MD
Maryland House Bill HB888

Maryland 2024 Regular Session

Maryland House Bill HB888 Compare Versions

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1- WES MOORE, Governor Ch. 605
21
3-– 1 –
4-Chapter 605
5-(House Bill 888)
62
7-AN ACT concerning
3+EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
4+ [Brackets] indicate matter deleted from existing law.
5+ Underlining indicates amendments to bill.
6+ Strike out indicates matter stricken from the bill by amendment or deleted from the law by
7+amendment.
8+ *hb0888*
89
9-Corporations and Associations – Ratification of Defective Corporate Acts –
10-Alterations
10+HOUSE BILL 888
11+C1 4lr1900
12+ CF SB 544
13+By: Delegate Amprey
14+Introduced and read first time: February 2, 2024
15+Assigned to: Economic Matters
16+Committee Report: Favorable
17+House action: Adopted
18+Read second time: March 8, 2024
1119
12-FOR the purpose of altering the process by which a defective corporate act may be ratified;
13-altering rules for certain legal actions by persons claiming to be adversely affected
14-by a ratification; and generally relating to the ratification of defective corporate acts.
20+CHAPTER ______
1521
16-BY repealing and reenacting, with amendments,
17- Article – Corporations and Associations
18-Section 2–701 through 2–707
19- Annotated Code of Maryland
20- (2014 Replacement Volume and 2023 Supplement)
22+AN ACT concerning 1
2123
22- SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
23-That the Laws of Maryland read as follows:
24+Corporations and Associations – Ratification of Defective Corporate Acts – 2
25+Alterations 3
2426
25-Article – Corporations and Associations
27+FOR the purpose of altering the process by which a defective corporate act may be ratified; 4
28+altering rules for certain legal actions by persons claiming to be adversely affected 5
29+by a ratification; and generally relating to the ratification of defective corporate acts. 6
2630
27-2–701.
31+BY repealing and reenacting, with amendments, 7
32+ Article – Corporations and Associations 8
33+Section 2–701 through 2–707 9
34+ Annotated Code of Maryland 10
35+ (2014 Replacement Volume and 2023 Supplement) 11
2836
29- (a) In this subtitle the following words have the meanings indicated.
37+ SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBL Y OF MARYLAND, 12
38+That the Laws of Maryland read as follows: 13
3039
31- (b) [“Corporate act” means any act taken by or on behalf of a corporation by the
32-board of directors, a committee of the board of directors, or the stockholders of the
33-corporation.
40+Article – Corporations and Associations 14
3441
35- (c)] “Date of the defective corporate act” means:
42+2–701. 15
3643
37- (1) The date and the time a defective corporate act was purportedly taken;
38-or
44+ (a) In this subtitle the following words have the meanings indicated. 16
3945
40- (2) If the exact time is unknown, the date and approximate time a defective
41-corporate act was purportedly taken.
46+ (b) [“Corporate act” means any act taken by or on behalf of a corporation by the 17
47+board of directors, a committee of the board of directors, or the stockholders of the 18
48+corporation. 19 2 HOUSE BILL 888
4249
43- [(d)] (C) “Defective corporate act” means:
4450
45- (1) Any corporate act purportedly taken that, at the date of the defective
46-corporate act, would have been within the power of the corporation but is void or voidable
47-due to a failure of authorization; or
48- Ch. 605 2024 LAWS OF MARYLAND
4951
50-– 2 –
51- (2) An overissue.
52+ (c)] “Date of the defective corporate act” means: 1
5253
53- [(e)] (D) “Failure of authorization” means the failure of a corporation to
54-authorize, approve, or otherwise effect a corporate act in compliance with the Maryland
55-General Corporation Law, its charter or bylaws, any action taken by its board of directors,
56-a committee of its board of directors, or its stockholders, or any plan or agreement to which
57-the corporation is a party, if and to the extent that the failure would render the corporate
58-act void or voidable.
54+ (1) The date and the time a defective corporate act was purportedly taken; 2
55+or 3
5956
60- [(f)] (E) “Overissue” means the purported issuance by a corporation of stock of:
57+ (2) If the exact time is unknown, the date and approximate time a defective 4
58+corporate act was purportedly taken. 5
6159
62- (1) A class or series in excess of the number of shares of the class or series
63-that the corporation has the power to issue under § 2–201(a) of this title or the corporation’s
64-charter at the time of THE PURPORTED issuance; or
60+ [(d)] (C) “Defective corporate act” means: 6
6561
66- (2) Any class or series that is not authorized for issuance by the
67-corporation’s charter AT THE TIME OF THE P URPORTED IS SUANCE.
62+ (1) Any corporate act purportedly taken that, at the date of the defective 7
63+corporate act, would have been within the power of the corporation but is void or voidable 8
64+due to a failure of authorization; or 9
6865
69- [(g)] (F) “Putative stock” means [stock]:
66+ (2) An overissue. 10
7067
71- (1) STOCK, including stock PURPORTEDLY issued upon exercise of rights,
72-options, warrants, or other securities convertible into or exercisable for stock[:
68+ [(e)] (D) “Failure of authorization” means the failure of a corporation to 11
69+authorize, approve, or otherwise effect a corporate act in compliance with the Maryland 12
70+General Corporation Law, its charter or bylaws, any action taken by its board of directors, 13
71+a committee of its board of directors, or its stockholders, or any plan or agreement to which 14
72+the corporation is a party, if and to the extent that the failure would render the corporate 15
73+act void or voidable. 16
7374
74- (1) Purportedly], PURPORTEDLY created or issued as a result of a
75-defective corporate act, that but for the failure of authorization would constitute valid stock;
76-[and]
75+ [(f)] (E) “Overissue” means the purported issuance by a corporation of stock of: 17
7776
78- (2) STOCK PURPORTEDLY ISS UED IN AN OVERISSUE ; AND
77+ (1) A class or series in excess of the number of shares of the class or series 18
78+that the corporation has the power to issue under § 2–201(a) of this title or the corporation’s 19
79+charter at the time of THE PURPORTED issuance; or 20
7980
80- (3) [That] STOCK THAT cannot be determined by the board of directors to
81-be valid stock.
81+ (2) Any class or series that is not authorized for issuance by the 21
82+corporation’s charter AT THE TIME OF THE P URPORTED ISSUANC E. 22
8283
83- [(h)] (G) “Valid stock” means stock that has been duly authorized and validly
84-issued in accordance with the provisions of this title.
84+ [(g)] (F) “Putative stock” means [stock]: 23
8585
86-2–702.
86+ (1) STOCK, including stock PURPORTEDLY issued upon exercise of rights, 24
87+options, warrants, or other securities convertible into or exercisable for stock[: 25
8788
88- (a) The board of directors of a corporation may ratify a defective corporate act
89-UNDER THIS SUBTI TLE by adopting a resolution stating:
89+ (1) Purportedly], PURPORTEDLY created or issued as a result of a 26
90+defective corporate act, that but for the failure of authorization would constitute valid stock; 27
91+[and] 28
9092
91- (1) (i) The defective corporate act to be ratified; and
93+ (2) STOCK PURPORTEDLY ISS UED IN AN OVERISSUE ; AND 29
9294
93- (ii) If the defective corporate act involved the issuance of putative
94-stock, the number of shares and the class or series of putative stock [issued];
95- WES MOORE, Governor Ch. 605
95+ (3) [That] STOCK THAT cannot be determined by the board of directors to 30
96+be valid stock. 31 HOUSE BILL 888 3
9697
97-– 3 –
98- (2) The date of the defective corporate act;
9998
100- (3) The nature of the failure of authorization of the defective corporate act;
101-and
10299
103- (4) (i) If [the board of directors could have authorized or approved the
104-defective corporate act without] stockholder [approval at the date of the defective corporate
105-act and stockholder action is not required as of the date of ratification,] ACTION IS NOT
106-REQUIRED UNDER SUBSE CTION (B) OF THIS SECTION , that the board of directors
107-ratifies the defective corporate act; or
100+ [(h)] (G) “Valid stock” means stock that has been duly authorized and validly 1
101+issued in accordance with the provisions of this title. 2
108102
109- (ii) If stockholder [approval] ACTION is required [at the time of]
110-UNDER SUBSECTION (B) OF THIS SECTION , THAT THE BOARD OF DI RECTORS
111-APPROVES THE ratification [or if the board of directors could not have authorized or
112-approved] OF the defective corporate act [without stockholder approval at the date of the
113-defective corporate act or stockholder action is required as of the date of ratification, that
114-the board of directors] AND directs that the ratification be submitted for consideration at a
115-meeting of the stockholders.
103+2–702. 3
116104
117- (b) (1) [If a ratification is submitted for consideration at a meeting of the
118-stockholders under subsection (a)(4)(ii) of this section, the stockholders may ratify the
119-defective corporate act by adopting a resolution stating:] RATIFICATION OF A DEFECTIVE
120-CORPORATE ACT APPROV ED IN A RESOLUTION A DOPTED UNDER SUBSECT ION (A) OF
121-THIS SECTION SHALL B E SUBMITTED FOR CONS IDERATION AT A MEETI NG OF THE
122-STOCKHOLDERS IF STOC KHOLDER APPROVAL IS REQUIRED OR WOULD HA VE BEEN
123-REQUIRED ON THE DATE OF THE DEFEC TIVE CORPORATE ACT B Y ANY PROVISION
124-OF:
105+ (a) The board of directors of a corporation may ratify a defective corporate act 4
106+UNDER THIS SUBTITLE by adopting a resolution stating: 5
125107
126- (I) THE MARYLAND GENERAL CORPORATION LAW;
108+ (1) (i) The defective corporate act to be ratified; and 6
127109
128- (II) THE CHARTER OR BYLAWS OF THE CORPORATION ;
110+ (ii) If the defective corporate act involved the issuance of putative 7
111+stock, the number of shares and the class or series of putative stock [issued]; 8
129112
130- (III) ANY ACTION TAKEN BY T HE BOARD OF DIRECTOR S, A
131-COMMITTEE OF THE BOA RD OF DIRECTORS , OR THE STOCKHOLDERS ; OR
113+ (2) The date of the defective corporate act; 9
132114
133- (IV) ANY PLAN OR AGREEMENT TO WHICH THE CORPORA TION IS
134-A PARTY IN EFFECT AT THE TIME A RESOLUTIO N WAS ADOPTED UNDER SUBSECTION
135-(A) OF THIS SECTION.
115+ (3) The nature of the failure of authorization of the defective corporate act; 10
116+and 11
136117
137- [(1)] (2) TO RATIFY A DEFECTIVE CORPORATE ACT UNDER THIS
138-SUBSECTION, THE STOCKHOLDERS SHA LL ADOPT A RES OLUTION STATING :
118+ (4) (i) If [the board of directors could have authorized or approved the 12
119+defective corporate act without] stockholder [approval at the date of the defective corporate 13
120+act and stockholder action is not required as of the date of ratification,] ACTION IS NOT 14
121+REQUIRED UNDER SUBSE CTION (B) OF THIS SECTION , that the board of directors 15
122+ratifies the defective corporate act; or 16
139123
140- (i) The defective corporate act to be ratified; [and]
141- Ch. 605 2024 LAWS OF MARYLAND
124+ (ii) If stockholder [approval] ACTION is required [at the time of] 17
125+UNDER SUBSECTION (B) OF THIS SECTION , THAT THE BOARD OF DI RECTORS 18
126+APPROVES THE ratification [or if the board of directors could not have authorized or 19
127+approved] OF the defective corporate act [without stockholder approval at the date of the 20
128+defective corporate act or stockholder action is required as of the date of ratification, that 21
129+the board of directors] AND directs that the ratification be submitted for consideration at a 22
130+meeting of the stockholders. 23
142131
143-– 4 –
144- (ii) If the defective corporate act involved the issuance of putative
145-stock, the number of shares and the class or series of putative stock [issued];
132+ (b) (1) [If a ratification is submitted for consideration at a meeting of the 24
133+stockholders under subsection (a)(4)(ii) of this section, the stockholders may ratify the 25
134+defective corporate act by adopting a resolution stating:] RATIFICATION OF A DEF ECTIVE 26
135+CORPORATE ACT APPROV ED IN A RESOLUTION A DOPTED UNDER SUBSECT ION (A) OF 27
136+THIS SECTION SHALL B E SUBMITTED FOR CONS IDERATION AT A MEETI NG OF THE 28
137+STOCKHOLDERS IF STOC KHOLDER APPROVAL IS REQUIRED OR WOULD HAVE BEEN 29
138+REQUIRED ON THE DATE OF THE DEFECTIVE COR PORATE ACT BY ANY PR OVISION 30
139+OF: 31
146140
147- [(2)] (III) The date of the defective corporate act; and
141+ (I) THE MARYLAND GENERAL CORPORATION LAW; 32
148142
149- [(3)] (IV) That the stockholders ratify the defective corporate act.
143+ (II) THE CHARTER OR BYLAWS OF THE CORPORATION ; 33 4 HOUSE BILL 888
150144
151- (c) (1) The quorum and voting requirements applicable to [ratification]
152-ACTION BY THE BOARD OF DIRECTORS OR THE STOCKHOLDERS TO RATI FY A
153-DEFECTIVE CORPORATE ACT under this section shall be the approval standard requiring
154-the [greater] LARGER NUMBER OR portion of votes under:
155145
156- (i) The requirements that would be applicable to the defective
157-corporate act proposed to be ratified at the time of ratification; or
158146
159- (ii) The requirements that would have been applicable to the
160-defective corporate act on the date of the defective corporate act.
147+ (III) ANY ACTION TAKEN BY T HE BOARD OF DIRECTOR S, A 1
148+COMMITTEE OF THE BOARD OF DIRE CTORS, OR THE STOCKHOLDERS ; OR 2
161149
162- (2) (i) [Unless otherwise required by the charter or bylaws of a
163-corporation then in effect or in effect at the time of a defective corporate act, if the defective
164-corporate act is] EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS PARAGRAPH ,
165-APPROVAL BY STOCKHOL DERS OF THE RATIFICA TION OF the election of a director[,
166-ratification of the defective corporate act] shall require a majority of the votes cast at a
167-meeting at which a quorum is present.
150+ (IV) ANY PLAN OR AGREEMENT TO WHICH THE CORPORA TION IS 3
151+A PARTY IN EFFECT AT THE TIME A RESOLUTIO N WAS ADOPTED UNDER SUBSECTION 4
152+(A) OF THIS SECTION. 5
168153
169- (ii) IF THE CHARTER OR BYL AWS OF THE CORPORATI ON IN
170-EFFECT AT THE TIME O F THE RATIFICATION O F THE DEFECTIVE CORP ORATE ACT OR
171-IN EFFECT AT THE TIM E OF THE DEFECTIVE C ORPORATE ACT REQUIRES OR
172-REQUIRED A LARGER NU MBER OR PORTION OF V OTES CAST BY STOCKHO LDERS, BY
173-HOLDERS OF ANY CLASS OR SERIES OF STOCK , OR BY ANY SPECIFIED
174-STOCKHOLDERS TO ELEC T THE DIRECTOR, THEN THE AFFIRMATIVE VOTE OF THE
175-LARGER NUMBER OR POR TION OF VOTES CAST S HALL BE REQUIRED TO RATIFY
176-ELECTION OF THE DIRE CTOR.
154+ [(1)] (2) TO RATIFY A DEFECTIVE CORPORATE ACT UNDE R THIS 6
155+SUBSECTION, THE STOCKHOLDERS SHA LL ADOPT A RESOLUTIO N STATING: 7
177156
178- (3) The presence or approval of holders of stock of any class or series of
179-which no stock is [then] outstanding AT THE TIME OF RATIFICATION or of any person
180-that is no longer a stockholder may not be required.
157+ (i) The defective corporate act to be ratified; [and] 8
181158
182- [(3)] (4) Holders of putative stock on the record date for determining
183-which stockholders are entitled to vote on a ratification submitted to stockholders under
184-this section shall not be entitled to vote or be counted for quorum purposes in any vote to
185-consider ratification.
186- WES MOORE, Governor Ch. 605
159+ (ii) If the defective corporate act involved the issuance of putative 9
160+stock, the number of shares and the class or series of putative stock [issued]; 10
187161
188-– 5 –
189- (d) Ratification of a defective corporate act under this section shall make the
190-ratified defective corporate act binding on the corporation in accordance with § 2–703 of
191-this subtitle.
162+ [(2)] (III) The date of the defective corporate act; and 11
192163
193-2–703.
164+ [(3)] (IV) That the stockholders ratify the defective corporate act. 12
194165
195- (a) (1) Except as provided in paragraph (2) of this subsection, ratification of a
196-defective corporate act becomes effective on the date that the board of directors adopts a
197-resolution under § 2–702(a) of this subtitle or, if required by this subtitle, the date that
198-stockholders adopt a resolution under § 2–702(b) of this subtitle.
166+ (c) (1) The quorum and voting requirements applicable to [ratification] 13
167+ACTION BY THE BOARD OF DIRECTORS OR THE STOCKHOLDERS TO RATI FY A 14
168+DEFECTIVE CORPORATE ACT under this section shall be the approval standard requiring 15
169+the [greater] LARGER NUMBER OR portion of votes under: 16
199170
200- (2) If the defective corporate act would have required a filing with the
201-Department, ratification of the defective corporate act becomes effective on the later of:
171+ (i) The requirements that would be applicable to the defective 17
172+corporate act proposed to be ratified at the time of ratification; or 18
202173
203- (i) The [date] TIME that articles of validation filed in accordance
204-with § 2–705 of this subtitle are accepted for record by the Department; or
174+ (ii) The requirements that would have been applicable to the 19
175+defective corporate act on the date of the defective corporate act. 20
205176
206- (ii) The [date] TIME established in the articles of validation, not to
207-exceed 30 days after the articles are accepted for record.
177+ (2) (i) [Unless otherwise required by the charter or bylaws of a 21
178+corporation then in effect or in effect at the time of a defective corporate act, if the defective 22
179+corporate act is] EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS PARAGRAPH , 23
180+APPROVAL BY STOCKHOL DERS OF THE RATIFICA TION OF the election of a director[, 24
181+ratification of the defective corporate act] shall require a majority of the votes cast at a 25
182+meeting at which a quorum is present. 26
208183
209- (b) Beginning at the time ratification is effective and without regard to the
210-120–day period during which a claim may be brought under [§ 2–707(b)] § 2–706(B) of this
211-subtitle:
184+ (ii) IF THE CHARTER OR BYL AWS OF THE CORPORATI ON IN 27
185+EFFECT AT THE TIME O F THE RATIFICATION O F THE DEFECTIVE CORP ORATE ACT OR 28
186+IN EFFECT AT THE TIM E OF THE DEFECTIVE C ORPORATE ACT REQUIRES OR 29
187+REQUIRED A LARGER NU MBER OR PORTION OF V OTES CAST BY STOCKHO LDERS, BY 30
188+HOLDERS OF ANY CLASS OR SERIES OF STOCK , OR BY ANY SPECIFIED 31
189+STOCKHOLDERS TO ELEC T THE DIRECTOR, THEN THE AFFIRMATIVE VOTE OF THE 32 HOUSE BILL 888 5
212190
213- (1) A defective corporate act ratified in accordance with this subtitle is not
214-void or voidable as a result of the failure of authorization identified in a board action under
215-§ 2–702(a) of this subtitle and shall be deemed a valid corporate act effective as of the date
216-of the defective corporate act;
217191
218- (2) [The issuance of putative] PUTATIVE stock purportedly issued
219-pursuant to a defective corporate act identified in a board action under § 2–702(a) of this
220-subtitle is not void or voidable and shall be deemed valid stock as of the time it was
221-purportedly issued; and
192+LARGER NUMBER OR POR TION OF VOTES CAST S HALL BE REQUIRED TO RATIFY 1
193+ELECTION OF THE DIRE CTOR. 2
222194
223- (3) Any corporate act taken after a defective corporate act ratified in
224-accordance with this subtitle in reliance on the defective corporate act having been validly
225-effected, and any subsequent defective corporate act resulting from the original defective
226-corporate act, shall be valid as of the time the act was taken.
195+ (3) The presence or approval of holders of stock of any class or series of 3
196+which no stock is [then] outstanding AT THE TIME OF RATIFICATION or of any person 4
197+that is no longer a stockholder may not be required. 5
227198
228-2–704.
199+ [(3)] (4) Holders of putative stock on the record date for determining 6
200+which stockholders are entitled to vote on a ratification submitted to stockholders under 7
201+this section shall not be entitled to vote or be counted for quorum purposes in any vote to 8
202+consider ratification. 9
229203
230- (a) If ratification of a defective corporate act requires approval by stockholders
231-UNDER § 2–702(B) OF THIS SUBTITLE , the secretary of the corporation shall give notice
232-of the proposed ratification to all stockholders entitled to notice of the meeting in
233-accordance with § 2–504 of this title, stockholders as of the date of the defective corporate
234-act, and holders of putative stock. Ch. 605 2024 LAWS OF MARYLAND
204+ (d) Ratification of a defective corporate act under this section shall make the 10
205+ratified defective corporate act binding on the corporation in accordance with § 2–703 of 11
206+this subtitle. 12
235207
236-– 6 –
208+2–703. 13
237209
238- (b) (1) [Except as provided in paragraph (2) of this subsection, if ratification
239-of] IF a defective corporate act [does not require approval] IS RATIFIED BY THE B OARD
240-OF DIRECTORS IN ACCO RDANCE WITH § 2–702(A) OF THIS SUBTITLE WIT HOUT
241-ACTION by stockholders, AND NOTICE IS NOT RE QUIRED UNDER SUBSECT ION (A) OF
242-THIS SECTION, notice of the ratification may be given to stockholders as of the ratification
243-and as of the date of the defective corporate act and holders of putative stock [when the
244-board of directors adopts a resolution in accordance with § 2–702(a) of this subtitle].
210+ (a) (1) Except as provided in paragraph (2) of this subsection, ratification of a 14
211+defective corporate act becomes effective on the date that the board of directors adopts a 15
212+resolution under § 2–702(a) of this subtitle or, if required by this subtitle, the date that 16
213+stockholders adopt a resolution under § 2–702(b) of this subtitle. 17
245214
246- (2) In the case of a corporation with a class of equity securities registered
247-under the Securities Exchange Act of 1934, notice of a ratification THAT DOES NOT
248-REQUIRE APPROVAL OF STOCKHOLDERS shall be deemed to be given when the
249-ratification has been PUBLICLY disclosed in a document [publicly] FURNISHED TO OR
250-filed with the Securities and Exchange Commission.
215+ (2) If the defective corporate act would have required a filing with the 18
216+Department, ratification of the defective corporate act becomes effective on the later of: 19
251217
252- (c) (1) Except as provided in paragraph (2) of this subsection, notice given to
253-holders of putative stock in accordance with this section shall be [provided] GIVEN to:
218+ (i) The [date] TIME that articles of validation filed in accordance 20
219+with § 2–705 of this subtitle are accepted for record by the Department; or 21
254220
255- (i) Holders of putative stock as of the date of the defective corporate
256-act;
221+ (ii) The [date] TIME established in the articles of validation, not to 22
222+exceed 30 days after the articles are accepted for record. 23
257223
258- (ii) Where notice is required under subsection (a) of this section,
259-holders of putative stock as of the record date of the meeting; and
224+ (b) Beginning at the time ratification is effective and without regard to the 24
225+120–day period during which a claim may be brought under [§ 2–707(b)] § 2–706(B) of this 25
226+subtitle: 26
260227
261- (iii) Where notice is given under subsection (b) of this section, holders
262-of putative stock as of the date on which the board of directors adopted a resolution ratifying
263-the defective corporate act.
228+ (1) A defective corporate act ratified in accordance with this subtitle is not 27
229+void or voidable as a result of the failure of authorization identified in a board action under 28
230+§ 2–702(a) of this subtitle and shall be deemed a valid corporate act effective as of the date 29
231+of the defective corporate act; 30
264232
265- (2) Notice is not required to be given to holders of putative stock whose
266-identities or addresses cannot be reasonably determined from the records of the
267-corporation.
233+ (2) [The issuance of putative] PUTATIVE stock purportedly issued 31
234+pursuant to a defective corporate act identified in a board action under § 2–702(a) of this 32
235+subtitle is not void or voidable and shall be deemed valid stock as of the time it was 33
236+purportedly issued; and 34
237+ 6 HOUSE BILL 888
268238
269-2–705.
270239
271- (a) (1) If a defective corporate act ratified under this subtitle would have
272-required the filing of a charter document with the Department under any provision of this
273-article, the corporation shall file articles of validation in accordance with this section.
240+ (3) Any corporate act taken after a defective corporate act ratified in 1
241+accordance with this subtitle in reliance on the defective corporate act having been validly 2
242+effected, and any subsequent defective corporate act resulting from the original defective 3
243+corporate act, shall be valid as of the time the act was taken. 4
274244
275- (2) If a charter document that was required to be filed with respect to the
276-defective corporate act was not filed, the articles of validation required by this section shall
277-be filed in lieu of the charter document that was not filed.
245+2–704. 5
278246
279- (b) [The articles] ARTICLES of validation required by this section shall include:
280- WES MOORE, Governor Ch. 605
247+ (a) If ratification of a defective corporate act requires approval by stockholders 6
248+UNDER § 2–702(B) OF THIS SUBTITLE , the secretary of the corporation shall give notice 7
249+of the proposed ratification to all stockholders entitled to notice of the meeting in 8
250+accordance with § 2–504 of this title, stockholders as of the date of the defective corporate 9
251+act, and holders of putative stock. 10
281252
282-– 7 –
283- (1) The title and date of filing of any charter document previously filed with
284-respect to the defective corporate act and any charter document that amended,
285-supplemented, or corrected that charter document;
253+ (b) (1) [Except as provided in paragraph (2) of this subsection, if ratification 11
254+of] IF a defective corporate act [does not require approval] IS RATIFIED BY THE B OARD 12
255+OF DIRECTORS IN ACCO RDANCE WITH § 2–702(A) OF THIS SUBTITLE WIT HOUT 13
256+ACTION by stockholders, AND NOTICE IS NOT RE QUIRED UNDER SUBSECT ION (A) OF 14
257+THIS SECTION, notice of the ratification may be given to stockholders as of the ratification 15
258+and as of the date of the defective corporate act and holders of putative stock [when the 16
259+board of directors adopts a resolution in accordance with § 2–702(a) of this subtitle]. 17
286260
287- (2) A statement describing the defective corporate act;
261+ (2) In the case of a corporation with a class of equity securities registered 18
262+under the Securities Exchange Act of 1934, notice of a ratification THAT DOES NOT 19
263+REQUIRE APPROVAL OF STOCKHOLDERS shall be deemed to be given when the 20
264+ratification has been PUBLICLY disclosed in a document [publicly] FURNISHED TO OR 21
265+filed with the Securities and Exchange Commission. 22
288266
289- (3) The date of the defective corporate act;
267+ (c) (1) Except as provided in paragraph (2) of this subsection, notice given to 23
268+holders of putative stock in accordance with this section shall be [provided] GIVEN to: 24
290269
291- (4) A statement that the defective corporate act was ratified in accordance
292-with this subtitle and a description of the MANNER OF ratification; AND
270+ (i) Holders of putative stock as of the date of the defective corporate 25
271+act; 26
293272
294- (5) [The time that the ratification is to become effective; and
273+ (ii) Where notice is required under subsection (a) of this section, 27
274+holders of putative stock as of the record date of the meeting; and 28
295275
296- (6)] (i) [A statement that] IF a charter document was previously filed
297-with respect to the defective corporate act[,] and no change to the charter document is
298-required TO RATIFY THE DEFECT IVE CORPORATE ACT UN DER § 2–702 OF THIS
299-SUBTITLE, A STATEMENT THAT NO CHANGE IS MADE TO TH E CHARTER DOCUMENT ;
276+ (iii) Where notice is given under subsection (b) of this section, holders 29
277+of putative stock as of the date on which the board of directors adopted a resolution ratifying 30
278+the defective corporate act. 31
300279
301- (ii) [1. A statement that] IF a charter document was previously
302-filed with respect to the defective corporate act AND A CHANGE TO THE CHARTER
303-DOCUMENT IS REQUIRED TO RATIFY THE DEFECT IVE CORPORATE ACT UN DER §
304-2–702 OF THIS SUBTITLE , A STATEMENT DESCRIBI NG THE CHANGE AND ALL
305-INFORMATION REQUIRED TO BE INCLUDED UNDER THIS TITLE; OR
280+ (2) Notice is not required to be given to holders of putative stock whose 32
281+identities or addresses cannot be reasonably determined from the records of the 33
282+corporation. 34
306283
307- [2. A statement describing the changes being made to the
308-charter document; and
284+2–705. 35
285+ HOUSE BILL 888 7
309286
310- 3. Any other information required by this article; or]
311287
312- (iii) [1. A statement that] IF a charter document was not
313-previously filed with respect to the defective corporate act and [that a] THE DEFECTIVE
314-CORPORATE ACT RATIFI ED UNDER § 2–702 OF THIS SUBTITLE WOU LD HAVE
315-REQUIRED A CHARTER D OCUMENT TO BE FILED UNDER THIS TITLE , A STATEMENT
316-OF THE SECTION OF THIS TI TLE UNDER WHICH THE charter document was required to
317-be filed[;] AND ANY INFORMATION REQUIRED TO BE INCLU DED IN THE CHARTER
318-DOCUMENT UNDER THAT SECTION.
288+ (a) (1) If a defective corporate act ratified under this subtitle would have 1
289+required the filing of a charter document with the Department under any provision of this 2
290+article, the corporation shall file articles of validation in accordance with this section. 3
319291
320- [2. A citation to the provision of this article under which the
321-charter document was required to be filed; and
292+ (2) If a charter document that was required to be filed with respect to the 4
293+defective corporate act was not filed, the articles of validation required by this section shall 5
294+be filed in lieu of the charter document that was not filed. 6
322295
323- 3. Any other information required by this article.]
296+ (b) [The articles] ARTICLES of validation required by this section shall include: 7
324297
325-2–706.
326- Ch. 605 2024 LAWS OF MARYLAND
298+ (1) The title and date of filing of any charter document previously filed with 8
299+respect to the defective corporate act and any charter document that amended, 9
300+supplemented, or corrected that charter document; 10
327301
328-– 8 –
329- (a) Upon application by the corporation, any successor entity to the corporation,
330-any director of the corporation, any record or beneficial holder of valid stock or putative
331-stock, any record or beneficial holder of putative stock as of the date of the defective
332-corporate act, any holder of a voting trust certificate, any holder of a voting trust certificate
333-as of the date of the defective corporate act, or any other person claiming to be substantially
334-and adversely affected by a ratification under this subtitle, a court OF THE STATE OR A
335-FEDERAL COURT SITTIN G IN THE STATE may:
302+ (2) A statement describing the defective corporate act; 11
336303
337- (1) Determine the validity of any ratification under this subtitle; [or] AND
304+ (3) The date of the defective corporate act; 12
338305
339- (2) Modify or waive any of the procedures required by this subtitle to ratify
340-a defective corporate act.
306+ (4) A statement that the defective corporate act was ratified in accordance 13
307+with this subtitle and a description of the MANNER OF ratification; AND 14
341308
342- (b) An action under this section shall be brought within 120 days after:
309+ (5) [The time that the ratification is to become effective; and 15
343310
344- (1) If the ratification was approved by stockholders, AND THE NOT ICE
345-REQUIRED BY § 2–704(A) OF THIS SUBTITLE WAS GIVEN PRIOR TO THE
346-STOCKHOLDER ACTION , the date on which ratification [occurred] BECAME EFFECTIVE ;
347-or
311+ (6)] (i) [A statement that] IF a charter document was previously filed 16
312+with respect to the defective corporate act[,] and no change to the charter document is 17
313+required TO RATIFY THE DEFECT IVE CORPORATE ACT UN DER § 2–702 OF THIS 18
314+SUBTITLE, A STATEMENT THAT NO CHANGE IS MADE TO TH E CHARTER DOCUMENT ; 19
348315
349- (2) If notice was given or deemed given within 60 days after the
350-ratification, the date on which notice was given or deemed given to stockholders and any
351-holders of putative stock in accordance with § 2–704(B) OF this subtitle.
316+ (ii) [1. A statement that] IF a charter document was previously 20
317+filed with respect to the defective corporate act AND A CHANGE TO THE CHARTER 21
318+DOCUMENT IS REQUIRED TO RATIFY THE DEFECT IVE CORPORATE ACT UN DER § 22
319+2–702 OF THIS SUBTITLE , A STATEMENT DESCR IBING THE CHANGE AND ALL 23
320+INFORMATION REQUIRED TO BE INCLUDED UNDER THIS TITLE; OR 24
352321
353-2–707.
322+ [2. A statement describing the changes being made to the 25
323+charter document; and 26
354324
355- (a) Nothing in this subtitle may be construed to require that ratification of a
356-defective corporate act under this subtitle be the exclusive means of ratifying or validating
357-a defective corporate act or to limit the [ability] RIGHT of a corporation to file certificates
358-or charter documents in accordance with any other provision of this article.
325+ 3. Any other information required by this article; or] 27
359326
360- (b) The absence or failure of ratification in accordance with this subtitle shall not,
361-of itself, affect the validity or effectiveness of any corporate act otherwise lawfully ratified,
362-nor may it create a presumption that any corporate act is or was a defective corporate act
363-or void or voidable.
327+ (iii) [1. A statement that] IF a charter document was not 28
328+previously filed with respect to the defective corporate act and [that a] THE DEFECTIVE 29
329+CORPORATE ACT RATIFI ED UNDER § 2–702 OF THIS SUBTITLE WOU LD HAVE 30
330+REQUIRED A CHARTER D OCUMENT TO BE FILED UNDER THIS TITLE , A STATEMENT 31
331+OF THE SECTION OF THI S TITLE UNDER WHICH THE charter document was required to 32 8 HOUSE BILL 888
364332
365- SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect
366-October 1, 2024.
367333
368-Approved by the Governor, May 9, 2024.
334+be filed[;] AND ANY INFORMATION REQUIRED TO BE INCLU DED IN THE CHARTER 1
335+DOCUMENT UNDER THAT SECTION. 2
336+
337+ [2. A citation to the provision of this article under which the 3
338+charter document was required to be filed; and 4
339+
340+ 3. Any other information required by this article.] 5
341+
342+2–706. 6
343+
344+ (a) Upon application by the corporation, any successor entity to the corporation, 7
345+any director of the corporation, any record or beneficial holder of valid stock or putative 8
346+stock, any record or beneficial holder of putative stock as of the date of the defective 9
347+corporate act, any holder of a voting trust certificate, any holder of a voting trust certificate 10
348+as of the date of the defective corporate act, or any other person claiming to be substantially 11
349+and adversely affected by a ratification under this subtitle, a court OF THE STATE OR A 12
350+FEDERAL COURT SITTIN G IN THE STATE may: 13
351+
352+ (1) Determine the validity of any ratification under this subtitle; [or] AND 14
353+
354+ (2) Modify or waive any of the procedures required by this subtitle to ratify 15
355+a defective corporate act. 16
356+
357+ (b) An action under this section shall be brought within 120 days after: 17
358+
359+ (1) If the ratification was approved by stockholders, AND THE NOT ICE 18
360+REQUIRED BY § 2–704(A) OF THIS SUBTITLE WAS GIVEN PRIOR TO THE 19
361+STOCKHOLDER ACTION , the date on which ratification [occurred] BECAME EFFECTIVE ; 20
362+or 21
363+
364+ (2) If notice was given or deemed given within 60 days after the 22
365+ratification, the date on which notice was given or deemed given to stockholders and any 23
366+holders of putative stock in accordance with § 2–704(B) OF this subtitle. 24
367+
368+2–707. 25
369+
370+ (a) Nothing in this subtitle may be construed to require that ratification of a 26
371+defective corporate act under this subtitle be the exclusive means of ratifying or validating 27
372+a defective corporate act or to limit the [ability] RIGHT of a corporation to file certificates 28
373+or charter documents in accordance with any other provision of this article. 29
374+
375+ (b) The absence or failure of ratification in accordance with this subtitle shall not, 30
376+of itself, affect the validity or effectiveness of any corporate act otherwise lawfully ratified, 31
377+nor may it create a presumption that any corporate act is or was a defective corporate act 32
378+or void or voidable. 33
379+ HOUSE BILL 888 9
380+
381+
382+ SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 1
383+October 1, 2024. 2
384+
385+
386+
387+
388+Approved:
389+________________________________________________________________________________
390+ Governor.
391+________________________________________________________________________________
392+ Speaker of the House of Delegates.
393+________________________________________________________________________________
394+ President of the Senate.