SB218: Bill Text

LRB-2166/2

RJM:kmg:pg

2003 - 2004 LEGISLATURE

2003 Senate BILL 218

July 30, 2003 - Introduced by Senators Stepp, Kanavas, Darling, Leibham, Roessler, George and Reynolds, cosponsored by Representatives McCormick, Ladwig, Gronemus, Jensen, Suder, Ott, Nischke, Hahn, J. Fitzgerald, Krawczyk, Albers, Gundrum, Weber, Kreibich, Gunderson, Vrakas, Hundertmark and Van Roy. Referred to Committee on Economic Development, Job Creation and Housing.

SB218,2,2 An Act to repeal 180.0825 (2) (a), 180.0825 (5) (a), (b) and (c) to (h) and 180.1105 (1) (a) and (b); to renumber and amend 180.0602 (3); to consolidate, renumber and amend 180.0825 (2) (intro.) and (b); to amend 179.02 (1), 179.76 (4) (c), 179.77 (6) (c), 180.0502 (3), 180.0706 (title), 180.0824 (3), 180.0825 (1), 180.1106 (1) (b), 180.1140 (11), 180.1150 (2), 180.1161 (4) (c), 180.1201 (title), 180.1201 (2), 180.1302 (4), 180.1805 (5), 181.1106 (2), 181.1161 (4) (c), 183.1205 (2) and 183.1207 (4) (c); to repeal and recreate 180.1130 (14); and to create 180.0602 (3) (b), 180.0706 (3), 180.0708, 180.0825 (5) (am) and (bm), 180.1105 (1) (am), (bm) and (c) to (f) and 180.1201 (1) (d) of the statutes; relating to: the authority of the board of directors of business corporations and corporate committees; corporate shareholder notices and meetings; mergers, conversions, and other business combinations; the transfer of corporate property to certain affiliates; and naming limited partnerships.

Analysis by the Legislative Reference Bureau

This bill makes numerous changes to the laws governing business corporations. It also makes changes to the laws governing limited partnerships, nonstock corporations, and limited liability companies. Significant changes include:

Business corporations

Classes or series of stock

Under current law, a corporation's articles of incorporation may authorize the board of directors of the corporation to determine the preferences, limitations, and relative rights of a class or series of shares of stock. Generally, the board must set the terms of a class or series in an amendment to the articles of incorporation, which need not be approved by the shareholders. Current law permits the board to revise the terms by resolution, as long as no shares have been issued. After shares are issued, any such revision must be by amendment to the articles of incorporation.

This bill similarly permits the board to set and revise the distinguishing designation of a class or series. The bill also permits the board, at any time after the required articles of amendment are filed, to decrease the number shares of the applicable class or series (but not below the number of such shares that are outstanding), to eliminate the class or series (if no shares are outstanding), or to increase the number of shares of the class or series (but not beyond the number of such shares that are authorized.

Shareholder notices and meetings

Current law contains several requirements pursuant to which a corporation must provide notice to a shareholder. In addition, a corporation's articles of incorporation and bylaws may also contain such requirements. This bill provides an exemption from any such requirement if a specified number of notices or dividend payments are returned to the corporation as undeliverable. The bill permits a shareholder to reinstate the notice requirements by delivering to the corporation a written statement setting forth the shareholder's current address. Current law does not have any similar exemption, although current law does permit a shareholder to waive any notice required under the corporate laws or the corporation's articles of incorporation or bylaws.

This bill permits a corporation's articles of incorporation or bylaws to specify the manner in which shareholder meetings will be conducted. The bill also sets default rules for the conduct of these meetings if the articles of incorporation or bylaws do not so specify. Under these default rules, a chairperson appointed by the board of directors must preside over the meeting. The chairperson must determine the order of business and time of adjournment and may establish rules for the conduct of the meeting which the chairperson believes are fair to the interests of all shareholders. In addition, the chairperson must provide notice of when the polls close for each item voted upon at the meeting, except that if no such notice is provided the polls close upon final adjournment of the meeting.

Committees

Current law permits the board of directors to create committees, unless the articles of incorporation or bylaws provide otherwise. Currently, a committee must have at least two members. This bill allows a committee to have only one member.

With certain exceptions, the creation of a committee, appointment of members to it, and designation of alternative members currently must be approved by the greater of: 1) a majority of all directors currently in office; or 2) the number of directors required by the articles of incorporation or bylaws to take action (typically, a majority of directors present, if a quorum is present). This bill deletes the possible necessity for a majority vote of all directors currently in office, unless that requirement is specified in the articles of incorporation or bylaws.

Current law prohibits a committee from doing any of the following: 1) authorizing distributions; 2) approving or proposing to shareholders action that this chapter requires be approved by shareholders; 3) filling vacancies on the board of directors or, with certain exceptions, on any of its committees; 4) amending articles of incorporation without shareholder action; 5) adopting, amending, or repealing bylaws; 6) approving a plan of merger not requiring shareholder approval; 7) authorizing or approving reacquisition of shares, except according to a formula or method prescribed by the board of directors; or 8) authorizing or approving the issuance or sale or contract for sale of shares, or determining the designation and relative rights, preferences, and limitations of a class or series of shares, except that the board of directors may authorize a committee or a senior executive officer of the corporation to do so within limits prescribed by the board of directors. This bill deletes all of these restrictions, except items 2) and 5).

Mergers, share exchanges, and business combinations

Currently, when a corporation approves a merger or share exchange, it must file articles of merger or share exchange with the Department of Financial Institutions. Among other things, the articles of merger or share exchange must include the plan of merger or share exchange. This bill deletes this requirement and, instead, requires the articles of merger to state that a plan of merger or share exchange has been approved and adopted as required by law, that the plan is on file at the principle place of business of the surviving corporation, and that the surviving corporation will provide a copy of the plan, upon request and without cost, to any shareholder or, upon payment of the cost of producing the copy, to any other interested person. The bill also specifies other information that must be included in the articles of merger or share exchange.

Currently, a corporation may not engage in a business combination (including certain mergers) unless a specified supermajority of shareholders vote to approve the combination. However, this requirement does not apply if the shareholders receive a price for their shares that satisfies a specified formula. One factor in applying this formula is to determine the valuation date of the shares. Currently, the valuation date is defined as the later of the day before the date on which the shareholders' vote concerning the combination or the day that is 20 days before the consummation of the combination. This bill specifies, instead, that the valuation date is the day before the first public announcement of the proposed business combination.

Current law restricts the ability of a corporation to engage in a business combination (including certain mergers) for three years following the "stock acquisition date," which is defined as the date on which any person first acquires at least 10% of the corporation's stock. Under this bill, the "stock acquisition date" is the time at which a person first acquires at least 10% of the corporation's stock.

With certain exceptions, the voting power of any person owning greater than 20% of a corporation's stock is currently limited to 10% of the full voting power of those shares, unless the articles of incorporation provide otherwise or unless regular voting power is restored by vote of the shareholders. This bill also permits the board of directors to specify that regular voting power will apply.

Under current law, if a shareholder dissents from certain mergers, share exchanges, or other business combinations, the shareholder may obtain payment of the fair value of his or her shares. Currently, the fair value is determined pursuant to several specified criteria. With limited exceptions, this bill provides an exemption from these dissenter's rights if the applicable shares are registered on a national securities exchange or quoted in the National Association of Securities Dealers, Inc. This exemption is identical to the exemption that applies generally to other dissenter's rights provisions.

Transfer of property to certain affiliates

Current law authorizes the board of directors of a corporation to sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property in the usual and regular course of business; to sell, lease, exchange, or otherwise dispose of less than substantially all of its property whether or not in the usual and regular course of business; and to encumber any or all of its property whether or not in the usual and regular course of business. Unless the articles of incorporation require otherwise, the board may take these actions without shareholder approval. This bill similarly permits the board to transfer any or all of its assets to one or more corporations or other entities, all of the shares or interests of which are owned by the corporation, unless the transfer is in connection with a plan or action involving the sale, exchange, or disposal of all or substantially all of the assets of the corporation and requires shareholder approval.

Other changes

Currently, the name of a limited partnership must contain the words "limited partnership" without abbreviation. This bill allows the name to include abbreviated versions of those words.

Under current law, when a limited partnership, business corporation, nonstock corporation, or limited liability company merges with or converts to another entity (or when a business corporation enters into a share exchange), title to all personal property transfers, by operation of law, to the surviving entity. Title to real estate generally must be transferred by deed, which must be recorded in the appropriate office of the register of deeds. This bill deletes this special treatment for real estate. As a result, under this bill, title to all property transfers, by operation of law, to the surviving entity.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB218, s. 1 Section 1. 179.02 (1) of the statutes is amended to read:

SB218,5,3 179.02 (1) Shall contain, with or without abbreviation, the words "limited partnership".

SB218, s. 2 Section 2. 179.76 (4) (c) of the statutes is amended to read:

SB218,5,13 179.76 (4) (c) The business entity continues to be vested with title to all property owned by the business entity that was converted without reversion or impairment, provided that, if the converting business entity has an interest in real estate in Wisconsin on the date of the conversion, the converting business entity shall transfer that interest to the business entity surviving the conversion and shall execute any real estate transfer return required under s. 77.22. The business entity surviving the conversion shall promptly record the instrument of conveyance under s. 59.43 in the office of the register of deeds for each county in which the real estate is located.

SB218, s. 3 Section 3. 179.77 (6) (c) of the statutes is amended to read:

SB218,6,2 179.77 (6) (c) The title to all property owned by each business entity that is a party to the merger is vested in the surviving business entity without reversion or impairment, provided that, if a merging business entity has an interest in real estate in Wisconsin on the date of the merger, the merging business entity shall transfer that interest to the business entity surviving the merger and shall execute any real estate transfer return required under s. 77.22. The business entity surviving the merger shall promptly record the instrument of conveyance under s. 59.43 in the office of the register of deeds for each county in which the real estate is located.

SB218, s. 4 Section 4. 180.0502 (3) of the statutes is amended to read:

SB218,6,11 180.0502 (3) If the name of a registered agent changes or if the street address of his or her a registered agent's business office, he or she changes, the registered agent may change the name of the registered agent or street address of the registered office of any corporation for which he or, she, or it is the registered agent by notifying. To make a change under this subsection, the registered agent shall notify the corporation in writing of the change and by signing, either manually or in facsimile, and delivering deliver to the department for filing a signed statement that complies with sub. (2) and recites that the corporation has been notified of the change.

SB218, s. 5 Section 5. 180.0602 (3) of the statutes is renumbered 180.0602 (3) (a) and amended to read:

SB218,6,25 180.0602 (3) (a) After the articles of amendment are filed under sub. (2) and before the corporation issues any shares of the class or series that is the subject of the articles of amendment, the board of directors may alter or revoke any the distinguishing designation of the class or series and the preferences, limitations, or relative rights described in the articles of amendment, by adopting another resolution appropriate for that purpose. The If the board of directors adopts such a resolution, the corporation shall file with the department revised articles of amendment that comply with sub. (2). A Except as provided in par. (b), a distinguishing designation, preference, limitation, or relative right may not be altered or revoked after the issuance of any shares of the class or series that are subject to the distinguishing designation, preference, limitation, or relative right, except by amendment of the articles of incorporation under s. 180.1003.

SB218, s. 6 Section 6. 180.0602 (3) (b) of the statutes is created to read:

SB218,7,9 180.0602 (3) (b) 1. Except as otherwise provided in this subdivision, after the articles of amendment are filed under sub. (2), the board of directors may decrease the number of shares of the class or series that is the subject of the articles of amendment by adopting another resolution appropriate for that purpose. The shares specified in the resolution shall resume the status applicable to them immediately before their inclusion in the class or series. The board of directors may not decrease the number of shares under this subdivision below the number of such shares that are then outstanding.

SB218,7,21 2. After the articles of amendment are filed under sub. (2), if no shares of the class or series that is the subject of the articles of amendment are then outstanding, the board of directors may eliminate from the articles of incorporation all matters set forth in the articles of amendment with respect to that class or series by adopting another resolution for that purpose. The board of directors shall prepare a certificate setting forth the content of any resolution under this subdivision, stating that none of the authorized shares of the class or series are outstanding, and stating that no such shares will be issued under the articles of amendment and shall deliver the signed certificate to the department for filing. A resolution under this subdivision takes effect upon filing of the certificate by the department and has the effect of eliminating from the articles of incorporation all matters set forth in the articles of amendment with respect to the applicable class or series.

SB218,8,3 3. Except as otherwise provided in this subdivision, after the articles of amendment are filed under sub. (2), the board of directors may increase the number of shares of the class or series that is the subject of the articles of amendment by adopting another resolution appropriate for that purpose. The board of directors may not increase the number of shares under this subdivision to be greater than the total number of authorized shares of the class or series as specified in the articles of incorporation.

SB218, s. 7 Section 7. 180.0706 (title) of the statutes is amended to read:

SB218,8,5 180.0706 (title) Waiver of and exemption from notice.

SB218, s. 8 Section 8. 180.0706 (3) of the statutes is created to read:

SB218,8,9 180.0706 (3) (a) Except as provided in par. (b), any notice required to be given by a corporation to a shareholder under this chapter is not required to be given if any of the following applies: