EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*sb0431*
SENATE BILL 431
C1 2lr1670
By: Senators West and Waldstreicher
Introduced and read first time: January 26, 2022
Assigned to: Judicial Proceedings
A BILL ENTITLED
AN ACT concerning 1
Corporations and Associations – Revisions 2
FOR the purpose of revising laws relating to the formation, organization, and operation of 3
corporations; repealing certain redundant and obsolete provisions; correcting certain 4
references; authorizing a certain dissent to be submitted by electronic transmission; 5
adding limited liability companies to the list of entity types that certain persons may 6
serve in certain capacities and be eligible for insurance provided by certain other 7
corporations; clarifying certain procedures relating to the abandonment of certain 8
proposed consolidations, mergers, or share exchanges; allowing a corporation to 9
dissolve, subject to a certain limitation, at the time established under the articles of 10
dissolution; and generally relating to corporations and associations. 11
BY repealing and reenacting, with amendments, 12
Article – Corporations and Associations 13
Section 1–101(f)(1)(iv) and (p)(1) and (4), 2–103(1), 2–104(b)(9) and (10), 2–208(a)(2), 14
2–208.1(a)(2), 2–410, 2–411(a)(2), 2–418(k)(1), 2–503(b) and (c), 2–509(b), 15
2–606.1(a), 3–105(a), 3–106.1(e)(1), 3–108(a) and (b), 3–109(b)(8), 3–408(a), 16
and 8–501(h)(1) 17
Annotated Code of Maryland 18
(2014 Replacement Volume and 2021 Supplement) 19
BY adding to 20
Article – Corporations and Associations 21
Section 2–104(b)(11) 22
Annotated Code of Maryland 23
(2014 Replacement Volume and 2021 Supplement) 24
BY repealing 25
Article – Corporations and Associations 26
Section 2–502.1 27
Annotated Code of Maryland 28 2 SENATE BILL 431
(2014 Replacement Volume and 2021 Supplement) 1
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 2
That the Laws of Maryland read as follows: 3
Article – Corporations and Associations 4
1–101. 5
(f) (1) “Charter” includes: 6
(iv) Articles of restatement[, if approved as described in § 2–609 of 7
this article]; 8
(p) “Governing document” means: 9
(1) The [articles or certificate of incorporation] CHARTER and the bylaws 10
of a Maryland corporation or a foreign corporation; 11
(4) The declaration of trust or governing instrument of a business trust OR 12
A REAL ESTATE INVEST MENT TRUST ; or 13
2–103. 14
Unless otherwise provided by law or its charter, a Maryland corporation has the 15
general powers, whether or not they are set forth in its charter, to: 16
(1) Have perpetual existence[, although existence may be limited to a 17
specified period if the limitation is stated in a charter provision adopted after May 31, 18
1908]; 19
2–104. 20
(b) The articles of incorporation may include: 21
(9) A provision that allows the board of directors, in considering a potential 22
acquisition of control of the corporation, to consider the effect of the potential acquisition of 23
control on: 24
(i) Stockholders, employees, suppliers, customers, and creditors of 25
the corporation; and 26
(ii) Communities in which offices or other establishments of the 27
corporation are located; [and] 28
SENATE BILL 431 3
(10) A provision that contains a future effective date for the articles of 1
incorporation that is not later than 30 days after the articles are accepted by the 2
Department for record; AND 3
(11) IF ADOPTED AFTER MAY 31, 1908, A PROVISION STATING THAT: 4
(I) THE EXISTENCE OF THE CORPORATION IS LIMITED TO A 5
SPECIFIC PERIOD; OR 6
(II) THE EXISTENCE OF THE CORPORATION SHALL BE LIMITED 7
TO A SPECIFIC PERIOD THAT SHALL BE CONTINUED , EXTENDED, OR TERMINATED ON 8
THE OCCURRENCE OF AN EVENT, AN ACTION, OR A DETERMINATION SET FO RTH IN 9
THE CHARTER . 10
2–208. 11
(a) (2) The [board] CORPORATION may not issue any of the stock that is 12
classified or reclassified prior to the time the articles supplementary are effective, as 13
provided in this section. 14
2–208.1. 15
(a) (2) The [board] CORPORATION may not issue any of the newly authorized 16
stock prior to the time the articles supplementary are effective, as provided in this section. 17
2–410. 18
(a) A director of a corporation who is present at a meeting of its board of directors 19
at which action on any corporate matter is taken is presumed to have assented to the action 20
unless: 21
(1) [He] THE DIRECTOR announces [his] THE DIRECTOR’S dissent at the 22
meeting; and 23
(2) (i) [His] THE dissent is entered in the minutes of the meeting; 24
(ii) [He] THE DIRECTOR files [his written] THE dissent to the 25
action IN WRITING with OR BY ELECTRONIC TRA NSMISSION TO the secretary of the 26
meeting before the meeting is adjourned; or 27
(iii) [He] THE DIRECTOR forwards [his written] THE dissent within 28
24 hours after the meeting is adjourned[,] TO THE SECRETARY OF THE MEETING OR THE 29
SECRETARY OF THE COR PORATION by [certified]: 30
4 SENATE BILL 431
1. CERTIFIED mail, return receipt requested, bearing a 1
postmark from the United States Postal Service[, to the secretary of the meeting or the 2
secretary of the corporation]; OR 3
2. ELECTRONIC TRANSMISSI ON. 4
(b) The right to dissent does not apply to a director who: 5
(1) Voted in favor of the action; or 6
(2) Failed to make [his] THE DIRECTOR’S dissent known at the meeting. 7
2–411. 8
(a) The board of directors of a corporation may: 9
(2) Delegate to these committees any of the powers of the board of directors, 10
except the power to: 11
(i) [Issue] AUTHORIZE THE ISSUANC E OF stock other than as 12
provided in subsection (b) of this section; 13
(ii) Recommend to the stockholders any action which requires 14
stockholder approval, other than the election of directors; 15
(iii) Amend the bylaws; or 16
(iv) Approve any merger or share exchange which does not require 17
stockholder approval. 18
2–418. 19
(k) (1) A corporation may purchase and maintain insurance on behalf of any 20
person who is or was a director, officer, employee, or agent of the corporation, or who, while 21
a director, officer, employee, or agent of the corporation, is or was serving at the request of 22
the corporation as a director, officer, partner, trustee, employee, or agent of another foreign 23
or domestic corporation, partnership, joint venture, trust, LIMITED LIABILITY CO MPANY, 24
other enterprise, or employee benefit plan against any liability asserted against and 25
incurred by such person in any such capacity or arising out of such person’s position, 26
whether or not the corporation would have the power to indemnify against liability under 27
the provisions of this section. 28
[2–502.1. 29
(a) Unless restricted by the charter or bylaws of the corporation, a corporation 30
may allow stockholders to participate in a meeting by means of a conference telephone or 31 SENATE BILL 431 5
other communications equipment if all persons participating in the meeting can read or 1
hear the proceedings of the meeting substantially concurrently with the proceedings. 2
(b) Participation in a meeting by the means authorized by subsection (a) of this 3
section constitutes presence in person at the meeting.] 4
2–503. 5
(b) If the board of directors is authorized to determine the place of a meeting of 6
the stockholders, the board OF DIRECTORS may determine that the meeting not be held at 7
any place, but instead may be held partially or solely by [means of] remote communication, 8
as authorized by subsection (c) of this section. 9
(c) If authorized by the board of directors and subject to any guidelines and 10
procedures that the board adopts, stockholders and proxy holders not physically present at 11
[a] THE meeting of the stockholders, MAY, by [means of] remote communication: 12
(1) [May participate] PARTICIPATE in the meeting of the stockholders; 13
and 14
(2) [May be] BE considered present in person and may vote at the meeting 15
of the stockholders, whether the meeting is held at a designated place or solely by [means 16
of] remote communication, if: 17
(i) The corporation implements reasonable measures to verify that 18
each person considered present and authorized to vote at the meeting by [means of] remote 19
communication is a stockholder or proxy holder; 20
(ii) The corporation implements reasonable measures to provide the 21
stockholders and proxy holders a reasonable opportunity to participate in the meeting and 22
to vote on matters submitted to the stockholders, including an opportunity to read or hear 23
the proceedings of the meeting substantially concurrently with the proceedings; and 24
(iii) In the event any stockholder or proxy holder votes or takes other 25
action at the meeting by [means of] remote communication, a record of the vote or other 26
action is maintained by the corporation. 27
2–509. 28
(b) (1) Shares of a corporation’s own stock owned directly or indirectly by it 29
may not be voted at any meeting and may not be counted in determining the total number 30
of outstanding shares entitled to be voted at any given time unless they are held by it in a 31
fiduciary capacity, in which case they may be voted and shall be counted in determining 32
the total number of outstanding shares at any given time. 33
6 SENATE BILL 431
(2) Shares of its own stock are considered owned indirectly by the 1
corporation if owned by another corporation OR ENTITY in which the corporation owns 2
shares OR INTERESTS entitled to cast a majority of all the votes entitled to be cast by 3
HOLDERS OF all shares OR INTERESTS outstanding and entitled to vote. 4
2–606.1. 5
(a) A [board] CORPORATION may not issue any of the stock that is classified, 6
reclassified, or newly authorized by an amendment before the time the amendment is 7
effective, as provided in § 2–610.1 of this subtitle. 8
3–105. 9
(a) A consolidation, merger, share exchange, or transfer of assets shall be 10
approved in the manner provided by this section, except that: 11
(1) A merger of a 90% or more owned subsidiary with or into its parent 12
need be approved only in accordance with the provisions of § 3–106 of this subtitle; 13
(2) A merger of a Maryland corporation in accordance with § 3–106.1 of this 14
subtitle need be approved only in the manner provided in § 3–106.1 of this subtitle; 15
(3) A MERGER OF A MARYLAND CORPORATION IN ACCORDANCE WITH 16
§ 3–106.2 OF THIS SUBTITL E NEED ONLY BE APPROVED IN THE MANNER PROVIDED 17
IN § 3–106.2 OF THIS SUBTITLE; 18
[(3)] (4) A share exchange need be approved by a Maryland successor only 19
by its board of directors and by any other action required by its charter; 20
[(4)] (5) A transfer of assets need be approved by a Maryland transferee 21
corporation only by its board of directors and by any other action required by its charter; 22
[(5)] (6) A foreign corporation party to the transaction shall have the 23
transaction advised, authorized, and approved in the manner and by the vote required by 24
its charter and the laws of the place where it is organized; 25
[(6)] (7) A merger need be approved by a Maryland successor corporation 26
only by a majority of its entire board of directors if: 27
(i) The merger does not reclassify or change the terms of any class 28
or series of its stock that is outstanding immediately before the merger becomes effective 29
or otherwise amend its charter and the number of its shares of stock of such class or series 30
outstanding immediately after the effective time of the merger does not increase by more 31
than 20% of the number of its shares of the class or series of stock that is outstanding 32
immediately before the merger becomes effective; or 33
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(ii) There is no stock outstanding or subscribed for and entitled to be 1
voted on the merger; 2
[(7)] (8) A business trust party to a merger shall have the merger advised, 3
authorized, and approved in the manner and by the vote required by its declaration of trust 4
and the laws of the place where it is organized; and 5
[(8)] (9) A consolidation, merger, or share exchange shall be approved by 6
a Maryland corporation registered as an open–end investment company under the 7
Investment Company Act of 1940 only by a majority of the entire board of directors and in 8
the manner and by the vote required under the Investment Company Act of 1940. 9
3–106.1. 10
(e) (1) Unless waived by all stockholders who, except for the application of this 11
section, would be entitled to vote on the merger, at least 20 business days before the articles 12
are filed with the Department[,] an acquiring entity that owns less than all of the 13
outstanding shares of the subject corporation as of immediately before the effective time of 14
the merger must have given notice of the transaction to each of the subject corporation’s 15
stockholders of record who, except for the application of this section, would be entitled to 16
vote on the merger on the date that notice is given or on a record date fixed for that purpose 17
that is not more than 10 days before the date that notice is given. 18
3–108. 19
(a) A proposed consolidation, merger, or share exchange may be abandoned before 20
the effective date of the articles: 21
(1) If the articles so provide, by majority vote of the entire board of directors 22
of any one corporation party to the articles [or of], the entire board of trustees of any one 23
business trust party to the articles, OR THE GOVERNING BOD Y OF ANY OTHER ENTIT Y 24
PARTY TO THE ARTICLE S; or 25
(2) Unless the articles provide otherwise, by majority vote of the entire 26
board of directors of each Maryland corporation party to the articles [and of], the entire 27
board of trustees of each Maryland business trust party to the articles, AND THE 28
GOVERNING BODY OF EA CH OTHER MARYLAND ENTITY PARTY TO THE ARTICLES. 29
(b) If the articles have been filed with the Department, notice of the abandonment 30
shall be given promptly to the Department BY: 31
(1) IF ABANDONED PURSUANT TO SUBSECTION (A)(1) OF THIS 32
SECTION, ANY ONE PARTY TO THE ARTICLES ; OR 33
(2) IF ABANDONED PURSU ANT TO SUBSECTION (A)(2) OF THIS 34
SECTION, EACH PARTY TO THE AR TICLES. 35 8 SENATE BILL 431
3–109. 1
(b) Articles of consolidation, merger, or share exchange shall contain the terms 2
and conditions of the transaction and the manner of carrying it into effect, including: 3
(8) A statement that the terms and conditions of the transaction set forth 4
in the articles were advised, authorized, and approved by each corporation, partnership, 5
limited partnership, limited liability company, or business trust party to the articles in the 6
manner and by the vote required by its charter [or], declaration of trust, OR OTHER 7
GOVERNING DOCUMENT and the laws of the place where it is organized, and a statement 8
of the manner of approval; and 9
3–408. 10
(a) Except as provided in subsection (b) of this section, the corporation is dissolved 11
[when the Department accepts its articles of dissolution for record] ON THE LATER OF : 12
(1) THE TIME THE DEPARTMENT ACCEPTS TH E ARTICLES OF 13
DISSOLUTION FOR RECO RD; OR 14
(2) THE TIME ESTABLISHED UNDER THE ARTICLES , NOT TO EXCEED 15
30 DAYS AFTER THE ARTIC LES ARE ACCEPTED FOR RECORD. 16
8–501. 17
(h) (1) The [board of trustees] REAL ESTATE INVESTME NT TRUST may not 18
issue any of the shares that are classified, reclassified, or newly authorized by an 19
amendment to the declaration of trust before the time the amendment is filed with the 20
Department. 21
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 22
October 1, 2022. 23