Kansas 2023 2023-2024 Regular Session

Kansas House Bill HB2455 Comm Sub / Analysis

                    SESSION OF 2023
SUPPLEMENTAL NOTE ON HOUSE BILL NO. 2455
As Recommended by House Committee on 
Judiciary
Brief*
HB 2455 would create a new section of law and 
substantially update various articles of the Kansas General 
Corporation Code (Code).
The bill would also amend various provisions concerning 
Secretary of State (SOS) business filings, reports, and fees in 
the Code and the Kansas Revised Limited Liability Company 
Act (RLLCA); Business Entity Transactions Act (BETA); the 
Business Entity Standard Treatment Act (BEST Act); Kansas 
Revised Uniform Limited Partnership Act (RULPA); and the 
Kansas Uniform Partnership Act (KUPA).
The bill would repeal several statutes as follows:
●On and after January 1, 2024, KSA 17-72a03, 
concerning public benefit corporation amendments 
and mergers;
●KSA 17-7511, concerning the inspection of a 
corporation’s income tax return to verify a business 
entity information report to the SOS;
●KSA 17-7514, KSA 56-1a610, and KSA 56a-1204, 
concerning applications for extension of time for 
filing income tax returns submitted to the SOS; and 
●KSA 56-1a608 and KSA 56a-1203 concerning 
annual reports and related fees. [Note: Continuing 
____________________
*Supplemental notes are prepared by the Legislative Research 
Department and do not express legislative intent. The supplemental 
note and fiscal note for this bill may be accessed on the Internet at 
http://www.kslegislature.org law requires such reports and fees be collected 
biennially.]
[Note: The bill would also repeal the version of KSA 17-
6712 as amended by Section 36, concerning appraisal rights 
in mergers and consolidations, on and after January 1, 2024. 
The new section would retain most of the bill’s amendments, 
as further explained below.]
The bill would also amend two sections of law 
concerning taxation to remove cross-references to a statute 
that would be repealed by the bill. .
Electronic Signatures and Electronic Transmissions 
(New Section 1) 
The bill would add a section to law governing the 
formation of corporations in the Code. This new section would 
provide that any act or transaction governed by the Code, 
articles of incorporation, or bylaws could be provided for in a 
“document,” which would be defined by the bill and would be 
deemed the equivalent of an electronic transmission.
The bill would also specify that whenever a signature is 
required or permitted under the Code, it could be a manual, 
facsimile, conformed, or “electronic signature,” which would 
be defined by the bill. The bill also would outline when an 
electronic transmission is deemed delivered to a person. In 
addition, the bill would allow persons to conduct transactions 
in accordance with the Uniform Electronic Transactions Act as 
long as the requirements of this section are satisfied.
The bill would specify the various types of transactions 
to which the section would not apply, and other related 
limitations of the section’s provisions.
The bill would state that the provisions of the Code 
would control to the fullest extent permitted under the federal 
Electronic Signatures in Global and National Commerce Act 
2- 2455 in the event such Code provisions are deemed to modify, 
limit, or supersede that Act. 
Other Code Amendments (Sections 2-50)
Throughout the Code, the bill would amend law to 
authorize certain actions of corporations in accordance with 
the new section concerning electronic signatures and 
electronic transmissions discussed above, unless otherwise 
restricted. Additionally, the bill would provide express 
authority for corporations to use networks of electronic 
databases, including blockchain and distributed ledgers, for 
certain electronic transmissions and records. 
The bill would make additional substantive changes to 
law governing various aspects of corporations, as follows.
Formation of Corporations (Sections 6-11)
The bill would amend law governing the formation of 
corporations in the Code to:
●Specify an amendment, repeal, or elimination of a 
provision eliminating or limiting the personal liability 
of a director to the corporation or its stockholders 
would not affect an act or omission by a director 
occurring before such amendment, repeal, or 
elimination unless the provision allows retroactive 
application;
●Specify any person, whether or not an incorporator 
or director, could provide an instruction that 
consent to action would be effective at a future 
time, including a time determined upon a 
happening of an event not later than 60 days after 
the instruction is given, and would be revocable 
prior to the time the consent becomes effective;
3- 2455 ●Expand the types of catastrophes that would 
trigger a corporation’s emergency powers to 
include an epidemic, a pandemic, or a declaration 
of a national emergency by the U.S. government. 
In addition, the bill would make a corporation’s 
emergency bylaws adoptable by a majority of 
directors present if a quorum cannot be readily 
convened, and would add language concerning 
actions that could be taken to address the 
emergency condition, including postponing 
stockholder meetings and changing record and 
payment dates of dividends declared; 
●Clarify a court’s jurisdiction to interpret, apply, or 
enforce, or determine the validity of, any 
instrument, document, or agreement when a 
corporation and one or more stockholders sells or 
offers to sell stock or when a corporation agrees to 
sell, lease, or exchange any of its property or 
assets upon consent of the stockholders; and
●Allow nonstock corporations to ratify defective 
corporate acts and stock.
Directors and Officers (Sections 12 and 13)
The bill would amend law governing directors and 
officers to:
●Clarify that bylaws could set a board of directors’ 
quorum at a number below or above a majority of 
directors, but the quorum could not be less than 
one-third of the total number of directors;
●Specify which officers would be entitled to 
mandatory indemnification for any act or omission 
occurring after June 30, 2023, including the 
corporation’s most highly compensated executive 
officers as identified in public filings with the U.S. 
Securities and Exchange Commission (SEC); and
4- 2455 ●Authorize a corporation to permissively grant 
indemnification for other persons who are not 
officers for acts or omissions occurring after June 
30, 2023.
Stocks and Dividends (Sections 14-20)
The bill would amend law governing stocks and 
dividends to:
●Permit stock certificates to be signed by any two 
authorized officers of the corporation rather than by 
certain specified officers;
●Provide that shares of a corporation’s capital stock 
would not be entitled to vote nor counted for 
quorum purposes if such shares belong to any 
entity that is controlled directly or indirectly by the 
corporation;
●Clarify the effective dates of amendments to a 
corporation’s articles of incorporation electing not 
to be governed by statutory provisions limiting 
business combinations with interested 
stockholders;
●Permit the ratification of defective corporate acts or 
stocks when there is no valid outstanding stock for 
ratifications occurring on or after July 1, 2023;
●Specify the date for determining shareholders to 
vote to ratify a defective corporate act that involved 
a vote of the shareholders would be the record 
date of the such vote, not the date of the apparent 
defective corporate act;
●Clarify that any act that is within a corporation’s 
powers under the Code could be ratified or 
validated, even if approval had not been obtained 
5- 2455 as required by the corporation’s articles of 
incorporation or bylaws; and
●Clarify the definition of “failure of authorization” 
would include the failure to authorize or effect an 
act or transaction in compliance with the disclosure 
set forth in any proxy or consent solicitation 
statement to the extent such failure would render 
the act or transaction void or voidable.
Meetings, Elections, Voting, and Notices (Sections 21-28)
The bill would amend law governing meetings, elections, 
voting, and notices to:
●Allow certain stockholder notices, including 
consents, to be provided by U.S. mail, courier, or 
email (the bill would not require an opt-in for email 
service);
●Allow the use of electronic databases, including 
blockchain, distributed ledgers, and stock ledgers, 
for certain electronic transmissions and 
recordkeeping;
●Allow certain stockholder records to be maintained 
on behalf of a corporation, and would specify that 
printed electronic records are valid and admissible 
evidence in court proceedings; and
●Remove language concerning dated signatures on 
written consents to no longer require such 
signatures be dated.
Merger or Consolidation (Sections 29-37)
The bill would amend law governing merger or 
consolidation to:
6- 2455 ●Replace references to “Kansas corporations” with 
“domestic corporations” and replace references to 
corporations organized in other states with “foreign 
corporations”; 
●Modify provisions regarding voting rights of 
stockholders and proxies in conformance with New 
Section 1 of the bill;
●Specify the information to be included in a merger 
or consolidation agreement, and remove a 
requirement that in a merger involving a holding 
company, the resulting company’s organizational 
documents be the same as the articles of 
incorporation of the original corporation;
●Specify that for mergers or consolidations between 
two domestic corporations consummated prior to 
July 1, 2023, the surviving entity would be required 
to amend its organizational documents to include 
certain identical information to that of the 
constituent corporation if it did not already contain 
the required information; 
●For mergers or consolidations between two 
domestic corporations consummated pursuant to 
an agreement or board of directors resolution 
adopted on or after July 1, 2023, no vote by 
stockholders would be required to approve such 
merger or consolidation unless expressly required 
by the corporation’s articles of incorporation;
●Allow certain surviving entities to amend their 
organizational documents to reduce the number of 
classes and shares of stock or other units and 
remove certain language authorized by the Act;
●Revise provisions concerning required stockholder 
votes to approve a merger to not require such vote 
when the offer is conditioned on a tender of a 
7- 2455 certain amount of shares of stock of the constituent 
corporation;
●Allow for certain stock to become excluded or be 
deemed rollover stock per a written agreement for 
the purposes of the merger. Such provisions would 
be effective only with respect to merger 
agreements entered into on or after July 1, 2023;
●Require a merger agreement concerning a 
surviving domestic corporation contain a statement 
concerning whether amendments or changes in the 
articles of incorporation are desired. For 
consolidation involving domestic corporations, the 
bill would require the articles of incorporation to be 
attached to the agreement;
●Require merger or consolidation agreements 
involving a surviving or resulting foreign 
corporation to include information required by the 
laws under which the corporation is organized;
●Require that for nonstock corporation mergers or 
consolidations involving converted memberships, 
the cash, property, rights, or securities provided in 
exchange for such conversion be specified in the 
agreement;
●Raise the fee for service of process by the SOS to 
$50 from $40. Continuing law and provisions under 
the bill would require an out-of-state nonstock 
corporation to designate the SOS as its agent for 
service of process by in-state corporations;
●Amend provisions related to the merger or 
consolidation of a nonstock corporation with a 
stock corporation by specifying what information 
related to the articles of incorporation must be in 
such agreement; 
8- 2455 ●If the SOS is required to be appointed to receive 
service of process for the surviving or resulting 
corporation, and if a certificate of merger or 
consolidation is required to be filed, the bill would 
require such designation to be included in the filed 
certificate; 
●Under an agreement consummated before July 1, 
2023, if a corporation’s articles of incorporation are 
amended, appraisal rights would be available, 
pursuant to continuing law [Note: A new statutory 
section that would become effective on January 1, 
2024, would not contain this specific appraisal 
provision];
●Under an agreement consummated on or after July 
1, 2023, the bill would:
○Set a threshold for maintaining a claim of 
appraisal rights in certain mergers to be 
greater than 1 percent of the outstanding 
shares, or the value of the consideration 
exceeds $1 million; and
○Allow corporations to tender payment of 
appraisal amounts when litigation begins to 
avoid accrual of interest; and
●Deny appraisal rights to persons who hold shares 
in an SEC reporting company pursuant to an 
intermediate merger under the bill.
Dissolution and Disposition of Corporate Assets (Sections 38 
and 39)
The bill would amend law governing dissolution and 
disposition of corporate assets to:
●Clarify the district court would have jurisdiction to 
revoke or forfeit a corporation’s articles of 
9- 2455 incorporation upon motion by the Attorney General; 
and
●Allow the district court to appoint trustees for 
winding up the affairs of those corporations whose 
articles of incorporation have been revoked or 
forfeited, and limit the court’s powers to revoke or 
forfeit to this section.
Extension, Renewal, or Reinstatement of Corporate Status 
(Sections 40-42)
The bill would amend law governing extension, renewal, 
or reinstatement of corporate status to:
●Modify the process by which a corporation could 
revoke a voluntary dissolution or restore certain 
articles of incorporation that expired because of an 
existing time limitation;
●Amend provisions relating to corporate revival for 
nonrevoked corporations to:
○Replace references to “renewal,” “extension,” 
and “reinstatement” with the term "revival";
○Set requirements for certificates of revival;
○Clarify rights and duties of a corporation upon 
revival; and
○Add language defining "board of directors" 
and "bylaws" for purposes of reviving a 
corporation and establishing the requirements 
for authorization by the board of directors.
Public Benefit Corporations (Sections 43-45)
The bill would amend law governing public benefit 
corporations to:
10- 2455 ●Amend provisions regarding the management of 
public benefit corporations by balancing pecuniary 
interests of stockholders, best interests of those 
materially affected by the corporation’s conduct, 
and specific public benefit (balancing requirement) 
to:
○Add language concerning conflicts of interest 
for directors of public benefit corporations and 
make the exculpatory provisions for directors 
of public benefit corporations the default;
○Add language regarding enforcement 
provisions of the balancing requirement to 
eliminate the super-majority stockholder 
voting requirements associated with article 
amendments to add or remove public benefit 
corporation provisions or to merge or 
consolidate with another entity such that the 
resulting entity would include or omit public 
benefit corporation provisions; and
○Remove the special appraisal rights of 
stockholders of a corporation that converts to 
or from a public benefit corporation.
Amendments to BETA (Sections 53-58)
The bill would amend provisions in BETA governing 
mergers of business entities to permit certain mergers or 
combinations with a corporation that can be effected without 
the vote of the stockholders when the merging entity owns 90 
percent or more of the stock of the corporation. The bill would 
allow such mergers to occur between domestic corporations 
and both domestic and foreign non-corporation business 
entities.
The bill would also state that the provisions of BETA 
would control to the fullest extent permitted under the federal 
Electronic Signatures in Global and National Commerce Act 
11- 2455 in the event such provisions modify, limit, or supersede that 
Act.
Amendments to Code, BETA, BEST Act, RULPA and 
KUPA Concerning SOS Filings, Reports, and Fees 
(Sections 51-52, 59-72; Other Various Sections 
Throughout)
The bill would amend law concerning business entity 
information filings, reports, and fees submitted to the SOS in 
the Code, BETA, the BEST Act, RULPA, and KUPA to:
●Clarify business filing entity reports must contain 
the location of the principal office, including a full 
postal address, and would clarify other references 
to addresses in these acts to mean postal 
addresses;
●Standardize the attributes of addresses of 
individuals and entities in periodic reports;
●Replace a per-page fee with a per-document fee 
for requested copies of certified and uncertified 
documents from the SOS;
●Expand the ability of the SOS to accept filings by 
various electronic means, including electronic 
uploads;
●Specify when filings must be made on forms 
prescribed by the SOS; 
●Remove language requiring the number of shares 
of capital stock issued for domestic for-profit 
corporations be included on business entity filing 
reports;
●Remove language requiring number of 
memberships or number of shares of capital stock 
12- 2455 issued for non-profit corporations be included on 
business entity filing reports;
●Add certificates of revocations of dissolution and 
certificates of merger or consolidation to the SOS 
fee schedule for corporate filings;
●Remove language requiring the SOS to maintain 
copies of applications for extension tax returns of 
limited liability companies; and
●Clarify provisions regarding resignation of resident 
service agents and filing related certificates of 
resignation.
Background
The bill was introduced by the House Committee on 
Federal and State Affairs at the request of a representative of 
the Kansas Bar Association (KBA). The bill was referred to 
the House Committee on Judiciary on March 9, 2023.
House Committee on Judiciary 
In the House Committee hearing on March 14, 2023, 
two representatives of the KBA and a representative of the 
SOS testified as proponents of the bill. Proponents generally 
stated the purpose of the updates contained in the bill is to 
bring Kansas statutes up to date with provisions contained in 
the Delaware General Corporation Law (DGCL). [Note: 
Kansas has patterned its Code on the DGCL since the 
Code’s adoption in 1972.] Proponents also stated the bill 
would standardize and improve requirements related to 
business filings with the SOS.
No other testimony was provided.
13- 2455 Fiscal Information 
According to the fiscal note prepared by the Division of 
the Budget on the bill, the SOS and the Department of 
Revenue indicate enactment of the bill would not have a fiscal 
effect.
Corporations; business entities; filings; Secretary of State; Kansas General 
Corporation Code; Kansas Revised Limited Liability Company Act; Business Entity 
Transactions Act; Kansas Revised Uniform Limited Partnership Act; Kansas Uniform 
Partnership Act
14- 2455