FILED SENATE
Apr 5, 2021
GENERAL ASSEMBLY OF NORTH CAROLINA
S.B. 507
SESSION 2021 PRINCIPAL CLERK
S D
SENATE BILL DRS35223-MV-16
Short Title: Modify Business Corporation Act. (Public)
Sponsors: Senator Galey (Primary Sponsor).
Referred to:
1 A BILL TO BE ENTITLED
2 AN ACT TO MAKE VARIOUS CHANGES TO THE NORTH CAROLINA BUSINESS
3 CORPORATION ACT, AS RECOMMENDED BY THE NORTH CAROLINA BAR
4 ASSOCIATION.
5 The General Assembly of North Carolina enacts:
6
7 PART I. CLARIFY THAT VOTING SHARES CONTROLLED BY CORPORATION
8 ARE NOT ENTITLED TO VOTE
9 SECTION 1.(a) G.S. 55-7-21 reads as rewritten:
10 "§ 55-7-21. Voting entitlement of shares.
11 (a) Except as provided in subsections (b) and (c) of this section or unless the articles of
12 incorporation provide otherwise, each outstanding share, regardless of class, is entitled to one
13 vote on each matter voted on at a shareholders' meeting.
14 (b) Absent special circumstances, the shares of a corporation are not entitled to vote if
15 they are owned, directly or indirectly, by a second corporation, domestic or foreign, and the first
16 corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of
17 the second corporation.owned by or otherwise belong to the corporation, directly or indirectly,
18 through an entity of which a majority of the voting power is held directly or indirectly by the
19 corporation or which is otherwise controlled by the corporation.
20 (c) Subsection (b) of this section does not limit the power of a corporation to vote any
21 shares, including its own shares, held by it held, directly or indirectly, in a fiduciary
22 capacity.capacity, unless they are held for the benefit of, or otherwise belong to, the corporation,
23 directly or indirectly, through an entity of which a majority of the voting power is held directly
24 or indirectly by the corporation or which is otherwise controlled by the corporation.
25 (d) Redeemable shares are not entitled to vote after notice of redemption is given to the
26 holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company,
27 or other financial institution under an irrevocable obligation to pay the holders the redemption
28 price on surrender of the shares.
29 (e) For purposes of this section, "voting power" means the current power to vote in the
30 election of directors of a corporation or to elect, select, or appoint managers, managing members,
31 or other members of the governing body of another entity."
32 SECTION 1.(b) This section becomes effective October 1, 2021.
33
34 PART II. CLARIFY THAT BOARD MAY FIX COMPENSATION OF DIRECTORS
35 FOR SERVICES IN ANY CAPACITY AS A DIRECTOR
36 SECTION 2.(a) G.S. 55-8-11 reads as rewritten:
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 General Assembly Of North Carolina Session 2021
1 "§ 55-8-11. Compensation of directors.
2 Unless the articles of incorporation or bylaws provide otherwise, the board of directors,
3 without regard to personal interest, may fix the compensation of directors for services in any
4 capacity. capacity as a director. The compensation established pursuant to this section of directors
5 of a public corporation or of a corporation that so provides in its articles of incorporation is
6 presumed to be fair to the corporation unless proven not to be fair to the corporation by a
7 preponderance of the evidence."
8 SECTION 2.(b) This section becomes effective October 1, 2021.
9
10 PART III. CLARIFY THAT A QUORUM IS A MAJORITY UNLESS OTHERWISE
11 FIXED AND SHALL NOT BE FIXED AT LESS THAN ONE-THIRD
12 SECTION 3.(a) G.S. 55-8-24 reads as rewritten:
13 "§ 55-8-24. Quorum and voting.
14 (a) Unless the articles of incorporation or bylaws require provide for a greater number,
15 or lesser number or unless otherwise expressly provided in this Chapter, a quorum of a board of
16 directors consists of:of a majority of the number of directors specified in or fixed in accordance
17 with the articles of incorporation or bylaws.
18 (1) A majority of the fixed number of directors if the corporation has a fixed board
19 size; or
20 (2) A majority of the number of directors prescribed, or if no number is prescribed
21 the number in office immediately before the meeting begins, if the corporation
22 has a variable-range size board.
23 (b) The quorum of the board of directors provided in the articles of incorporation or a
24 bylaw adopted by the shareholders may authorize a quorum of a board of directors to bylaws
25 shall not consist of no fewer less than one-third of the fixed or prescribed number of directors
26 determined under subsection (a).specified in or fixed in accordance with the articles of
27 incorporation or bylaws.
28 (c) If a quorum is present when a vote is taken, the affirmative vote of a majority of
29 directors present is the act of the board of directors unless the articles of incorporation or bylaws
30 require the vote of a greater number of directors.directors or unless otherwise expressly provided
31 in this Chapter.
32 (d) A director who is present at a meeting of the board of directors or a committee or
33 subcommittee of the board of directors when corporate action is taken is deemed to have assented
34 to the action taken unless any of the following requirements are met:
35 (1) The director objects at the beginning of the meeting (or meeting, or promptly
36 upon the director's arrival) arrival, to holding it or transacting business at the
37 meeting.
38 (2) The director's dissent or abstention from the action taken is entered in the
39 minutes of the meeting.
40 (3) The director files written notice of the director's dissent or abstention with the
41 presiding officer of the meeting before its adjournment or with the corporation
42 immediately after adjournment of the meeting. The right of dissent or
43 abstention is not available to a director who votes in favor of the action taken."
44 SECTION 3.(b) This section becomes effective October 1, 2021.
45
46 PART IV. AUTHORIZE CHANGE OF CORPORATE NAME WITHOUT
47 SHAREHOLDER APPROVAL
48 SECTION 4.(a) G.S. 55-10-02 reads as rewritten:
49 "§ 55-10-02. Amendment by board of directors.
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1 Unless the articles of incorporation provide otherwise, a corporation's board of directors may
2 adopt any of the following amendments to the corporation's articles of incorporation without
3 shareholder approval:
4 …
5 (4) If the corporation has only one class of shares outstanding:outstanding, to do
6 any of the following:
7 a. To change Change each issued and unissued authorized share of the
8 class into a greater number of whole shares of the class; orclass.
9 b. To increase Increase the number of authorized shares of the class to
10 the extent necessary to permit the issuance of shares as a share
11 dividend.
12 (5) To change the corporate name by substituting the word "corporation",
13 "incorporated", "company", "limited", or the abbreviation "corp.", "inc.",
14 "co.", or "ltd.", for a similar word or abbreviation in the name, or by adding,
15 deleting, or changing a geographical attribution for the name.
16 …."
17 SECTION 4.(b) This section becomes effective October 1, 2021.
18
19 PART V. CLARIFY JURISDICTION OF THE COURT IN AN APPRAISAL
20 PROCEEDING COMMENCED UNDER G.S. 55-13-30
21 SECTION 5.(a) G.S. 55-13-30 reads as rewritten:
22 "§ 55-13-30. Court Action.
23 (a) If a shareholder makes a demand for payment under G.S. 55-13-28 which that remains
24 unsettled, the corporation shall commence a proceeding within 60 days after receiving the
25 payment demand by filing a complaint with the Superior Court Division of the General Court of
26 Justice to determine whether the shareholder complied with the requirements of this Article and
27 is entitled to appraisal rights, and, if so, to determine the fair value of the shares and accrued
28 interest. The shareholder has the burden of proving that the shareholder complied with the
29 requirements of this Article regarding entitlement to appraisal rights. If the superior court
30 determines that a shareholder has not complied with the requirements of this Article, the
31 shareholder is not entitled to appraisal rights, and the court shall dismiss the proceeding as to the
32 shareholder. If the corporation does not commence the proceeding within the 60-day period, the
33 corporation shall pay in cash to each shareholder the amount the shareholder demanded pursuant
34 to G.S. 55-13-28, plus interest.
35 (a1) Repealed by Session Laws 1997-202, s. 4.
36 (b) The corporation shall commence the proceeding in the appropriate court of the county
37 where the corporation's principal office (or, office, or, if none, its registered office) office in this
38 State is located. If the corporation is a foreign corporation without a registered office in this State,
39 it shall commence the proceeding in the county in this State where the principal office or
40 registered office of the domestic corporation merged with the foreign corporation was located at
41 the time of the transaction.
42 (c) The corporation shall make all shareholders (whether shareholders, whether or not
43 residents of this State) State, whose demands remain unsettled parties to the proceeding as in an
44 action against their shares and all parties must shall be served with a copy of the complaint.
45 Nonresidents may be served by registered or certified mail or by publication as provided by law.
46 (d) The jurisdiction of the superior court in which the proceeding is commenced under
47 subsection (b) of this section is plenary and exclusive. The court may appoint one or more persons
48 as appraisers to receive evidence and recommend a decision on the question of fair value. The
49 appraisers shall have the powers described in the order appointing them, or in any amendment to
50 it. The shareholders demanding appraisal rights are entitled to the same discovery rights as parties
51 in other civil proceedings. There shall be is no right to a trial by jury.
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1 (e) Each shareholder made a party to the proceeding that is determined by the superior
2 court to have complied with the requirements of this Article and is entitled to appraisal rights is
3 entitled to judgment either (i) for the amount, if any, by which the court finds the fair value of
4 the shareholder's shares, plus interest, exceeds the amount paid by the corporation to the
5 shareholder for the shareholder's shares or (ii) for the fair value, plus interest, of the shareholder's
6 shares for which the corporation elected to withhold payment under G.S. 55-13-27."
7 SECTION 5.(b) This section is effective when it becomes law and applies to
8 proceedings commenced on or after that date.
9
10 PART VI. MODERNIZE CORPORATE RECORDS REQUIREMENTS AND CLARIFY
11 INSPECTION RIGHTS
12 SECTION 6.(a) G.S. 55-16-01 reads as rewritten:
13 "§ 55-16-01. Corporate records.
14 (a) A corporation shall keep as permanent records minutes of all meetings of its
15 incorporators, shareholders and board of directors, a record of all actions taken by the
16 shareholders or board of directors without a meeting, and a record of all actions taken by a
17 committee of the board of directors in place of the board of directors on behalf of the
18 corporation.maintain the following records:
19 (1) Its articles of incorporation as currently in effect.
20 (2) Its bylaws as currently in effect.
21 (3) All written communications within the past three years to shareholders
22 generally.
23 (4) Minutes of all meetings of, and records of all actions taken without a meeting
24 by, its shareholders, its board of directors, and board committees established
25 under section G.S. 55-8-25.
26 (5) A list of the names and business addresses of its current directors and officers.
27 (6) Its most recent annual report delivered as required by G.S. 55-16-22.
28 (b) A corporation shall maintain appropriate accounting records.all annual financial
29 statements prepared for the corporation for its last three fiscal years, or each year of its existence
30 if shorter than three years, and any audit or other reports with respect to the financial statements.
31 (c) A corporation or its agent shall maintain a record of its shareholders, in a form that
32 permits preparation of a list of the names and addresses of all current shareholders, in alphabetical
33 order by class of shares showing the number and class of shares held by each.each shareholder.
34 (d) A corporation shall maintain its records in written form or in another form capable of
35 conversion into written form within a reasonable time.accounting records in a form that permits
36 preparation of its financial statements.
37 (e) A corporation shall keep a copy of the following records at its principal office:
38 (1) Its articles or restated articles of incorporation and all amendments to them
39 currently in effect;
40 (2) Its bylaws or restated bylaws and all amendments to them currently in effect;
41 (3) Resolutions adopted by its board of directors creating one or more classes or
42 series of shares, and fixing their relative rights, preferences, and limitations,
43 if shares issued pursuant to those resolutions are outstanding;
44 (4) The minutes of all shareholders' meetings, and records of all action taken by
45 shareholders without a meeting, for the past three years;
46 (5) All written communications to shareholders generally within the past three
47 years and the financial statements required to be made available to the
48 shareholders for the past three years under G.S. 55-16-20;
49 (6) A list of the names and business addresses of its current directors and officers;
50 and
51 (7) Its most recent annual report delivered as required by G.S. 55-16-22.
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1 maintain the records specified in this section in a manner so that they may be made available
2 for inspection within a reasonable time."
3 SECTION 6.(b) Article 16 of Chapter 55 of the General Statutes is amended by
4 adding a new section to read:
5 "§ 55-16-01A. Definitions.
6 In this Article, the following definitions apply:
7 (1) Reserved.
8 (2) Reserved.
9 (3) Qualified shareholder. – A person who has been a shareholder in the
10 corporation for at least six months immediately preceding the shareholder's
11 demand for inspection of records or who holds at least five percent (5%) of
12 the corporation's outstanding shares of any class.
13 (4) Shareholder. – A record shareholder or a beneficial shareholder whose shares
14 are held in a voting trust or by a nominee on the beneficial shareholder's behalf
15 and whose beneficial ownership is certified to the corporation by that voting
16 trust or nominee."
17 SECTION 6.(c) G.S. 55-16-02 reads as rewritten:
18 "§ 55-16-02. Inspection of records by shareholders.
19 (a) A qualified shareholder of a corporation is entitled to inspect and copy, during regular
20 business hours at the corporation's principal office, any of the records of the corporation
21 described in G.S. 55-16-01(e) if he G.S. 55-16-01(a), excluding minutes of meetings of, and
22 records of actions taken without a meeting by, the corporation's board of directors and board
23 committees established under G.S. 55-8-25, if the qualified shareholder gives the corporation
24 written notice of his the qualified shareholder's demand at least five business days before the date
25 on which he the qualified shareholder