WES MOORE, Governor Ch. 560
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Chapter 560
(House Bill 209)
AN ACT concerning
Corporations and Associations – Revisions
FOR the purpose of altering certain provisions governing the issuance of stock, convertible
securities, and scrip; clarifying the authority of corporations to hold annual meetings
by remote communication; clarifying the application of certain provisions of law to
the conversion of a corporation; requiring a real estate investment trust that
voluntarily dissolves to file a notice of termination with the State Department of
Assessments and Taxation; authorizing the charter or bylaws of a nonstock
corporation to provide for the service of certain ex officio directors; providing for the
application of certain provisions of law regarding voting rights to statutory trusts;
and generally relating to corporations and associations.
BY repealing and reenacting, with amendments,
Article – Corporations and Associations
Section 2–203, 2–210, 2–214, 2–501(b), 2–503(c), 4–601, 4A–402(a)(5), 5–202(b), and
8–502
Annotated Code of Maryland
(2014 Replacement Volume and 2022 Supplement)
BY repealing and reenacting, without amendments,
Article – Corporations and Associations
Section 2–501(a), 2–503(a), and 4A–402(a)(8)(viii) and (9)
Annotated Code of Maryland
(2014 Replacement Volume and 2022 Supplement)
BY adding to
Article – Corporations and Associations
Section 12–307
Annotated Code of Maryland
(2014 Replacement Volume and 2022 Supplement)
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
That the Laws of Maryland read as follows:
Article – Corporations and Associations
2–203.
(a) Before the issuance of stock or convertible securities, the board of directors
shall adopt a resolution that:
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(1) Authorizes the issuance;
(2) Sets the minimum consideration for the stock or convertible securities
or a formula for its determination; and
(3) Fairly describes any consideration other than money.
(b) In the absence of actual fraud in the transaction, the minimum consideration
stated in the charter or determined by the board of directors in its resolution is conclusive
for all purposes.
(c) For purposes of this section, the consideration for stock issued as a stock
dividend is the resulting capitalization of surplus.
(d) This section does not apply to the issuance of stock or convertible securities as
part of:
(1) A reclassification of stock effected by amendment of the charter; or
(2) A consolidation, merger, [or] share exchange, OR CONVERSION ,
including a consolidation, merger, [or] share exchange, OR CONVERSION to which a wholly
owned subsidiary of the corporation is a party.
(e) If its issuance is authorized in accordance with this subtitle, stock with par
value and securities convertible into stock with par value may be issued as full paid and
nonassessable even if the price or value of the consideration received is less than the par
value of the stock issued or the stock into which the securities are convertible.
(f) Notwithstanding any other provision of this section or § 2–204 or § 2–206 of
this subtitle, a corporation may issue stock or other securities of the corporation pursuant
to § 2–103(13) of this title without consideration of any kind.
2–210.
(a) Except as provided in subsections (b) and (c) of this section, each stockholder
is entitled to stock certificates [which] THAT represent and certify the shares of stock [he]
THE STOCKHOLDER holds in the corporation.
(b) A stock certificate may not be issued until the stock represented by it is fully
paid.
(c) (1) Unless the charter or bylaws provide otherwise, the board of directors
of a corporation may authorize the issue of some or all of the shares of any or all of its
classes or series without certificates.
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(2) The authorization under paragraph (1) of this subsection does not affect
shares already represented by certificates until they are surrendered to the corporation.
(3) For shares issued without certificates, on request by a stockholder, the
corporation shall send the stockholder, without charge, a statement in writing or by
electronic transmission of the information required on certificates by § 2–211 of this
subtitle.
(D) A CORPORATION MAY NOT ISSUE A STOCK CERTIF ICATE IN BEARER
FORM.
2–214.
(a) A corporation may, but is not obliged to:
(1) Issue fractional shares of stock;
(2) Eliminate a fractional interest by rounding up to a full share of stock;
(3) Arrange for the disposition of a fractional interest by the person entitled
to it;
(4) Pay cash for the fair value of a fractional share of stock determined as
of the time when the person entitled to receive it is determined; or
(5) Issue scrip or other evidence of ownership which:
(i) Entitles its holder to exchange scrip or other evidence of
ownership aggregating a full share for a certificate which represents the share; and
(ii) Unless otherwise provided, does not entitle its holder to exercise
voting rights, receive dividends, or participate in the assets of the corporation in the event
of liquidation.
(b) The board of directors may impose any reasonable condition on the issuance
of the scrip or other evidence of ownership, including a condition that:
(1) It becomes void if not exchanged for a certificate representing a full
share of stock before a specified date;
(2) The corporation may sell the stock for which the scrip or other evidence
of ownership is exchangeable and distribute the proceeds to the holders; or
(3) The proceeds of a sale under paragraph (2) of this subsection are
forfeited to the corporation if not claimed within a specified period not less than three years
from the date the scrip or other evidence of ownership was originally issued. Ch. 560 2023 LAWS OF MARYLAND
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(C) A CORPORATION MAY NOT ISSUE A CERTIFICATE REPRESENTING SCRIP
IN BEARER FORM .
(D) FOR SCRIP ISSUED WITH OUT A CERTIFICATE , ON REQUEST BY A
SCRIPHOLDER , THE CORPORATION SHAL L DELIVER TO THE SCR IPHOLDER,
WITHOUT CHARGE , A STATEMENT IN WRITI NG OR BY ELECTRONIC TRANSMISSION OF
THE INFORMATION REQU IRED TO BE ON A CERT IFICATE UNDER § 2–211 OF THIS
SUBTITLE.
2–501.
(a) Each corporation shall hold an annual meeting of its stockholders to elect
directors and transact any other business within its powers.
(b) (1) If the charter or bylaws of a corporation [registered under] THAT IS AN
INVESTMENT COMPANY A S DEFINED IN the Investment Company Act of 1940 so
provides, the corporation is not required to hold an annual meeting in any year in which
the election of directors is not required to be acted upon under the Investment Company
Act of 1940.
(2) If a corporation is required under paragraph (1) of this subsection to
hold a meeting of stockholders to elect directors, the meeting shall be designated as the
annual meeting of stockholders for that year.
2–503.
(a) Unless the charter provides otherwise, meetings of stockholders shall be held
as is:
(1) Provided in the charter or bylaws; or
(2) Set by the board of directors under the provisions of the charter or
bylaws.
(c) If authorized by the board of directors and subject to any guidelines and
procedures that the board adopts, stockholders and proxy holders not physically present at
the meeting of the stockholders, may, by remote communication:
(1) Participate in the meeting of the stockholders; and
(2) Be considered present in person and may vote at the meeting of the
stockholders, whether the meeting is held at a designated place or PARTIALLY OR solely
by remote communication, if:
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(i) The corporation implements reasonable measures to verify that
each person considered present and authorized to vote at the meeting by remote
communication is a stockholder or proxy holder;
(ii) The corporation implements reasonable measures to provide the
stockholders and proxy holders a reasonable opportunity to participate in the meeting and
to vote on matters submitted to the stockholders, including an opportunity to read or hear
the proceedings of the meeting substantially concurrently with the proceedings; and
(iii) In the event any stockholder or proxy holder votes or takes other
action at the meeting by remote communication, a record of the vote or other action is
maintained by the corporation.
4–601.
(A) [A] SUBJECT TO SUBSECTION (B) OF THIS SECTION , A consolidation,
merger, share exchange, [or] transfer of assets, OR CONVERSION of a close corporation
shall be made in accordance with the provisions of Title 3 of this article.
(B) [However, approval] APPROVAL of a proposed consolidation or merger, a
transfer of [its] assets, A CONVERSION , or an acquisition of [its] stock in a share exchange
requires the affirmative vote of every stockholder of the CLOSE corporation.
4A–402.
(a) Except for the requirement set forth in § 4A–404 of this subtitle that certain
consents be in writing, members may enter into an operating agreement not inconsistent
with the articles of organization to regulate or establish any aspect of the affairs of the
limited liability company, the conduct of its business, or the relations of its members,
including provisions establishing:
(5) (i) The right to have and a procedure for having a member’s
membership interest evidenced by a certificate issued by the limited liability company,
which may NOT be issued in bearer form [only if specifically allowed by the operating
agreement];
(ii) The procedure for assignment, pledge, or transfer of any
membership interest represented by the certificate; and
(iii) Any other provisions dealing with the certificate;
(8) Procedures relating to:
(viii) Any other matter with respect to the exercise of voting rights by
members; or
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(9) That a membership interest, an economic interest, or a noneconomic
interest may or shall be transferred or assigned in whole or in part to one or more persons,
including on the occurrence of any of the events described in § 4A–606 of this title,
regardless of whether the persons to whom the interest is transferred or assigned are
members.
5–202.
(b) Notwithstanding any other provision of this article, the charter or bylaws of a
nonstock corporation may:
(1) Divide the directors or members of the corporation into classes;
(2) Prescribe the tenure and conditions of service of its directors, but no
class of directors may be elected to serve for a period shorter than the interval between
annual meetings unless:
(i) All or a class of directors must be members; and
(ii) Qualifications for membership have the effect of shortening their
tenure of service;
(3) PROVIDE THAT AN INDIV IDUAL MAY SERVE AS A DIRECTOR BY
REASON OF SERVING IN A SPECIFIED OFFICE O R POSITION WITHIN OR OUTSIDE THE
CORPORATION AND PRES CRIBE THAT THE INDIV IDUAL SHALL SERVE AS A DIRECTOR
DURING THE INDIVIDUA L’S SERVICE IN THE SPE CIFIED OFFICE OR POS ITION;
(4) Prescribe the rights, privileges, and qualifications of its members;
[(4)] (5) Prescribe the manner of giving notice of any meeting of its
members;
[(5)] (6) Provide for the number or proportion of voting members whose
presence in person or by proxy constitutes a quorum at any meeting of its members;
[(6)] (7) Provide that any action may be taken or authorized by any
number or proportion of the votes of all its members or all its directors entitled to vote;
[(7)] (8) Deny or limit the right of its members to vote by proxy;
[(8)] (9) Provide for the right of members to vote by mail or by electronic
transmission on a stated proposal or for the election of directors or any officers who are
elected by members;
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[(9)] (10) Regulate the management of the business and affairs of the
corporation; and
[(10)] (11) Regulate the exercise or allocation of voting power between or
among the directors and members.
8–502.
(a) A real estate investment trust may terminate its existence by voluntary
dissolution[. The Department shall be notified of the effective date of the dissolution.] IN
ACCORDANCE WITH SUBS ECTION (B) OF THIS SECTION.
(b) [A real estate investment trust may curtail or cease its trust activities by
partially or completely distributing its assets.]
(1) IN ORDER TO TERMINATE ITS EXISTENCE , A REAL ESTATE
INVESTMENT TRUST MUS T FILE A NOTICE OF TERMINATION WITH THE DEPARTMENT
THAT INCLUDES :
(I) THE NAME OF THE REAL ESTATE INVESTMENT TRUST ;
(II) 1. A STATEMENT THAT THE T ERMINATION OF THE RE AL
ESTATE INVESTMENT TR UST BY VOLUNTARY DIS SOLUTION WAS APPROVE D IN THE
MANNER AND BY THE VO TE REQUIRED BY LAW A ND BY THE DECLARATIO N OF TRUST
OF THE REAL ESTATE I NVESTMENT TRUST ; AND
2. A STATEMENT DETAILING THE MANNER OF
APPROVAL;
(III) ALL OTHER PROVISIONS THE BOARD OF THE REA L ESTATE
INVESTMENT TRUST CON SIDERS NECESSARY TO DISSOLVE AND TERMINA TE THE
REAL ESTATE INVESTME NT TRUST; AND
(IV) A STATEMENT THAT THE R EAL ESTATE INVESTMENT TR UST
IS DISSOLVED AND TER MINATED.
(2) THE NOTICE OF TERMINA TION SHALL BE EXECUT ED BY:
(I) THE CHAIRMAN OR VICE CHAIRMAN OF THE BOAR D OF
TRUSTEES;
(II) THE CHIEF EXECUTIVE O FFICER;
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(III) THE CHIEF OPERATING O FFICER;
(IV) THE CHIEF FINANCIAL O FFICER;
(V) THE PRESIDENT OR A VI CE PRESIDENT; OR
(VI) IF AUTHORIZED BY THE BYLAWS OR A RESOLUTI ON OF THE
BOARD OF TRUSTEES , ANY OTHER OFFICER OR AGENT OF THE REAL ES TATE
INVESTMENT TRUST .
(C) (1) EXCEPT AS PROVIDED IN PARAGRAPH (2) OF THIS SUBSECTION ,
THE REAL ESTATE INVE STMENT TRUST IS DISS OLVED AND TERMINATED ON THE
LATER OF:
(I) THE TIME THAT THE DEPARTMENT ACCEPTS TH E NOTICE
OF TERMINATION FOR R ECORD; OR
(II) THE TIME ESTABLISHED BY THE NOTICE OF TER MINATION,
NOT TO EXCEED 30 DAYS AFTER THE NOTIC E IS ACCEPTED FOR RE CORD.
(2) THE REAL ESTATE INVES TMENT TRUST CONTINUE S TO EXIST FOR
THE PURPOSE OF :
(I) PAYING, SATISFYING, AND DISCHARGING ANY EXISTING
DEBTS OR OBLIGATIONS ;
(II) COLLECTING AND DISTRI BUTING ASSETS; AND
(III) TAKING ALL OTHER ACTI ONS REQUIRED TO LIQU IDATE AND
WIND UP ITS BUSINESS AND AFFAIRS.
[(c)] (D) (1) The Attorney General may institute proceedings to dissolve a
real estate investment trust [which] THAT has abused, misused, or failed to use its powers.
(2) The proceedings shall be brought in the manner and on the grounds
provided in Title 3, Subtitle 5 of this article with respect to dissolution of a corporation for
misuse of its franchise.
[(2)] (3) The venue of an action under this subsection is in a county where
an officer or resident agent of the real estate investment trust is located.
12–307.
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(A) NOTWITHSTANDING § 3–709 OF THIS ARTICLE , THE PROVISIONS OF
TITLE 3, SUBTITLE 7 OF THIS ARTICLE APPLY TO A STATUTORY TRUST FORMED ON
OR AFTER OCTOBER 1, 2023, THAT IS A CLOSED –END INVESTMENT COMPA NY AS
DEFINED IN THE INVESTMENT COMPANY ACT OF 1940.
(B) NOTWITHSTANDING § 3–709 OF THIS ARTICLE , THE GOVERNING
INSTRUMENT OF A STAT UTORY TRUST FORMED B EFORE OCTOBER 1, 2023, THAT IS
A CLOSED–END INVESTMENT COMPA NY AS DEFINED IN THE INVESTMENT COMPANY
ACT OF 1940 MAY PROVIDE THAT TITLE 3, SUBTITLE 7 OF THIS ARTICLE APPL IES
TO THE STATUTORY TRU ST.
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect
October 1, 2023.
Approved by the Governor, May 8, 2023.