EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
Underlining indicates amendments to bill.
Strike out indicates matter stricken from the bill by amendment or deleted from the law by
amendment.
*hb1171*
HOUSE BILL 1171
C1 5lr2625
CF SB 992
By: Delegate Amprey
Introduced and read first time: February 6, 2025
Assigned to: Economic Matters
Committee Report: Favorable with amendments
House action: Adopted
Read second time: February 27, 2025
CHAPTER ______
AN ACT concerning 1
Corporations and Associations – Revisions 2
FOR the purpose of establishing a process for the transfer of assets that are collateral for 3
securing a mortgage, pledge, or security interest without the approval of the 4
stockholders; establishing certain exceptions to the process for the transfer of assets 5
that are secured collateral without the approval of the stockholders; repealing 6
provisions of law specifying what shall be included in the articles of merger if a 7
limited partnership, limited liability company, or partnership is a party to the 8
articles; and generally relating to corporations and associations. 9
BY repealing and reenacting, with amendments, 10
Article – Corporations and Associations 11
Section 2–411(e), 3–104, and 3–109(d) 12
Annotated Code of Maryland 13
(2014 Replacement Volume and 2024 Supplement) 14
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 15
That the Laws of Maryland read as follows: 16
Article – Corporations and Associations 17
2–411. 18
(e) Notwithstanding subsection (a) of this section or [§ 2–408(d)] § 2–408(E) of 19
this subtitle, the charter or bylaws of a corporation, or any agreement to which the 20 2 HOUSE BILL 1171
corporation is a party and which has been approved by the board of directors, may provide 1
for: 2
(1) The establishment of one or more standing committees or for the 3
creation of one or more committees upon the occurrence of certain events; and 4
(2) The composition of the membership, and the qualifications and the 5
voting and other rights of members of any such committee, subject to the continued service 6
of members of the committee as directors. 7
3–104. 8
(a) Notwithstanding any other provision of this subtitle, unless the charter or 9
bylaws of a corporation provide otherwise by reference to this section or the subject matter 10
of this section, the approval of the stockholders is not required for any: 11
(1) Transfer of assets by a corporation in the ordinary course of business 12
actually conducted by it or as a distribution as defined in § 2–301 of this article; 13
(2) Mortgage, pledge, or creation of any other security interest in any or all 14
of the assets of a corporation, whether or not in the ordinary course of its business; 15
(3) Transfer of assets by a corporation to one or more persons if all of the 16
equity interests of the person or persons are owned, directly or indirectly, by the 17
corporation; 18
(4) Transfer of assets by a corporation registered as an open–end 19
investment company under the Investment Company Act of 1940, including a transfer 20
between or among classes or series of stock of a corporation; or 21
(5) Transfer of assets by a corporation that is dissolved. 22
(b) Notwithstanding any other provisions of this subtitle, unless the charter or 23
bylaws of a corporation provide otherwise by reference to this section or the subject matter 24
of this section, the approval of the stockholders and articles of share exchange are not 25
required for an exchange of shares of stock through voluntary action or under an agreement 26
with the stockholders participating in the exchange. 27
(C) NOTWITHSTANDING ANY O THER PROVISION OF TH IS SUBTITLE, UNLESS 28
THE CHARTER OR BYLAW S OF A CORPORATION P ROVIDE OTHERWISE BY REFERENCE 29
TO THIS SECTION OR T HE SUBJECT MATTER OF THIS SECTION, THE APPROVAL OF 30
THE STOCKHOLDERS IS NOT REQUIRED FOR A T RANSFER OF ASSETS TH AT IS 31
COLLATERAL FOR SECUR ING A MORTGAGE , PLEDGE, OR SECURITY INTEREST IF: 32
(1) THE MORTGAGEE , PLEDGEE, OR SECURED PARTY EXE RCISES ITS 33
RIGHTS UNDER : 34 HOUSE BILL 1171 3
(I) TITLE 9 OF THE MARYLAND UNIFORM COMMERCIAL CODE; 1
(II) THE REAL PROPERTY ARTICLE; OR 2
(III) OTHER APPLICABLE LAW TO EFFECT THE TRANSFER OF 3
ASSETS WITHOUT THE C ONSENT OF THE CORPOR ATION; OR 4
(2) THE BOARD OF DIRECTOR S OF THE CORPORATION AUTHORIZES 5
AN ALTERNATIVE SALE OF ASSETS WITH THE M ORTGAGEE, THE PLEDGEE , A 6
SECURED PARTY , OR ANOTHER PERSON : 7
(I) THAT RESULTS IN THE R EDUCTION OR ELIMINATION OF 8
THE LIABILITIES OR O BLIGATIONS SECURED B Y THE ASSETS; AND 9
(II) FOR WHICH THE VALUE O F THE ASSETS IS LESS THAN OR 10
EQUAL TO THE AMOUNT OF THE LIABILITIES O R OBLIGATIONS BEING REDUCED OR 11
ELIMINATED. 12
(D) THE RECEIPT OF CONSID ERATION BY THE CORPORATION O R ITS 13
STOCKHOLDERS IN AN A LTERNATIVE SALE OF A SSETS IN ACCORDANCE WITH 14
SUBSECTION (C)(2) OF THIS SECTION MAY NOT CREATE A PRESUMP TION THAT THE 15
VALUE OF THE ASSETS IS GREATER THAN THE AMOUNT OF LIABILITIE S OR 16
OBLIGATIONS BEING EL IMINATED OR REDUCED FOR THE P URPOSES OF THIS 17
SECTION. 18
(E) (1) THIS SUBSECTION DOES NOT APPLY TO ANY PRO CEEDING 19
AGAINST A CORPORATIO N AND ANOTHER NECESS ARY PARTY TO ENJOIN A SALE 20
BEFORE THE SALE IS C OMPLETED. 21
(2) SUBJECT TO PARAGRAPH (3) OF THIS SUBSECTION , FAILURE TO 22
SATISFY SUBSECTION (C)(2)(II) OF THIS SECTION MAY NOT INVALIDATE A SAL E IF 23
THE TRANSFEREE OF TH E ASSETS: 24
(I) PROVIDED VALUE FOR TH E ASSETS, INCLUDING THE 25
REDUCTION OR ELIMINA TION OF THE LIABILIT IES OR OBLIGATIONS S ECURED BY 26
THE ASSETS; AND 27
(II) ACTED IN GOOD FAITH . 28
(3) PARAGRAPH (2) OF THIS SUBSECTION M AY NOT BE INTERPRETE D 29
TO ELIMINATE ANY LIABILITY FOR MONETA RY DAMAGES ARISING F ROM CLAIM, 30
INCLUDING: 31
4 HOUSE BILL 1171
(I) A CLAIM THAT FOR MONETARY DAMAGES ARISING FROM 1
THE DIRECTOR DID NOT FAILING TO SATISFY THE STANDARD OF CONDUCT FOR 2
DIRECTORS UNDER § 2–405.1(C) OF THIS ARTICLE , INCLUDING A CLAIM BY OR IN 3
THE RIGHT OF THE COR PORATION; OR 4
(II) A CLAIM FOR EQUITABLE RELIEF. 5
[(c)] (F) A transaction described in subsection (a) [or], (b), OR (C) of this section 6
also may be effected as otherwise provided in this subtitle. 7
3–109. 8
(d) In addition to the requirements of subsection (b) of this section, articles of 9
merger shall include: 10
(1) (i) Any amendment to the charter, certificate of limited partnership, 11
articles of organization, or declaration of trust of the successor to be effected as part of the 12
merger; and 13
(ii) The restatement, if a restatement of the charter, the certificate 14
of limited partnership, articles of organization, or declaration of trust of the successor is to 15
be effected as a part of the merger; 16
(2) As to each corporation party to the articles: 17
(i) The total number of shares of stock of all classes or series which 18
the corporation has authority to issue; 19
(ii) The number of shares of stock of each class or series; 20
(iii) The par value of the shares of stock of each class or series or a 21
statement that the shares are without par value; and 22
(iv) If there are any shares of stock with par value, the aggregate par 23
value of all the shares of all classes or series; 24
(3) As to each business trust party to the articles: 25
(i) The total number of shares of beneficial interest of all classes and 26
series which the business trust has authority to issue; and 27
(ii) The number of shares of beneficial interest of each class and 28
series; 29
(4) [As to each limited partnership party to the articles: 30
HOUSE BILL 1171 5
(i) The percentages of partnership interest of each class or series of 1
partnership interest of the limited partnership; and 2
(ii) The class of partners and the respective percentage of 3
partnership interests in each class or series of partnership interest; 4
(5) As to each limited liability company party to the articles: 5
(i) The percentages of membership interest of each class or series of 6
membership interest of the limited liability company; and 7
(ii) The class of members and the respective percentage of 8
membership interests in each class or series of membership interest; 9
(6) As to each partnership party to the articles: 10
(i) The percentages of partnership interest of each class or series of 11
partnership interest of the partnership; and 12
(ii) The class of partners and the respective percentage of 13
partnership interests in each class or series of partnership interest; 14
(7)] If the charter[, certificate of limited partnership, articles of 15
organization,] or declaration of trust of the successor is amended in a manner which 16
changes any of the information required by items (2) [through (5)] AND (3) of this 17
subsection, that information as it was both immediately before and as changed by the 18
merger; and 19
[(8)] (5) The manner and basis of converting or exchanging issued shares 20
of stock of the merging corporations, outstanding partnership interest of the merging 21
partnership or limited partnership, or shares of beneficial interest of the merging business 22
trusts into different stock of a corporation, partnership interest of a partnership or limited 23
partnership, outstanding membership interest of a limited liability company, shares of 24
beneficial interest of a business trust, or other consideration, and the treatment of any 25
issued shares of stock of the merging corporations, partnership interest of the merging 26
partnership or limited partnerships, membership interest of the merging limited liability 27
company, or shares of beneficial interest of the merging business trusts not to be converted 28
or exchanged, any or all of which may be made dependent on facts ascertainable outside 29
the articles of merger. 30
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 31
October 1, 2025. 32