Senate Study Bill 3157 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON JUDICIARY BILL BY CHAIRPERSON HOGG) A BILL FOR An Act relating to the Iowa business corporation Act by 1 removing limitations imposed on shareholders making 2 long-term arrangements affecting the affairs of the 3 corporation, and by providing for the delivery of financial 4 information to shareholders. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5481SC (7) 85 da/rj
S.F. _____ DIVISION I 1 VOTING TRUSTS AND 2 SHAREHOLDER AGREEMENTS 3 Section 1. Section 490.730, Code 2014, is amended to read 4 as follows: 5 490.730 Voting trusts. 6 1. One or more shareholders may create a voting trust, 7 conferring on a trustee the right to vote or otherwise act for 8 them, by signing an agreement setting out the provisions of the 9 trust, which may include anything consistent with its purpose, 10 and transferring their shares to the trustee. When a voting 11 trust agreement is signed, the trustee shall must prepare a 12 list of the names and addresses of all voting trust beneficial 13 owners of beneficial interests in the trust , together with the 14 number and class of shares each transferred to the trust, and 15 deliver copies of the list and agreement to the corporation’s 16 principal office. 17 2. A voting trust becomes effective on the date the first 18 shares subject to the trust are registered in the trustee’s 19 name. A voting trust is valid for not more than ten years after 20 its effective date unless extended under subsection 3 . 21 3. All or some of the parties to a voting trust may extend 22 it for additional terms of not more than ten years each 23 by signing an extension agreement and obtaining the voting 24 trustee’s written consent to the extension. An extension is 25 valid for ten years from the date the first shareholder signs 26 the extension agreement. The voting trustee must deliver 27 copies of the extension agreement and list of beneficial owners 28 to the corporation’s principal office. An extension agreement 29 binds only those parties signing it. Limits, if any, on the 30 duration of a voting trust shall be as set forth in the voting 31 trust. A voting trust that became effective between December 32 31, 1989, and June 30, 2014, both dates inclusive, remains 33 governed by the provisions of this section then in effect, 34 unless the voting trust is amended to provide otherwise by 35 -1- LSB 5481SC (7) 85 da/rj 1/ 5
S.F. _____ unanimous agreement of the parties to the voting trust. 1 Sec. 2. Section 490.732, subsection 2, paragraph c, Code 2 2014, is amended by striking the paragraph. 3 Sec. 3. Section 490.732, Code 2014, is amended by adding the 4 following new subsection: 5 NEW SUBSECTION . 8. Limits, if any, on the duration of an 6 agreement authorized by this section shall be as set forth in 7 the agreement. An agreement that became effective between 8 January 1, 2003, and June 30, 2014, both dates inclusive, 9 unless the agreement provided otherwise, remains governed by 10 the provisions of this section then in effect. 11 DIVISION II 12 FINANCIAL STATEMENTS FOR SHAREHOLDERS 13 Sec. 4. Section 490.1620, subsection 3, Code 2014, is 14 amended to read as follows: 15 3. a. Within one hundred twenty days after the close 16 of each fiscal year, the corporation shall send the annual 17 financial statements to each shareholder. Thereafter, on 18 written request from a shareholder to whom the statements were 19 not sent, the corporation shall send the shareholder the latest 20 financial statements. 21 b. A public corporation may fulfill its responsibilities 22 under this section paragraph “a” by delivering the specified 23 financial statements, or otherwise making them available, in 24 any manner permitted by the applicable rules and regulations of 25 the United States securities and exchange commission. 26 Sec. 5. Section 490.1620, Code 2014, is amended by adding 27 the following new subsection: 28 NEW SUBSECTION . 3A. A corporation that is not a public 29 corporation may fulfill its responsibilities under this section 30 by filing annual financial reports in compliance with state or 31 federal law, provided that such reports meet all the following 32 requirements: 33 a. Contain a balance sheet as of the end of the fiscal year 34 and an income statement for that year. 35 -2- LSB 5481SC (7) 85 da/rj 2/ 5
S.F. _____ b. Are required by state or federal law to be filed with a 1 state or federal agency within one hundred twenty days after 2 the close of each fiscal year. 3 c. Are available to the public, including via internet 4 access, without charge. 5 EXPLANATION 6 The inclusion of this explanation does not constitute agreement with 7 the explanation’s substance by the members of the general assembly. 8 BILL’S PROVISIONS —— VOTING TRUSTS AND SHAREHOLDER 9 AGREEMENTS. This bill amends provisions which govern voting 10 trusts and shareholder agreements. Through these arrangements, 11 shareholders may fundamentally affect how a corporation is 12 controlled, the management of its assets, and the rights and 13 duties of its shareholders and officers by entering into 14 certain arrangements (Code sections 490.730 and 490.732). This 15 bill eliminates a 10-year term restriction imposed on a voting 16 trust or shareholder agreement. However, a voting trust or 17 shareholder agreement formed prior to the effective date of the 18 bill continues to be subject to the 10-year term restriction. 19 BILL’S PROVISIONS —— FINANCIAL STATEMENTS FOR SHAREHOLDERS. 20 The bill provides that a corporation other than a public 21 corporation (e.g., closed corporation), is not required to 22 deliver financial statements to shareholders if the corporation 23 files certain reports with a state or federal agency. The 24 reports must include a balance sheet as of the end of the 25 fiscal year and an income statement for that year. The reports 26 must be filed with a state or federal agency within 120 days 27 after the close of the fiscal year. Finally, the records must 28 be available to the public without charge. 29 CURRENT LAW —— VOTING TRUSTS. A voting trust is a special 30 arrangement between one or more shareholders and a trustee 31 (either through a single agreement or many separate agreements 32 made between a number of shareholders and a trustee) in which 33 the shareholder or shareholders surrenders legal ownership of 34 their respective shares of common stock and the trustee acts 35 -3- LSB 5481SC (7) 85 da/rj 3/ 5
S.F. _____ on their behalf as a principal rather than a proxy. A voting 1 trust becomes effective on the date the first shares subject to 2 the trust are registered in the trustee’s name, and continues 3 for a term not to exceed 10 years but which may be extended 4 for additional terms each not to exceed 10 years (Code section 5 490.730). 6 CURRENT LAW —— SHAREHOLDER AGREEMENTS. The shareholders 7 of a closed corporation (whose stock is not publicly traded) 8 may execute a shareholder agreement that governs the exercise 9 of the corporate powers or the management of its business 10 and affairs (Code section 490.732). This includes how it is 11 controlled; how distributions are made; the management by a 12 board of directors or offices; the rights and duties of its 13 shareholders, including voting rights; the management of its 14 property, assets, and contracts; and its dissolution. It 15 must be approved or signed by all shareholders. There is no 16 requirement that a shareholder agreement be filed with the 17 secretary of state. Purchasers of shares take subject to the 18 agreement only if they are notified of the agreement (printed 19 on the share certificates or on an information statement). 20 The shareholder agreement may be inconsistent with another 21 provision of the Code chapter, but presumably cannot conflict 22 with the corporation’s articles of incorporation. 23 CURRENT LAW —— FINANCIAL STATEMENTS FOR SHAREHOLDERS. A 24 corporation is required to prepare and submit to shareholders 25 various financial statements at the end of the corporation’s 26 fiscal year, including a balance sheet, an income statement, 27 and a statement of changes in shareholders’ equity. The 28 financial statements are to be sent to each shareholder within 29 120 days after the close of the fiscal year (Code section 30 490.1620(3)). In 2013, the general assembly enacted HF 469 31 (2013 Iowa Acts, chapter 31) which allows a public corporation 32 to fulfill these requirements by delivering or making the 33 financial statements available in accordance with rules and 34 regulations of the United States securities and exchange 35 -4- LSB 5481SC (7) 85 da/rj 4/ 5
S.F. _____ commission. A public corporation has a class of voting stock 1 listed on a national securities exchange or is held of record 2 by more than 2,000 shareholders (Code section 490.140(27)). 3 -5- LSB 5481SC (7) 85 da/rj 5/ 5