EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*sb0058*
SENATE BILL 58
C1 3lr0902
(PRE–FILED) CF 3lr1160
By: Senators West and Waldstreicher
Requested: November 18, 2022
Introduced and read first time: January 11, 2023
Assigned to: Judicial Proceedings
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 SENATE BILL 58
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
SENATE BILL 58 3
(a) Except as provided in subsections (b) and (c) of this section, each stockholder 1
is entitled to stock certificates [which] THAT represent and certify the shares of stock [he] 2
THE STOCKHOLDER holds in the corporation. 3
(b) A stock certificate may not be issued until the stock represented by it is fully 4
paid. 5
(c) (1) Unless the charter or bylaws provide otherwise, the board of directors 6
of a corporation may authorize the issue of some or all of the shares of any or all of its 7
classes or series without certificates. 8
(2) The authorization under paragraph (1) of this subsection does not affect 9
shares already represented by certificates until they are surrendered to the corporation. 10
(3) For shares issued without certificates, on request by a stockholder, the 11
corporation shall send the stockholder, without charge, a statement in writing or by 12
electronic transmission of the information required on certificates by § 2–211 of this 13
subtitle. 14
(D) A CORPORATION MAY NOT ISSUE A STOCK CERTIFICATE IN BEARE R 15
FORM. 16
2–214. 17
(a) A corporation may, but is not obliged to: 18
(1) Issue fractional shares of stock; 19
(2) Eliminate a fractional interest by rounding up to a full share of stock; 20
(3) Arrange for the disposition of a fractional interest by the person entitled 21
to it; 22
(4) Pay cash for the fair value of a fractional share of stock determined as 23
of the time when the person entitled to receive it is determined; or 24
(5) Issue scrip or other evidence of ownership which: 25
(i) Entitles its holder to exchange scrip or other evidence of 26
ownership aggregating a full share for a certificate which represents the share; and 27
(ii) Unless otherwise provided, does not entitle its holder to exercise 28
voting rights, receive dividends, or participate in the assets of the corporation in the event 29
of liquidation. 30
(b) The board of directors may impose any reasonable condition on the issuance 31
of the scrip or other evidence of ownership, including a condition that: 32 4 SENATE BILL 58
(1) It becomes void if not exchanged for a certificate representing a full 1
share of stock before a specified date; 2
(2) The corporation may sell the stock for which the scrip or other evidence 3
of ownership is exchangeable and distribute the proceeds to the holders; or 4
(3) The proceeds of a sale under paragraph (2) of this subsection are 5
forfeited to the corporation if not claimed within a specified period not less than three years 6
from the date the scrip or other evidence of ownership was originally issued. 7
(C) A CORPORATION MAY NOT ISSUE A CERTIFICATE REPRESENTING SCRIP 8
IN BEARER FORM . 9
(D) FOR SCRIP ISSUED WITH OUT A CERTIFICATE, ON REQUEST BY A 10
SCRIPHOLDER , THE CORPORATION SHAL L DELIVER TO THE SCR IPHOLDER, 11
WITHOUT CHARGE , A STATEMENT IN WRITI NG OR BY ELECTRONIC TRANSMISSION OF 12
THE INFORMATION REQU IRED TO BE ON A CERTIFICATE UNDER § 2–211 OF THIS 13
SUBTITLE. 14
2–501. 15
(a) Each corporation shall hold an annual meeting of its stockholders to elect 16
directors and transact any other business within its powers. 17
(b) (1) If the charter or bylaws of a corporation [registered under] THAT IS AN 18
INVESTMENT COMPANY AS D EFINED IN the Investment Company Act of 1940 so 19
provides, the corporation is not required to hold an annual meeting in any year in which 20
the election of directors is not required to be acted upon under the Investment Company 21
Act of 1940. 22
(2) If a corporation is required under paragraph (1) of this subsection to 23
hold a meeting of stockholders to elect directors, the meeting shall be designated as the 24
annual meeting of stockholders for that year. 25
2–503. 26
(a) Unless the charter provides otherwise, meetings of stockholders shall be held 27
as is: 28
(1) Provided in the charter or bylaws; or 29
(2) Set by the board of directors under the provisions of the charter or 30
bylaws. 31
SENATE BILL 58 5
(c) If authorized by the board of directors and subject to any guidelines and 1
procedures that the board adopts, stockholders and proxy holders not physically present at 2
the meeting of the stockholders, may, by remote communication: 3
(1) Participate in the meeting of the stockholders; and 4
(2) Be considered present in person and may vote at the meeting of the 5
stockholders, whether the meeting is held at a designated place or PARTIALLY OR solely 6
by remote communication, if: 7
(i) The corporation implements reasonable measures to verify that 8
each person considered present and authorized to vote at the meeting by remote 9
communication is a stockholder or proxy holder; 10
(ii) The corporation implements reasonable measures to provide the 11
stockholders and proxy holders a reasonable opportunity to participate in the meeting and 12
to vote on matters submitted to the stockholders, including an opportunity to read or hear 13
the proceedings of the meeting substantially concurrently with the proceedings; and 14
(iii) In the event any stockholder or proxy holder votes or takes other 15
action at the meeting by remote communication, a record of the vote or other action is 16
maintained by the corporation. 17
4–601. 18
(A) [A] SUBJECT TO SUBSECTION (B) OF THIS SECTION , A consolidation, 19
merger, share exchange, [or] transfer of assets, OR CONVERSION of a close corporation 20
shall be made in accordance with the provisions of Title 3 of this article. 21
(B) [However, approval] APPROVAL of a proposed consolidation or merger, a 22
transfer of [its] assets, A CONVERSION , or an acquisition of [its] stock in a share exchange 23
requires the affirmative vote of every stockholder of the CLOSE corporation. 24
4A–402. 25
(a) Except for the requirement set forth in § 4A–404 of this subtitle that certain 26
consents be in writing, members may enter into an operating agreement not inconsistent 27
with the articles of organization to regulate or establish any aspect of the affairs of the 28
limited liability company, the conduct of its business, or the relations of its members, 29
including provisions establishing: 30
(5) (i) The right to have and a procedure for having a member’s 31
membership interest evidenced by a certificate issued by the limited liability company, 32
which may NOT be issued in bearer form [only if specifically allowed by the operating 33
agreement]; 34
6 SENATE BILL 58
(ii) The procedure for assignment, pledge, or transfer of any 1
membership interest represented by the certificate; and 2
(iii) Any other provisions dealing with the certificate; 3
(8) Procedures relating to: 4
(viii) Any other matter with respect to the exercise of voting rights by 5
members; or 6
(9) That a membership interest, an economic interest, or a noneconomic 7
interest may or shall be transferred or assigned in whole or in part to one or more persons, 8
including on the occurrence of any of the events described in § 4A–606 of this title, 9
regardless of whether the persons to whom the interest is transferred or assigned are 10
members. 11
5–202. 12
(b) Notwithstanding any other provision of this article, the charter or bylaws of a 13
nonstock corporation may: 14
(1) Divide the directors or members of the corporation into classes; 15
(2) Prescribe the tenure and conditions of service of its directors, but no 16
class of directors may be elected to serve for a period shorter than the interval between 17
annual meetings unless: 18
(i) All or a class of directors must be members; and 19
(ii) Qualifications for membership have the effect of shortening their 20
tenure of service; 21
(3) PROVIDE THAT AN INDIV IDUAL MAY SERVE AS A DIRECTOR BY 22
REASON OF SERVING IN A SPECIFIED OFFICE O R POSITION WITHIN OR OUTS IDE THE 23
CORPORATION AND PRES CRIBE THAT THE INDIV IDUAL SHALL SERVE AS A DIRECTOR 24
DURING THE INDIVIDUA L’S SERVICE IN THE SPE CIFIED OFFICE OR POS ITION; 25
(4) Prescribe the rights, privileges, and qualifications of its members; 26
[(4)] (5) Prescribe the manner of giving notice of any meeting of its 27
members; 28
[(5)] (6) Provide for the number or proportion of voting members whose 29
presence in person or by proxy constitutes a quorum at any meeting of its members; 30
SENATE BILL 58 7
[(6)] (7) Provide that any action may be taken or authorized by any 1
number or proportion of the votes of all its members or all its directors entitled to vote; 2
[(7)] (8) Deny or limit the right of its members to vote by proxy; 3
[(8)] (9) Provide for the right of members to vote by mail or by electronic 4
transmission on a stated proposal or for the election of directors or any officers who are 5
elected by members; 6
[(9)] (10) Regulate the management of the business and affairs of the 7
corporation; and 8
[(10)] (11) Regulate the exercise or allocation of voting power between or 9
among the directors and members. 10
8–502. 11
(a) A real estate investment trust may terminate its existence by voluntary 12
dissolution IN ACCORDANCE WITH S UBSECTION (B) OF THIS SECTION . [The 13
Department shall be notified of the effective date of the dissolution.] 14
(b) [A real estate investment trust may curtail or cease its trust activities by 15
partially or completely distributing its assets.] 16
(1) IN ORDER TO TERMINATE ITS EXISTENCE , A REAL ESTATE 17
INVESTMENT TRUST MUS T FILE A NOTICE OF TERMINATION WITH THE DEPARTMENT 18
THAT INCLUDES : 19
(I) THE NAME OF THE REAL ESTATE INVESTMENT TR UST; 20
(II) 1. A STATEMENT THAT THE T ERMINATION OF THE RE AL 21
ESTATE INVESTMENT TR UST BY VOLUNTARY DIS SOLUTION WAS APPROV ED IN THE 22
MANNER AND BY THE VO TE REQUIRED BY LAW A ND BY THE DECLARATIO N OF TRUST 23
OF THE REAL ESTATE I NVESTMENT TRUST ; AND 24
2. A STATEMENT DETAILING THE MANNER OF 25
APPROVAL; 26
(III) ALL OTHER PROVISIONS THE BOARD OF THE REA L ESTATE 27
INVESTMENT TRUST CONSIDERS NECESSARY TO DISSOLVE AND TERM INATE THE 28
REAL ESTATE INVESTME NT TRUST; AND 29
(IV) A STATEMENT THAT THE R EAL ESTATE INVESTMEN T TRUST 30
IS DISSOLVED AND TER MINATED. 31 8 SENATE BILL 58
(2) THE NOTICE OF TERMINA TION SHALL BE EXECUT ED BY: 1
(I) THE CHAIRMAN OR VICE CHAIRMAN OF THE BOAR D OF 2
TRUSTEES; 3
(II) THE CHIEF EXECUTIVE O FFICER; 4
(III) THE CHIEF OPERATING O FFICER; 5
(IV) THE CHIEF FINANCIAL O FFICER; 6
(V) THE PRESIDENT OR A VICE PRESIDENT ; OR 7
(VI) IF AUTHORIZED BY THE BYLAWS OR A RESOLUTI ON OF THE 8
BOARD OF TRUSTEES , ANY OTHER OFFICER OR AGENT OF THE REAL ES TATE 9
INVESTMENT TRUST . 10
(C) (1) EXCEPT AS PROVIDED IN PARAGRAPH (2) OF THIS SUBSECTION , 11
THE REAL ESTATE INVE STMENT TRUST IS DISS OLVED AND TERMINATED ON THE 12
LATER OF: 13
(I) THE TIME THAT THE DEPARTMENT ACCEPTS THE NOTICE 14
OF TERMINATION FOR RECORD ; OR 15
(II) THE TIME ESTABLISHED BY THE NOTICE OF TER MINATION, 16
NOT TO EXCEED 30 DAYS AFTER THE NOTIC E IS ACCEPTED FOR RE CORD. 17
(2) THE REAL ESTATE INVES TMENT TRUST CONTINUE S TO EXIST FOR 18
THE PURPOSE O F: 19
(I) PAYING, SATISFYING, AND DISCHARGING ANY EXISTING 20
DEBTS OR OBLIGATIONS ; 21
(II) COLLECTING AND DISTRI BUTING ASSETS; AND 22
(III) TAKING ALL OTHER ACTIONS REQUIRED TO LIQUIDAT E AND 23
WIND UP ITS BUSINESS AND AFFAIRS. 24
[(c)] (D) (1) The Attorney General may institute proceedings to dissolve a 25
real estate investment trust [which] THAT has abused, misused, or failed to use its powers. 26
SENATE BILL 58 9
(2) The proceedings shall be brought in the manner and on the grounds 1
provided in Title 3, Subtitle 5 of this article with respect to dissolution of a corporation for 2
misuse of its franchise. 3
[(2)] (3) The venue of an action under this subsection is in a county where 4
an officer or resident agent of the real estate investment trust is located. 5
12–307. 6
(A) NOTWITHSTANDING § 3–709 OF THIS ARTICLE , THE PROVISIONS OF 7
TITLE 3, SUBTITLE 7 OF THIS ARTICLE APPL Y TO A STATUTORY TRU ST FORMED ON 8
OR AFTER OCTOBER 1, 2023, THAT IS A CLOSED –END INVESTMENT COMPA NY AS 9
DEFINED IN THE INVESTMENT COMPANY ACT OF 1940. 10
(B) NOTWITHSTANDING § 3–709 OF THIS ARTICLE , THE GOVERNING 11
INSTRUMENT OF A STAT UTORY TRUST FORMED BEFORE OCTOBER 1, 2023, THAT IS 12
A CLOSED–END INVESTMENT COMPA NY AS DEFINED IN THE INVESTMENT COMPANY 13
ACT OF 1940 MAY PROVIDE THAT TITLE 3, SUBTITLE 7 OF THIS ARTICLE APPL IES 14
TO THE STATUTORY TRU ST. 15
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 16
October 1, 2023. 17