S-1922.1 _______________________________________________
SUBSTITUTE SENATE BILL 5107
_______________________________________________
State of Washington 55th Legislature 1997 Regular Session
By Senate Committee on Law & Justice (originally sponsored by Senators Roach and Johnson)
Read first time 02/25/97.
AN ACT Relating to consent provisions under the Washington business corporation act; and amending RCW 23B.02.020, 23B.07.040, and 23B.19.040.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1. RCW 23B.02.020 and 1996 c 155 s 5 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) Action may be taken by shareholders by unanimous written consent of all shareholders entitled to vote on the action, unless the approval of a lesser number of shareholders is permitted as provided in RCW 23B.07.040;
(q) 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)))
(r) 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)))
(s) 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)))
(t) 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)))
(u) 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)))
(v) 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)))
(w) Directors are elected by cumulative voting under RCW 23B.07.280;
(((w)))
(x) Directors are elected by a plurality of votes cast by shares
entitled to vote under RCW 23B.07.280;
(((x)))
(y) A corporation must have a board of directors under RCW 23B.08.010;
(((y)))
(z) 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)))
(aa) The shareholders may remove one or more directors with or without
cause under RCW 23B.08.080;
(((aa)))
(bb) A vacancy on the board of directors may be filled by the
shareholders or the board of directors under RCW 23B.08.100;
(((bb)))
(cc) 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)))
(dd) 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)))
(ee) 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)))
(ff) 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)))
(gg) 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)))
(hh) 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)))
(ii) Unless ((the)) this title or the board of directors
requires 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)))
(jj) 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)))
(kk) 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)))
(ll) 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)))
(mm) 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)))
(nn) 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)))
(oo) 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.
(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) Provisions authorizing shareholder action to be taken by written consent of less than all of the shareholders entitled to vote on the action, in accordance with RCW 23B.07.040;
(g) 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)))
(h) The terms of directors may be staggered under RCW 23B.08.060;
(((h)))
(i) 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)))
(j) 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.
Sec. 2. RCW 23B.07.040 and 1991 c 72 s 33 are each amended to read as follows:
(1)(a) Action required or permitted by this title to be taken at a shareholders' meeting may be taken without a meeting or a vote if either:
(i)
The action is taken by all ((the)) shareholders entitled to vote on
the action; or
(ii) The action is taken by shareholders holding of record or otherwise entitled to vote in the aggregate not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on the action were present and voted, and at the time the action is taken the corporation is not a public company and is authorized to take such action under this subsection (1)(a)(ii) by a general or limited authorization contained in its articles of incorporation.
(b)
The taking of action by shareholders without a meeting or vote
must be evidenced by one or more written consents describing the action taken,
signed by ((all the)) shareholders holding of record or otherwise
entitled to vote ((on the)) in the aggregate not less than the
minimum number of votes necessary in order to take such action by
written consent under (a)(i) or (ii) of this subsection, and delivered to
the corporation for inclusion in the minutes or filing with the corporate
records.
(2)
If not otherwise fixed under RCW 23B.07.030 or 23B.07.070, the record date for
determining shareholders entitled to take action without a meeting is the date on
which the first shareholder ((signs the)) consent is signed under
subsection (1) of this section. Every written consent shall bear the date
of signature of each shareholder who signs the consent. A written consent is
not effective to take the action referred to in the consent unless, within
sixty days of the earliest dated consent delivered to the corporation, written
consents signed by a sufficient number of shareholders to take action are
delivered to the corporation.
(3)
A shareholder may withdraw consent only by delivering a written notice of
withdrawal to the corporation prior to the time when ((all)) consents sufficient
to authorize taking the action have been delivered to the corporation.
(4)
Unless the written shareholder consent specifies a later effective date, action
taken under this section is effective when ((all)): (a) Consents
sufficient to authorize taking the action have been delivered to the
corporation((, unless the consent specifies a later effective date));
and (b) the period of advance notice required by the corporation's articles of
incorporation to be given to any nonconsenting shareholders has been satisfied.
(5) A consent signed under this section has the effect of a meeting vote and may be described as such in any document, except that, if the action requires the filing of a certificate under any other section of this title, the certificate so filed shall state, in lieu of any statement required by that section concerning any vote of shareholders, that written consent has been obtained in accordance with this section and that written notice to any nonconsenting shareholders has been given as provided in this section.
(6)
((If this title requires that)) Notice of ((proposed)) the
taking of action by shareholders without a meeting by less than
unanimous written consent of all shareholders entitled to vote on the action
shall be given, before the date on which the action becomes effective, to those
shareholders entitled to vote on the action who have not consented in writing
and, if this title would otherwise require that notice of a meeting of
shareholders to consider the action be given to nonvoting shareholders ((and
the action is to be taken by unanimous consent of the voting shareholders, the
corporation must give its)), to all nonvoting shareholders ((written
notice of the proposed action at least ten days before the action is taken))
of the corporation. The general or limited authorization in the
corporation's articles of incorporation authorizing shareholder action by less
than unanimous written consent shall specify the amount and form of notice
required to be given to nonconsenting shareholders before the effective date of
the action. In the case of action of a type that would constitute a significant
business transaction under RCW 23B.19.020(15), the notice shall be given no
fewer than twenty days before the effective date of the action. The notice
((must)) shall be in writing and shall contain or be accompanied
by the same material that, under this title, would have been required to be
sent to nonconsenting or nonvoting shareholders in a notice of meeting
at which the proposed action would have been submitted ((to such
shareholders)) for shareholder action. If the action taken is of
a type that would entitle shareholders to exercise dissenters' rights under RCW
23B.13.020(1), then the notice must comply with RCW 23B.13.220(2), RCW
23B.13.210 shall not apply, and all shareholders who have not signed the
consent taking the action are entitled to receive the notice, demand payment
under RCW 23B.13.230, and assert other dissenters' rights as prescribed in
chapter 23B.13 RCW.
Sec. 3. RCW 23B.19.040 and 1996 c 155 s 3 are each amended to read as follows:
(1)(a)
Notwithstanding 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
time engage in a significant business transaction unless it is exempted by
RCW 23B.19.030 or unless the significant business transaction or the
purchase of shares made by the acquiring person is approved prior to the
acquiring person's share acquisition 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 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)) Except for a
significant business transaction approved under subsection (1) of this section
or exempted by RCW 23B.19.030, in addition to any other requirement, a
target corporation shall not engage at any time in any significant business
transaction described in RCW 23B.19.020(15) (a) or (e) with any
acquiring person of such a corporation other than a significant business
transaction that either meets all of the ((following)) conditions
of (a), (b), and (c) of this subsection or meets the conditions of (d) of
this subsection:
(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 significant
business ((combination)) transaction 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.
(d) The significant business transaction is approved at an annual meeting of shareholders, or special meeting of shareholders called for such a purpose, no earlier than five years after the acquiring person's share acquisition time, by a majority of the votes entitled to be counted within each voting group entitled to vote separately on the transaction. The votes of all outstanding shares entitled to vote under this title or the articles of incorporation shall be entitled to be counted under this subsection except that the votes of shares as to which an acquiring person has beneficial ownership or voting control may not be counted to determine whether shareholders have approved a transaction for purposes of this subsection. The votes of shares as to which an acquiring person has beneficial ownership or voting control shall, however, be counted in determining whether a transaction is approved under other sections of this title and for purposes of determining a quorum.
(3) Subsection (2) of this section does not apply to a target corporation that on June 6, 1996, 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, chapter 155, Laws of 1996.
(4) A significant business transaction that is made in violation of subsection (1) or (2) of this section and that is not exempt under RCW 23B.19.030 is void.
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