S.B. No. 1971
AN ACT
relating to domestic corporations and other domestic entities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 6.252, Business Organizations Code, is
amended by amending Subsections (a), (b), and (c) and adding
Subsections (c-1), (c-2), (c-3), (c-4), and (g) to read as follows:
(a) Except as provided by this code or the governing
documents, any number of owners of a domestic entity, or any number
of owners of the domestic entity and the domestic entity itself, may
enter into a written voting agreement that is not set forth in the
domestic entity's governing documents to provide the manner of
voting of the ownership interests of the domestic entity. A voting
agreement entered into under this subsection is not part of the
governing documents of the domestic entity.
(b) A copy of a voting agreement entered into under
Subsection (a):
(1) may [shall] be deposited with the domestic entity
at the domestic entity's principal executive office or registered
office; and
(2) if deposited as provided by Subdivision (1), is
subject to examination by an owner, whether in person or by the
owner's agent or attorney, in the same manner as the owner is
entitled to examine the books and records of the domestic entity.
(c) A voting agreement entered into under Subsection (a) is
specifically enforceable against the owner [holder] of an ownership
interest that is the subject of the agreement if the owner executes
the voting agreement or acknowledges in writing that the owner or
the ownership interest is bound by the agreement[, and any
successor or transferee of the holder, if:
[(1) the voting agreement is noted conspicuously on
the certificate representing the ownership interests; or
[(2) a notation of the voting agreement is contained
in a notice sent by or on behalf of the domestic entity in
accordance with Section 3.205, if the ownership interest is not
represented by a certificate].
(c-1) A voting agreement entered into under Subsection (a)
is specifically enforceable against any subsequent owner of the
ownership interest subject to the voting agreement if the
subsequent owner:
(1) has notice or actual knowledge of the voting
agreement at or before the time of transfer to the subsequent owner;
(2) is not a transferee for value and receives notice
or obtains actual knowledge of the voting agreement; or
(3) acknowledges in writing that the subsequent owner
or the ownership interest is bound by the voting agreement.
(c-2) A subsequent owner is considered to have notice of a
voting agreement for purposes of Subsection (c-1)(1) if, at the
time of transfer, the existence of the voting agreement is noted
conspicuously on any certificate representing the ownership
interest held by the transferor owner. The notice described by this
subsection is not the exclusive method by which notice of the voting
agreement may be received by a subsequent owner for purposes of
Subsection (c-1)(1).
(c-3) A voting agreement that becomes specifically
enforceable against a subsequent owner under Subsection (c-1)(2) is
specifically enforceable from the time the subsequent owner first
receives notice or obtains actual knowledge of the voting
agreement.
(c-4) A voting agreement that becomes specifically
enforceable against a subsequent owner under Subsection (c-1)(3) is
specifically enforceable from the time of the written
acknowledgment by the subsequent owner.
(g) This section does not impair the right of the domestic
entity to treat an owner of record as entitled to vote the ownership
interest standing in the owner's name or to accept that owner's vote
of the ownership interest.
SECTION 2. Sections 10.354(b) and (c), Business
Organizations Code, are amended to read as follows:
(b) Notwithstanding Subsection (a), subject to Subsection
(c), an owner may not dissent from a plan of merger or conversion in
which there is a single surviving or new domestic entity or non-code
organization, or from a plan of exchange, if:
(1) the ownership interest, or a depository receipt in
respect of the ownership interest, held by the owner:
(A) in the case of a plan of merger, conversion,
or exchange, other than a plan of merger pursuant to Section
21.459(c), is part of a class or series of ownership interests, or
depository receipts in respect of ownership interests, that [are],
on the record date set for purposes of determining which owners are
entitled to vote on the plan of merger, conversion, or exchange, as
appropriate, are either:
(i) [(A)] listed on a national securities
exchange; or
(ii) [(B)] held of record by at least 2,000
owners; or
(B) in the case of a plan of merger pursuant to
Section 21.459(c), is part of a class or series of ownership
interests, or depository receipts in respect of ownership
interests, that, immediately before the date the board of directors
of the corporation that issued the ownership interest held,
directly or indirectly, by the owner approves the plan of merger,
are either:
(i) listed on a national securities
exchange; or
(ii) held of record by at least 2,000
owners;
(2) the owner is not required by the terms of the plan
of merger, conversion, or exchange, as appropriate, to accept for
the owner's ownership interest any consideration that is different
from the consideration to be provided to any other holder of an
ownership interest of the same class or series as the ownership
interest held by the owner, other than cash instead of fractional
shares or interests the owner would otherwise be entitled to
receive; and
(3) the owner is not required by the terms of the plan
of merger, conversion, or exchange, as appropriate, to accept for
the owner's ownership interest any consideration other than:
(A) ownership interests, or depository receipts
in respect of ownership interests, of a domestic entity or non-code
organization of the same general organizational type that,
immediately after the effective date of the merger, conversion, or
exchange, as appropriate, will be part of a class or series of
ownership interests, or depository receipts in respect of ownership
interests, that are:
(i) listed on a national securities
exchange or authorized for listing on the exchange on official
notice of issuance; or
(ii) held of record by at least 2,000
owners;
(B) cash instead of fractional ownership
interests, or fractional depository receipts in respect of
ownership interests, the owner would otherwise be entitled to
receive; or
(C) any combination of the ownership interests,
or fractional depository receipts in respect of ownership
interests, and cash described by Paragraphs (A) and (B).
(c) Subsection (b) shall not apply [either] to a domestic
entity that is a subsidiary with respect to a merger under Section
10.006 [or to a corporation with respect to a merger under Section
21.459(c)].
SECTION 3. Sections 10.355(d) and (f), Business
Organizations Code, are amended to read as follows:
(d) In addition to the requirements prescribed by
Subsection (c), a notice required to be provided:
(1) under Subsection (a)(1) must accompany the notice
of the meeting to consider the action;
(2) under Subsection (a)(2) must be provided to:
(A) each owner who consents in writing to the
action before the owner delivers the written consent; and
(B) each owner who is entitled to vote on the
action and does not consent in writing to the action before the 11th
day after the date the action takes effect; and
(3) under Subsection (b-1) must be provided:
(A) if given before the consummation of the
[tender or exchange] offer described by Section 21.459(c)(2), to
each shareholder to whom that offer is made; or
(B) if given after the consummation of the
[tender or exchange] offer described by Section 21.459(c)(2), to
each shareholder who did not tender the shareholder's shares in
that offer.
(f) If the notice given under Subsection (b-1) did not
include a statement of the effective date of the merger, the
responsible organization shall, not later than the 10th day after
the effective date, give a second notice to the shareholders
notifying them of the merger's effective date. If the second notice
is given after the later of the date on which the [tender or
exchange] offer described by Section 21.459(c)(2) is consummated or
the 20th day after the date notice under Subsection (b-1) is given,
then the second notice is required to be given to only those
shareholders who have made a demand under Section 10.356(b)(3).
SECTION 4. Section 10.356(b), Business Organizations Code,
is amended to read as follows:
(b) To perfect the owner's rights of dissent and appraisal
under Section 10.354, an owner:
(1) if the proposed action is to be submitted to a vote
of the owners at a meeting, must give to the domestic entity a
written notice of objection to the action that:
(A) is addressed to the entity's president and
secretary;
(B) states that the owner's right to dissent will
be exercised if the action takes effect;
(C) provides an address to which notice of
effectiveness of the action should be delivered or mailed; and
(D) is delivered to the entity's principal
executive offices before the meeting;
(2) with respect to the ownership interest for which
the rights of dissent and appraisal are sought:
(A) must vote against the action if the owner is
entitled to vote on the action and the action is approved at a
meeting of the owners; and
(B) may not consent to the action if the action is
approved by written consent; and
(3) must give to the responsible organization a demand
in writing that:
(A) is addressed to the president and secretary
of the responsible organization;
(B) demands payment of the fair value of the
ownership interests for which the rights of dissent and appraisal
are sought;
(C) provides to the responsible organization an
address to which a notice relating to the dissent and appraisal
procedures under this subchapter may be sent;
(D) states the number and class of the ownership
interests of the domestic entity owned by the owner and the fair
value of the ownership interests as estimated by the owner; and
(E) is delivered to the responsible organization
at its principal executive offices at the following time:
(i) not later than the 20th day after the
date the responsible organization sends to the owner the notice
required by Section 10.355(e) that the action has taken effect, if
the action was approved by a vote of the owners at a meeting;
(ii) not later than the 20th day after the
date the responsible organization sends to the owner the notice
required by Section 10.355(d)(2) that the action has taken effect,
if the action was approved by the written consent of the owners;
(iii) not later than the 20th day after the
date the responsible organization sends to the owner a notice that
the merger was effected, if the action is a merger effected under
Section 10.006; or
(iv) not later than the 20th day after the
date the responsible organization gives to the shareholder the
notice required by Section 10.355(b-1) or the date of the
consummation of the [tender or exchange] offer described by Section
21.459(c)(2), whichever is later, if the action is a merger
effected under Section 21.459(c).
SECTION 5. Section 21.002, Business Organizations Code, is
amended by adding Subdivision (10-a) to read as follows:
(10-a) "Share transfer records" means one or more
records maintained by or on behalf of a corporation in accordance
with Section 3.151 in which the names of all of the corporation's
shareholders of record, the address of and number of shares
registered in the name of each shareholder of record, and all
issuances and transfers of shares of the corporation are recorded.
SECTION 6. Section 21.305(b), Business Organizations Code,
is amended to read as follows:
(b) The notice of redemption shall be sent to each holder of
redeemable shares being called not later than the 21st day or
earlier than the 60th day before the date set for redemption, unless
otherwise provided by the terms of the class or series of shares
contained in the certificate of formation.
SECTION 7. Sections 21.372(a) and (a-1), Business
Organizations Code, are amended to read as follows:
(a) Not later than the 11th day before the date of each
meeting of the shareholders of a corporation, [an officer or agent
of the corporation who is in charge of the corporation's share
transfer records shall prepare] an alphabetical list of the
shareholders entitled to vote at the meeting or at any adjournment
of the meeting shall be prepared by or on behalf of the corporation.
The list of shareholders must:
(1) state:
(A) the address of each shareholder;
(B) the type of shares held by each shareholder;
(C) the number of shares held by each
shareholder; and
(D) the number of votes that each shareholder is
entitled to if the number of votes is different from the number of
shares stated under Paragraph (C); and
(2) be kept on file at the registered office or
principal executive office of the corporation for at least 10 days
before the date of the meeting.
(a-1) Instead of being kept on file, the list required by
Subsection (a) may be kept on a reasonably accessible electronic
data system [network] if the information required to gain access to
the list is provided with notice of the meeting. Section 21.353(c),
Section 21.354(a-1), and this subsection may not be construed to
require a corporation to include any electronic contact information
of a shareholder on the list. A corporation that elects to make the
list available on an electronic data system [network] must take
reasonable measures to ensure the information is available only to
shareholders of the corporation.
SECTION 8. Section 21.459, Business Organizations Code, is
amended by amending Subsections (c), (d), and (e) and adding
Subsection (f) to read as follows:
(c) This subsection applies only to a corporation that is a
party to the merger and has a class or series of [whose] shares that
are, immediately before the date its board of directors approves
the plan of merger, either listed on a national securities exchange
or held of record by at least 2,000 shareholders. Unless required
by the corporation's certificate of formation, a plan of merger is
not required to be approved by the shareholders of the corporation
if:
(1) the plan of merger expressly:
(A) permits or requires the merger to be effected
under this subsection; and
(B) provides that any merger effected under this
subsection shall be effected as soon as practicable following the
consummation of the offer [described by Subdivision (2)];
(2) an organization consummates an [a tender or
exchange] offer for all of the outstanding shares of the
corporation on the terms provided in the plan of merger that, absent
this subsection, would be entitled to vote on the approval of the
plan of merger, except that:
(A) the offer may be conditioned on the tender of
a minimum number or percentage of shares of the corporation or of
any class or series of shares of the corporation;
(B) the offer may exclude any excluded shares;
and
(C) the organization may consummate separate
offers for separate classes or series of shares of the corporation
[owned at the time of the commencement of the offer by:
[(A) the corporation;
[(B) the organization making the offer;
[(C) any person who owns, directly or indirectly,
all of the ownership interests in the organization making the
offer; or
[(D) any direct or indirect wholly owned
subsidiary of a person described by Paragraph (A), (B), or (C)];
(3) immediately following the consummation of the
offer, shares that are irrevocably accepted for purchase or
exchange pursuant to the consummation of the offer [described by
Subdivision (2)] and that are received by the depository before the
expiration of the offer, together with [in addition to] the shares
that are otherwise owned by the consummating organization or its
qualified affiliates and any rollover shares, equal at least the
percentage of the shares of the corporation, and of each class or
series of those shares[, of the corporation] that, absent this
subsection, would be required to approve the plan of merger by:
(A) Section 21.457 and, if applicable, Section
21.458; and
(B) the certificate of formation of the
corporation;
(4) the organization consummating the offer or one of
its qualified affiliates [described by Subdivision (2)] merges with
or into the corporation pursuant to the plan of merger; and
(5) each outstanding share, other than excluded
shares, of each class or series of the corporation that is the
subject of and is not irrevocably accepted for purchase or exchange
in the offer [described by Subdivision (2)] is to be converted or
exchanged in the merger into, or into the right to receive, the same
amount and kind of consideration, as described by Section
10.002(a)(5), as to be paid or delivered for shares of such class or
series of the corporation irrevocably accepted for purchase or
exchange in the offer.
(d) In Subsection (c) and this subsection and, as
applicable, in Sections 10.355(d)(3)(B), 10.355(f), and
10.356(b)(3)(E)(iv):
(1) "Consummates," "consummation," or "consummating"
means irrevocably accepts for purchase or exchange shares tendered
pursuant to an [a tender or exchange] offer.
(2) "Depository" means an agent appointed to
facilitate consummation of an [the] offer [described by Subsection
(c)(2)].
(3) "Offer" means a tender offer or an exchange offer
that satisfies the requirements of Subsection (c)(2).
(e) For purposes of Subsection (c) and this subsection:
(1) "Excluded shares" means:
(A) shares of the corporation that are owned at
the commencement of the offer by:
(i) the corporation;
(ii) the organization consummating the
offer;
(iii) any person that owns, directly or
indirectly, all of the outstanding ownership interests of the
organization consummating the offer; or
(iv) any direct or indirect wholly owned
subsidiary of the corporation, the organization consummating the
offer, or any person described by Subparagraph (iii); and
(B) rollover shares.
(2) "Qualified affiliate" means, with respect to the
organization consummating an offer, any person that:
(A) owns, directly or indirectly, all of the
outstanding ownership interests of the organization consummating
the offer; or
(B) is a direct or indirect wholly owned
subsidiary of the organization consummating the offer or of any
person described by Paragraph (A).
(3) "Received" means:
(A) [(c)(3), "received,"] with respect to
certificated shares, [means:
[(1)] physical receipt of a certificate representing
shares accompanied by an executed letter of transmittal[, in the
case of certificated shares]; [and]
(B) [(2)] transfer into the depository's account
by means of [or] an agent's message; and
(C) with respect to uncertificated shares held of
record by a person other than a clearing corporation as nominee,
physical receipt of an executed letter of transmittal by the
depository [being received by the depository, in the case of
uncertificated shares].
(4) "Rollover shares" means any shares of the
corporation that are the subject of a written agreement, separate
from the offer, requiring the shares to be transferred,
contributed, or delivered to the organization consummating the
offer or any of the organization's qualified affiliates in exchange
for ownership interests in the organization consummating the offer
or a qualified affiliate of that organization. The term does not
include shares of a corporation described by this subdivision that,
immediately before the time a merger described by Subsection (c)
becomes effective, have not been transferred, contributed, or
delivered to the organization consummating the offer or any of the
organization's qualified affiliates pursuant to the written
agreement.
(f) For purposes of Subsections (c) and (e), shares cease to
be "received":
(1) with respect to certificated shares, if the
certificate representing the shares was canceled before
consummation of the offer; and
(2) with respect to uncertificated shares, to the
extent the uncertificated shares have been reduced or eliminated
due to any sale of those shares before the consummation of the
offer.
SECTION 9. Section 21.701, Business Organizations Code, is
amended to read as follows:
Sec. 21.701. DEFINITIONS. In this subchapter and
Subchapter P:
(1) "Close corporation" means a domestic corporation
formed under this subchapter or governed by this subchapter because
of Section 21.705, 21.706, or 21.707.
(2) "Close corporation provision" means a provision in
the certificate of formation of a close corporation or in a
shareholders' agreement of a close corporation.
(3) "Ordinary corporation" means a domestic
corporation that is not a close corporation.
(4) "Shareholders' agreement" means a written
agreement regulating an aspect of the business and affairs of or the
relationship among the shareholders of a close corporation that has
been executed under this subchapter.
SECTION 10. Section 21.901, Business Organizations Code, is
amended by amending Subdivisions (2) and (4) and adding Subdivision
(5-a) to read as follows:
(2) "Defective corporate act" means:
(A) an overissue;
(B) an election or appointment of directors that
is void or voidable due to a failure of authorization; or
(C) any act or transaction purportedly taken by
or on behalf of the corporation that is, and at the time the act or
transaction was purportedly taken would have been, within the power
of a corporation to take under the corporate statute, without
regard to the failure of authorization identified in Section
21.903(a)(4), but is void or voidable due to a failure of
authorization.
(4) "Failure of authorization" means:
(A) the failure to authorize or effect an act or
transaction in compliance with the provisions of the corporate
statute, the governing documents of the corporation, [or] any plan
or agreement to which the corporation is a party, or the disclosure
set forth in any proxy or consent solicitation statement, if and to
the extent the failure would render the act or transaction void or
voidable; or
(B) the failure of the board of directors or an
officer of the corporation to authorize or approve an act or
transaction taken by or on behalf of the corporation that required
the prior authorization or approval of the board of directors or the
officer.
(5-a) "Putative record date" means, with respect to
any defective corporate act that involved the establishment of a
record date for a meeting of or action by shareholders or any other
purpose, that record date.
SECTION 11. Section 21.905, Business Organizations Code, is
amended to read as follows:
Sec. 21.905. SHAREHOLDER APPROVAL OF RATIFIED DEFECTIVE
CORPORATE ACT REQUIRED; EXCEPTION. Each defective corporate act
ratified under Section 21.903 must be submitted to shareholders for
approval as provided by Sections 21.906 and 21.907, unless:
(1)(A) no other provision of the corporate statute, no
provision of the corporation's governing documents, and no
provision of any plan or agreement to which the corporation is a
party would have required shareholder approval of:
(i) [(A)] the defective corporate act to be
ratified at the time of that defective corporate act; or
(ii) [(B)] the type of defective corporate
act to be ratified at the time the board of directors adopts the
resolutions ratifying that defective corporate act under Section
21.903; and
(B) [(2)] the defective corporate act to be
ratified did not result from a failure to comply with Subchapter M;
or
(2) as of the record date for determining the
shareholders entitled to vote on the ratification of the defective
corporate act, there are no valid shares outstanding and entitled
to vote on the ratification, regardless of whether as of that record
date there exist any putative shares.
SECTION 12. Section 21.906(a), Business Organizations
Code, is amended to read as follows:
(a) If the ratification of a defective corporate act is
required to be submitted to the shareholders for approval under
Section 21.905, notice of the time, place, if any, and purpose of
the meeting shall be given at least 20 days before the date of the
meeting to:
(1) each holder of record, as of the record date of the
meeting, of valid shares and putative shares, regardless of whether
the shares are voting or nonvoting, at the address of the holder as
it appears or most recently appeared, as appropriate, on the
corporation's records; and
(2) each holder of record of valid shares and putative
shares, regardless of whether the shares are voting or nonvoting,
other than to a holder whose identity or address cannot be
ascertained from the corporation's records:
(A) as of the time of the defective corporate
act; or
(B) in the case of any defective corporate act
that involved the establishment of a putative record date, as of
that putative record date[, except that notice is not required to be
given to a holder whose identity or address cannot be ascertained
from the corporation's records].
SECTION 13. Section 21.911(e), Business Organizations
Code, is amended to read as follows:
(e) Notwithstanding Subsections (a)-(d):
(1) notice is not required to be given under this
section to a person if notice of the ratification of the defective
corporate act is given to that person in accordance with Section
21.906; and
(2) for a corporation that has a class of stock listed
on a national securities exchange, the notice required by this
section and Section 21.906(a)(2) may be considered given if the
information contained in the notice is disclosed in a document
publicly filed by the corporation with the Securities and Exchange
Commission under Section 13, 14, or 15(d), Securities Exchange Act
of 1934 (15 U.S.C. Section 78m, 78n, or 78o(d)), and any rules
promulgated under that Act.
SECTION 14. Section 21.953(c), Business Organizations
Code, is amended to read as follows:
(c) The name of the public benefit corporation specified in
its certificate of formation may contain the words "public benefit
corporation," the abbreviation "P.B.C.," or the designation "PBC."
If the name does not contain those words or that abbreviation or
designation, [the corporation must,] before the issuance of
[issuing] unissued shares or the disposition [disposing] of
treasury shares and except as provided by Subsection (d), [provide]
notice that the corporation is a public benefit corporation shall
be given to any person:
(1) to whom the unissued shares are issued; or
(2) who acquires the treasury shares.
SECTION 15. Section 21.955(b), Business Organizations
Code, is amended to read as follows:
(b) A notice sent to any person [by a public benefit
corporation] under Section 3.205 must state conspicuously that the
corporation is a public benefit corporation governed by this
subchapter.
SECTION 16. Section 22.001, Business Organizations Code, is
amended by adding Subdivision (3-a) to read as follows:
(3-a) "Director" means a person who is a member of the
board of directors, regardless of the name or title used to
designate the person. The term does not include a person designated
as a director of the corporation, or as an ex officio, honorary, or
other type of director of the corporation if the person is not
entitled to vote as a director.
SECTION 17. Section 22.002, Business Organizations Code, is
amended to read as follows:
Sec. 22.002. MEETINGS BY REMOTE COMMUNICATIONS TECHNOLOGY.
A [Subject to the provisions of this code and the certificate of
formation and bylaws of a corporation, a] meeting of the members of
a corporation, the board of directors of a corporation, or any
committee designated by the board of directors of a corporation may
be held by means of a conference telephone or similar
communications equipment, another suitable [remote] electronic
communications system, including videoconferencing technology or
the Internet, or any combination of those means, in accordance with
Section 6.002 [only if:
[(1) each person entitled to participate in the
meeting consents to the meeting being held by means of that system;
and
[(2) the system provides access to the meeting in a
manner or using a method by which each person participating in the
meeting can communicate concurrently with each other participant].
SECTION 18. Section 22.210, Business Organizations Code, is
amended to read as follows:
Sec. 22.210. NON-DIRECTOR RIGHTS AND LIMITATIONS [EX
OFFICIO MEMBER OF BOARD]. [(a)] The certificate of formation or
bylaws of a corporation may provide that a person who is not a
director [may be an ex officio member of the board of directors of
the corporation.
[(b) A person designated as an ex officio member of the
board] is entitled to receive notice of and to attend [board]
meetings of the board of directors. By having those rights, the
person does not have the authority, duties, or liabilities of a
director and is not a governing person of the corporation.
[(c) An ex officio member is not entitled to vote unless the
certificate of formation or bylaws authorize the member to vote. An
ex officio member of the board who is not entitled to vote does not
have the duties or liabilities of a director provided by this
chapter.]
SECTION 19. Section 22.356(b), Business Organizations
Code, is amended to read as follows:
(b) The books and records of a corporation other than a bona
fide alumni association are subject to audit at the discretion of
the state auditor if:
(1) the corporation's certificate of formation
[charter] specifically dedicates the corporation's activities to
the benefit of a particular state agency; and
(2) a board member, officer, or employee of that state
agency is a director [sits on the board of directors] of the
corporation [in other than an ex officio capacity].
SECTION 20. Sections 6.252(d) and (e), Business
Organizations Code, are repealed.
SECTION 21. This Act takes effect September 1, 2019.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1971 passed the Senate on
May 3, 2019, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1971 passed the House on
May 22, 2019, by the following vote: Yeas 144, Nays 0, two
present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor