Bill Summary – FastDemocracy

LEGISLATIVE GENERAL COUNSEL                                               H.B. 404
Approved for Filing: A.L. West 6
          6 02-24-20 4:33 PM 6
                 CORPORATE ELECTRONIC RECORDS AMENDMENTS
                                       2020 GENERAL SESSION
                                           STATE OF UTAH
                              Chief Sponsor: Jeffrey D. Stenquist
                                  Senate Sponsor: ____________
 6
 LONG TITLE
 General Description:
            This bill amends provisions in Title 16, Chapter 10a, Utah Revised Business
 Corporation Act, related to corporate records.
 Highlighted Provisions:
        This bill:
        < defines terms;
        < authorizes a corporation to:
            C    use an electronic network to create and maintain corporate records;
            C    use a data address to identify a corporation's shareholder; and
            C    accept a shareholder vote if signed by a network signature that corresponds to a
 data address;
        < provides requirements for the use of electronic networks; and
        < makes technical and conforming changes.
 Money Appropriated in this Bill:
        None
 Other Special Clauses:
        None
 Utah Code Sections Affected:
                                                                                                        H.B. 404
 AMENDS:
        16-10a-102, as last amended by Laws of Utah 2008, Chapter 249
     *HB0404*
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        16-10a-720, as last amended by Laws of Utah 2010, Chapter 378
        16-10a-724, as enacted by Laws of Utah 1992, Chapter 277
        16-10a-730, as last amended by Laws of Utah 2010, Chapter 378
        16-10a-1601, as enacted by Laws of Utah 1992, Chapter 277
        16-10a-1602, as enacted by Laws of Utah 1992, Chapter 277
        42-2-6.6, as last amended by Laws of Utah 2015, Chapter 240
34
 Be it enacted by the Legislature of the state of Utah:
        Section 1. Section 16-10a-102 is amended to read:
        16-10a-102. Definitions.
        As used in this chapter:
        (1) (a) "Address" means a location where mail can be delivered by the United States
 Postal Service.
        (b) "Address" includes:
        (i) a post office box number;
        (ii) a rural free delivery route number; and
        (iii) a street name and number.
        (2) "Affiliate" means a person that directly or indirectly through one or more
 intermediaries controls, or is controlled by, or is under common control with, the person
 specified.
        (3) "Assumed corporate name" means a name assumed for use in this state by a foreign
 corporation [pursuant to] under Section 16-10a-1506 because [its] the foreign corporation's
 corporate name is not available for use in this state.
        (4) "Articles of incorporation" include:
        (a) amended and restated articles of incorporation;
        (b) articles of merger; and
        (c) a document of a similar import to those described in Subsections (4)(a) and (b).
        (5) "Authorized shares" means the shares of all classes a domestic or foreign
 corporation is authorized to issue.
        (6) "Bylaws" includes amended bylaws and restated bylaws.
        (7) "Cash" and "money" are used interchangeably in this chapter and mean:
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       02-24-20 4:33 PM                                                                        H.B. 404
         (a) legal tender;
         (b) a negotiable instrument; and
         (c) a cash equivalent readily convertible into legal tender.
         (8) "Conspicuous" means so written that a reasonable person against whom the writing
 is to operate should have noticed [it] the writing, including printing or typing in:
         (a) italics;
         (b) boldface;
         (c) contrasting color;
         (d) capitals; or
         (e) underlining.
         (9) "Control" or a "controlling interest" means the direct or indirect possession of the
 power to direct or cause the direction of the management and policies of an entity, whether
 through the ownership of voting shares, by contract, or otherwise.
         (10) "Corporate name" means:
         (a) the name of a domestic corporation or a domestic nonprofit corporation as stated in
 [its] the corporation's articles of incorporation; or
         (b) the name of a foreign corporation or a foreign nonprofit corporation as stated in
 [its] the corporation's articles of incorporation or document of similar import.
         (11) "Corporation" or "domestic corporation" means a corporation for profit that:
         (a) is not a foreign corporation; and
         (b) is incorporated under or subject to this chapter.
         (12) "Data address" means a string of alphanumeric characters on a distributed
 electronic network or database that may be accessed to facilitate or record a transaction on the
 distributed electronic network or database only by knowledge or possession of a private key.
         [(12)] (13) "Deliver" includes delivery by mail or another means of transmission
 authorized by Section 16-10a-103, except that delivery to the division means actual receipt by
 the division.
         [(13)] (14) (a) "Distribution" means the following by a corporation to or for the benefit
 of [its] the corporation's shareholders in respect of any of the corporation's shares:
         (i) a direct or indirect transfer of money or other property, other than a corporation's
 own shares; or
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        H.B. 404                                                                   02-24-20 4:33 PM
        (ii) incurrence of indebtedness by the corporation.
        (b) A distribution may be in the form of:
        (i) a declaration or payment of a dividend;
        (ii) a purchase, redemption, or other acquisition of shares;
        (iii) distribution of indebtedness; or
        (iv) another form.
        [(14)] (15) "Division" means the Division of Corporations and Commercial Code.
        [(15)] (16) "Effective date," when referring to a document filed by the division, means
 the time and date determined in accordance with Section 16-10a-123.
        [(16)] (17) "Effective date of notice" means the date notice is effective as provided in
 Section 16-10a-103.
        [(17)] (18) "Electronic transmission" or "electronically transmitted" means a process of
 communication not directly involving the physical transfer of paper, including a process of
 communication that uses a distributed electronic network or database, that is suitable for the
 receipt, retention, retrieval, and reproduction of information by the recipient, whether by
 e-mail, facsimile, or otherwise.
        [(18)] (19) "Employee" includes an officer but not a director, unless the director
 accepts a duty that makes that director also an employee.
        [(19)] (20) "Entity" includes:
        (a) a domestic and foreign corporation;
        (b) a nonprofit corporation;
        (c) a limited liability company;
        (d) a profit or nonprofit unincorporated association;
        (e) a business trust;
        (f) an estate;
        (g) a partnership;
        (h) a trust;
        (i) two or more persons having a joint or common economic interest;
        (j) a state;
        (k) the United States; and
        (l) a foreign government.
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        02-24-20 4:33 PM                                                                       H.B. 404
        [(20)] (21) "Foreign corporation" means a corporation for profit incorporated under a
 law other than the law of this state.
        [(21)] (22) "Governmental subdivision" means:
        (a) county;
        (b) municipality; or
        (c) another type of governmental subdivision authorized by the laws of this state.
        (23) "Identity" means the name of a shareholder or the data address for which the
 shareholder has knowledge or possession of the private key uniquely associated with the data
 address.
        [(22)] (24) "Individual" means:
        (a) a natural person;
        (b) the estate of an incompetent individual; or
        (c) the estate of a deceased individual.
        [(23)] (25) "Mail," "mailed," or "mailing" means deposit, deposited, or depositing in
 the United States mail, properly addressed, first class postage prepaid, and includes registered
 or certified mail for which the proper fee is paid.
        (26) "Network signature" means a string of alphanumeric characters that, when
 broadcast by a shareholder to the data address's corresponding distributed electronic network or
 database, provides reasonable assurances to a corporation that the shareholder has knowledge
 or possession of the private key uniquely associated with the data address.
        [(24)] (27) "Notice" [is as provided] means the same as that term is defined in Section
 16-10a-103.
        [(25)] (28) "Principal office" means the office, in or out of this state, designated by a
 domestic or foreign corporation as [its] the corporation's principal office in the most recent
 document on file with the division providing the information, including:
        (a) an annual report;
        (b) an application for a certificate of authority; or
        (c) a notice of change of principal office.
        [(26)] (29) "Proceeding" includes:
        (a) a civil suit;
        (b) arbitration or mediation; and
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        H.B. 404                                                                      02-24-20 4:33 PM
          (c) a criminal, administrative, or investigatory action.
          [(27)] (30) "Qualified shares" means, with respect to a director's conflicting interest
 transaction [pursuant to] under Section 16-10a-853, one or more shares entitled to vote on the
 transaction, except a share:
          (a) that, to the knowledge, before the vote, of the secretary, other officer, or agent of
 the corporation authorized to tabulate votes, is beneficially owned; or
          (b) the voting of which is controlled, by:
          (i) a director who has a conflicting interest respecting the transaction; or
          (ii) a related person of that director[; or].
          [(iii) a person referred to in Subsections (27)(b)(i) and (ii).]
          [(28)] (31) "Receive," when used in reference to receipt of a writing or other document
 by a domestic or foreign corporation, means the writing or other document is actually received
 by:
          (a) the corporation at [its] the corporation's:
          (i) registered office in this state; or
          (ii) principal office;
          (b) the secretary of the corporation, wherever the secretary is found; or
          (c) another person authorized by the bylaws or the board of directors to receive the
 writing or other document, wherever that person is found.
          [(29)] (32) (a) "Record date" means the date established under Part 6, Shares and
 Distributions, or Part 7, Shareholders, on which a corporation determines the identity of [its]
 the corporation's shareholders.
          (b) The determination under Subsection [(29)] (32)(a) shall be made as of the close of
 business on the record date unless another time for doing so is specified when the record date is
 fixed.
          (33) "Record of shareholders" means a record administered by or on behalf of a
 corporation that records the identity of:
          (a) each of the corporation's shareholders; and
          (b) the number and class of shares held by each shareholder in accordance with Section
 16-10a-1601.
          [(30)] (34) "Registered office" means the office within this state designated by a
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        02-24-20 4:33 PM                                                                          H.B. 404
 domestic or foreign corporation as [its] the corporation's registered office in the most recent
 document on file with the division providing that information, including:
        (a) articles of incorporation;
        (b) an application for a certificate of authority; or
        (c) a notice of change of registered office.
        [(31)] (35) "Related person" of a director means:
        (a) the spouse of the director;
        (b) a child, grandchild, sibling, or parent of the director;
        (c) the spouse of a child, grandchild, sibling, or parent of the director;
        (d) an individual having the same home as the director;
        (e) a trust or estate of which the director or any other individual specified in this
 Subsection [(31)] (35) is a substantial beneficiary; or
        (f) a trust, estate, incompetent, conservatee, or minor of which the director is a
 fiduciary.
        [(32)] (36) "Secretary" means the corporate officer to whom the bylaws or the board of
 directors delegates responsibility under Subsection 16-10a-830(3) for:
        (a) the preparation and maintenance of:
        (i) minutes of the meetings of the board of directors and of the shareholders; and
        (ii) the other records and information required to be kept by the corporation by Section
 16-10a-830; and
        (b) authenticating records of the corporation.
        [(33)] (37) " Share" means the unit into which the proprietary interests in a corporation
 are divided.
        [(34)] (38) (a) "Shareholder" means:
        (i) the person in whose name a share is registered in the records of a corporation; [or]
        (ii) the beneficial owner of a share to the extent recognized [pursuant to] under Section
 16-10a-723[.]; or
        (iii) the owner of a private key that is uniquely associated with a data address that
 facilitates or records the sending and receiving of shares.
        (b) For purposes of this chapter:
        (i) the following, identified as a shareholder in a corporation's current record of
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        H.B. 404                                                                     02-24-20 4:33 PM
 shareholders, constitute one shareholder:
        (A) (I) three or fewer coowners; or
        (II) in the case of more than three coowners, each coowner in excess of the first three is
 counted as a separate shareholder;
        (B) a corporation, limited liability company, partnership, trust, estate, or other entity;
 and
        (C) the trustees, guardians, custodians, or other fiduciaries of a single trust, estate, or
 account;
        (ii) shareholdings registered in substantially similar names constitute one shareholder if
 it is reasonable to believe that the names represent the same person; and
        (iii) if the record of a shareholder is not maintained in accordance with accepted
 practice, an additional person who would be identified as an owner on that record if [it] the
 record had been maintained in accordance with accepted practice shall be included as a holder
 of record.
        [(35)] (39) "Subscriber" means a person who subscribes for shares in a corporation,
 whether before or after incorporation.
        [(36)] (40) "Tribe" means a tribe, band, nation, pueblo, or other organized group or
 community of Indians, including an Alaska Native village, that is legally recognized as eligible
 for and is consistent with a special program, service, or entitlement provided by the United
 States to Indians because of their status as Indians.
        [(37)] (41) "Tribal corporation" means a corporation:
        (a) incorporated under the law of a tribe; and
        (b) that is at least 51% owned or controlled by the tribe.
        [(38)] (42) (a) "Voting group" means all shares of one or more classes or series that
 under the articles of incorporation or this chapter are entitled to vote and be counted together
 collectively on a matter at a meeting of shareholders.
        (b) All shares entitled by the articles of incorporation or this chapter to vote generally
 on the matter are for that purpose a single voting group.
        Section 2. Section 16-10a-720 is amended to read:
        16-10a-720. Shareholders' list for meeting.
        (1) (a) After fixing a record date for a shareholders' meeting, a corporation shall
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        02-24-20 4:33 PM                                                                             H.B. 404
 prepare [a] an alphabetical or numerical list of the [names] identities of all [its] the
 corporation's shareholders who are entitled to be given notice of the meeting. [The list shall be]
         (b) The corporation shall ensure that the list:
         (i) is arranged by voting group, and within each voting group by class or series of
 shares[. The list shall be alphabetical within each class or series and shall show the address of,
 and the number of shares held by, each shareholder.]; and
         (ii) shows the number of shares held by each shareholder.
         (2) (a) The shareholders' list shall be available for inspection by any shar