EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*hb0209*
HOUSE BILL 209
C1 3lr1160
CF SB 58
By: Delegate Watson
Introduced and read first time: January 20, 2023
Assigned to: Economic Matters
A BILL ENTITLED
AN ACT concerning 1
Corporations and Associations – Revisions 2
FOR the purpose of altering certain provisions governing the issuance of stock, convertible 3
securities, and scrip; clarifying the authority of corporations to hold annual meetings 4
by remote communication; clarifying the application of certain provisions of law to 5
the conversion of a corporation; requiring a real estate investment trust that 6
voluntarily dissolves to file a notice of termination with the State Department of 7
Assessments and Taxation; authorizing the charter or bylaws of a nonstock 8
corporation to provide for the service of certain ex officio directors; providing for the 9
application of certain provisions of law regarding voting rights to statutory trusts; 10
and generally relating to corporations and associations. 11
BY repealing and reenacting, with amendments, 12
Article – Corporations and Associations 13
Section 2–203, 2–210, 2–214, 2–501(b), 2–503(c), 4–601, 4A–402(a)(5), 5–202(b), and 14
8–502 15
Annotated Code of Maryland 16
(2014 Replacement Volume and 2022 Supplement) 17
BY repealing and reenacting, without amendments, 18
Article – Corporations and Associations 19
Section 2–501(a), 2–503(a), and 4A–402(a)(8)(viii) and (9) 20
Annotated Code of Maryland 21
(2014 Replacement Volume and 2022 Supplement) 22
BY adding to 23
Article – Corporations and Associations 24
Section 12–307 25
Annotated Code of Maryland 26
(2014 Replacement Volume and 2022 Supplement) 27
2 HOUSE BILL 209
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 1
That the Laws of Maryland read as follows: 2
Article – Corporations and Associations 3
2–203. 4
(a) Before the issuance of stock or convertible securities, the board of directors 5
shall adopt a resolution that: 6
(1) Authorizes the issuance; 7
(2) Sets the minimum consideration for the stock or convertible securities 8
or a formula for its determination; and 9
(3) Fairly describes any consideration other than money. 10
(b) In the absence of actual fraud in the transaction, the minimum consideration 11
stated in the charter or determined by the board of directors in its resolution is conclusive 12
for all purposes. 13
(c) For purposes of this section, the consideration for stock issued as a stock 14
dividend is the resulting capitalization of surplus. 15
(d) This section does not apply to the issuance of stock or convertible securities as 16
part of: 17
(1) A reclassification of stock effected by amendment of the charter; or 18
(2) A consolidation, merger, [or] share exchange, OR CONVERSION , 19
including a consolidation, merger, [or] share exchange, OR CONVERSION to which a wholly 20
owned subsidiary of the corporation is a party. 21
(e) If its issuance is authorized in accordance with this subtitle, stock with par 22
value and securities convertible into stock with par value may be issued as full paid and 23
nonassessable even if the price or value of the consideration received is less than the par 24
value of the stock issued or the stock into which the securities are convertible. 25
(f) Notwithstanding any other provision of this section or § 2–204 or § 2–206 of 26
this subtitle, a corporation may issue stock or other securities of the corporation pursuant 27
to § 2–103(13) of this title without consideration of any kind. 28
2–210. 29
(a) Except as provided in subsections (b) and (c) of this section, each stockholder 30
is entitled to stock certificates [which] THAT represent and certify the shares of stock [he] 31
THE STOCKHOLDER holds in the corporation. 32 HOUSE BILL 209 3
(b) A stock certificate may not be issued until the stock represented by it is fully 1
paid. 2
(c) (1) Unless the charter or bylaws provide otherwise, the board of directors 3
of a corporation may authorize the issue of some or all of the shares of any or all of its 4
classes or series without certificates. 5
(2) The authorization under paragraph (1) of this subsection does not affect 6
shares already represented by certificates until they are surrendered to the corporation. 7
(3) For shares issued without certificates, on request by a stockholder, the 8
corporation shall send the stockholder, without charge, a statement in writing or by 9
electronic transmission of the information required on certificates by § 2–211 of this 10
subtitle. 11
(D) A CORPORATION MAY NOT ISSUE A STOCK CERTIF ICATE IN BEARER 12
FORM. 13
2–214. 14
(a) A corporation may, but is not obliged to: 15
(1) Issue fractional shares of stock; 16
(2) Eliminate a fractional interest by rounding up to a full share of stock; 17
(3) Arrange for the disposition of a fractional interest by the person entitled 18
to it; 19
(4) Pay cash for the fair value of a fractional share of stock determined as 20
of the time when the person entitled to receive it is determined; or 21
(5) Issue scrip or other evidence of ownership which: 22
(i) Entitles its holder to exchange scrip or other evidence of 23
ownership aggregating a full share for a certificate which represents the share; and 24
(ii) Unless otherwise provided, does not entitle its holder to exercise 25
voting rights, receive dividends, or participate in the assets of the corporation in the event 26
of liquidation. 27
(b) The board of directors may impose any reasonable condition on the issuance 28
of the scrip or other evidence of ownership, including a condition that: 29
(1) It becomes void if not exchanged for a certificate representing a full 30
share of stock before a specified date; 31 4 HOUSE BILL 209
(2) The corporation may sell the stock for which the scrip or other evidence 1
of ownership is exchangeable and distribute the proceeds to the holders; or 2
(3) The proceeds of a sale under paragraph (2) of this subsection are 3
forfeited to the corporation if not claimed within a specified period not less than three years 4
from the date the scrip or other evidence of ownership was originally issued. 5
(C) A CORPORATION MAY NOT ISSUE A CERTIFICATE REPRESENTING SCRIP 6
IN BEARER FORM . 7
(D) FOR SCRIP ISSUED WITH OUT A CERTIFICATE , ON REQUEST BY A 8
SCRIPHOLDER , THE CORPORATION SHAL L DELIVER TO THE SCR IPHOLDER, 9
WITHOUT CHARGE , A STATEMENT IN WRITI NG OR BY ELECTRONIC TRANSMISSION OF 10
THE INFORMATION REQU IRED TO BE ON A CERT IFICATE UNDER § 2–211 OF THIS 11
SUBTITLE. 12
2–501. 13
(a) Each corporation shall hold an annual meeting of its stockholders to elect 14
directors and transact any other business within its powers. 15
(b) (1) If the charter or bylaws of a corporation [registered under] THAT IS AN 16
INVESTMENT COMPANY A S DEFINED IN the Investment Company Act of 1940 so 17
provides, the corporation is not required to hold an annual meeting in any year in which 18
the election of directors is not required to be acted upon under the Investment Company 19
Act of 1940. 20
(2) If a corporation is required under paragraph (1) of this subsection to 21
hold a meeting of stockholders to elect directors, the meeting shall be designated as the 22
annual meeting of stockholders for that year. 23
2–503. 24
(a) Unless the charter provides otherwise, meetings of stockholders shall be held 25
as is: 26
(1) Provided in the charter or bylaws; or 27
(2) Set by the board of directors under the provisions of the charter or 28
bylaws. 29
(c) If authorized by the board of directors and subject to any guidelines and 30
procedures that the board adopts, stockholders and proxy holders not physically present at 31
the meeting of the stockholders, may, by remote communication: 32
HOUSE BILL 209 5
(1) Participate in the meeting of the stockholders; and 1
(2) Be considered present in person and may vote at the meeting of the 2
stockholders, whether the meeting is held at a designated place or PARTIALLY OR solely 3
by remote communication, if: 4
(i) The corporation implements reasonable measures to verify that 5
each person considered present and authorized to vote at the meeting by remote 6
communication is a stockholder or proxy holder; 7
(ii) The corporation implements reasonable measures to provide the 8
stockholders and proxy holders a reasonable opportunity to participate in the meeting and 9
to vote on matters submitted to the stockholders, including an opportunity to read or hear 10
the proceedings of the meeting substantially concurrently with the proceedings; and 11
(iii) In the event any stockholder or proxy holder votes or takes other 12
action at the meeting by remote communication, a record of the vote or other action is 13
maintained by the corporation. 14
4–601. 15
(A) [A] SUBJECT TO SUBSECTION (B) OF THIS SECTION , A consolidation, 16
merger, share exchange, [or] transfer of assets, OR CONVERSION of a close corporation 17
shall be made in accordance with the provisions of Title 3 of this article. 18
(B) [However, approval] APPROVAL of a proposed consolidation or merger, a 19
transfer of [its] assets, A CONVERSION , or an acquisition of [its] stock in a share exchange 20
requires the affirmative vote of every stockholder of the CLOSE corporation. 21
4A–402. 22
(a) Except for the requirement set forth in § 4A–404 of this subtitle that certain 23
consents be in writing, members may enter into an operating agreement not inconsistent 24
with the articles of organization to regulate or establish any aspect of the affairs of the 25
limited liability company, the conduct of its business, or the relations of its members, 26
including provisions establishing: 27
(5) (i) The right to have and a procedure for having a member’s 28
membership interest evidenced by a certificate issued by the limited liability company, 29
which may NOT be issued in bearer form [only if specifically allowed by the operating 30
agreement]; 31
(ii) The procedure for assignment, pledge, or transfer of any 32
membership interest represented by the certificate; and 33
(iii) Any other provisions dealing with the certificate; 34 6 HOUSE BILL 209
(8) Procedures relating to: 1
(viii) Any other matter with respect to the exercise of voting rights by 2
members; or 3
(9) That a membership interest, an economic interest, or a noneconomic 4
interest may or shall be transferred or assigned in whole or in part to one or more persons, 5
including on the occurrence of any of the events described in § 4A–606 of this title, 6
regardless of whether the persons to whom the interest is transferred or assigned are 7
members. 8
5–202. 9
(b) Notwithstanding any other provision of this article, the charter or bylaws of a 10
nonstock corporation may: 11
(1) Divide the directors or members of the corporation into classes; 12
(2) Prescribe the tenure and conditions of service of its directors, but no 13
class of directors may be elected to serve for a period shorter than the interval between 14
annual meetings unless: 15
(i) All or a class of directors must be members; and 16
(ii) Qualifications for membership have the effect of shortening their 17
tenure of service; 18
(3) PROVIDE THAT AN INDIV IDUAL MAY SERVE AS A DIRECTOR BY 19
REASON OF SERVING IN A SPECIFIED OFFICE OR POSITION W ITHIN OR OUTSIDE THE 20
CORPORATION AND PRES CRIBE THAT THE INDIV IDUAL SHALL SERVE AS A DIRECTOR 21
DURING THE INDIVIDUA L’S SERVICE IN THE SPE CIFIED OFFICE OR POS ITION; 22
(4) Prescribe the rights, privileges, and qualifications of its members; 23
[(4)] (5) Prescribe the manner of giving notice of any meeting of its 24
members; 25
[(5)] (6) Provide for the number or proportion of voting members whose 26
presence in person or by proxy constitutes a quorum at any meeting of its members; 27
[(6)] (7) Provide that any action may be taken or authorized by any 28
number or proportion of the votes of all its members or all its directors entitled to vote; 29
[(7)] (8) Deny or limit the right of its members to vote by proxy; 30
HOUSE BILL 209 7
[(8)] (9) Provide for the right of members to vote by mail or by electronic 1
transmission on a stated proposal or for the election of directors or any officers who are 2
elected by members; 3
[(9)] (10) Regulate the management of the business and affairs of the 4
corporation; and 5
[(10)] (11) Regulate the exercise or allocation of voting power between or 6
among the directors and members. 7
8–502. 8
(a) A real estate investment trust may terminate its existence by voluntary 9
dissolution[. The Department shall be notified of the effective date of the dissolution.] IN 10
ACCORDANCE WITH SUBS ECTION (B) OF THIS SECTION. 11
(b) [A real estate investment trust may curtail or cease its trust activities by 12
partially or completely distributing its assets.] 13
(1) IN ORDER TO TERMINATE ITS EXISTENCE , A REAL EST ATE 14
INVESTMENT TRUST MUS T FILE A NOTICE OF TERMINATION WITH THE DEPARTMENT 15
THAT INCLUDES : 16
(I) THE NAME OF THE REAL ESTATE INVESTMENT TR UST; 17
(II) 1. A STATEMENT THAT THE T ERMINATION OF THE RE AL 18
ESTATE INVESTMENT TR UST BY VOLUNTARY DIS SOLUTION WAS AP PROVED IN THE 19
MANNER AND BY THE VO TE REQUIRED BY LAW A ND BY THE DECLARATIO N OF TRUST 20
OF THE REAL ESTATE I NVESTMENT TRUST ; AND 21
2. A STATEMENT DETAILING THE MANNER OF 22
APPROVAL; 23
(III) ALL OTHER PROVISIONS THE BOARD OF THE REA L ESTATE 24
INVESTMENT TRUS T CONSIDERS NECESSAR Y TO DISSOLVE AND TE RMINATE THE 25
REAL ESTATE INVESTME NT TRUST; AND 26
(IV) A STATEMENT THAT THE R EAL ESTATE INVESTMEN T TRUST 27
IS DISSOLVED AND TER MINATED. 28
(2) THE NOTICE OF TERMINA TION SHALL BE EXECUT ED BY: 29
(I) THE CHAIRMAN OR VICE CHAIRMAN OF THE BOARD OF 30
TRUSTEES; 31 8 HOUSE BILL 209
(II) THE CHIEF EXECUTIVE O FFICER; 1
(III) THE CHIEF OPERATING O FFICER; 2
(IV) THE CHIEF FINANCIAL O FFICER; 3
(V) THE PRESIDENT OR A VI CE PRESIDENT; OR 4
(VI) IF AUTHORIZED BY THE BYLAWS OR A RESOLUTI ON OF THE 5
BOARD OF TRUSTEES , ANY OTHER OFFICER OR AGENT OF THE REAL ES TATE 6
INVESTMENT TRUST . 7
(C) (1) EXCEPT AS PROVIDED IN PARAGRAPH (2) OF THIS SUBSECTION , 8
THE REAL ESTATE INVE STMENT TRUST IS DISS OLVED AND TERMINATED ON THE 9
LATER OF: 10
(I) THE TIME THAT TH E DEPARTMENT ACCEPTS TH E NOTICE 11
OF TERMINATION FOR R ECORD; OR 12
(II) THE TIME ESTABLISHED BY THE NOTICE OF TER MINATION, 13
NOT TO EXCEED 30 DAYS AFTER THE NOTIC E IS ACCEPTED FOR RE CORD. 14
(2) THE REAL ESTATE INVES TMENT TRUST CONTINUE S TO EXIST FOR 15
THE PURPOSE OF: 16
(I) PAYING, SATISFYING, AND DISCHARGING ANY EXISTING 17
DEBTS OR OBLIGATIONS ; 18
(II) COLLECTING AND DISTRI BUTING ASSETS; AND 19
(III) TAKING ALL OTHER ACTI ONS REQUIRED TO LIQU IDATE AND 20
WIND UP ITS BUSINESS AND AFFAIRS. 21
[(c)] (D) (1) The Attorney General may institute proceedings to dissolve a 22
real estate investment trust [which] THAT has abused, misused, or failed to use its powers. 23
(2) The proceedings shall be brought in the manner and on the grounds 24
provided in Title 3, Subtitle 5 of this article with respect to dissolution of a corporation for 25
misuse of its franchise. 26
[(2)] (3) The venue of an action under this subsection is in a county where 27
an officer or resident agent of the real estate investment trust is located. 28
HOUSE BILL 209 9
12–307. 1
(A) NOTWITHSTANDING § 3–709 OF THIS ARTICLE , THE PROVISIONS OF 2
TITLE 3, SUBTITLE 7 OF THIS ARTICLE APPL Y TO A STATUTORY TRU ST FORMED ON 3
OR AFTER OCTOBER 1, 2023, THAT IS A CLOSED –END INVESTMENT COMPA NY AS 4
DEFINED IN THE INVESTMENT COMPANY ACT OF 1940. 5
(B) NOTWITHSTANDING § 3–709 OF THIS ARTICLE , THE GOVERNING 6
INSTRUMENT OF A STAT UTORY TRUST FORMED B EFORE OCTOBER 1, 2023, THAT IS 7
A CLOSED–END INVESTMENT COMPA NY AS DEFINED IN THE INVESTMENT COMPANY 8
ACT OF 1940 MAY PROVIDE THAT TITLE 3, SUBTITLE 7 OF THIS ARTICLE APPLIES 9
TO THE STATUTORY TRU ST. 10
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 11
October 1, 2023. 12