of each other voting group entitled under RCW 23B.10.040 or the articles of incorporation to vote separately on the proposed amendment. The articles of incorporation may require a greater vote than that provided for in this subsection. The articles of incorporation of a corporation other than a public company may ((provide for)) require a lesser vote than that provided for in this subsection, or ((for)) may require a lesser vote by separate voting groups, so long as the required vote ((provided for each voting group entitled to vote separately on the amendment)) is not less than a majority of all the votes entitled to be cast on the proposed amendment ((by that voting group)) and of each other voting group entitled to vote separately on the proposed amendment. Separate voting by additional voting groups is required on a proposed amendment under the circumstances described in RCW 23B.10.040.

Sec. 5   RCW 23B.10.040 and 1989 c 165 s 123 are each amended to read as follows:
     (1) Except as otherwise required by subsection (3) of this section or otherwise permitted by subsection (4) of this section, the holders of the outstanding shares of a class or series are entitled to vote as a separate voting group((,)) on a proposed amendment if shareholder voting is otherwise required by this title((, on a proposed amendment)) and if the amendment would:
     (a) Increase ((or decrease)) the aggregate number of authorized shares of the class or series;
     (b) Effect an exchange or reclassification of all or part of the issued and outstanding shares of the class or series into shares of another class or series, thereby adversely affecting the holders of the shares so exchanged or reclassified;
     (c) ((Effect an exchange or reclassification, or create the right of exchange, of all or part of the shares of another class into shares of the class;
     (d))) Change the ((designation,)) rights, preferences, or limitations of all or part of the issued and outstanding shares of the class or series, thereby adversely affecting the holders of shares of the class or series;
     (((e))) (d) Change ((the shares of)) all or part of the issued and outstanding shares of the class or series into a different number of shares of the same class or series, thereby adversely affecting the holders of shares of the class or series;
     (((f))) (e) Create a new class or series of shares having rights or preferences with respect to distributions or to dissolution that are, or upon designation by the board of directors in accordance with RCW 23B.06.020 may be, prior, superior, or substantially equal to the shares of the class or series;
     (((g))) (f) Increase the rights((,)) or preferences with respect to distributions or to dissolution, or the number of authorized shares of any class or series that, after giving effect to the amendment, ((have)) has rights or preferences with respect to distributions or to dissolution that are, or upon designation by the board of directors in accordance with RCW 23B.06.020 may be, prior, superior, or substantially equal to the shares of the class or series;
     (((h))) (g) Limit or deny an existing preemptive right of all or part of the shares of the class or series; ((or
     (i))) (h) Cancel or otherwise adversely affect rights to distributions or dividends that have accumulated but not yet been declared on all or part of the shares of the class or series; or
     (i) Effect a redemption or cancellation of all or part of the shares of the class or series in exchange for cash or any other form of consideration other than shares of the corporation.
     (2) If a proposed amendment would affect only a series of a class of shares in one or more of the ways described in subsection (1) of this section, only the shares of that series are entitled to vote as a separate voting group on the proposed amendment. A voting group entitled to vote separately under this section may never comprise a group of holders smaller than the holders of a single class or series authorized and designated as a class or series in the articles of incorporation, unless otherwise provided in the articles of incorporation or unless the board of directors conditions its submission of the proposed amendment on a separate vote by one or more smaller voting groups.
     (3) If a proposed amendment, that ((entitles)) would otherwise entitle two or more classes or series of shares ((within a class)) to vote as separate voting groups under this section, would affect those two or more classes or series in the same or a substantially similar way, then instead of voting as separate voting groups the shares of all ((the)) similarly affected classes or series ((within the class so affected must)) shall vote together as a single voting group on the proposed amendment, unless otherwise provided in the articles of incorporation or unless the board of directors conditions its submission of the proposed amendment on a separate vote by one or more classes or series.
     (4) A class or series of shares is entitled to the voting group rights granted by this section although the articles of incorporation ((provide that)) generally describe the shares ((are)) of the class or series as nonvoting shares. The articles of incorporation may, however, limit or deny the voting group rights granted by subsection (1)(a), (e), or (f) of this section as to any class or series of issued or unissued shares, by means of a provision that makes explicit reference to the limitation or denial of voting group rights that would otherwise apply under subsection (1)(a), (e), or (f) of this section.

Sec. 6   RCW 23B.11.030 and 1989 c 165 s 133 are each amended to read as follows:
     (1) After adopting a plan of merger or share exchange, the board of directors of each corporation party to the merger, and the board of directors of the corporation whose shares will be acquired in the share exchange, shall submit the plan of merger, except as provided in subsection (7) of this section, or share exchange for approval by its shareholders.
     (2) For a plan of merger or share exchange to be approved:
     (a) The board of directors must recommend the plan of merger or share exchange to the shareholders, unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the plan; and
     (b) The shareholders entitled to vote must approve the plan, except as provided in subsection (7) of this section.
     (3) The board of directors may condition its submission of the proposed plan of merger or share exchange on any basis, including the affirmative vote of holders of a specified percentage of shares held by any group of shareholders not otherwise entitled under this title or the articles of incorporation to vote as a separate voting group on the proposed plan of merger or share exchange.
     (4) The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting in accordance with RCW 23B.07.050. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider the plan of merger or share exchange and must contain or be accompanied by a copy or summary of the plan.
     (5) ((Unless this title, the articles of incorporation, or)) In addition to any other voting conditions imposed by the board of directors((, acting pursuant to)) under subsection (3) of this section, ((require a greater vote or a vote by voting groups,)) the plan of merger to be authorized must be approved by ((each voting group entitled to vote separately on the plan by)) two-thirds of the voting group comprising all the votes entitled to be cast on the plan ((by that voting group)), and of each other voting group entitled under section 7 of this act or the articles of incorporation to vote separately on the plan, unless shareholder action is not required under subsection (7) of this section. The articles of incorporation may ((provide for a)) require a greater or lesser vote than that provided in this subsection, or ((for)) a greater or lesser vote by separate voting groups, so long as the required vote ((provided for each voting group entitled to vote separately on the plan of merger)) is not less than a majority of all the votes entitled to be cast on the plan of merger ((by that voting group)) and of each other voting group entitled to vote separately on the plan. Separate voting by additional voting groups is required on a plan of merger ((if the plan contains a provision that, if contained in a proposed amendment to articles of incorporation, would require action by one or more separate voting groups on the proposed amendment under RCW 23B.10.040)) under the circumstances described in section 7 of this act.
     (6) ((Unless this title, the articles of incorporation, or)) In addition to any other voting conditions imposed by the board of directors((, acting pursuant to)) under subsection (3) of this section, ((require a greater vote or a vote by voting groups,)) the plan of share exchange to be authorized must be approved by ((each voting group entitled to vote separately on the plan by)) two-thirds of the voting group comprising all the votes entitled to be cast on the plan ((by that voting group)), and of each other voting group entitled under section 7 of this act or the articles of incorporation to vote separately on the plan. The articles of incorporation may ((provide for a)) require a greater or lesser vote than that provided in this subsection, or ((for)) a greater or lesser vote by separate voting groups, so long as the required vote ((provided for each voting group entitled to vote separately on the plan of share exchange)) is not less than a majority of all the votes entitled to be cast on the plan of share exchange ((by that voting group)) and of each other voting group entitled to vote separately on the plan. Separate voting by additional voting groups is required on a plan of share exchange ((by each class or series of shares included in the exchange, with each class or series constituting a separate voting group)) under the circumstances described in section 7 of this act.
     (7) Action by the shareholders of the surviving corporation on a plan of merger is not required if:
     (a) The articles of incorporation of the surviving corporation will not differ, except for amendments enumerated in RCW 23B.10.020, from its articles of incorporation before the merger;
     (b) Each shareholder of the surviving corporation whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations, and relative rights, immediately after the merger;
     (c) The number of voting shares outstanding immediately after the merger, plus the number of voting shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed the total number of voting shares of the surviving corporation authorized by its articles of incorporation immediately before the merger; and
     (d) The number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed the total number of participating shares authorized by its articles of incorporation immediately before the merger.
     (8) As used in subsection (7) of this section:
     (a) "Participating shares" means shares that entitle their holders to participate without limitation in distributions.
     (b) "Voting shares" means shares that entitle their holders to vote unconditionally in elections of directors.
     (9) After a merger or share exchange is authorized, and at any time before articles of merger or share exchange are filed, the planned merger or share exchange may be abandoned, subject to any contractual rights, without further shareholder action, in accordance with the procedure set forth in the plan of merger or share exchange or, if none is set forth, in the manner determined by the board of directors.

NEW SECTION.  Sec. 7   A new section is added to chapter 23B.11 RCW to read as follows:
     (1) Except as otherwise required by subsection (3) of this section or otherwise permitted by subsection (4) of this section, the holders of the outstanding shares of a class or series are entitled to vote as a separate voting group on a proposed plan of merger or plan of share exchange if shareholder voting is otherwise required by this title and if, as a result of the proposed plan, holders of part or all of the class or series would hold or receive:
     (a) Shares of any class or series of the surviving or acquiring corporation, or of any parent corporation of the surviving corporation, and either (i) that class or series has a greater number of authorized shares than the class or series held by the holders prior to the merger or share exchange, or (ii) the proposed plan effects a change in the number of shares held by the holders, or in the rights, preferences, or limitations of the shares they hold, or in the class or series of shares they hold, and such change adversely affects the holders;
     (b) Shares of any class or series of the surviving or acquiring corporation, or of any parent corporation of the surviving corporation, and the holders who hold or receive shares of that class or series are adversely affected under the proposed plan, as compared to their circumstances prior to the proposed merger or share exchange, by the creation, existence, number of authorized shares, or rights or preferences with respect to distributions or to dissolution, of another class or series of shares of the surviving, acquiring, or parent corporation having rights or preferences with respect to distributions or to dissolution that are, or upon designation by the surviving, acquiring, or parent corporation's board of directors may be, prior, superior, or substantially equal to the shares of the class or series held or to be received by the holders in the proposed merger or share exchange; or
     (c) Cash or any other form of consideration other than shares of the surviving or acquiring corporation or of any parent corporation of the surviving corporation, received upon redemption or cancellation of all or part of their shares pursuant to the proposed plan of merger or share exchange.
     (2) If a proposed plan of merger or share exchange would affect only a series of a class of shares in one or more of the ways described in subsection (1) of this section, only the shares of that series are entitled to vote as a separate voting group on the proposed plan. A voting group entitled to vote separately under this section may never comprise a group of holders smaller than the holders of a single class or series authorized and designated as a class or series in the articles of incorporation, unless otherwise provided in the articles of incorporation or unless the board of directors conditions its submission of the proposed plan on a separate vote by one or more smaller voting groups.
     (3) If a proposed plan of merger or share exchange, that would otherwise entitle two or more classes or series of shares to vote as separate voting groups under this section, would affect those two or more classes or series in the same or a substantially similar way, then instead of voting as separate voting groups, the shares of all similarly affected classes or series shall vote together as a single voting group on the proposed plan of merger or share exchange, unless otherwise provided in the articles of incorporation or unless the board of directors conditions its submission of the proposed plan on a separate vote by one or more classes or series. Holders of shares of two or more classes or series of shares who will, under a proposed plan, receive the same type of consideration in the form of shares of the surviving or acquiring corporation or of any parent corporation of the surviving corporation, cash or other form of consideration, or the same combination thereof, but in differing amounts resulting solely from application of provisions in the corporation's articles of incorporation governing distribution of consideration received in a merger or share exchange, are affected in the same or a substantially similar way and are not, by reason of receiving the same types or differing amounts of consideration, entitled to vote as separate voting groups on the proposed plan, unless the articles of incorporation expressly require otherwise or the board of directors conditions its submission of the proposed plan on a separate vote by one or more classes or series.
     (4) A class or series of shares is entitled to the voting group rights granted by this section although the articles of incorporation generally describe the shares of the class or series as nonvoting shares. The articles of incorporation may, however, limit or deny the voting group rights granted by this section as to any class or series of issued or unissued shares, by means of a provision that makes explicit reference to the limitation or denial of voting group rights that would otherwise apply under this section.

Sec. 8   RCW 23B.12.020 and 1989 c 165 s 139 are each amended to read as follows:
     (1) A corporation may sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property, otherwise than in the usual and regular course of business, on the terms and conditions and for the consideration determined by the corporation's board of directors, if the board of directors proposes and its shareholders approve the proposed transaction.
     (2) For a transaction to be authorized:
     (a) The board of directors must recommend the proposed transaction to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the submission of the proposed transaction; and
     (b) The shareholders entitled to vote must approve the transaction.
     (3) The board of directors may condition its submission of the proposed transaction on any basis, including the affirmative vote of holders of a specified percentage of shares held by any group of shareholders not otherwise entitled under this title or the articles of incorporation to vote as a separate voting group on the proposed transaction.
     (4) The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting in accordance with RCW 23B.07.050. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider the sale, lease, exchange, or other disposition of all, or substantially all, the property of the corporation and contain or be accompanied by a description of the transaction.
     (5) ((Unless the articles of incorporation or)) In addition to any other voting conditions imposed by the board of directors((, acting pursuant to)) under subsection (3) of this section, ((require a greater vote or a vote by voting groups,)) the transaction to be authorized must be approved by two-thirds of the voting group comprising all the votes entitled to be cast on the transaction, and of each other voting group entitled under the articles of incorporation to vote separately on the transaction. The articles of incorporation may ((provide for a)) require a greater or lesser vote than ((that)) provided ((for)) in this subsection, or ((for)) a greater or lesser vote by any separate voting groups provided for in the articles of incorporation, so long as the required vote ((provided for each voting group entitled to vote separately on the transaction)) is not less than a majority of all the votes entitled to be cast on the transaction ((by that voting group)) and of each other voting group entitled to vote separately on the transaction.
     (6) After a sale, lease, exchange, or other disposition of property is authorized, the transaction may be abandoned, subject to any contractual rights, without further shareholder action, in a manner determined by the board of directors.
     (7) A transaction that constitutes a distribution is governed by RCW 23B.06.400 and not by this section.

Sec. 9   RCW 23B.13.020 and 1991 c 269 s 37 are each amended to read as follows:
     (1) A shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholder's shares in the event of, any of the following corporate actions:
     (a) Consummation of a plan of merger to which the corporation is a party (i) if shareholder approval is required for the merger by RCW 23B.11.030, 23B.11.080, or the articles of incorporation, and the shareholder is entitled to vote on the merger, or (ii) if the corporation is a subsidiary that is merged with its parent under RCW 23B.11.040;
     (b) Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan;
     (c) Consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one year after the date of sale;
     (d) An amendment of the articles of incorporation ((that materially reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under RCW 23B.06.040)), whether or not the shareholder was entitled to vote on the amendment, if the amendment effects a redemption or cancellation of all of the shareholder's shares in exchange for cash or other consideration other than shares of the corporation; or
     (e) Any corporate action taken pursuant to a shareholder vote to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares.
     (2) A shareholder entitled to dissent and obtain payment for the shareholder's shares under this chapter may not challenge the corporate action creating the shareholder's entitlement unless the action fails to comply with the procedural requirements imposed by this title, RCW 25.10.900 through 25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with respect to the shareholder or the corporation.
     (3) The right of a dissenting shareholder to obtain payment of the fair value of the shareholder's shares shall terminate upon the occurrence of any one of the following events:
     (a) The proposed corporate action is abandoned or rescinded;
     (b) A court having jurisdiction permanently enjoins or sets aside the corporate action; or
     (c) The shareholder's demand for payment is withdrawn with the written consent of the corporation.

Sec. 10   RCW 23B.14.020 and 1989 c 165 s 155 are each amended to read as follows:
     (1) A corporation's board of directors may propose dissolution for submission to the shareholders.
     (2) For a proposal to dissolve to be adopted:
     (a) The board of directors must recommend dissolution to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders; and
     (b) The shareholders entitled to vote must approve the proposal to dissolve as provided in subsection (5) of this section.
     (3) The board of directors may condition its submission of the proposal for dissolution on any basis, including the affirmative vote of holders of a specified percentage of shares held by any group of shareholders not otherwise entitled under this title or the articles of incorporation to vote as a separate voting group on the proposed dissolution.
     (4) The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting in accordance with RCW 23B.07.050. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider dissolving the corporation.
     (5) ((Unless the articles of incorporation or)) In addition to any other voting conditions imposed by the board of directors((, acting pursuant to)) under subsection (3) of this section, ((require a greater vote or a vote by voting groups,)) the proposal to dissolve must be approved by two-thirds of the voting group comprising all the votes entitled to be cast on ((that)) the proposal ((in order to be adopted)), and of each other voting group entitled under the articles of incorporation to vote separately on the proposal. The articles of incorporation may ((provide for a)) require a greater or lesser vote than ((that)) provided ((for)) in this subsection, or ((for)) a greater or lesser vote by any separate voting groups provided for in the articles of incorporation, so long as the required vote ((provided for each voting group entitled to vote separately on the proposal to dissolve)) is not less than a majority of all the votes entitled to be cast on the proposal ((by that voting group)) and of each other voting group entitled to vote separately on the proposal.