Maryland 2024 Regular Session

Maryland Senate Bill SB544 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	WES MOORE, Governor Ch. 604
2	1
3		-	– 1 –
4		-	Chapter 604
5		-	(Senate Bill 544)
6	2
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	+	sb0544
8	9
9		-	Corporations and Associations – Ratification of Defective Corporate Acts –
10		-	Alterations
	10	+	SENATE BILL 544
	11	+	C1 4lr1899
	12	+	CF HB 888
	13	+	By: Senators Waldstreicher and West
	14	+	Introduced and read first time: January 25, 2024
	15	+	Assigned to: Judicial Proceedings
	16	+	Committee Report: Favorable
	17	+	Senate action: Adopted
	18	+	Read second time: February 27, 2024
11	19
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 ______
15	21
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
21	23
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
24	26
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
26	30
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
28	36
29		-	(a) In this subtitle the following words have the meanings indicated.
	37	+	SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 12
	38	+	That the Laws of Maryland read as follows: 13
30	39
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
34	41
35		-	~~(c)] “Date of the defective corporate act” means:~~
	42	+	2–701. 15
36	43
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
39	45
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 SENATE BILL 544
42	49
43		-	[(d)] (C) “Defective corporate act” means:
44	50
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. 604 2024 LAWS OF MARYLAND
49	51
50		-	– 2 –
51		-	(2) An overissue.
	52	+	(c)] “Date of the defective corporate act” means: 1
52	53
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
59	56
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
61	59
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
65	61
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 ISSUANCE .
	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
68	65
69		-	~~[(g)]~~ (F) ~~“Putative stock”~~ ~~means [stock]:~~
	66	+	(2) An overissue. 10
70	67
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
73	74
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
77	76
78		-	(2) [That] 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
79	80
80		-	(3) ~~STOCK~~ THAT ~~cannot be determined~~ by the ~~board of directors to be valid~~
81		-	~~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 ISSUANCE . 22
82	83
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
85	85
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
87	88
88		-	(a) The board of directors of a corporation may ratify a defective corporate act
89		-	UNDER THIS SUBTITLE 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
90	92
91		-	(1) ~~(i) The defective corporate act to be ratified~~; and
	93	+	(2) [That] STOCK PURPORTEDLY ISS UED IN AN OVERISSUE ; AND 29
92	94
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. 604
	95	+	(3) STOCK THAT cannot be determined by the board of directors to be valid 30
	96	+	stock. 31 SENATE BILL 544 3
96	97
97		-	– 3 –
98		-	(2) The date of the defective corporate act;
99	98
100		-	(3) The nature of the failure of authorization of the defective corporate act;
101		-	and
102	99
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
108	102
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
116	104
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 DEF ECTIVE
120		-	CORPORATE ACT APPROVED IN A RESOLUTION ADOPTED UNDER SUBSECTION (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 DEFECTIVE COR PORATE ACT BY 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
125	107
126		-	(I) THE ~~MARYLAND GENERAL CORPORATION LAW~~;
	108	+	(1) (i) The defective corporate act to be ratified; and 6
127	109
128		-	(II) THE CHARTER O R BYLAWS OF THE CORPOR ATION;
	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
129	112
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
132	114
133		-	(IV) ANY PLAN OR AGREEMENT TO WHICH T HE CORPORATION 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
136	117
137		-	[(1)] (2) TO RATIFY A DEFECTIVE CORPORATE ACT UNDER THIS
138		-	SUBSECTION, THE STOCKHOLDERS SHA LL ADOPT A RESOLUTIO N 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
139	123
140		-	(i) The defective corporate act to be ratified; [and]
141		-	Ch. 604 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
142	131
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	+	CORPORAT E ACT APPROVED IN A RESOLUTION ADOPTED U NDER SUBSECTION (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 HA VE BEEN 29
	138	+	REQUIRED ON THE DATE OF THE DEFECTIVE COR PORATE ACT BY ANY PROVISION 30
	139	+	OF: 31
146	140
147		-	~~[(2)]~~ (~~III~~) The ~~date of the defective corporate act~~; ~~and~~
	141	+	(I) THE MARYLAND GENERAL CORPORATION LAW; 32
148	142
149		-	~~[(3)]~~ (IV) ~~That~~ the ~~stockholders ratify~~ the ~~defective corporate act.~~
	143	+	(II) THE CHARTER O R BYLAWS OF THE CORPOR ATION; 33 4 SENATE BILL 544
150	144
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:
155	145
156		-	(i) The requirements that would be applicable to the defective
157		-	corporate act proposed to be ratified at the time of ratification; or
158	146
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 BOA RD OF DIRECTORS , OR THE STOCKHOLDERS ; OR 2
161	149
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 STOCKHOLD ERS OF THE RATIFICAT ION 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 T HE CORPORATION IS 3
	151	+	A PARTY IN EFFECT AT THE TIME A RESOLUTIO N WAS ADOPTED UNDER SUBSECTION 4
	152	+	(A) OF THIS SECTION. 5
168	153
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 O F 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 UNDER THIS 6
	155	+	SUBSECTION, THE STOCKHOLDERS SHA LL ADOPT A RESOLUTIO N STATING: 7
177	156
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 RATIF ICATION 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
181	158
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. 604
	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
187	161
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
192	163
193		-	~~2–703~~.
	164	+	[(3)] (IV) That the stockholders ratify the defective corporate act. 12
194	165
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
199	170
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
202	173
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
205	176
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 STOCKHOLD ERS OF THE RATIFICAT ION 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
208	183
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 O F STOCK, OR BY ANY SPECIFIED 31
	189	+	STOCKHOLDERS TO ELEC T THE DIRECTOR , THEN THE AFFIRMATIVE VOTE OF THE 32 SENATE BILL 544 5
212	190
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;
217	191
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 REQUIRE D TO RATIFY 1
	193	+	ELECTION OF THE DIRE CTOR. 2
222	194
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 RATIF ICATION or of any person 4
	197	+	that is no longer a stockholder may not be required. 5
227	198
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
229	203
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. 604 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
235	207
236		-	– ~~6 –~~
	208	+	2–703. 13
237	209
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
245	214
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
251	217
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
254	220
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
257	223
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
260	227
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
264	232
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 SENATE BILL 544
268	238
269		-	2–705.
270	239
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
274	244
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
278	246
279		-	(b) [The articles] ARTICLES of validation required by this section shall include:
280		-	WES MOORE, Governor Ch. 604
	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
281	252
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
286	260
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
288	266
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
290	269
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
293	272
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
295	275
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 THE 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
300	279
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 DESCRIBING THE CHANG E 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
306	283
307		-	[2. ~~A statement describing the changes being made to the~~
308		-	~~charter document;~~ ~~and~~
	284	+	2–705. 35
	285	+	SENATE BILL 544 7
309	286
310		-	3. Any other information required by this article; or]
311	287
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 TITLE UNDER WHICH TH E 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
319	291
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
322	295
323		-	~~3. Any other information~~ required by this ~~article.]~~
	296	+	(b) [The articles] ARTICLES of validation required by this section shall include: 7
324	297
325		-	2–706.
326		-	Ch. 604 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
327	301
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
336	303
337		-	(1) ~~Determine~~ the ~~validity~~ of ~~any ratification under this subtitle~~; ~~[or] AND~~
	304	+	(3) The date of the defective corporate act; 12
338	305
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
341	308
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
343	310
344		-	(1) If ~~the ratification~~ was ~~approved by stockholders,~~ ~~AND THE NOTICE~~
345		-	~~REQUIRED BY § 2–704(A) OF THIS SUBTITLE WAS GIVEN PRIOR~~ TO ~~T HE~~
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 THE CHARTER DOCUMENT ; 19
348	315
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 DESCRIBING THE CHANG E AND ALL 23
	320	+	INFORMATION REQUIRED TO BE INCLUDED UNDER THIS TITLE; OR 24
352	321
353		-	2–707.
	322	+	[2. A statement describing the changes being made to the 25
	323	+	charter document; and 26
354	324
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
359	326
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 TIT LE, A STATEMENT 31
	331	+	OF THE SECTION OF THIS TITLE UNDER WHICH TH E charter document was required to 32 8 SENATE BILL 544
364	332
365		-	SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect
366		-	October 1, 2024.
367	333
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 NOTICE 18
	360	+	REQUIRED BY § 2–704(A) OF THIS SUBTITLE WAS GIVEN PRIOR TO T HE 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	+	SENATE BILL 544 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	+	Approved:
	388	+	________________________________________________________________________________
	389	+	Governor.
	390	+	________________________________________________________________________________
	391	+	President of the Senate.
	392	+	________________________________________________________________________________
	393	+	Speaker of the House of Delegates.