Maryland 2025 Regular Session

Maryland House Bill HB1171 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1	1
2	2
3	3		EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
4	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	5		hb1171
9	6
10	7		HOUSE BILL 1171
11	8		C1 5lr2625
12		-	CF ~~SB 992~~
	9	+	CF 5lr2624
13	10		By: Delegate Amprey
14	11		Introduced and read first time: February 6, 2025
15	12		Assigned to: Economic Matters
16		-	Committee Report: Favorable with amendments
17		-	House action: Adopted
18		-	Read second time: February 27, 2025
19	13
20		-	~~CHAPTER ______~~
	14	+	A BILL ENTITLED
21	15
22	16		AN ACT concerning 1
23	17
24	18		Corporations and Associations – Revisions 2
25	19
26	20		FOR the purpose of establishing a process for the transfer of assets that are collateral for 3
27	21		securing a mortgage, pledge, or security interest without the approval of the 4
28	22		stockholders; establishing certain exceptions to the process for the transfer of assets 5
29	23		that are secured collateral without the approval of the stockholders; repealing 6
30	24		provisions of law specifying what shall be included in the articles of merger if a 7
31	25		limited partnership, limited liability company, or partnership is a party to the 8
32	26		articles; and generally relating to corporations and associations. 9
33	27
34	28		BY repealing and reenacting, with amendments, 10
35	29		Article – Corporations and Associations 11
36	30		Section 2–411(e), 3–104, and 3–109(d) 12
37	31		Annotated Code of Maryland 13
38	32		(2014 Replacement Volume and 2024 Supplement) 14
39	33
40	34		SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 15
41	35		That the Laws of Maryland read as follows: 16
42	36
43	37		Article – Corporations and Associations 17
44	38
45	39		2–411. 18
46	40
47	41		(e) Notwithstanding subsection (a) of this section or [§ 2–408(d)] § 2–408(E) of 19
48		-	this subtitle, the charter or bylaws of a corporation, or any agreement to which the 20 2 HOUSE BILL 1171
	42	+	this subtitle, the charter or bylaws of a corporation, or any agreement to which the 20
	43	+	corporation is a party and which has been approved by the board of directors, may provide 21
	44	+	for: 22
49	45
50		-
51		-	corporation is a party and which has been approved by the board of directors, may provide 1
52		-	for: 2
53		-
54		-	(1) The establishment of one or more standing committees or for the 3
55		-	creation of one or more committees upon the occurrence of certain events; and 4
56		-
57		-	(2) The composition of the membership, and the qualifications and the 5
58		-	voting and other rights of members of any such committee, subject to the continued service 6
59		-	of members of the committee as directors. 7
60		-
61		-	3–104. 8
62		-
63		-	(a) Notwithstanding any other provision of this subtitle, unless the charter or 9
64		-	bylaws of a corporation provide otherwise by reference to this section or the subject matter 10
65		-	of this section, the approval of the stockholders is not required for any: 11
66		-
67		-	(1) Transfer of assets by a corporation in the ordinary course of business 12
68		-	actually conducted by it or as a distribution as defined in § 2–301 of this article; 13
69		-
70		-	(2) Mortgage, pledge, or creation of any other security interest in any or all 14
71		-	of the assets of a corporation, whether or not in the ordinary course of its business; 15
72		-
73		-	(3) Transfer of assets by a corporation to one or more persons if all of the 16
74		-	equity interests of the person or persons are owned, directly or indirectly, by the 17
75		-	corporation; 18
76		-
77		-	(4) Transfer of assets by a corporation registered as an open–end 19
78		-	investment company under the Investment Company Act of 1940, including a transfer 20
79		-	between or among classes or series of stock of a corporation; or 21
80		-
81		-	(5) Transfer of assets by a corporation that is dissolved. 22
82		-
83		-	(b) Notwithstanding any other provisions of this subtitle, unless the charter or 23
84		-	bylaws of a corporation provide otherwise by reference to this section or the subject matter 24
85		-	of this section, the approval of the stockholders and articles of share exchange are not 25
86		-	required for an exchange of shares of stock through voluntary action or under an agreement 26
87		-	with the stockholders participating in the exchange. 27
88		-
89		-	(C) NOTWITHSTANDING ANY O THER PROVISION OF TH IS SUBTITLE, UNLESS 28
90		-	THE CHARTER OR BYLAW S OF A CORPORATION P ROVIDE OTHERWISE BY REFERENCE 29
91		-	TO THIS SECTION OR T HE SUBJECT MATTER OF THIS SECTION, THE APPROVAL OF 30
92		-	THE STOCKHOLDERS IS NOT REQUIRED FOR A T RANSFER OF ASSETS TH AT IS 31
93		-	COLLATERAL FOR SECUR ING A MORTGAGE , PLEDGE, OR SECURITY INTEREST IF: 32
94		-
95		-	(1) THE MORTGAGEE , PLEDGEE, OR SECURED PARTY EXE RCISES ITS 33
96		-	RIGHTS UNDER : 34 HOUSE BILL 1171 3
	46	+	(1) The establishment of one or more standing committees or for the 23
	47	+	creation of one or more committees upon the occurrence of certain events; and 24 2 HOUSE BILL 1171
97	48
98	49
99	50
100		-	(I) TITLE 9 OF THE MARYLAND UNIFORM COMMERCIAL CODE; 1
	51	+	(2) The composition of the membership, and the qualifications and the 1
	52	+	voting and other rights of members of any such committee, subject to the continued service 2
	53	+	of members of the committee as directors. 3
101	54
102		-	~~(II) THE REAL PROPERTY ARTICLE; OR 2~~
	55	+	3–104. 4
103	56
104		-	(III) OTHER APPLICABLE LAW TO EFFECT THE TRANSFER OF 3
105		-	ASSETS WITHOUT THE C ONSENT OF THE CORPOR ATION; OR 4
	57	+	(a) Notwithstanding any other provision of this subtitle, unless the charter or 5
	58	+	bylaws of a corporation provide otherwise by reference to this section or the subject matter 6
	59	+	of this section, the approval of the stockholders is not required for any: 7
106	60
107		-	(2) THE BOARD OF DIRECTOR S OF THE CORPORATION AUTHORIZES 5
108		-	AN ALTERNATIVE SALE OF ASSETS WITH THE M ORTGAGEE, THE PLEDGEE , A 6
109		-	SECURED PARTY , OR ANOTHER PERSON : 7
	61	+	(1) Transfer of assets by a corporation in the ordinary course of business 8
	62	+	actually conducted by it or as a distribution as defined in § 2–301 of this article; 9
110	63
111		-	(I) ~~THAT RESULTS~~ IN ~~THE R EDUCTION~~ OR ~~ELIMINATION OF 8~~
112		-	~~THE LIABILITIES OR O BLIGATIONS SECURED B Y~~ THE ASSETS; ~~AND 9~~
	64	+	(2) Mortgage, pledge, or creation of any other security interest in any or all 10
	65	+	of the assets of a corporation, whether or not in the ordinary course of its business; 11
113	66
114		-	(II) ~~FOR WHICH~~ THE ~~VALUE O F THE ASSETS IS LESS THAN OR 10~~
115		-	~~EQUAL TO THE AMOUNT~~ OF THE ~~LIABILITIES O R OBLIGATIONS BEING REDUCED~~ OR 11
116		-	~~ELIMINATED. 12~~
	67	+	(3) Transfer of assets by a corporation to one or more persons if all of the 12
	68	+	equity interests of the person or persons are owned, directly or indirectly, by the 13
	69	+	corporation; 14
117	70
118		-	(D) THE RECEIPT OF CONSID ERATION BY THE CORPORATION O R ITS 13
119		-	STOCKHOLDERS IN AN A LTERNATIVE SALE OF A SSETS IN ACCORDANCE WITH 14
120		-	SUBSECTION (C)(2) OF THIS SECTION MAY NOT CREATE A PRESUMP TION THAT THE 15
121		-	VALUE OF THE ASSETS IS GREATER THAN THE AMOUNT OF LIABILITIE S OR 16
122		-	OBLIGATIONS BEING EL IMINATED OR REDUCED FOR THE P URPOSES OF THIS 17
123		-	SECTION. 18
	71	+	(4) Transfer of assets by a corporation registered as an open–end 15
	72	+	investment company under the Investment Company Act of 1940, including a transfer 16
	73	+	between or among classes or series of stock of a corporation; or 17
124	74
125		-	(E) (1) THIS SUBSECTION DOES NOT APPLY TO ANY PRO CEEDING 19
126		-	AGAINST A CORPORATIO N AND ANOTHER NECESS ARY PARTY TO ENJOIN A SALE 20
127		-	BEFORE THE SALE IS C OMPLETED. 21
	75	+	(5) Transfer of assets by a corporation that is dissolved. 18
128	76
129		-	(2) SUBJECT TO PARAGRAPH (3) OF THIS SUBSECTION , FAILURE TO 22
130		-	SATISFY SUBSECTION (C)(2)(II) OF THIS SECTION MAY NOT INVALIDATE A SAL E IF 23
131		-	THE TRANSFEREE OF TH E ASSETS: 24
	77	+	(b) Notwithstanding any other provisions of this subtitle, unless the charter or 19
	78	+	bylaws of a corporation provide otherwise by reference to this section or the subject matter 20
	79	+	of this section, the approval of the stockholders and articles of share exchange are not 21
	80	+	required for an exchange of shares of stock through voluntary action or under an agreement 22
	81	+	with the stockholders participating in the exchange. 23
132	82
133		-	(I) PROVIDED VALUE FOR TH E ASSETS, INCLUDING THE 25
134		-	REDUCTION OR ELIMINA TION OF THE LIABILIT IES OR OBLIGATIONS S ECURED BY 26
135		-	THE ASSETS; AND 27
	83	+	(C) NOTWITHSTANDING ANY O THER PROVISION OF TH IS SUBTITLE, UNLESS 24
	84	+	THE CHARTER OR BYLAW S OF A CORPORATION P ROVIDE OTHERWISE BY REFERENCE 25
	85	+	TO THIS SECTION OR T HE SUBJECT MATTER OF THIS SECTION, THE APPROVAL OF 26
	86	+	THE STOCKHOLDERS IS NOT REQUIRED FOR A TRANSFER OF ASSETS T HAT IS 27
	87	+	COLLATERAL FOR SECUR ING A MORTGAGE , PLEDGE, OR SECURITY INTEREST IF: 28
136	88
137		-	(II) ACTED IN GOOD FAITH . 28
	89	+	(1) THE MORTGAGEE , PLEDGEE, OR SECURED PARTY EXE RCISES ITS 29
	90	+	RIGHTS UNDER : 30
138	91
139		-	(3) ~~PARAGRAPH (2)~~ OF ~~THIS SUBSECTION M AY NOT BE INTERPRETE D 29~~
140		-	~~TO ELIMINATE ANY LIABILITY FOR MONETA RY DAMAGES ARISING F ROM CLAIM, 30~~
141		-	~~INCLUDING: 31~~
142		-	4 HOUSE BILL 1171
	92	+	(I) TITLE 9 OF THE MARYLAND UNIFORM COMMERCIAL CODE; 31
	93	+
	94	+	(II) THE REAL PROPERTY ARTICLE; OR 32
	95	+	HOUSE BILL 1171 3
143	96
144	97
145		-	(I) A CLAIM THAT FOR MONETARY DAMAGES ARISING FROM 1
146		-	THE DIRECTOR DID NOT FAILING TO SATISFY THE STANDARD OF CONDUCT FOR 2
147		-	DIRECTORS UNDER § 2–405.1(C) OF THIS ARTICLE , INCLUDING A CLAIM BY OR IN 3
148		-	THE RIGHT OF THE COR PORATION; OR 4
	98	+	(III) OTHER APPLICABLE LAW TO EFFECT THE TRANSF ER OF 1
	99	+	ASSETS WITHOUT THE C ONSENT OF THE CORPOR ATION; OR 2
149	100
150		-	(II) A CLAIM FOR EQUITABLE RELIEF. 5
	101	+	(2) THE BOARD OF DIRECTOR S OF THE CORPORATION AUTHORIZES 3
	102	+	AN ALTERNATIVE SALE OF ASSETS WITH THE M ORTGAGEE, THE PLEDGEE , A 4
	103	+	SECURED PAR TY, OR ANOTHER PERSON : 5
151	104
152		-	~~[(c)]~~ (F) ~~A transaction described~~ in ~~subsection (a) [or], (b),~~ OR ~~(C)~~ of ~~this section~~ 6
153		-	~~also may be effected as otherwise provided in this subtitle.~~ 7
	105	+	(I) THAT RESULTS IN THE R EDUCTION OR ELIMINAT ION OF 6
	106	+	THE LIABILITIES OR O BLIGATIONS SECURED B Y THE ASSETS; AND 7
154	107
155		-	3–109. 8
	108	+	(II) FOR WHICH THE VALUE O F THE ASSETS IS LESS THAN OR 8
	109	+	EQUAL TO THE AMOUNT OF THE LIABILITIES O R OBLIGATIONS BEING REDUCED OR 9
	110	+	ELIMINATED. 10
156	111
157		-	(d) In addition to the requirements of subsection (b) of this section, articles of 9
158		-	merger shall include: 10
	112	+	(D) THE RECEIPT OF CONSID ERATION BY THE CORPO RATION OR ITS 11
	113	+	STOCKHOLDERS IN AN A LTERNATIVE SALE OF A SSETS IN ACCORDANCE WITH 12
	114	+	SUBSECTION (C)(2) OF THIS SECTION MAY NOT CREATE A PRESUMP TION THAT THE 13
	115	+	VALUE OF THE ASSETS IS GREATER THAN THE AMOUNT OF LIABIL ITIES OR 14
	116	+	OBLIGATIONS BEING EL IMINATED OR REDUCED FOR THE PURPOSES OF THIS 15
	117	+	SECTION. 16
159	118
160		-	(1) ~~(i)~~ Any ~~amendment to the charter, certificate of limited partnership, 11~~
161		-	~~articles of organization,~~ ~~or declaration of trust of the successor~~ to ~~be effected as part of the 12~~
162		-	~~merger; and 13~~
	119	+	(E) (1) THIS SUBSECTION DOES NOT APPLY TO ANY PRO CEEDING 17
	120	+	AGAINST A CORPORATIO N AND ANOTHER NECESS ARY PARTY TO ENJOIN A SALE 18
	121	+	BEFORE THE SALE IS C OMPLETED. 19
163	122
164		-	(ii) ~~The restatement,~~ ~~if a restatement~~ of ~~the charter~~, ~~the certificate 14~~
165		-	~~of limited partnership, articles~~ of ~~organization, or declaration of trust of the successor is to 15~~
166		-	~~be effected as a part~~ of ~~the merger;~~ 16
	123	+	(2) SUBJECT TO PARAGRAPH (3) OF THIS SUBSECTION , FAILURE TO 20
	124	+	SATISFY SUBSECTION (C)(2)(II) OF THIS SECTION MAY NOT INVALIDATE A SAL E IF 21
	125	+	THE TRANSFEREE OF TH E ASSETS: 22
167	126
168		-	(2) As to each corporation party to the articles: 17
	127	+	(I) PROVIDED VALUE FOR TH E ASSETS, INCLUDING THE 23
	128	+	REDUCTION OR ELIMINA TION OF THE LIABILITIES OR OBLIG ATIONS SECURED BY 24
	129	+	THE ASSETS; AND 25
169	130
170		-	(i) The total number of shares of stock of all classes or series which 18
171		-	the corporation has authority to issue; 19
	131	+	(II) ACTED IN GOOD FAITH . 26
172	132
173		-	(ii) The number of shares of stock of each class or series; 20
	133	+	(3) PARAGRAPH (2) OF THIS SUBSECTION M AY NOT BE INTERPRETE D 27
	134	+	TO ELIMINATE ANY LIA BILITY FOR MONETARY DAMAGES ARISING FROM : 28
174	135
175		-	(iii) The par value of the shares of stock of each class or series or a 21
176		-	statement that the shares are without par value; and 22
	136	+	(I) A CLAIM THAT THE DIREC TOR DID NOT SATI SFY THE 29
	137	+	STANDARD OF CONDUCT FOR DIRECTORS UNDER § 2–405.1(C) OF THIS ARTICLE , 30
	138	+	INCLUDING A CLAIM BY OR IN THE RIGHT OF T HE CORPORATION ; OR 31
177	139
178		-	(iv) If there are any shares of stock with par value, the aggregate par 23
179		-	value of all the shares of all classes or series; 24
180		-
181		-	(3) As to each business trust party to the articles: 25
182		-
183		-	(i) The total number of shares of beneficial interest of all classes and 26
184		-	series which the business trust has authority to issue; and 27
185		-
186		-	(ii) The number of shares of beneficial interest of each class and 28
187		-	series; 29
188		-
189		-	(4) [As to each limited partnership party to the articles: 30
190		-	HOUSE BILL 1171 5
	140	+	(II) A CLAIM FOR EQUITABLE RELIEF. 32 4 HOUSE BILL 1171
191	141
192	142
193		-	(i) The percentages of partnership interest of each class or series of 1
194		-	partnership interest of the limited partnership; and 2
195	143
196		-	(ii) ~~The class~~ of ~~partners and the respective percentage of 3~~
197		-	~~partnership interests~~ in ~~each class or series of partnership interest; 4~~
	144	+	[(c)] (F) A transaction described in subsection (a) [or], (b), OR (C) of this section 1
	145	+	also may be effected as otherwise provided in this subtitle. 2
198	146
199		-	~~(5) As to each limited liability company party to the articles: 5~~
	147	+	3–109. 3
200	148
201		-	(i) The ~~percentages~~ of ~~membership interest~~ of ~~each class or series~~ of 6
202		-	~~membership interest of the limited liability company; and 7~~
	149	+	(d) In addition to the requirements of subsection (b) of this section, articles of 4
	150	+	merger shall include: 5
203	151
204		-	(ii) The class of members and the respective percentage of 8
205		-	membership interests in each class or series of membership interest; 9
	152	+	(1) (i) Any amendment to the charter, certificate of limited partnership, 6
	153	+	articles of organization, or declaration of trust of the successor to be effected as part of the 7
	154	+	merger; and 8
206	155
207		-	(6) As to each partnership party to the articles: 10
	156	+	(ii) The restatement, if a restatement of the charter, the certificate 9
	157	+	of limited partnership, articles of organization, or declaration of trust of the successor is to 10
	158	+	be effected as a part of the merger; 11
208	159
209		-	(i) The percentages of partnership interest of each class or series of 11
210		-	partnership interest of the partnership; and 12
	160	+	(2) As to each corporation party to the articles: 12
211	161
212		-	(ii) The ~~class~~ of ~~partners and the respective percentage~~ of 13
213		-	~~partnership interests in each class or series of partnership interest~~; 14
	162	+	(i) The total number of shares of stock of all classes or series which 13
	163	+	the corporation has authority to issue; 14
214	164
215		-	(7)] If the charter[, certificate of limited partnership, articles of 15
216		-	organization,] or declaration of trust of the successor is amended in a manner which 16
217		-	changes any of the information required by items (2) [through (5)] AND (3) of this 17
218		-	subsection, that information as it was both immediately before and as changed by the 18
219		-	merger; and 19
	165	+	(ii) The number of shares of stock of each class or series; 15
220	166
221		-	[(8)] (5) The manner and basis of converting or exchanging issued shares 20
222		-	of stock of the merging corporations, outstanding partnership interest of the merging 21
223		-	partnership or limited partnership, or shares of beneficial interest of the merging business 22
224		-	trusts into different stock of a corporation, partnership interest of a partnership or limited 23
225		-	partnership, outstanding membership interest of a limited liability company, shares of 24
226		-	beneficial interest of a business trust, or other consideration, and the treatment of any 25
227		-	issued shares of stock of the merging corporations, partnership interest of the merging 26
228		-	partnership or limited partnerships, membership interest of the merging limited liability 27
229		-	company, or shares of beneficial interest of the merging business trusts not to be converted 28
230		-	or exchanged, any or all of which may be made dependent on facts ascertainable outside 29
231		-	the articles of merger. 30
	167	+	(iii) The par value of the shares of stock of each class or series or a 16
	168	+	statement that the shares are without par value; and 17
232	169
233		-	SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 31
234		-	October 1, 2025. 32
	170	+	(iv) If there are any shares of stock with par value, the aggregate par 18
	171	+	value of all the shares of all classes or series; 19
	172	+
	173	+	(3) As to each business trust party to the articles: 20
	174	+
	175	+	(i) The total number of shares of beneficial interest of all classes and 21
	176	+	series which the business trust has authority to issue; and 22
	177	+
	178	+	(ii) The number of shares of beneficial interest of each class and 23
	179	+	series; 24
	180	+
	181	+	(4) [As to each limited partnership party to the articles: 25
	182	+
	183	+	(i) The percentages of partnership interest of each class or series of 26
	184	+	partnership interest of the limited partnership; and 27
	185	+
	186	+	(ii) The class of partners and the respective percentage of 28
	187	+	partnership interests in each class or series of partnership interest; 29
	188	+
	189	+	(5) As to each limited liability company party to the articles: 30 HOUSE BILL 1171 5
235	190
236	191
	192	+
	193	+	(i) The percentages of membership interest of each class or series of 1
	194	+	membership interest of the limited liability company; and 2
	195	+
	196	+	(ii) The class of members and the respective percentage of 3
	197	+	membership interests in each class or series of membership interest; 4
	198	+
	199	+	(6) As to each partnership party to the articles: 5
	200	+
	201	+	(i) The percentages of partnership interest of each class or series of 6
	202	+	partnership interest of the partnership; and 7
	203	+
	204	+	(ii) The class of partners and the respective percentage of 8
	205	+	partnership interests in each class or series of partnership interest; 9
	206	+
	207	+	(7)] If the charter[, certificate of limited partnership, articles of 10
	208	+	organization,] or declaration of trust of the successor is amended in a manner which 11
	209	+	changes any of the information required by items (2) [through (5)] AND (3) of this 12
	210	+	subsection, that information as it was both immediately before and as changed by the 13
	211	+	merger; and 14
	212	+
	213	+	[(8)] (5) The manner and basis of converting or exchanging issued shares 15
	214	+	of stock of the merging corporations, outstanding partnership interest of the merging 16
	215	+	partnership or limited partnership, or shares of beneficial interest of the merging business 17
	216	+	trusts into different stock of a corporation, partnership interest of a partnership or limited 18
	217	+	partnership, outstanding membership interest of a limited liability company, shares of 19
	218	+	beneficial interest of a business trust, or other consideration, and the treatment of any 20
	219	+	issued shares of stock of the merging corporations, partnership interest of the merging 21
	220	+	partnership or limited partnerships, membership interest of the merging limited liability 22
	221	+	company, or shares of beneficial interest of the merging business trusts not to be converted 23
	222	+	or exchanged, any or all of which may be made dependent on facts ascertainable outside 24
	223	+	the articles of merger. 25
	224	+
	225	+	SECTION 2. AND BE IT FURTHER ENA CTED, That this Act shall take effect 26
	226	+	October 1, 2025. 27
237	227