Senate Study Bill 1169 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON JUDICIARY BILL BY CHAIRPERSON HOGG) A BILL FOR An Act relating to business corporations, including by 1 providing for their organization and operation; providing 2 for the relationship between shareholders, directors, and 3 officers; and including effective date provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1488XC (8) 85 da/nh
S.F. _____ DIVISION I 1 PRINCIPAL PROVISIONS 2 Section 1. Section 490.140, subsections 3, 6, 9, and 26, 3 Code 2013, are amended to read as follows: 4 3. “Conspicuous” means so written , displayed, or presented 5 that a reasonable person against whom the writing is to operate 6 should have noticed it. For example, printing text in italics , 7 or boldface , or contrasting color, or typing in capitals , or 8 underlined , is conspicuous. 9 6. “Deliver” or “delivery” means any method of delivery 10 used in conventional commercial practice, including delivery in 11 person, by hand, mail, commercial delivery, and , if authorized 12 in accordance with section 490.141, by electronic transmission. 13 9. “Electronic transmission” or “electronically transmitted” 14 means any form or process of communication not directly 15 involving the physical transfer of paper that or another 16 tangible medium, which is suitable all of the following: 17 a. Suitable for the retention, retrieval, and reproduction 18 of information by the recipient. 19 b. Retrievable in paper form by the recipient through an 20 automated process used in conventional commercial practice, 21 unless otherwise authorized in accordance with section 490.141, 22 subsection 10. 23 26. “Sign” or “signature” means, with present intent to 24 authenticate or adopt a document, doing any of the following: 25 a. Executing or adopting a tangible symbol to a document, 26 and includes any manual, facsimile, or conformed , or electronic 27 signature. 28 b. Attaching to or logically associating with an electronic 29 transmission an electronic sound, symbol, or process, and 30 includes an electronic signature in an electronic transmission. 31 Sec. 2. Section 490.140, Code 2013, is amended by adding the 32 following new subsections: 33 NEW SUBSECTION . 7A. “Document” means any of the following: 34 a. A tangible medium on which information is inscribed, and 35 -1- LSB 1488XC (8) 85 da/nh 1/ 68
S.F. _____ includes any writing or written instrument. 1 b. An electronic record. 2 NEW SUBSECTION . 7B. “Domestic unincorporated entity” means 3 an unincorporated entity whose internal affairs are governed by 4 the laws of this state. 5 NEW SUBSECTION . 8A. “Electronic” means relating to 6 technology having electrical, digital, magnetic, wireless, 7 optical, electromagnetic, or similar capabilities. 8 NEW SUBSECTION . 8B. “Electronic record” means information 9 that is stored in an electronic or other medium and is 10 retrievable in paper form through an automated process used in 11 conventional commercial practice, unless otherwise authorized 12 in accordance with section 490.141, subsection 10. 13 NEW SUBSECTION . 11A. “Expenses” means reasonable expenses 14 of any kind that are incurred in connection with a matter. 15 NEW SUBSECTION . 21B. “Qualified director” means the same 16 as defined in section 490.143. 17 NEW SUBSECTION . 32. “Writing” or “written” means any 18 information in the form of a document. 19 Sec. 3. Section 490.141, Code 2013, is amended to read as 20 follows: 21 490.141 Notice or other communication . 22 1. Notice under this chapter must be in writing unless oral 23 notice is reasonable under in the circumstances. Notice by 24 electronic transmission is written notice. Unless otherwise 25 agreed between the sender and the recipient, words in a notice 26 or other communication under this chapter must be in English. 27 2. Notice A notice or other communication may be 28 communicated in person; by mail or other given or sent by 29 any method of delivery ; or by telephone, voice mail, or 30 other , except that electronic means transmissions must be in 31 accordance with this section . If these forms of personal 32 notice methods of delivery are impracticable, a notice or 33 other communication may be communicated by a newspaper of 34 general circulation in the area where published; or by radio, 35 -2- LSB 1488XC (8) 85 da/nh 2/ 68
S.F. _____ television, or other form of public broadcast communication. 1 3. Written notice by a domestic or foreign corporation to 2 its shareholder, if in a comprehensible form, is effective 3 according to one of the following: 4 a. Upon deposit in the United States mail, if mailed 5 postpaid and correctly addressed to the shareholder’s address 6 shown in the corporation’s current record of shareholders. 7 b. When electronically transmitted to the shareholder in a 8 manner authorized by the shareholder. 9 4. Written notice Notice or other communication to a 10 domestic or foreign corporation authorized to transact business 11 in this state may be addressed delivered to its registered 12 agent at its registered office or to the secretary of the 13 corporation or its secretary at its principal office shown in 14 its most recent biennial report or, in the case of a foreign 15 corporation that has not yet delivered a biennial report, in 16 its application for a certificate of authority. 17 4. Notice or other communications may be delivered by 18 electronic transmission if consented to by the recipient or if 19 authorized by subsection 10. 20 5. Any consent under subsection 4 may be revoked by the 21 person who consented by written or electronic notice to the 22 person to whom the consent was delivered. Any such consent is 23 deemed revoked if all of the following apply: 24 a. The corporation is unable to deliver two consecutive 25 electronic transmissions given by the corporation in accordance 26 with such consent. 27 b. Such inability becomes known to the secretary or an 28 assistant secretary of the corporation or to the transfer 29 agent, or other person responsible for the giving of notice 30 or other communications; provided, however, the inadvertent 31 failure to treat such inability as a revocation shall not 32 invalidate any meeting or other action. 33 6. Unless otherwise agreed between the sender and the 34 recipient, an electronic transmission is received when all of 35 -3- LSB 1488XC (8) 85 da/nh 3/ 68
S.F. _____ the following apply: 1 a. The electronic transmission enters an information 2 processing system that the recipient has designated or uses 3 for the purposes of receiving electronic transmissions or 4 information of the type sent, and from which the recipient is 5 able to retrieve the electronic transmission. 6 b. The electronic transmission is in a form capable of being 7 processed by that system. 8 7. Receipt of an electronic acknowledgment from an 9 information processing system described in subsection 6, 10 paragraph “a” , establishes that an electronic transmission was 11 received but, by itself, does not establish that the content 12 sent corresponds to the content received. 13 8. An electronic transmission is received under this 14 section even if no individual is aware of its receipt. 15 5. 9. Except as provided in subsection 3 , written notice, 16 Notice or other communication if in a comprehensible form or 17 manner , is effective at the earliest of any of the following: 18 a. When received. If in physical form, the earliest of 19 when it is actually received or when it is left at any of the 20 following: 21 (1) A shareholder’s address shown on the corporation’s 22 record of shareholders maintained by the corporation under 23 section 490.1601, subsection 3. 24 (2) A director’s residence or usual place of business. 25 (3) The corporation’s principal place of business. 26 b. Five days after its deposit in the United States mail, 27 if If mailed postpaid by United States mail postage prepaid 28 and correctly addressed to a shareholder, upon deposit in the 29 United States mail . 30 c. On the date shown on the If mailed by United States 31 mail postage prepaid and correctly addressed to a recipient 32 other than a shareholder, the earliest of when it is actually 33 received or as follows: 34 (1) If sent by registered or certified mail, return receipt 35 -4- LSB 1488XC (8) 85 da/nh 4/ 68
S.F. _____ requested , if sent by registered or certified mail, return 1 receipt requested, and the date shown on the return receipt is 2 signed by or on behalf of the addressee. 3 6. Oral notice is effective when communicated if 4 communicated in a comprehensible manner. 5 (2) Five days after it is deposited in the United States 6 mail. 7 d. If an electronic transmission, when it is received as 8 provided in subsection 6. 9 e. If oral, when communicated. 10 10. A notice or other communication may be in the form of 11 an electronic transmission that cannot be directly reproduced 12 in paper form by the recipient through an automated process 13 used in conventional commercial practice only if all of the 14 following apply: 15 a. The electronic transmission is otherwise retrievable in 16 perceivable form. 17 b. The sender and the recipient have consented in writing to 18 the use of such form of electronic transmission. 19 7. 11. If this chapter prescribes notice requirements for 20 notices or other communications in particular circumstances, 21 those requirements govern. If articles of incorporation or 22 bylaws prescribe notice requirements for notices or other 23 communications, not inconsistent with this section or other 24 provisions of this chapter , those requirements govern. The 25 articles of incorporation or bylaws may authorize or require 26 delivery of notices of meetings of directors by electronic 27 transmission. 28 Sec. 4. NEW SECTION . 490.143 Qualified director. 29 1. For purposes of this chapter, a “qualified director” 30 is a director who takes action under any of the following 31 provisions, if at the time action is to be taken any of the 32 following applies: 33 a. Under section 490.744, the director does not have any of 34 the following: 35 -5- LSB 1488XC (8) 85 da/nh 5/ 68
S.F. _____ (1) A material interest in the outcome of the proceeding. 1 (2) A material relationship with a person who has such an 2 interest. 3 b. Under section 490.853 or 490.855, all of the following 4 apply: 5 (1) The director is not a party to the proceeding. 6 (2) The director is not a director as to whom a transaction 7 is a director’s conflicting interest transaction or who sought 8 a disclaimer of the corporation’s interest in a business 9 opportunity under section 490.870, which transaction or 10 disclaimer is challenged in the proceeding. 11 (3) The director does not have a material relationship with 12 a director described in either subparagraph (1) or (2). 13 c. Under section 490.862, the director is not any of the 14 following: 15 (1) A director as to whom the transaction is a director’s 16 conflicting interest transaction. 17 (2) A director who has a material relationship with another 18 director as to whom the transaction is a director’s conflicting 19 interest transaction. 20 d. Under section 490.870, the director would be a qualified 21 director under paragraph “c” , if the business opportunity was a 22 director’s conflicting interest transaction. 23 2. For purposes of this section, all of the following apply: 24 a. “Material interest” means an actual or potential 25 benefit or detriment, other than one which would devolve on 26 the corporation or the shareholders generally, that would 27 reasonably be expected to impair the objectivity of the 28 director’s judgment when participating in the action to be 29 taken. 30 b. “Material relationship” means a familial, financial, 31 professional, employment, or other relationship that would 32 reasonably be expected to impair the objectivity of the 33 director’s judgment when participating in the action to be 34 taken. 35 -6- LSB 1488XC (8) 85 da/nh 6/ 68
S.F. _____ 3. The presence of one or more of the following 1 circumstances shall not automatically prevent a director from 2 being a qualified director: 3 a. Nomination or election of the director to the current 4 board by any director who is not a qualified director with 5 respect to the matter, or by any person that has a material 6 relationship with that director, acting alone or participating 7 with others. 8 b. Service as a director of another corporation of which a 9 director who is not a qualified director with respect to the 10 matter, or any individual who has a material relationship with 11 that director, is or was also a director. 12 c. With respect to action to be taken under section 490.744, 13 status as a named defendant, as a director against whom action 14 is demanded, or as a director who approved the conduct being 15 challenged. 16 Sec. 5. NEW SECTION . 490.144 Householding. 17 1. A corporation has delivered written notice or any 18 other report or statement under this chapter, the articles of 19 incorporation, or the bylaws to all shareholders who share a 20 common address if all of the following apply: 21 a. The corporation delivers one copy of the notice, report, 22 or statement to the common address. 23 b. The corporation addresses the notice, report, or 24 statement to those shareholders either as a group or to each 25 of those shareholders individually or to the shareholders in a 26 form to which each of those shareholders has consented. 27 c. Each of those shareholders consents to delivery of 28 a single copy of such notice, report, or statement to the 29 shareholders’ common address. Any such consent shall be 30 revocable by any of such shareholders who deliver written 31 notice of revocation to the corporation. If such written 32 notice of revocation is delivered, the corporation shall begin 33 providing individual notices, reports, or other statements 34 to the revoking shareholder no later than thirty days after 35 -7- LSB 1488XC (8) 85 da/nh 7/ 68
S.F. _____ delivery of the written notice of revocation. 1 2. Any shareholder who fails to object by written notice 2 to the corporation, within sixty days of written notice by the 3 corporation of its intention to send single copies of notices, 4 reports, or statements to shareholders who share a common 5 address as permitted by subsection 1, shall be deemed to have 6 consented to receiving such single copy at the common address. 7 Sec. 6. Section 490.502, subsection 2, Code 2013, is amended 8 to read as follows: 9 2. If a registered agent changes the street address of the 10 a registered agent’s business office changes , the registered 11 agent may change the street address of the registered office of 12 any corporation for which the person is the registered agent by 13 notifying delivering a signed written notice of the change to 14 the corporation in writing of the change and signing, either 15 manually or in facsimile, and delivering to the secretary of 16 state for filing a signed statement that complies with the 17 requirements of subsection 1 and recites that the corporation 18 has been notified of the change. 19 Sec. 7. Section 490.620, subsection 4, Code 2013, is amended 20 to read as follows: 21 4. If a subscriber defaults in payment of money or 22 property under a subscription agreement entered into before 23 incorporation, the corporation may collect the amount owed 24 as any other debt. Alternatively, unless the subscription 25 agreement provides otherwise, the corporation may rescind the 26 agreement and may sell the shares if the debt remains unpaid 27 more than twenty days after the corporation sends a written 28 demand for payment to the subscriber. 29 Sec. 8. Section 490.624, Code 2013, is amended by adding the 30 following new subsection: 31 NEW SUBSECTION . 3. The board of directors may authorize one 32 or more officers to do all of the following: 33 a. Designate the recipients of rights, options, warrants, 34 or other equity compensation awards that involve the issuance 35 -8- LSB 1488XC (8) 85 da/nh 8/ 68
S.F. _____ of shares. 1 b. Determine, within an amount and subject to any other 2 limitations established by the board and, if applicable, the 3 stockholders, the number of such rights, options, warrants, 4 or other equity compensation awards and the terms thereof to 5 be received by the recipients, provided that an officer shall 6 not use such authority to designate the officer or any other 7 persons the board of directors may specify as a recipient of 8 such rights, options, warrants, or other equity compensation 9 awards. 10 Sec. 9. Section 490.701, subsection 1, Code 2013, is amended 11 to read as follows: 12 1. A Unless directors are elected by written consent in 13 lieu of an annual meeting as permitted by section 490.704, a 14 corporation shall hold annually, at a time stated in or fixed 15 in accordance with the bylaws, a meeting of shareholders ; 16 provided, however, that if a corporation’s articles of 17 incorporation authorize shareholders to cumulate their votes 18 when electing directors pursuant to section 490.728, directors 19 shall not be elected by less than unanimous consent . 20 Sec. 10. Section 490.703, Code 2013, is amended to read as 21 follows: 22 490.703 Court-ordered meeting. 23 1. The district court of the county where a corporation’s 24 principal office, or, if none in this state, its registered 25 office, is located may summarily order a meeting to be held 26 either: pursuant to any of the following: 27 a. On application of any shareholder of the corporation 28 entitled to participate in an annual meeting if an annual 29 meeting was not held or action by written consent in lieu 30 thereof did not become effective within the earlier of six 31 months after the end of the corporation’s fiscal year or 32 fifteen months after its last annual meeting. 33 b. On application of a shareholder who signed a demand for 34 a special meeting valid under section 490.702 if either any of 35 -9- LSB 1488XC (8) 85 da/nh 9/ 68
S.F. _____ the following applies : 1 (1) Notice of the special meeting was not given within 2 thirty days after the date the demand was delivered to the 3 corporation’s secretary. 4 (2) The special meeting was not held in accordance with the 5 notice. 6 2. The court may fix the time and place of the meeting, 7 ascertain the shares entitled to participate in the meeting, 8 specify a record date or dates for ascertaining shareholders 9 entitled to notice of and to vote at the meeting, prescribe the 10 form and content of the meeting notice, fix the quorum required 11 for specific matters to be considered at the meeting or direct 12 that the votes represented at the meeting constitute a quorum 13 for action on those matters, and enter other orders necessary 14 to accomplish the purpose or purposes of the meeting. 15 Sec. 11. Section 490.704, Code 2013, is amended to read as 16 follows: 17 490.704 Action without meeting. 18 1. Unless otherwise provided in the articles of 19 incorporation, any action required or permitted by this chapter 20 to be taken at a shareholders’ meeting may be taken without 21 a meeting or vote, and, except as provided in subsection 22 5 , without prior notice, if one or more written consents 23 describing the action taken are signed by the holders of 24 outstanding shares having not less than ninety percent of the 25 votes entitled to be cast at a meeting at which all shares 26 entitled to vote on the action were present and voted, and are 27 delivered to the corporation for inclusion in the minutes or 28 filing with the corporate records. 29 2. A written consent shall bear the date of signature of 30 each shareholder who signs the consent and no written consent 31 is effective to take the corporate action referred to in 32 the consent unless, within sixty days of the earliest dated 33 consent delivered in the manner required by this section to the 34 corporation, written consents signed by a sufficient number 35 -10- LSB 1488XC (8) 85 da/nh 10/ 68
S.F. _____ of holders to take action are delivered to the corporation. 1 A written consent may be revoked by a writing to that effect 2 received by the corporation prior to the receipt by the 3 corporation of unrevoked written consents sufficient in number 4 to take corporate action. Except in the case of a public 5 corporation, the articles of incorporation may provide that 6 any action required or permitted by this chapter to be taken 7 at a shareholders’ meeting may be taken without a meeting, and 8 without prior notice, if consents in writing setting forth the 9 action so taken are signed by the holders of outstanding shares 10 having not less than the minimum number of votes that would be 11 required to authorize or take the action at a meeting at which 12 all shares entitled to vote on the action were present and 13 voted. The written consent shall bear the date of signature 14 of the shareholder who signs the consent and be delivered to 15 the corporation for inclusion in the minutes or filing with the 16 corporate records. 17 3. If not otherwise fixed under section 490.703 or 490.707 , 18 the record date for determining shareholders entitled to take 19 action without a meeting is the date the first shareholder 20 signs the consent under subsection 1 . If not otherwise fixed 21 under section 490.707 and if prior board action is not required 22 respecting the action to be taken without a meeting, the 23 record date for determining the shareholders entitled to take 24 action without a meeting shall be the first date on which a 25 signed written consent is delivered to the corporation. If 26 not otherwise fixed under section 490.707 and if prior board 27 action is required respecting the action to be taken without 28 a meeting, the record date shall be the close of business on 29 the day the resolution of the board taking such prior action 30 is adopted. No written consent shall be effective to take 31 the corporate action referred to therein unless, within sixty 32 days of the earliest date on which a consent delivered to the 33 corporation as required by this section was signed, written 34 consents signed by sufficient shareholders to take the action 35 -11- LSB 1488XC (8) 85 da/nh 11/ 68
S.F. _____ have been delivered to the corporation. A written consent 1 may be revoked by a writing to that effect delivered to the 2 corporation before unrevoked written consents sufficient in 3 number to take the corporate action are delivered to the 4 corporation. 5 4. A consent signed under pursuant to the provisions of this 6 section has the effect of a meeting vote and may be described 7 as such in any document. Unless the articles of incorporation, 8 bylaws, or a resolution of the board of directors provides for 9 a reasonable delay to permit tabulation of written consents, 10 the action taken by written consent shall be effective when 11 written consents signed by sufficient shareholders to take the 12 action are delivered to the corporation. 13 5. If this chapter requires that notice of proposed action 14 be given to shareholders not entitled to vote and the action 15 is to be taken by consent of the voting shareholders, the 16 corporation must give all shareholders written notice of the 17 proposed action at least ten days before the action is taken. 18 The notice must contain or be accompanied by the same material 19 that, under this chapter , would have been required to be sent 20 to shareholders not entitled to vote in a notice of meeting 21 at which the proposed action would have been submitted to the 22 shareholders for action. 23 6. Prompt notice of the taking of corporate action without 24 a meeting by less than unanimous written consent shall be given 25 to those shareholders who have not consented in writing. If 26 the taking of that corporate action requires the giving of 27 notice under section 490.1320, subsection 2 , the notice of 28 the action shall set forth the matters described in section 29 490.1322 . 30 5. a. If this chapter requires that notice of a proposed 31 action be given to nonvoting shareholders and the action is 32 to be taken by written consent of the voting shareholders, 33 the corporation must give its nonvoting shareholders written 34 notice of the action not more than ten days after any of the 35 -12- LSB 1488XC (8) 85 da/nh 12/ 68
S.F. _____ following: 1 (1) Written consents sufficient to take the action have been 2 delivered to the corporation. 3 (2) Such later date that tabulation of consents is completed 4 pursuant to an authorization under subsection 4. 5 b. The notice must reasonably describe the action taken and 6 contain or be accompanied by the same material that, under any 7 provision of this chapter, would have been required to be sent 8 to nonvoting shareholders in a notice of a meeting at which the 9 proposed action would have been submitted to the shareholders 10 for action. 11 6. a. If action is taken by less than unanimous written 12 consent of the voting shareholders, the corporation must give 13 its nonconsenting voting shareholders written notice of the 14 action not more than ten days after any of the following: 15 (1) Written consents sufficient to take the action have been 16 delivered to the corporation. 17 (2) Such later date that tabulation of consents is completed 18 pursuant to an authorization under subsection 4. 19 b. The notice must reasonably describe the action taken 20 and contain or be accompanied by the same material that, under 21 any provision of this chapter, would have been required to be 22 sent to voting shareholders in a notice of a meeting at which 23 the action would have been submitted to the shareholders for 24 action. 25 7. The notice requirements in subsections 5 and 6 shall not 26 delay the effectiveness of actions taken by written consent, 27 and a failure to comply with such notice requirements shall 28 not invalidate actions taken by written consent, provided that 29 this subsection shall not be deemed to limit judicial power 30 to fashion any appropriate remedy in favor of a shareholder 31 adversely affected by a failure to give such notice within the 32 required time period. 33 Sec. 12. Section 490.705, subsections 1 and 5, Code 2013, 34 are amended to read as follows: 35 -13- LSB 1488XC (8) 85 da/nh 13/ 68
S.F. _____ 1. A corporation shall notify shareholders of the date, 1 time, and place of each annual and special shareholders’ 2 meeting no fewer than ten nor more than sixty days before 3 the meeting date. The notice shall include the record date 4 for determining the shareholders entitled to vote at the 5 meeting, if such date is different than the record date for 6 determining shareholders entitled to notice of the meeting. If 7 the board of directors has authorized participation by means 8 of remote communication pursuant to section 490.709 for any 9 class or series of shareholders, the notice to such class or 10 series of shareholders shall describe the means of remote 11 communication to be used. Unless this chapter or the articles 12 of incorporation require otherwise, the corporation is required 13 to give notice only to shareholders entitled to vote at the 14 meeting as of the record date for determining the shareholders 15 entitled to notice of the meeting . 16 5. Unless the bylaws require otherwise, if an annual or 17 special shareholders’ meeting is adjourned to a different date, 18 time, or place, notice need not be given of the new date, 19 time, or place if the new date, time, or place is announced at 20 the meeting before adjournment. If a new record date for the 21 adjourned meeting is or must be fixed under section 490.707 , 22 however, notice of the adjourned meeting must be given under 23 this section to persons who are shareholders as of the new 24 record date entitled to vote at such adjourned meeting as of 25 the record date fixed for notice of such adjourned meeting . 26 Sec. 13. Section 490.707, Code 2013, is amended to read as 27 follows: 28 490.707 Record date. 29 1. The bylaws may fix or provide the manner of fixing 30 the record date or dates for one or more voting groups in 31 order to determine the shareholders entitled to notice of a 32 shareholders’ meeting, to demand a special meeting, to vote, 33 or to take any other action. If the bylaws do not fix or 34 provide for fixing a record date, the board of directors of the 35 -14- LSB 1488XC (8) 85 da/nh 14/ 68
S.F. _____ corporation may fix a future date as the record date. 1 2. A record date fixed under this section shall not be more 2 than seventy days before the meeting or action requiring a 3 determination of shareholders. 4 3. A determination of shareholders entitled to notice of 5 or to vote at a shareholders’ meeting is effective for any 6 adjournment of the meeting unless the board of directors fixes 7 a new record date or dates , which it must do if the meeting is 8 adjourned to a date more than one hundred twenty days after the 9 date fixed for the original meeting. 10 4. If a court orders a meeting adjourned to a date more than 11 one hundred twenty days after the date fixed for the original 12 meeting, it may provide that the original record date continues 13 in effect or it may fix a new record date or dates . 14 5. The record date for a shareholders’ meeting fixed by 15 or in the manner provided in the bylaws or by the board of 16 directors shall be the record date for determining shareholders 17 entitled both to notice of and to vote at the shareholders’ 18 meeting unless, in the case of a record date fixed by the 19 board of directors and to the extent not prohibited by the 20 bylaws, the board, at the time it fixes the record date for 21 shareholders entitled to notice of the meeting, fixes a later 22 record date on or before the date of the meeting to determine 23 the shareholders entitled to vote at the meeting. 24 Sec. 14. NEW SECTION . 490.709 Remote participation in 25 annual and special meetings. 26 1. Shareholders of any class or series may participate in 27 any meeting of shareholders by means of remote communication to 28 the extent the board of directors authorizes such participation 29 for such class or series. Participation by means of remote 30 communication shall be subject to such guidelines and 31 procedures as the board of directors adopts, and shall be in 32 conformity with subsection 2. 33 2. Shareholders participating in a shareholders’ meeting 34 by means of remote communication shall be deemed present and 35 -15- LSB 1488XC (8) 85 da/nh 15/ 68
S.F. _____ may vote at such a meeting if the corporation has implemented 1 reasonable measures to do all of the following: 2 a. Verify that each person participating remotely is a 3 shareholder. 4 b. Provide such shareholders a reasonable opportunity to 5 participate in the meeting and to vote on matters submitted to 6 the shareholders, including an opportunity to communicate, and 7 to read or hear the proceedings of the meeting, substantially 8 concurrently with such proceedings. 9 Sec. 15. Section 490.720, Code 2013, is amended to read as 10 follows: 11 490.720 Shareholders’ list for meeting. 12 1. After fixing a record date for a meeting, a corporation 13 shall prepare an alphabetical list of the names of all its 14 shareholders who are entitled to notice of a shareholders’ 15 meeting. The If the board of directors fixes a different 16 record date under section 490.707, subsection 5, to determine 17 the shareholders entitled to vote at the meeting, a corporation 18 also shall prepare an alphabetical list of the names of all 19 its shareholders who are entitled to vote at the meeting. A 20 list must be arranged by voting group and within each voting 21 group by class or series of shares, and show the address of and 22 number of shares held by each shareholder. 23 2. The shareholders’ list for notice must be available for 24 inspection by any shareholder beginning two business days after 25 notice of the meeting is given for which the list was prepared 26 and continuing through the meeting, at the corporation’s 27 principal office or at a place identified in the meeting notice 28 in the city where the meeting will be held. A shareholders’ 29 list for voting must be similarly available for inspection 30 promptly after the record date for voting. A shareholder, 31 or a shareholder’s agent or attorney, is entitled on written 32 demand to inspect and, subject to the requirements of section 33 490.1602, subsection 3 4 , to copy the a list, during regular 34 business hours and at the person’s expense, during the period 35 -16- LSB 1488XC (8) 85 da/nh 16/ 68
S.F. _____ it is available for inspection. 1 3. The corporation shall make the shareholders’ list of 2 shareholders entitled to vote available at the meeting, and any 3 shareholder, or a shareholder’s agent or attorney, is entitled 4 to inspect the list at any time during the meeting or any 5 adjournment. 6 4. If the corporation refuses to allow a shareholder, or a 7 shareholder’s agent or attorney, to inspect the a shareholders’ 8 list before or at the meeting, or copy the a list as permitted 9 by subsection 2 , the district court of the county where a 10 corporation’s principal office or, if none in this state, 11 its registered office, is located, on application of the 12 shareholder, may summarily order the inspection or copying at 13 the corporation’s expense and may postpone the meeting for 14 which the list was prepared until the inspection or copying is 15 complete. 16 5. Refusal or failure to prepare or make available the a 17 shareholders’ list does not affect the validity of action taken 18 at the meeting. 19 Sec. 16. Section 490.722, subsection 2, Code 2013, is 20 amended by striking the subsection. 21 Sec. 17. Section 490.724, subsection 4, Code 2013, is 22 amended to read as follows: 23 4. The corporation and its officer or agent who accepts 24 or rejects a vote, consent, waiver, or proxy appointment in 25 good faith and in accordance with the standards of this section 26 or section 490.722, subsection 2 , are not liable in damages 27 to the shareholder for the consequences of the acceptance or 28 rejection. 29 Sec. 18. Section 490.728, Code 2013, is amended by adding 30 the following new subsection: 31 NEW SUBSECTION . 4. Shares otherwise entitled to vote 32 cumulatively shall not be voted cumulatively at a particular 33 meeting unless any of the following applies: 34 a. The meeting notice or proxy statement accompanying 35 -17- LSB 1488XC (8) 85 da/nh 17/ 68
S.F. _____ the notice states conspicuously that cumulative voting is 1 authorized. 2 b. A shareholder who has the right to cumulate the 3 shareholder’s votes gives notice to the corporation not less 4 than forty-eight hours before the time set for the meeting of 5 the shareholder’s intent to cumulate votes during the meeting, 6 and if one shareholder gives this notice all other shareholders 7 in the same voting group participating in the election are 8 entitled to cumulate their votes without giving further notice. 9 Sec. 19. Section 490.742, subsection 2, Code 2013, is 10 amended to read as follows: 11 2. Ninety days have expired from the date delivery of 12 the demand was made, unless the shareholder has earlier been 13 notified that the demand has been rejected by the corporation 14 or unless irreparable injury to the corporation would result by 15 waiting for the expiration of the ninety-day period. 16 Sec. 20. Section 490.744, Code 2013, is amended to read as 17 follows: 18 490.744 Dismissal. 19 1. A derivative proceeding shall be dismissed by the court 20 on motion by the corporation if one of the groups specified 21 in subsection 2 or 6 5 has determined in good faith after 22 conducting a reasonable inquiry upon which its conclusions are 23 based that the maintenance of the derivative proceeding is 24 not in the best interests of the corporation. A corporation 25 moving to dismiss on this basis shall submit in support of the 26 motion a short and concise statement of the reasons for its 27 determination. 28 2. Unless a panel is appointed pursuant to subsection 6 5 , 29 the determination in subsection 1 shall be made by one any of 30 the following: 31 a. A majority vote of independent qualified directors 32 present at a meeting of the board of directors if the 33 independent qualified directors constitute a quorum. 34 b. A majority vote of a committee consisting of two or more 35 -18- LSB 1488XC (8) 85 da/nh 18/ 68
S.F. _____ independent qualified directors appointed by majority vote of 1 independent qualified directors present at a meeting of the 2 board of directors, whether or not such independent qualified 3 directors constitute a quorum. 4 3. None of the following shall by itself cause a director to 5 be considered not independent for purposes of this section : 6 a. The nomination or election of the director by persons 7 who are defendants in the derivative proceeding or against whom 8 action is demanded. 9 b. The naming of the director as a defendant in the 10 derivative proceeding or as a person against whom action is 11 demanded. 12 c. The approval by the director of the act being challenged 13 in the derivative proceeding or demand if the act resulted in 14 no personal benefit to the director. 15 4. 3. a. If a derivative proceeding is commenced 16 after a determination has been made rejecting a demand by a 17 shareholder, the complaint shall allege with particularity 18 facts establishing one any of the following: 19 (1) That a majority of the board of directors did not 20 consist of independent qualified directors at the time the 21 determination was made. 22 (2) That the requirements of subsection 1 have not been met. 23 b. All discovery and other proceedings shall be stayed 24 during the pendency of any motion to dismiss unless the 25 court finds upon the motion of any party that particularized 26 discovery is necessary to preserve evidence or prevent undue 27 prejudice to that party. 28 5. 4. If a majority of the board of directors does not 29 consist consisted of independent qualified directors at the 30 time the determination is was made, the corporation plaintiff 31 shall have the burden of proving that the requirements of 32 subsection 1 have not been met ; if not, the corporation shall 33 have the burden of proving that the requirements of subsection 34 1 have been met . If a majority of the board of directors 35 -19- LSB 1488XC (8) 85 da/nh 19/ 68
S.F. _____ consists of independent directors at the time the determination 1 is made, the plaintiff shall have the burden of proving that 2 the requirements of subsection 1 have not been met. 3 6. 5. The court may appoint a panel of one or more 4 independent persons upon motion by the corporation to make 5 a determination whether the maintenance of the derivative 6 proceeding is in the best interests of the corporation. In 7 such case, the plaintiff shall have the burden of proving that 8 the requirements of subsection 1 have not been met. 9 Sec. 21. Section 490.746, Code 2013, is amended to read as 10 follows: 11 490.746 Payment of expenses. 12 On termination of the derivative proceeding, the court may 13 do either any of the following: 14 1. Order the corporation to pay the plaintiff’s reasonable 15 expenses , including attorney fees incurred in the proceeding, 16 if it finds that the proceeding has resulted in a substantial 17 benefit to the corporation. 18 2. Order the plaintiff to pay any defendant’s reasonable 19 expenses , including attorney fees incurred in defending the 20 proceeding, if it finds that the proceeding was commenced or 21 maintained without reasonable cause or for an improper purpose. 22 Sec. 22. NEW SECTION . 490.748 Shareholder action to appoint 23 custodian or receiver. 24 1. The district court may appoint one or more persons 25 to be custodians, or, if the corporation is insolvent, to 26 be receivers, of and for a corporation in a proceeding by a 27 shareholder where it is established that any of the following 28 applies: 29 a. The directors are deadlocked in the management of 30 the corporate affairs, the shareholders are unable to break 31 the deadlock, and irreparable injury to the corporation is 32 threatened or being suffered. 33 b. The directors or those in control of the corporation are 34 acting fraudulently and irreparable injury to the corporation 35 -20- LSB 1488XC (8) 85 da/nh 20/ 68
S.F. _____ is threatened or being suffered. 1 2. a. The district court may issue injunctions, appoint a 2 temporary custodian or temporary receiver with all the powers 3 and duties the court directs, take other action to preserve the 4 corporate assets wherever located, and carry on the business of 5 the corporation until a full hearing is held. 6 b. The district court shall hold a full hearing, after 7 notifying all parties to the proceeding and any interested 8 persons designated by the court, before appointing a custodian 9 or receiver. 10 c. The district court has jurisdiction over the corporation 11 and all of its property, wherever located. 12 3. The district court may appoint an individual or domestic 13 or foreign corporation, authorized to transact business in this 14 state, as a custodian or receiver and may require the custodian 15 or receiver to post bond, with or without sureties, in an 16 amount the court directs. 17 4. The district court shall describe the powers and duties 18 of the custodian or receiver in its appointing order, which may 19 be amended from time to time. Among other powers, all of the 20 following apply: 21 a. A custodian may exercise all of the powers of the 22 corporation, through or in place of its board of directors, to 23 the extent necessary to manage the business and affairs of the 24 corporation. 25 b. A receiver may do any of the following: 26 (1) Dispose of all or any part of the assets of the 27 corporation wherever located, at a public or private sale, if 28 authorized by the district court. 29 (2) Sue and defend in the receiver’s own name as receiver in 30 all courts of this state. 31 5. The district court during a custodianship may 32 redesignate the custodian as a receiver, and during a 33 receivership may redesignate the receiver as a custodian, if 34 doing so is in the best interests of the corporation. 35 -21- LSB 1488XC (8) 85 da/nh 21/ 68
S.F. _____ 6. The district court from time to time during the 1 custodianship or receivership may order compensation paid and 2 expense disbursements or reimbursements made to the custodian 3 or receiver from the assets of the corporation or proceeds from 4 the sale of its assets. 5 Sec. 23. Section 490.801, Code 2013, is amended to read as 6 follows: 7 490.801 Requirement for and duties functions of board of 8 directors. 9 1. Except as provided in section 490.732 , each corporation 10 must have a board of directors. 11 2. All corporate powers shall be exercised by or under the 12 authority of the board of directors of the corporation , and 13 the business and affairs of the corporation shall be managed 14 by or under the direction , and subject to the oversight, of , 15 its board of directors, subject to any limitation set forth in 16 the articles of incorporation, or in an agreement authorized 17 under section 490.732 . 18 Sec. 24. Section 490.807, Code 2013, is amended to read as 19 follows: 20 490.807 Resignation of directors. 21 1. A director may resign at any time by delivering a 22 written notice resignation to the board of directors , or its 23 chairperson chair , or to the secretary of the corporation. 24 2. A resignation is effective when the notice resignation 25 is delivered unless the notice resignation specifies a 26 later effective date or an effective date determined upon 27 the happening of an event or events . A resignation that is 28 conditioned upon failing to receive a specified vote for 29 election as a director may provide that it is irrevocable. 30 Sec. 25. Section 490.810, subsection 2, Code 2013, is 31 amended to read as follows: 32 2. If the vacant office was held by a director elected by 33 a voting group of shareholders, only the holders of shares of 34 that voting group are entitled to vote to fill the vacancy 35 -22- LSB 1488XC (8) 85 da/nh 22/ 68
S.F. _____ if it is filled by the shareholders , and only the directors 1 elected by that voting group are entitled to fill the vacancy 2 if it is filled by the directors . 3 Sec. 26. NEW SECTION . 490.826 Submission of matters for 4 shareholder vote. 5 A corporation may agree to submit a matter to a vote of its 6 shareholders even if, after approving the matter, the board of 7 directors determines it no longer recommends the matter. 8 Sec. 27. Section 490.830, Code 2013, is amended by adding 9 the following new subsection: 10 NEW SUBSECTION . 2A. In discharging board or committee 11 duties a director shall disclose, or cause to be disclosed, 12 to the other board or committee members information which 13 the director knows is not already known by them but is known 14 by the director to be material to the discharge of their 15 decision-making or oversight functions, except that disclosure 16 is not required to the extent that the director reasonably 17 believes that doing so would violate a duty imposed under law, 18 a legally enforceable obligation of confidentiality, or a 19 professional ethics rule. 20 Sec. 28. Section 490.831, subsection 1, paragraph a, 21 subparagraph (1), Code 2013, is amended to read as follows: 22 (1) No defense interposed by the director based on any of 23 the following precludes liability: 24 (a) A provision in the articles of incorporation authorized 25 by section 490.202, subsection 2 , paragraph “d” , or the . 26 (b) The protection afforded by section 490.832 if 27 interposed as a bar to the proceeding by the director, does not 28 preclude liability 490.861 for action taken in compliance with 29 section 490.862 or 490.863 . 30 (c) The protection afforded by section 490.870. 31 Sec. 29. Section 490.831, subsection 3, paragraphs a and b, 32 Code 2013, are amended to read as follows: 33 a. In any instance where fairness is at issue, such 34 as consideration of the fairness of a transaction to the 35 -23- LSB 1488XC (8) 85 da/nh 23/ 68
S.F. _____ corporation under section 490.832 490.861, subsection 2, 1 paragraph “c” , alter the burden of proving the fact or lack of 2 fairness otherwise applicable. 3 b. Alter the fact or lack of liability of a director 4 under another section of this chapter , such as the provisions 5 governing the consequences of an unlawful distribution under 6 section 490.833 or a transactional interest under section 7 490.832 490.861 . 8 Sec. 30. Section 490.841, Code 2013, is amended to read as 9 follows: 10 490.841 Duties Functions of officers. 11 Each officer has the authority and shall perform the duties 12 functions set forth in the bylaws or, to the extent consistent 13 with the bylaws, the duties functions prescribed by the board 14 of directors or by direction of an officer authorized by the 15 board of directors to prescribe the duties functions of other 16 officers. 17 Sec. 31. Section 490.842, subsection 1, unnumbered 18 paragraph 1, Code 2013, is amended to read as follows: 19 An officer when performing in such capacity shall has the 20 duty to act in conformity with all of the following: 21 Sec. 32. Section 490.850, subsection 2, Code 2013, is 22 amended to read as follows: 23 2. “Director” or “officer” means an individual who is or 24 was a director or officer, respectively, of a corporation or 25 who, while a director or officer of the corporation, is or was 26 serving at the corporation’s request as a director, officer, 27 partner, trustee, employee, or agent of another domestic 28 or foreign corporation, partnership, joint venture, trust, 29 employee benefit plan, or other entity. A director or officer 30 is considered to be serving an employee benefit plan at the 31 corporation’s request if the director’s individual’s duties to 32 the corporation also impose duties on, or otherwise involve 33 services by, that director the individual to the plan or to 34 participants in or beneficiaries of the plan. “Director” or 35 -24- LSB 1488XC (8) 85 da/nh 24/ 68
S.F. _____ “officer” includes, unless the context requires otherwise, the 1 estate or personal representative of a director or officer. 2 Sec. 33. Section 490.850, subsections 3 and 4, Code 2013, 3 are amended by striking the subsections. 4 Sec. 34. Section 490.850, subsection 5, Code 2013, is 5 amended to read as follows: 6 5. “Liability” means the obligation to pay a judgment, 7 settlement, penalty, fine, including an excise tax assessed 8 with respect to an employee benefit plan, or reasonable 9 expenses incurred with respect to a proceeding. 10 Sec. 35. Section 490.853, Code 2013, is amended to read as 11 follows: 12 490.853 Advance for expenses. 13 1. A corporation may, before final disposition of 14 a proceeding, advance funds to pay for or reimburse the 15 reasonable expenses incurred in connection with the proceeding 16 by a director an individual who is a party to a the proceeding 17 because the person is a director if the person that individual 18 is a member of the board of directors if the director delivers 19 all of the following to the corporation: 20 a. A signed written affirmation of the director’s good 21 faith belief that the director has met the relevant standard 22 of conduct described in section 490.851 has been met by the 23 director or that the proceeding involved conduct for which 24 liability has been eliminated under a provision of the articles 25 of incorporation as authorized by section 490.202, subsection 26 2 , paragraph “d” . 27 b. The director’s A signed written undertaking of the 28 director to repay any funds advanced if the director is not 29 entitled to mandatory indemnification under section 490.852 and 30 it is ultimately determined under section 490.854 or section 31 490.855 that the director has not met the relevant standard of 32 conduct described in section 490.851 . 33 2. The undertaking required by subsection 1 , paragraph “b” , 34 must be an unlimited general obligation of the director but 35 -25- LSB 1488XC (8) 85 da/nh 25/ 68
S.F. _____ need not be secured and may be accepted without reference to 1 the financial ability of the director to make repayment. 2 3. Authorizations under this section shall be made 3 according to one any of the following: 4 a. By the board of directors as follows : 5 (1) If there are two or more disinterested qualified 6 directors, by a majority vote of all the disinterested 7 qualified directors, a majority of whom shall for such purpose 8 constitute a quorum, or by a majority of the members of a 9 committee of two or more disinterested qualified directors 10 appointed by such a vote. 11 (2) If there are fewer than two disinterested qualified 12 directors, by the vote necessary for action by the board 13 in accordance with section 490.824, subsection 3 , in which 14 authorization directors who do are not qualify as disinterested 15 qualified directors may participate. 16 b. By the shareholders, but shares owned by or voted under 17 the control of a director who at the time does not qualify as is 18 not a disinterested qualified director may shall not be voted 19 on the authorization. 20 Sec. 36. Section 490.855, Code 2013, is amended to read as 21 follows: 22 490.855 Determination and authorization of indemnification. 23 1. A corporation shall not indemnify a director under 24 section 490.851 unless authorized for a specific proceeding 25 after a determination has been made that indemnification of 26 the director is permissible because the director has met the 27 relevant standard of conduct set forth in section 490.851 . 28 2. The determination shall be made by any of the following: 29 a. If there are two or more disinterested qualified 30 directors, by the board of directors by a majority vote of all 31 the disinterested qualified directors, a majority of whom shall 32 for such purpose constitute a quorum, or by a majority of the 33 members of a committee of two or more disinterested qualified 34 directors appointed by such a vote. 35 -26- LSB 1488XC (8) 85 da/nh 26/ 68
S.F. _____ b. By special legal counsel selected in one of the following 1 manners : 2 (1) Selected in the manner prescribed in paragraph “a” . 3 (2) If there are fewer than two disinterested qualified 4 directors, selected by the board of directors, in which 5 selection directors who do not qualify as disinterested are not 6 qualified directors may participate. 7 c. By the shareholders, but shares owned by or voted under 8 the control of a director who at the time does not qualify as a 9 disinterested is not a qualified director shall not be voted on 10 the determination. 11 3. Authorization of indemnification shall be made in 12 the same manner as the determination that indemnification 13 is permissible, except that if there are fewer than two 14 disinterested qualified directors or if the determination is 15 made by special legal counsel, authorization of indemnification 16 shall be made by those entitled under subsection 2 , paragraph 17 “b” , to select special legal counsel under subsection 2, 18 paragraph “b” , subparagraph (2) . 19 Sec. 37. Section 490.858, Code 2013, is amended by adding 20 the following new subsection: 21 NEW SUBSECTION . 1A. A right of indemnification or to 22 advances for expenses created by this division or under 23 subsection 1 and in effect at the time of an act or omission 24 shall not be eliminated or impaired with respect to such act 25 or omission by an amendment of the articles of incorporation 26 or bylaws or a resolution of the directors or shareholders, 27 adopted after the occurrence of such act or omission, unless, 28 in the case of a right created under subsection 1, the 29 provision creating such right and in effect at the time of 30 such act or omission explicitly authorizes such elimination or 31 impairment after such act or omission has occurred. 32 Sec. 38. Section 490.858, subsection 3, Code 2013, is 33 amended to read as follows: 34 3. A Subject to subsection 1A, a corporation may, by a 35 -27- LSB 1488XC (8) 85 da/nh 27/ 68
S.F. _____ provision in its articles of incorporation, limit any of the 1 rights to indemnification or advance for expenses created by or 2 pursuant to this part. 3 Sec. 39. NEW SECTION . 490.860 Part definitions. 4 As used in this part, unless the context otherwise requires: 5 1. “Control” , including the term “controlled by” , means any 6 of the following: 7 a. Having the power, directly or indirectly, to elect or 8 remove a majority of the members of the board of directors 9 or other governing body of an entity, whether through the 10 ownership of voting shares or interests, by contract, or 11 otherwise. 12 b. Being subject to a majority of the risk of loss from the 13 entity’s activities or entitled to receive a majority of the 14 entity’s residual returns. 15 2. “Director’s conflicting interest transaction” means 16 a transaction effected or proposed to be effected by the 17 corporation, or by an entity controlled by the corporation to 18 which, or respecting which, any of the following applies: 19 a. To which, at the relevant time, the director is a party. 20 b. Respecting which, at the relevant time, the director 21 had knowledge and a material financial interest known to the 22 director. 23 c. Respecting which, at the relevant time, the director knew 24 that a related person was a party or had a material financial 25 interest. 26 3. “Fair to the corporation” means, for purposes of section 27 490.861, subsection 2, paragraph “c” , that the transaction 28 as a whole was beneficial to the corporation, taking into 29 appropriate account whether it was all of the following: 30 a. Fair in terms of the director’s dealings with the 31 corporation. 32 b. Comparable to what might have been obtainable in an arm’s 33 length transaction, given the consideration paid or received 34 by the corporation. 35 -28- LSB 1488XC (8) 85 da/nh 28/ 68
S.F. _____ 4. “Material financial interest” means a financial interest 1 in a transaction that would reasonably be expected to impair 2 the objectivity of the director’s judgment when participating 3 in action on the authorization of the transaction. 4 5. “Related person” means any of the following: 5 a. The director’s spouse. 6 b. A child, stepchild, grandchild, parent, stepparent, 7 grandparent, sibling, step sibling, half sibling, aunt, uncle, 8 niece, or nephew, or spouse of any thereof, of the director or 9 of the director’s spouse. 10 c. An individual living in the same home as the director. 11 d. An entity, other than the corporation or an entity 12 controlled by the corporation, controlled by the director or 13 any person specified in this subsection. 14 e. A domestic or foreign person who is any of the following: 15 (1) A business or nonprofit corporation, other than the 16 corporation or an entity controlled by the corporation, of 17 which the director is a director. 18 (2) An unincorporated entity of which the director is a 19 general partner or a member of the governing body. 20 (3) An individual, trust, or estate for whom or of which the 21 director is a trustee, guardian, personal representative, or 22 like fiduciary. 23 f. A person that is, or an entity that is controlled by, an 24 employer of the director. 25 6. “Relevant time” means any of the following: 26 a. The time at which directors’ action respecting the 27 transaction is taken in compliance with section 490.862. 28 b. If the transaction is not brought before the board of 29 directors of the corporation, or its committee, for action 30 under section 490.862, at the time the corporation, or an 31 entity controlled by the corporation, becomes legally obligated 32 to consummate the transaction. 33 7. “Required disclosure” means disclosure of all of the 34 following: 35 -29- LSB 1488XC (8) 85 da/nh 29/ 68
S.F. _____ a. The existence and nature of the director’s conflicting 1 interest. 2 b. All facts known to the director respecting the subject 3 matter of the transaction that a director free of such 4 conflicting interest would reasonably believe to be material in 5 deciding whether to proceed with the transaction. 6 Sec. 40. NEW SECTION . 490.861 Judicial action. 7 1. A transaction effected or proposed to be effected by the 8 corporation, or by an entity controlled by the corporation, 9 shall not be the subject of equitable relief, or give rise to 10 an award of damages or other sanctions against a director of 11 the corporation, in a proceeding by a shareholder or by or in 12 the right of the corporation, on the ground that the director 13 has an interest respecting the transaction, if it is not a 14 director’s conflicting interest transaction. 15 2. A director’s conflicting interest transaction may 16 not be the subject of equitable relief, or give rise to an 17 award of damages or other sanctions against a director of the 18 corporation, in a proceeding by a shareholder or by or in the 19 right of the corporation, on the ground that the director has 20 an interest respecting the transaction, if any of the following 21 apply: 22 a. Directors’ action respecting the transaction was taken in 23 compliance with section 490.862 at any time. 24 b. Shareholders’ action respecting the transaction was taken 25 in compliance with section 490.863 at any time. 26 c. The transaction, judged according to the circumstances 27 at the relevant time, is established to have been fair to the 28 corporation. 29 Sec. 41. NEW SECTION . 490.862 Directors’ action. 30 1. Directors’ action respecting a director’s conflicting 31 interest transaction is effective for purposes of section 32 490.861, subsection 2, paragraph “a” , if the transaction has 33 been authorized by the affirmative vote of a majority, but 34 no fewer than two, of the qualified directors who voted on 35 -30- LSB 1488XC (8) 85 da/nh 30/ 68
S.F. _____ the transaction, after required disclosure by the conflicted 1 director of information not already known by such qualified 2 directors, or after modified disclosure in compliance with 3 subsection 2, provided that all of the following apply: 4 a. The qualified directors have deliberated and voted 5 outside the presence of and without the participation by any 6 other director. 7 b. Where the action has been taken by a committee, all 8 members of the committee were qualified directors, and any of 9 the following apply: 10 (1) The committee was composed of all the qualified 11 directors on the board of directors. 12 (2) The members of the committee were appointed by the 13 affirmative vote of a majority of the qualified directors on 14 the board. 15 2. Notwithstanding subsection 1, when a transaction is 16 a director’s conflicting interest transaction only because a 17 related person described in section 490.860, subsection 5, 18 paragraph “e” or “f” , is a party to or has a material financial 19 interest in the transaction, the conflicted director is not 20 obligated to make required disclosure to the extent that the 21 director reasonably believes that doing so would violate a 22 duty imposed under law, a legally enforceable obligation of 23 confidentiality, or a professional ethics rule, provided that 24 the conflicted director discloses to the qualified directors 25 voting on the transaction all of the following: 26 a. All information required to be disclosed that is not so 27 violative. 28 b. The existence and nature of the director’s conflicting 29 interest. 30 c. The nature of the conflicted director’s duty not to 31 disclose the confidential information. 32 3. A majority, but no fewer than two, of all the qualified 33 directors on the board of directors, or on the committee, 34 constitutes a quorum for purposes of action that complies with 35 -31- LSB 1488XC (8) 85 da/nh 31/ 68
S.F. _____ this section. 1 4. Where directors’ action under this section does not 2 satisfy a quorum or voting requirement applicable to the 3 authorization of the transaction by reason of the articles of 4 incorporation, the bylaws, or a provision of law, independent 5 action to satisfy those authorization requirements must be 6 taken by the board of directors or a committee, in which action 7 directors who are not qualified directors may participate. 8 Sec. 42. NEW SECTION . 490.863 Shareholders’ action. 9 1. a. Shareholders’ action respecting a director’s 10 conflicting interest transaction is effective for purposes of 11 section 490.861, subsection 2, paragraph “b” , if a majority of 12 the votes cast by the holders of all qualified shares are in 13 favor of the transaction after all of the following occur: 14 (1) Notice to shareholders describing the action to be taken 15 respecting the transaction. 16 (2) Provision to the corporation of the information 17 referred to in subsection 2. 18 (3) Communication to the shareholders entitled to vote 19 on the transaction of the information that is the subject of 20 required disclosure, to the extent the information is not known 21 by them. 22 b. In the case of shareholders’ action at a meeting, the 23 shareholders entitled to vote shall be determined as of the 24 record date for notice of the meeting. 25 2. A director who has a conflicting interest respecting 26 the transaction shall, before the shareholders’ vote, inform 27 the secretary or other officer or agent of the corporation 28 authorized to tabulate votes, in writing, of the number of 29 shares that the director knows are not qualified shares under 30 subsection 3, and the identity of the holders of those shares. 31 3. For purposes of this section, all of the following apply: 32 a. “Holder” means and “held by” refers to shares held by 33 both a record shareholder, as defined in section 490.1301, 34 subsection 7, and a beneficial shareholder, as defined in 35 -32- LSB 1488XC (8) 85 da/nh 32/ 68
S.F. _____ 490.1301, subsection 2. 1 b. “Qualified shares” means all shares entitled to be 2 voted with respect to the transaction except for shares that 3 the secretary or other officer or agent of the corporation 4 authorized to tabulate votes either knows, or under subsection 5 2 is notified, are held by any of the following: 6 (1) A director who has a conflicting interest respecting the 7 transaction. 8 (2) A related person of the director, excluding a person 9 described in section 490.860, subsection 5, paragraph “f” . 10 4. A majority of the votes entitled to be cast by the 11 holders of all qualified shares constitutes a quorum for 12 purposes of compliance with this section. Subject to the 13 provisions of subsection 5, shareholders’ action that otherwise 14 complies with this section is not affected by the presence of 15 holders, or by the voting, of shares that are not qualified 16 shares. 17 5. If a shareholders’ vote does not comply with subsection 18 1 solely because of a director’s failure to comply with 19 subsection 2, and if the director establishes that the failure 20 was not intended to influence and did not in fact determine the 21 outcome of the vote, the court may take such action respecting 22 the transaction and the director, and may give such effect, 23 if any, to the shareholders’ vote, as the court considers 24 appropriate in the circumstances. 25 6. Where shareholders’ action under this section does 26 not satisfy a quorum or voting requirement applicable to the 27 authorization of the transaction by reason of the articles of 28 incorporation, the bylaws, or a provision of law, independent 29 action to satisfy those authorization requirements must be 30 taken by the shareholders, in which action shares that are not 31 qualified shares may participate. 32 Sec. 43. Section 490.870, subsection 1, paragraphs a and b, 33 Code 2013, are amended to read as follows: 34 a. Action by qualified directors disclaiming the 35 -33- LSB 1488XC (8) 85 da/nh 33/ 68
S.F. _____ corporation’s interest in the opportunity is taken in 1 compliance with the procedures set forth in section 490.832 2 490.862 , as if the decision being made concerned a director’s 3 conflicting interest transaction. 4 b. Shareholders’ action disclaiming the corporation’s 5 interest in the opportunity is taken in compliance with the 6 procedure set forth in section 490.832 490.863 , as if the 7 decision being made concerned a director’s conflicting interest 8 transaction; except that, rather than making the disclosure 9 “required disclosure” as required defined in section 490.832 10 490.860 , in each case the director shall have made prior 11 disclosure to those acting on behalf of the corporation of all 12 material facts concerning the business opportunity that are 13 then known to the director. 14 Sec. 44. Section 490.1003, subsection 2, Code 2013, is 15 amended to read as follows: 16 2. a. Except as provided in sections 490.1005 , 490.1007 , 17 and 490.1008 , after adopting the proposed amendment, the board 18 of directors must submit the amendment to the shareholders for 19 their approval. The board of directors must also transmit to 20 the shareholders a recommendation that the shareholders approve 21 the amendment, unless any of the following apply: 22 (1) The board of directors makes a determination that 23 because of conflicts of interest or other special circumstances 24 it should not make such a recommendation , in which case the . 25 (2) Section 490.826 applies. 26 b. If paragraph “a” , subparagraph (1) or (2), applies, the 27 board of directors must transmit to the shareholders the basis 28 for the determination so proceeding . 29 Sec. 45. Section 490.1104, subsection 2, Code 2013, is 30 amended to read as follows: 31 2. a. Except as provided in subsection 7 and in section 32 490.1105 , after adopting the plan of merger or share exchange 33 the board of directors must submit the plan to the shareholders 34 for their approval. The board of directors must also transmit 35 -34- LSB 1488XC (8) 85 da/nh 34/ 68
S.F. _____ to the shareholders a recommendation that the shareholders 1 approve the plan, unless the any of the following apply: 2 (1) The board of directors makes a determination that 3 because of conflicts of interest or other special circumstances 4 it should not make such a recommendation , in which case . 5 (2) Section 490.826 applies. 6 b. If paragraph “a” , subparagraph (1) or (2), applies, the 7 board of directors must transmit to the shareholders the basis 8 for that determination so proceeding . 9 Sec. 46. Section 490.1106, subsection 1, unnumbered 10 paragraph 1, Code 2013, is amended to read as follows: 11 After a plan of merger or share exchange has been adopted 12 and approved as required by this chapter , articles of merger 13 or share exchange shall be executed signed on behalf of each 14 party to the merger or share exchange by any officer or other 15 duly authorized representative. The articles shall set forth 16 the following: 17 Sec. 47. Section 490.1108, subsection 2, Code 2013, is 18 amended to read as follows: 19 2. If a merger or share exchange is abandoned under 20 subsection 1 after articles of merger or share exchange have 21 been filed with the secretary of state but before the merger 22 or share exchange has become effective, a statement that the 23 merger or share exchange has been abandoned in accordance with 24 this section , executed signed on behalf of a party to the 25 merger or share exchange by an officer or other duly authorized 26 representative, shall be delivered to the secretary of state 27 for filing prior to the effective date of the merger or share 28 exchange. Upon filing, the statement shall take effect and the 29 merger or share exchange shall be deemed abandoned and shall 30 not become effective. 31 Sec. 48. Section 490.1202, subsection 2, Code 2013, is 32 amended to read as follows: 33 2. a. A disposition that requires approval of the 34 shareholders under subsection 1 shall be initiated by 35 -35- LSB 1488XC (8) 85 da/nh 35/ 68
S.F. _____ a resolution by the board of directors authorizing the 1 disposition. After adoption of such a resolution, the board 2 of directors shall submit the proposed disposition to the 3 shareholders for their approval. The board of directors shall 4 also transmit to the shareholders a recommendation that the 5 shareholders approve the proposed disposition, unless the any 6 of the following apply: 7 (1) The board of directors makes a determination that 8 because of conflicts of interest or other special circumstances 9 it should not make such a recommendation , in which case . 10 (2) Section 490.826 applies. 11 b. If paragraph “a” , subparagraph (1) or (2), applies, the 12 board of directors shall transmit to the shareholders the basis 13 for that determination so proceeding . 14 Sec. 49. Section 490.1301, Code 2013, is amended by adding 15 the following new subsection: 16 NEW SUBSECTION . 5A. “Interested transaction” means a 17 corporate action described in section 490.1302, subsection 1, 18 other than a merger pursuant to section 490.1105, involving an 19 interested person in which any of the shares or assets of the 20 corporation are being acquired or converted. As used in this 21 definition, all of the following apply: 22 a. “Beneficial owner” means any person who, directly 23 or indirectly, through any contract, arrangement, or 24 understanding, other than a revocable proxy, has or shares the 25 power to vote, or to direct the voting of, shares; except that 26 a member of a national securities exchange is not deemed to be 27 a beneficial owner of securities held directly or indirectly 28 by it on behalf of another person solely because the member is 29 the record holder of the securities if the member is precluded 30 by the rules of the exchange from voting without instruction 31 on contested matters or matters that may affect substantially 32 the rights or privileges of the holders of the securities to 33 be voted. When two or more persons agree to act together for 34 the purpose of voting their shares of the corporation, each 35 -36- LSB 1488XC (8) 85 da/nh 36/ 68
S.F. _____ member of the group formed thereby is deemed to have acquired 1 beneficial ownership, as of the date of the agreement, of all 2 voting shares of the corporation beneficially owned by any 3 member of the group. 4 b. “Excluded shares” means shares acquired pursuant to an 5 offer for all shares having voting power if the offer was made 6 within one year prior to the corporate action for consideration 7 of the same kind and of a value equal to or less than that paid 8 in connection with the corporate action. 9 c. “Interested person” means a person, or an affiliate of a 10 person, who at any time during the one-year period immediately 11 preceding approval by the board of directors of the corporate 12 action was or had any of the following: 13 (1) Was the beneficial owner of twenty percent or more of 14 the voting power of the corporation, other than as owner of 15 excluded shares. 16 (2) Had the power, contractually or otherwise, other than as 17 owner of excluded shares, to cause the appointment or election 18 of twenty-five percent or more of the directors to the board of 19 directors of the corporation. 20 (3) Was a senior executive or director of the corporation 21 or a senior executive of any affiliate thereof, and that 22 senior executive or director will receive, as a result of the 23 corporate action, a financial benefit not generally available 24 to other shareholders as such, other than any of the following: 25 (a) Employment, consulting, retirement, or similar benefits 26 established separately and not as part of or in contemplation 27 of the corporate action. 28 (b) Employment, consulting, retirement, or similar benefits 29 established in contemplation of, or as part of, the corporate 30 action that are not more favorable than those existing before 31 the corporate action or, if more favorable, that have been 32 approved on behalf of the corporation in the same manner as is 33 provided in section 490.862. 34 (c) In the case of a director of the corporation who will, 35 -37- LSB 1488XC (8) 85 da/nh 37/ 68
S.F. _____ in the corporate action, become a director of the acquiring 1 entity in the corporate action or one of its affiliates, rights 2 and benefits as a director that are provided on the same basis 3 as those afforded by the acquiring entity generally to other 4 directors of such entity or such affiliate. 5 Sec. 50. Section 490.1302, subsection 2, paragraph a, Code 6 2013, is amended by striking the paragraph and inserting in 7 lieu thereof the following: 8 a. Appraisal rights shall not be available for the holders 9 of shares of any class or series of shares which is any of the 10 following: 11 (1) A covered security under section 18(b)(1)(A) or (B) of 12 the federal Securities Act of 1933, as amended. 13 (2) Traded in an organized market and has at least two 14 thousand shareholders and a market value of at least twenty 15 million dollars, exclusive of the value of such shares held by 16 the corporation’s subsidiaries, senior executives, directors, 17 and beneficial shareholders owning more than ten percent of 18 such shares. 19 (3) Issued by an open-end management investment company 20 registered with the United States securities and exchange 21 commission under the federal Investment Company Act of 1940 and 22 may be redeemed at the option of the holder at net asset value. 23 Sec. 51. Section 490.1302, subsection 2, paragraph b, 24 subparagraph (1), Code 2013, is amended to read as follows: 25 (1) The record date fixed to determine the shareholders 26 entitled to receive notice of , and to vote at, the meeting 27 of shareholders to act upon the corporate action requiring 28 appraisal rights. 29 Sec. 52. Section 490.1302, subsection 2, paragraph d, Code 30 2013, is amended by striking the paragraph and inserting in 31 lieu thereof the following: 32 d. Paragraph “a” , shall not be applicable and appraisal 33 rights shall be available pursuant to subsection 1 for the 34 holders of any class or series of shares where the corporate 35 -38- LSB 1488XC (8) 85 da/nh 38/ 68
S.F. _____ action is an interested transaction. 1 Sec. 53. Section 490.1302, subsection 2, paragraph e, Code 2 2013, is amended by striking the paragraph. 3 Sec. 54. Section 490.1302, subsection 4, Code 2013, is 4 amended by striking the subsection. 5 Sec. 55. Section 490.1320, Code 2013, is amended to read as 6 follows: 7 490.1320 Notice of appraisal rights. 8 1. If Where any proposed corporate action described 9 specified in section 490.1302, subsection 1 , is to be submitted 10 to a vote at a shareholders’ meeting, the meeting notice must 11 state that the corporation has concluded that the shareholders 12 are, are not, or may be entitled to assert appraisal rights 13 under this part. If the corporation concludes that appraisal 14 rights are or may be available, a copy of this part must 15 accompany the meeting notice sent to those record shareholders 16 entitled to exercise appraisal rights. 17 2. In a merger pursuant to section 490.1105 , the parent 18 corporation must notify in writing all record shareholders of 19 the subsidiary who are entitled to assert appraisal rights 20 that the corporate action became effective. Such notice must 21 be sent within ten days after the corporate action became 22 effective and include the materials described in section 23 490.1322 . 24 3. Where any corporate action specified in section 25 490.1302, subsection 1, is to be approved by written consent 26 of the shareholders pursuant to section 490.704, all of the 27 following apply: 28 a. Written notice that appraisal rights are, are not, or may 29 be available must be sent to each record shareholder from whom 30 a consent is solicited at the time consent of such shareholder 31 is first solicited and, if the corporation has concluded that 32 appraisal rights are or may be available, must be accompanied 33 by a copy of this chapter. 34 b. Written notice that appraisal rights are, are not, or 35 -39- LSB 1488XC (8) 85 da/nh 39/ 68
S.F. _____ may be available must be delivered together with the notice to 1 nonconsenting and nonvoting shareholders required by section 2 490.704, subsections 5 and 6, may include the materials 3 described in section 490.1322 and, if the corporation has 4 concluded that appraisal rights are or may be available, must 5 be accompanied by a copy of this chapter. 6 4. Where corporate action described in section 490.1302, 7 subsection 1, is proposed, or a merger pursuant to section 8 490.1105 is effected, the notice referred to in subsection 1 9 or 3, if the corporation concludes that appraisal rights are 10 or may be available, and in subsection 2 shall be accompanied 11 by all of the following: 12 a. The annual financial statements specified in section 13 490.1620, subsection 1, of the corporation that issued the 14 shares that may be subject to appraisal, which shall be as of 15 a date ending not more than sixteen months before the date of 16 the notice and shall comply with section 490.1620, subsection 17 2; provided that, if such annual financial statements are not 18 reasonably available, the corporation shall provide reasonably 19 equivalent financial information. 20 b. The latest available quarterly financial statements of 21 such corporation, if any. 22 5. The right to receive the information described in 23 subsection 4 may be waived in writing by a shareholder before 24 or after the corporate action. 25 Sec. 56. Section 490.1321, Code 2013, is amended to read as 26 follows: 27 490.1321 Notice of intent to demand payment. 28 1. If proposed a corporate action requiring appraisal 29 rights under specified in section 490.1302 , subsection 1, is 30 submitted to a vote at a shareholders’ meeting, a shareholder 31 who wishes to assert appraisal rights with respect to any class 32 or series of shares must do all of the following: 33 a. Deliver to the corporation before the vote is taken 34 written notice of the shareholder’s intent to demand payment if 35 -40- LSB 1488XC (8) 85 da/nh 40/ 68
S.F. _____ the proposed action is effectuated. 1 b. Not vote, or cause or permit to be voted, any shares of 2 such class or series in favor of the proposed action. 3 2. If a corporate action specified in section 490.1302, 4 subsection 1, is to be approved by less than unanimous written 5 consent, a shareholder who wishes to assert appraisal rights 6 with respect to any class or series of shares must not sign a 7 consent in favor of the proposed action with respect to that 8 class or series of shares. 9 3. A shareholder who does not fails to satisfy the 10 requirements of subsection 1 or 2, is not entitled to payment 11 under this part. 12 Sec. 57. Section 490.1322, subsection 1, Code 2013, is 13 amended to read as follows: 14 1. If proposed corporate action requiring appraisal rights 15 under section 490.1302, subsection 1 , becomes effective, the 16 corporation must deliver send a written appraisal notice 17 and the form required by subsection 2 , paragraph “a” , to 18 all shareholders who satisfied the requirements of section 19 490.1321 , subsection 1, or section 490.1321, subsection 2 . In 20 the case of a merger under section 490.1105 , the parent must 21 deliver a written an appraisal notice and form to all record 22 shareholders who may be entitled to assert appraisal rights. 23 Sec. 58. Section 490.1322, subsection 2, unnumbered 24 paragraph 1, Code 2013, is amended to read as follows: 25 The appraisal notice must be sent delivered no earlier than 26 the date the corporate action specified in section 490.1302, 27 subsection 1, became effective and no later than ten days after 28 such date and must do all of the following: 29 Sec. 59. Section 490.1322, subsection 2, paragraph a, Code 30 2013, is amended to read as follows: 31 a. Be accompanied by Supply a form that specifies does all 32 of the following: 33 (1) Specifies the first date of any announcement to 34 shareholders made prior to the date the corporate action became 35 -41- LSB 1488XC (8) 85 da/nh 41/ 68
S.F. _____ effective of the first announcement to shareholders of the 1 principal terms of the proposed corporate action and requires , 2 if any. 3 (2) If such announcement was made, requires the shareholder 4 asserting appraisal rights to certify whether beneficial 5 ownership of those shares for which appraisal rights are 6 asserted was acquired before that date. 7 (3) Requires the shareholder asserting appraisal rights to 8 certify whether or not beneficial ownership of those shares for 9 which appraisal rights are asserted was acquired before that 10 date, and that the such shareholder did not vote for or consent 11 to the transaction. 12 Sec. 60. Section 490.1322, subsection 2, paragraph b, 13 subparagraph (2), Code 2013, is amended to read as follows: 14 (2) A date by which the corporation must receive the form, 15 which date shall not be fewer than forty nor more than sixty 16 days after the date the appraisal notice and form are is sent 17 under subsection 1 , and state that the shareholder shall have 18 waived the right to demand appraisal with respect to the 19 shares unless the form is received by the corporation by such 20 specified date. 21 Sec. 61. Section 490.1323, subsections 1 and 3, Code 2013, 22 are amended to read as follows: 23 1. A shareholder who receives notice pursuant to section 24 490.1322 and who wishes to exercise appraisal rights must 25 certify on sign and return the form sent by the corporation 26 and, in the case of certificated shares, deposit the 27 shareholder’s certificates in accordance with the terms of 28 the notice by the date referred to in the notice pursuant to 29 section 490.1322, subsection 2, paragraph “b” , subparagraph 30 (2). In addition, if applicable, the shareholder must certify 31 on the form whether the beneficial owner of such shares 32 acquired beneficial ownership of the shares before the date 33 required to be set forth in the notice pursuant to section 34 490.1322, subsection 2 , paragraph “a” . If a shareholder fails 35 -42- LSB 1488XC (8) 85 da/nh 42/ 68
S.F. _____ to make this certification, the corporation may elect to 1 treat the shareholder’s shares as after-acquired shares under 2 section 490.1325 . In addition, a shareholder who wishes to 3 exercise appraisal rights must execute and return the form and, 4 in a case of certificated shares, deposit the shareholder’s 5 certificates in accordance with the terms of the notice 6 by the date referred to in the notice pursuant to section 7 490.1322, subsection 2 , paragraph “b” , subparagraph (2). Once 8 a shareholder deposits that shareholder’s certificates or, in 9 the case of uncertificated shares, returns the executed signed 10 forms, that shareholder loses all rights as a shareholder, 11 unless the shareholder withdraws pursuant to subsection 2 . 12 3. A shareholder who does not execute sign and return the 13 form and, in the case of certificated shares, deposit the 14 shareholder’s share certificates where required, each by the 15 date set forth in the notice described in section 490.1322, 16 subsection 2 , shall not be entitled to payment under this 17 division . 18 Sec. 62. Section 490.1324, subsection 2, paragraph a, Code 19 2013, is amended to read as follows: 20 a. (1) Financial The annual financial statements specified 21 in section 490.1620, subsection 1, of the corporation that 22 issued the shares to be appraised, consisting of a balance 23 sheet as of the end of a fiscal year which shall be of a date 24 ending not more than sixteen months before the date of payment , 25 an income statement for that year, a statement of changes 26 in shareholders’ equity for that year, and the shall comply 27 with section 490.1620, subsection 2; provided that, if such 28 annual financial statements are not reasonably available, the 29 corporation shall provide reasonably equivalent financial 30 information. 31 (2) The latest available interim quarterly financial 32 statements of such corporation , if any. 33 Sec. 63. Section 490.1325, subsection 1, Code 2013, is 34 amended to read as follows: 35 -43- LSB 1488XC (8) 85 da/nh 43/ 68
S.F. _____ 1. A corporation may elect to withhold payment required 1 by section 490.1324 from any shareholder who was required to, 2 but did not certify that beneficial ownership of all of the 3 shareholder’s shares for which appraisal rights are asserted 4 was acquired before the date set forth in the appraisal notice 5 sent pursuant to section 490.1322, subsection 2 , paragraph “a” . 6 Sec. 64. Section 490.1331, Code 2013, is amended to read as 7 follows: 8 490.1331 Court costs and counsel fees expenses . 9 1. The court in an appraisal proceeding commenced under 10 section 490.1330 shall determine all court costs of the 11 proceeding, including the reasonable compensation and expenses 12 of appraisers appointed by the court. The court shall assess 13 the court costs against the corporation, except that the court 14 may assess court costs against all or some of the shareholders 15 demanding appraisal, in amounts the court finds equitable, to 16 the extent the court finds such shareholders acted arbitrarily, 17 vexatiously, or not in good faith with respect to the rights 18 provided by this division . 19 2. The court in an appraisal proceeding may also assess the 20 fees and expenses of counsel and experts for the respective 21 parties, in amounts the court finds equitable, for either any 22 of the following: 23 a. Against the corporation and in favor of any or all 24 shareholders demanding appraisal if the court finds the 25 corporation did not substantially comply with the requirements 26 of section 490.1320 , 490.1322 , 490.1324 , or 490.1325 . 27 b. Against either the corporation or a shareholder demanding 28 appraisal, in favor of any other party, if the court finds that 29 the party against whom the fees and expenses are assessed acted 30 arbitrarily, vexatiously, or not in good faith with respect to 31 the rights provided by this chapter . 32 3. If the court in an appraisal proceeding finds that the 33 services of counsel for expenses incurred by any shareholder 34 were of substantial benefit to other shareholders similarly 35 -44- LSB 1488XC (8) 85 da/nh 44/ 68
S.F. _____ situated, and that the fees for those services such expenses 1 should not be assessed against the corporation, the court may 2 award to such counsel reasonable fees to direct that such 3 expenses be paid out of the amounts awarded the shareholders 4 who were benefited. 5 4. To the extent the corporation fails to make a required 6 payment pursuant to section 490.1324 , 490.1325 , or 490.1326 , 7 the shareholder may sue directly for the amount owed and, to 8 the extent successful, shall be entitled to recover from the 9 corporation all costs and expenses of the suit , including 10 counsel fees . 11 Sec. 65. NEW SECTION . 490.1340 Other remedies limited. 12 1. The legality of a proposed or completed corporate 13 action described in section 490.1302, subsection 1, shall not 14 be contested, nor may the corporate action be enjoined, set 15 aside, or rescinded, in a legal or equitable proceeding by a 16 shareholder after the shareholders have approved the corporate 17 action. 18 2. Subsection 1 does not apply to a corporate action that 19 meets any of the following conditions: 20 a. Was not authorized and approved in accordance with the 21 applicable provisions of any of the following: 22 (1) Division X, XI, or XII of this chapter. 23 (2) The articles of incorporation or bylaws. 24 (3) The resolution of the board of directors authorizing the 25 corporate action. 26 b. Was procured as a result of fraud, a material 27 misrepresentation, or an omission of a material fact necessary 28 to make statements made, in light of the circumstances in which 29 they were made, not misleading. 30 c. Is an interested transaction, unless it has been 31 recommended by the board of directors in the same manner as 32 is provided in section 490.862 and has been approved by the 33 shareholders in the same manner as is provided in section 34 490.863 as if the interested transaction were a director’s 35 -45- LSB 1488XC (8) 85 da/nh 45/ 68
S.F. _____ conflicting interest transaction. 1 d. Is approved by less than unanimous consent of the 2 voting shareholders pursuant to section 490.704, if all of the 3 following apply: 4 (1) The challenge to the corporate action is brought by a 5 shareholder who did not consent and as to whom notice of the 6 approval of the corporate action was not effective at least ten 7 days before the corporate action was effected. 8 (2) The proceeding challenging the corporate action is 9 commenced within ten days after notice of the approval of the 10 corporate action is effective as to the shareholder bringing 11 the proceeding. 12 Sec. 66. Section 490.1402, subsection 2, paragraph a, Code 13 2013, is amended to read as follows: 14 a. (1) The board of directors must recommend dissolution to 15 the shareholders unless the any of the following apply: 16 (a) The board of directors determines that because of 17 conflict of interest or other special circumstances it should 18 make no recommendation and communicates . 19 (b) Section 490.826 applies. 20 (2) If paragraph “a” , subparagraph (1) or (2), applies, 21 it must communicate the basis for its determination to the 22 shareholders so proceeding . 23 Sec. 67. Section 490.1430, Code 2013, is amended to read as 24 follows: 25 490.1430 Grounds for judicial dissolution. 26 1. The district court may dissolve a corporation in any of 27 the following ways: 28 1. a. A proceeding by the attorney general, if it is 29 established that either any of the following apply: 30 a. (1) The corporation obtained its articles of 31 incorporation through fraud. 32 b. (2) The corporation has continued to exceed or abuse the 33 authority conferred upon it by law. 34 2. b. A proceeding by a shareholder if it is established 35 -46- LSB 1488XC (8) 85 da/nh 46/ 68
S.F. _____ that any of the following conditions exist: 1 a. (1) The directors are deadlocked in the management of 2 the corporate affairs, the shareholders are unable to break the 3 deadlock, and either irreparable injury to the corporation is 4 threatened or being suffered, or the business and affairs of 5 the corporation can no longer be conducted to the advantage of 6 the shareholders generally, because of the deadlock. 7 b. (2) The directors or those in control of the corporation 8 have acted, are acting, or will act in a manner that is 9 illegal, oppressive, or fraudulent. 10 c. (3) The shareholders are deadlocked in voting power 11 and have failed, for a period that includes at least two 12 consecutive annual meeting dates, to elect successors to 13 directors whose terms have expired. 14 d. (4) The corporate assets are being misapplied or wasted. 15 3. c. A proceeding by a creditor if it is established that 16 either any of the following apply: 17 a. (1) The creditor’s claim has been reduced to judgment, 18 the execution on the judgment returned unsatisfied, and the 19 corporation is insolvent. 20 b. (2) The corporation has admitted in writing that the 21 creditor’s claim is due and owing and the corporation is 22 insolvent. 23 4. d. A proceeding by the corporation to have its voluntary 24 dissolution continued under court supervision. 25 e. A proceeding by a shareholder if the corporation has 26 abandoned its business and has failed within a reasonable time 27 to liquidate and distribute its assets and dissolve. 28 2. Subsection 1, paragraph “b” , shall not apply in the 29 case of a corporation that, on the date of the filing of the 30 proceeding, has shares which are any of the following: 31 a. Listed on the New York stock exchange, the American stock 32 exchange, or on any exchange owned or operated by the NASDAQ 33 stock market, l.l.c., or listed or quoted on a system owned or 34 operated by the national association of securities dealers, 35 -47- LSB 1488XC (8) 85 da/nh 47/ 68
S.F. _____ inc. 1 b. Not so listed or quoted, but are held by at least three 2 hundred shareholders and the shares outstanding have a market 3 value of at least twenty million dollars, exclusive of the 4 value of such shares held by the corporation’s subsidiaries, 5 senior executives, directors, and beneficial shareholders 6 owning more than ten percent of such shares. 7 3. As used in this section, “beneficial shareholder” has the 8 meaning specified in section 490.1301, subsection 2. 9 Sec. 68. Section 490.1431, subsection 4, Code 2013, is 10 amended to read as follows: 11 4. Within ten days of the commencement of a proceeding 12 under section 490.1430, subsection 2 , to dissolve a corporation 13 that has no shares listed on a national securities exchange or 14 regularly traded in a market maintained by one or more members 15 of a national securities exchange under section 490.1430, 16 subsection 1, paragraph “b” , the corporation must send to all 17 shareholders, other than the petitioner, a notice stating that 18 the shareholders are entitled to avoid the dissolution of the 19 corporation by electing to purchase the petitioner’s shares 20 under section 490.1434 , and a copy of section 490.1434 . 21 Sec. 69. Section 490.1432, subsections 1 and 5, Code 2013, 22 are amended to read as follows: 23 1. A Unless an election to purchase has been filed under 24 section 490.1434, a court in a judicial proceeding brought to 25 dissolve a corporation may appoint one or more receivers to 26 wind up and liquidate, or one or more custodians to manage, 27 the business and affairs of the corporation. The court shall 28 hold a hearing, after notifying all parties to the proceeding 29 and any interested persons designated by the court, before 30 appointing a receiver or custodian. The court appointing a 31 receiver or custodian has exclusive jurisdiction over the 32 corporation and all its property wherever located. 33 5. The court from time to time during the receivership 34 or custodianship may order compensation paid and expense 35 -48- LSB 1488XC (8) 85 da/nh 48/ 68
S.F. _____ disbursements or reimbursements made expenses paid or 1 reimbursed to the receiver or custodian and the receiver’s 2 or custodian’s counsel from the assets of the corporation or 3 proceeds from the sale of the assets. 4 Sec. 70. Section 490.1434, subsections 1, 2, 4, and 5, Code 5 2013, are amended to read as follows: 6 1. In a proceeding under section 490.1430, subsection 2 1, 7 paragraph “b” , to dissolve a corporation that has no shares 8 listed on a national securities exchange or regularly traded 9 in a market maintained by one or more members of a national or 10 affiliated securities association , the corporation may elect 11 or, if it fails to elect, one or more shareholders may elect to 12 purchase all shares owned by the petitioning shareholder at the 13 fair value of the shares. An election pursuant to this section 14 shall be irrevocable unless the court determines that it is 15 equitable to set aside or modify the election. 16 2. An election to purchase pursuant to this section may 17 be filed with the court at any time within ninety days after 18 the filing of the petition under section 490.1430, subsection 19 2 1, paragraph “b” , or at such later time as the court in its 20 discretion may allow. If the election to purchase is filed 21 by one or more shareholders, the corporation shall, within 22 ten days thereafter, give written notice to all shareholders, 23