HF 2469 (LSB 5272HV (2) 89)

HOUSE FILE 2469

BY  COMMITTEE ON JUDICIARY

(SUCCESSOR TO HSB 630)

(COMPANION TO LSB 5272SV BY COMMITTEE ON JUDICIARY)

A BILL FOR

An Act relating to corporations by providing for the use of electronic mail and other electronic transmissions, and shareholders’ lists.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
SHAREHOLDER NOTICES, LISTS, AND RECORDS

    Section 1.  Section 490.140, Code 2022, is amended by adding the following new subsections:
   NEW SUBSECTION.  12A.  “Electronic mail” means an electronic transmission directed to a unique electronic mail address.
   NEW SUBSECTION.  12B.  “Electronic mail address” means a destination, commonly expressed as a string of characters, consisting of a unique user name or mailbox, commonly referred to as the “local part” of the address, and a reference to an internet domain, commonly referred to as the “domain part” of the address, whether or not displayed, to which electronic mail may be sent or delivered.
    Sec. 2.  Section 490.141, Code 2022, is amended to read as follows:
   490.141  Notices and other communications.
   1.  A notice under this chapter must be in writing unless oral notice is reasonable in the circumstances. Unless otherwise agreed between the sender and the recipient, words in a notice or other communication under this chapter must be in English.
   2.  A notice or other communication may be given by any method of delivery, except that a notice or other communication by electronic transmissions transmission must be in accordance with this section. If the methods of delivery are impracticable, a notice or other communication from a corporation may be given by means of a broad nonexclusionary distribution to the public, which may include a newspaper of general circulation in the area where published; radio, television, or other form of public broadcast communication; or other methods of distribution that the corporation has previously identified to its shareholders.
   3.  A notice or other communication to a domestic corporation or to a registered foreign corporation registered to do business in this state may be delivered to the corporation’s registered agent at its registered office or to the secretary at the corporation’s principal office shown in its most recent biennial report required by section 490.1621 or, in the case of a foreign corporation that has not yet delivered a biennial report, in its foreign registration statement.
   4.  A notice or other communication from a corporation to a shareholder may be delivered by electronic mail to the electronic mail address for a shareholder required to be included in the record of shareholders maintained pursuant to section 490.1601, subsection 4, unless the shareholder has previously notified the corporation in writing that the shareholder objects to receiving notices and other communication by electronic mail. Any notice or other communication may be delivered to a shareholder by another form of electronic transmission if consented to by the shareholder or if authorized by subsection 10. Any notice or other communication from the corporation to any other person may be delivered by electronic transmission if consented to by the recipient or if authorized by subsection 10.
   5.  Any consent given under this subsection 4 or subsection 10 may be revoked with respect to future notices or communications by the person who consented by giving written or electronic notice to the person to whom the consent was delivered. Any such consent is deemed revoked
   5.  A notice or other communication shall no longer be delivered to an electronic mail address or other electronic transmission address pursuant to subsection 4, if all of the following apply:
   a.  The corporation is unable to deliver two consecutive electronic transmissions given by the corporation in accordance with such consent receives notice from the information processing system into which such notice or other communication was entered that two consecutive notices or other communications given by electronic transmission have not been delivered to the electronic mail address or other electronic transmission address to which such notice or other communication was directed.
   b.  Such inability notice of nondelivery becomes known to the secretary, or an assistant secretary or to the transfer agent, or other another person responsible for the giving of notice notices or other communications for the corporation; provided, however, that the inadvertent failure to treat such inability as a revocation recognize such notice of nondelivery as a cessation of authority to provide a shareholder with notice by electronic mail or other electronic transmission shall not invalidate any meeting or other action.
   6.  Unless otherwise agreed between the sender and the recipient, an a notice or other communication by electronic transmission is received when all of the following apply:
   a.  The electronic transmission enters an information processing system that the recipient has designated or uses for the purposes of receiving electronic transmissions or information of the type sent, and from which the recipient is able to retrieve the directed to any of the following:
   (1)  In the case of a shareholder, the electronic mail address for the shareholder required to be included in the record of shareholders maintained pursuant to section 490.1601, subsection 4, or other electronic transmission address at which the shareholder has consented to receive notice or other communications by electronic transmission.
   (2)  In the case of any other recipient, the electronic transmission address at which the recipient has consented to receive notice or other communications by electronic transmission.
   b.  The electronic transmission is in a form capable of being processed by that system.
   7.  Receipt of an electronic acknowledgment from an information processing system described in subsection 6, paragraph “a”, establishes that an electronic transmission was received but, by itself, does not establish that the content sent corresponds to the content received.
   8.  An electronic transmission is received under this section even if no person is aware of its receipt. 
   9.  A notice or other communication, if in a comprehensible form or manner, is effective at the earliest of the following:
   a.  If in a physical form, the earliest of when it is actually received, or when it is left at any of the following:
   (1)  A shareholder’s address shown on included in the corporation’s record of shareholders maintained by the corporation under pursuant to section 490.1601, subsection 4.
   (2)  A director’s residence or usual place of business.
   (3)  The domestic or registered foreign corporation’s principal office.
   b.  If mailed by United States mail postage prepaid and correctly addressed to a shareholder at the shareholder’s address included in the record of shareholders pursuant to section 490.1601, subsection 4, upon deposit in the United States mail.
   c.  If mailed by United States mail postage prepaid and correctly addressed to a recipient other than a shareholder, at the address included in the corporation’s records the earliest of when it is actually received, or as follows:
   (1)  If sent by registered or certified mail, return receipt requested, the date shown on the return receipt signed by or on behalf of the addressee.
   (2)  Five days after it is deposited in the United States mail.
   d.  If an electronic transmission, when it is received as provided in subsection 6.
   e.  If oral, when communicated.
   10.  A notice or other communication may be in the form of an electronic transmission that cannot be directly reproduced in paper form by the recipient through an automated process used in conventional commercial practice only if all of the following apply:
   a.  The electronic transmission is otherwise retrievable in perceivable form.
   b.  The sender and the recipient have consented in writing to the use of such form of electronic transmission.
   11.  If this chapter prescribes requirements for notices or other communications in particular circumstances, those requirements govern. If articles of incorporation or bylaws prescribe requirements for notices or other communications, not inconsistent with this section or other provisions of this chapter, those requirements govern. The articles of incorporation or bylaws may authorize or require delivery of notices of meetings of directors by electronic transmission. 
   12.  In the event that any provisions of this chapter are deemed to modify, limit, or supersede the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§7001 §7001 et seq., the provisions of this chapter shall control to the maximum extent permitted by section 102(a)(2) of that federal Act.
   13.  a.  Whenever notice would otherwise be required to be given under any provision of this subchapter chapter to a shareholder, such the notice need not be given if the corporation is not permitted to deliver notice by electronic transmission pursuant to subsections 4 and 5 and any of the following apply: 
   (1)  Notices to the shareholders of two consecutive annual meetings, and all notices of meetings during the period between such two consecutive annual meetings, have been sent to such shareholder at such shareholder’s address as shown on the records of the corporation included in the record of shareholders maintained pursuant to section 490.1601, subsection 4, and have been returned undeliverable or could not be delivered. 
   (2)  All, but not less than two, payments of dividends on securities during a twelve-month period, or two consecutive payments of dividends on securities during a period of more than twelve months, have been sent to such shareholder at such shareholder’s address as shown on the records of the corporation included in the record of shareholders maintained pursuant to section 490.1601, subsection 4, and have been returned undeliverable or could not be delivered.
   (3)  No address has been provided to the corporation by or on behalf of a shareholder and the corporation has not otherwise obtained an address for the shareholder that the corporation believes is reliable.
   b.  If In addition, if any such shareholder shall deliver to which this subsection applies delivers to the corporation a written notice setting forth such shareholder’s then-current address, the requirement that notice be given to such shareholder shall be reinstated.
    Sec. 3.  Section 490.720, Code 2022, is amended to read as follows:
   490.720  Shareholders’ list List of shareholders for meeting.
   1.  After fixing a record date for a meeting, a corporation shall prepare an alphabetical list of the names of all its the shareholders who are entitled to notice of a the shareholders’ meeting. If the board of directors fixes a different record date under section 490.707, subsection 5, to determine the shareholders entitled to vote at the meeting, a corporation also shall prepare an alphabetical list of the names of all its the shareholders who are entitled to vote at the meeting. A The list must be arranged by voting group, and within each voting group by class or series of shares, and show contain the address of, and number and class or series of shares held by, each shareholder. Nothing contained in this subsection shall require and, if the notice or other communications regarding the meeting has been or will be sent by the corporation to include on such list the a shareholder by electronic mail address or other electronic contact information of a transmission, the electronic mail or other electronic transmission address of that shareholder.
   2.  a.  The shareholders’ list for of shareholders entitled to notice shall be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting. The shareholders’ list list of shareholders for notice shall be made available at via any of the following:
   (1)  The At the corporation’s principal office or at a place identified in the meeting notice in the city where the meeting will be held.
   (2)  A On a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting.  The list of shareholders entitled to vote shall be similarly available for inspection promptly after the record date for voting. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to shareholders of the corporation.
   b.  A shareholders’ list for voting shall be similarly available for inspection promptly after the record date for voting. A shareholder, or the shareholder’s agent or attorney, is entitled on written demand to inspect and, subject to the requirements of section 490.1602, subsection 3, to copy a list of shareholders, during regular business hours and at the shareholder’s expense, during the period it is available for inspection.  A corporation may satisfy the shareholder’s right to copy a list of shareholders by furnishing a copy in the manner described in section 490.1603, subsection 2. A shareholder and the shareholder’s agent or attorney who inspects or is furnished a copy of a list of shareholders under this subsection or under subsection 3 or who copies the list under this subsection may use the information on that list only for purposes related to the meeting and its subject matter and must keep the information on that list confidential.
   3.  If the meeting is to be held at a place, the corporation shall make the list of shareholders entitled to vote available at the meeting and any adjournment, and any shareholder, or the shareholder’s agent or attorney, is entitled to inspect the list at any time during the meeting or and any adjournment. If the meeting is to be held solely by means of remote communication, then such list shall also be open to available for such inspection during the meeting and any adjournment on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.  The corporation may satisfy its obligation to make such list available for inspection during a meeting by furnishing a copy of the list in the manner described in section 490.1603, subsection 2, to the shareholders prior to the meeting.
   4.  If the corporation refuses to allow a shareholder, or the shareholder’s agent or attorney, to inspect a shareholders’ list of shareholders before or at the meeting or any adjournment, or copy a list as permitted by subsection 2, the district court of the county where a corporation’s principal office or, if none in this state, its registered office, is located, on application of the shareholder, may summarily order the inspection or copying at the corporation’s expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete.
   5.  Refusal or failure to prepare or make available the shareholders’ list of shareholders does not affect the validity of action taken at the meeting.
    Sec. 4.  Section 490.1601, subsection 4, Code 2022, is amended to read as follows:
   4.  A corporation shall maintain a record of its current shareholders in alphabetical order by class or series of shares showing the address of, and the number and class or series of shares held by, each shareholder to which notices and other communications from the corporation are to be sent, and which shall include the number and class or series of shares held by each such shareholder. Nothing contained in this subsection shall require the corporation to include in such record the electronic mail address or other electronic contact information of In addition, if a shareholder has provided an electronic mail address to the corporation or has consented to receive notices or other communications by electronic mail or other electronic transmission, the record of shareholders shall include the electronic mail or other electronic transmission address of the shareholder if notices or other communications are being delivered by the corporation to the shareholder at such electronic mail or other electronic transmission address pursuant to section 490.141, subsection 4. An electronic mail address of a shareholder shall be deemed to be provided by a shareholder if the electronic mail address is contained in a communication to the corporation by or on behalf of the shareholder unless the communication expressly indicates that the electronic mail address shall not be used to deliver notices or other communications.
DIVISION II
GRAMMATICAL CHANGES

    Sec. 5.  Section 490.140, subsection 57, Code 2022, is amended to read as follows:
   57.  “United States” includes a district, authority, bureau, commission, department, and any other agency of the United States.
    Sec. 6.  Section 490.143, subsection 1, paragraph e, subparagraph (2), Code 2022, is amended to read as follows:
   (2)  Has a material relationship with a director or officer who pursues or takes advantage of the business opportunity, directly, or indirectly through or on behalf of another person.
    Sec. 7.  Section 490.1704, subsection 4, Code 2022, is amended to read as follows:
   4.  Unless otherwise provided in the articles of incorporation, the violation by a director of the duties imposed by subsections 1 and 2 shall not constitute an intentional infliction of harm on the corporation or the shareholders for the purposes of sections section 490.202, subsection 2, paragraphs “d” and “e”.
DIVISION III
TERMINOLOGY CHANGES

    Sec. 8.  Section 490.120, subsection 5, Code 2022, is amended to read as follows:
   5.  The document must be in the English language. A corporate name need not be in English if written in English letters or Arabic or Roman numerals, and the certificate of existence registration required of foreign corporations need not be in English if accompanied by a reasonably authenticated English translation.
    Sec. 9.  Section 490.401, subsection 2, paragraphs c and e, Code 2022, are amended to read as follows:
   c.  The name of a registered foreign corporation registered to do business in this state or an alternate name adopted by a registered foreign corporation registered to do business in this state because its corporate name is unavailable.
   e.  The name of a foreign nonprofit corporation registered authorized to do business in this state or an alternate name adopted by a foreign nonprofit corporation registered authorized to conduct activities in this state because its real name is unavailable.
    Sec. 10.  Section 490.401, subsection 4, unnumbered paragraph 1, Code 2022, is amended to read as follows:
   A corporation may use the name, including the fictitious name, of another domestic or foreign corporation that is used in this state if the other corporation is incorporated or authorized registered to transact do business in this state and the proposed user corporation submits documentation to the satisfaction of the secretary of state establishing any of the following conditions:
    Sec. 11.  Section 490.748, subsection 3, Code 2022, is amended to read as follows:
   3.  The district court may appoint an individual or domestic or registered foreign corporation, registered to do business in this state, as a custodian or receiver and may require the custodian or receiver to post bond, with or without sureties, in an amount the district court directs.
    Sec. 12.  Section 490.922, subsection 5, Code 2022, is amended to read as follows:
   5.  If the domesticating corporation is a registered foreign corporation that is registered to do business in this state under subchapter XV, its registration statement shall be canceled automatically when the domestication becomes effective.
    Sec. 13.  Section 490.1511, subsection 4, Code 2022, is amended to read as follows:
   4.  The registration of a registered foreign corporation to do business in this state ceases on the effective date of the termination as set forth in the certificate of termination, unless before that date the foreign corporation cures each ground for termination stated in the certificate of termination. If the foreign corporation cures each ground, the secretary of state shall file a statement that the certificate of termination is withdrawn.
    Sec. 14.  Section 490.1621, subsection 4, Code 2022, is amended to read as follows:
   4.  The first biennial report shall be delivered to the secretary of state between January 1 and April 1 of the first even-numbered year following the calendar year in which a domestic corporation was incorporated or a foreign corporation was authorized to transact registered to do business in this state. Subsequent biennial reports must be delivered to the secretary of state between January 1 and April 1 of the following even-numbered calendar years. For purposes of this section, each biennial report shall contain information related to the two-year period immediately preceding the calendar year in which the report is filed. 
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   BACKGROUND. This bill amends provisions in the Iowa business corporation Act (IBCA) (Code chapter 490) as revised in HF 844 (2021 Iowa Acts, chapter 165) based on recommendations by the American bar association and published as the 2016 revised version of the “Model Business Corporation Act” (MBCA). The bill includes later additions to the MBCA relating to the use of electronic transmission to deliver and receive communications between a corporation and shareholders. The bill also makes changes to the use of grammar in provisions enacted in HF 844 and the terminology used in the MBCA and enacted in HF 844 to enhance the IBCA’s readability.
   DIVISION I —— NOTICES AND OTHER COMMUNICATION. The bill defines electronic mail (email) as any electronic transmission directed to a unique electronic mail address (amended Code section 490.140(12A), (12B)). The use of other forms of electronic transmission is also allowed. The exception for a corporation’s use of electronic transmission, including email, to communicate with a shareholder is the shareholder’s written objection (amended Code section 490.140(4)). The corporation must also cease using this form of communication if it receives a message that the electronic transmission could not be delivered (amended Code section 490.140(5)).
   DIVISION I —— LIST OF SHAREHOLDERS. The phrase “shareholders’ list” refers to a register of all active owners of the corporation’s shares which the corporation must keep current. The bill changes the name to “list of shareholders”. The bill provides that if a communication regarding a meeting has been sent by the corporation to the shareholder by email or other electronic transmission, the address of the email or other electronic transmission must be included as part of the list (amended Code section 490.720(1)). The bill also provides that a corporation may comply with its obligation to make the list available for inspection by providing a copy of the list prior to meeting; the list is often used for the restricted use of protecting shareholder rights (amended Code section 490.720(2)).
   DIVISION I —— RECORD OF SHAREHOLDERS. The corporation is required to maintain a record of shareholders which is the basis for providing communications to shareholders. If a shareholder provides an email address to the corporation or has consented to receive communication by electronic transmission, the record must include the email or other electronic transmission address of the shareholder (amended Code section 490.1601(4)). In these cases, the electronic mail address or other electronic transmission address of a shareholder is deemed to be provided by a shareholder to the corporation if it is contained in a communication to the corporation by or on behalf of the shareholder, unless the shareholder’s communication expressly indicates otherwise.
   DIVISION II —— GRAMMATICAL CHANGES. The bill amends several provisions to correspond to modern rules of grammar, including the proper use of an indefinite article, a comma, and the singular (amended Code sections 490.140(57), 490.143(1), and 490.1704(4)).
   DIVISION III —— TERMINOLOGY CHANGES. Prior to the enactment of the revised MBCA, the IBCA, like other model business organization statutes (e.g., limited liability companies under Code chapter 489 or nonprofit corporations under Code chapter 504), provided that a foreign business was “authorized to transact business in this state” or the equivalent phrase “authorized to do business in this state” by obtaining a certificate of authorization (e.g., Code section 489.208 or 504.112). By comparison, a domestic corporation (incorporated with the secretary of state) may obtain a certificate of existence (Code section 490.128) which is also the phrase used by other business organizations, including limited liability companies (Code section 489.208). A domestic or foreign nonprofit corporation may obtain a certificate of existence or certificate of authority (Code section 504.112). The MBCA provides that in order “to do business in this state” a foreign corporation must be registered with the secretary of state and obtain a certificate of registration (Code section 490.128). Such a corporation is defined as a “registered foreign corporation” (Code section 490.140(47)).
   The bill makes changes to this terminology when referring to foreign corporations to conform with the MBCA’s use of terms and to enhance readability. The phrase “certificate of existence” is changed to “certificate of registration” (amended Code section 490.120(5)). The phrase “authorized to transact business in this state” is changed to “registered to do business in this state” (amended Code sections 490.401(4) and 490.1621(4)). The phrase “foreign corporation registered to do business in this state” is shortened to “registered foreign corporation” (amended Code sections 490.401(2), 490.748(3), 490.922(5), and 490.1511(4)). When referring to a foreign nonprofit corporation, the phrase “registered to do business in this state” is changed to “authorized to do business in this state (amended Code section 490.401(2)).