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LEGISLATURE OF NEBRASKA
ONE HUNDRED SIXTH LEGISLATURE
SECOND SESSION
LEGISLATIVE BILL 808
Introduced by La Grone, 49; Kolterman, 24.
Read first time January 08, 2020
Committee: Banking, Commerce and Insurance
1 A BILL FOR AN ACT relating to the Nebraska Model Business Corporation
2 Act; to amend section 21-201, Revised Statutes Cumulative
3 Supplement, 2018; to define terms; to provide for the ratification
4 of defective corporate actions; to harmonize provisions; and to
5 repeal the original section.
6 Be it enacted by the people of the State of Nebraska,
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1 Section 1. Section 21-201, Revised Statutes Cumulative Supplement,
2 2018, is amended to read:
3 21-201 (MBCA 1.01) Sections 21-201 to 21-2,232 and sections 2 to 9
4 of this act shall be known and may be cited as the Nebraska Model
5 Business Corporation Act.
6 Sec. 2. (MBCA 1.45) In sections 2 to 9 of this act:
7 (1) Corporate action means any action taken by or on behalf of the
8 corporation, including any action taken by the incorporator, the board of
9 directors, a committee of the board of directors, an officer or agent of
10 the corporation, or the shareholders.
11 (2) Date of the defective corporate action means the date, or the
12 approximate date, if the exact date is unknown, the defective corporate
13 action was purported to have been taken.
14 (3) Defective corporate action means (i) any corporate action
15 purportedly taken that is, and at the time such corporate action was
16 purportedly taken would have been, within the power of the corporation,
17 but is void or voidable due to a failure of authorization, and (ii) an
18 overissue.
19 (4) Failure of authorization means the failure to authorize,
20 approve, or otherwise effect a corporate action in compliance with the
21 provisions of the Nebraska Model Business Corporation Act, the articles
22 of incorporation or bylaws, a corporate resolution or any plan or
23 agreement to which the corporation is a party, if and to the extent such
24 failure would render such corporate action void or voidable.
25 (5) Overissue means the purported issuance of:
26 (i) Shares of a class or series in excess of the number of shares of
27 a class or series the corporation has the power to issue under section
28 21-237 at the time of such issuance; or
29 (ii) Shares of any class or series that is not then authorized for
30 issuance by the articles of incorporation.
31 (6) Putative shares means the shares of any class or series,
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1 including shares issued upon exercise of rights, options, warrants, or
2 other securities convertible into shares of the corporation, or interests
3 with respect to such shares, that were created or issued as a result of a
4 defective corporate action, that (i) but for any failure of authorization
5 would constitute valid shares, or (ii) cannot be determined by the board
6 of directors to be valid shares.
7 (7) Valid shares means the shares of any class or series that have
8 been duly authorized and validly issued in accordance with the act,
9 including as a result of ratification or validation under sections 2 to 9
10 of this act.
11 (8) Validation effective time with respect to any defective
12 corporate action ratified under sections 2 to 9 of this act means the
13 later of:
14 (i) The time at which the ratification of the defective corporate
15 action is approved by the shareholders, or if approval of shareholders is
16 not required, the time at which the notice required by section 6 of this
17 act becomes effective in accordance with section 21-215; and
18 (ii) The time at which any articles of validation filed in
19 accordance with section 8 of this act become effective.
20 The validation effective time shall not be affected by the filing or
21 pendency of a judicial proceeding under section 9 of this act or
22 otherwise, unless otherwise ordered by the court.
23 Sec. 3. (MBCA 1.46) (a) A defective corporate action shall not be
24 void or voidable if ratified in accordance with section 4 of this act or
25 validated in accordance with section 9 of this act.
26 (b) Ratification under section 4 of this act or validation under
27 section 9 of this act shall not be deemed to be the exclusive means of
28 ratifying or validating any defective corporate action, and the absence
29 or failure of ratification in accordance with sections 2 to 9 of this act
30 shall not, of itself, affect the validity or effectiveness of any
31 corporate action properly ratified under common law or otherwise, nor
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1 shall it create a presumption that any such corporate action is or was a
2 defective corporate action or void or voidable.
3 (c) In the case of an overissue, putative shares shall be valid
4 shares effective as of the date originally issued or purportedly issued
5 upon:
6 (1) The effectiveness under sections 2 to 9 of this act and under
7 sections 21-2,150 to 21-2,160 of an amendment to the articles of
8 incorporation authorizing, designating, or creating such shares; or
9 (2) The effectiveness of any other corporate action under sections 2
10 to 9 of this act ratifying the authorization, designation, or creation of
11 such shares.
12 Sec. 4. (MBCA 1.47) (a) To ratify a defective corporate action
13 under this section, other than the ratification of an election of the
14 initial board of directors under subsection (b) of this section, the
15 board of directors shall take action ratifying the action in accordance
16 with section 5 of this act, stating:
17 (1) The defective corporate action to be ratified and, if the
18 defective corporate action involved the issuance of putative shares, the
19 number and type of putative shares purportedly issued;
20 (2) The date of the defective corporate action;
21 (3) The nature of the failure of authorization with respect to the
22 defective corporate action to be ratified; and
23 (4) That the board of directors approves the ratification of the
24 defective corporate action.
25 (b) In the event that a defective corporate action to be ratified
26 relates to the election of the initial board of directors of the
27 corporation under subdivision (a)(2) of section 21-223, a majority of the
28 persons who, at the time of the ratification, are exercising the powers
29 of directors may take an action stating:
30 (1) The name of the person or persons who first took action in the
31 name of the corporation as the initial board of directors of the
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1 corporation;
2 (2) The earlier of the date on which such persons first took such
3 action or were purported to have been elected as the initial board of
4 directors; and
5 (3) That the ratification of the election of such person or persons
6 as the initial board of directors is approved.
7 (c) If any provision of the Nebraska Model Business Corporation Act,
8 the articles of incorporation or bylaws, any corporate resolution, or any
9 plan or agreement to which the corporation is a party in effect at the
10 time action under subsection (a) of this section is taken requires
11 shareholder approval or would have required shareholder approval at the
12 date of the occurrence of the defective corporate action, the
13 ratification of the defective corporate action approved in the action
14 taken by the directors under subsection (a) of this section shall be
15 submitted to the shareholders for approval in accordance with section 5
16 of this act.
17 (d) Unless otherwise provided in the action taken by the board of
18 directors under subsection (a) of this section, after the action by the
19 board of directors has been taken and, if required, approved by the
20 shareholders, the board of directors may abandon the ratification at any
21 time before the validation effective time without further action of the
22 shareholders.
23 Sec. 5. (MBCA 1.48) (a) The quorum and voting requirements
24 applicable to a ratifying action by the board of directors under
25 subsection (a) of section 4 of this act shall be the quorum and voting
26 requirements applicable to the corporate action proposed to be ratified
27 at the time such ratifying action is taken.
28 (b) If the ratification of the defective corporate action requires
29 approval by the shareholders under subsection (c) of section 4 of this
30 act, and if the approval is to be given at a meeting, the corporation
31 shall notify each holder of valid and putative shares, regardless of
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1 whether entitled to vote, as of the record date for notice of the meeting
2 and as of the date of the occurrence of defective corporate action,
3 provided that notice shall not be required to be given to holders of
4 valid or putative shares whose identities or addresses for notice cannot
5 be determined from the records of the corporation. The notice must state
6 that the purpose, or one of the purposes, of the meeting, is to consider
7 ratification of a defective corporate action and must be accompanied by
8 (i) either a copy of the action taken by the board of directors in
9 accordance with subsection (c) of section 4 of this act or the
10 information required by subdivisions (a)(1) through (4) of section 4 of
11 this act, and (ii) a statement that any claim that the ratification of
12 such defective corporate action and any putative shares issued as a
13 result of such defective corporate action should not be effective, or
14 should be effective only on certain conditions, must be brought within
15 one hundred twenty days from the applicable validation effective time.
16 (c) Except as provided in subsection (d) of this section with
17 respect to the voting requirements to ratify the election of a director,
18 the quorum and voting requirements applicable to the approval by the
19 shareholders required by subsection (c) of section 4 of this act shall be
20 the quorum and voting requirements applicable to the corporate action
21 proposed to be ratified at the time of such shareholder approval.
22 (d) The approval by shareholders to ratify the election of a
23 director requires that the votes cast within the voting group favoring
24 such ratification exceed the votes cast opposing such ratification of the
25 election at a meeting at which a quorum is present.
26 (e) Putative shares on the record date for determining the
27 shareholders entitled to vote on any matter submitted to shareholders
28 under subsection (c) of section 4 of this act, and without giving effect
29 to any ratification of putative shares that becomes effective as a result
30 of such vote, shall neither be entitled to vote nor counted for quorum
31 purposes in any vote to approve the ratification of any defective
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1 corporate action.
2 (f) If the approval under this section of putative shares would
3 result in an overissue, in addition to the approval required by section 4
4 of this act, approval of an amendment to the articles of incorporation
5 under sections 21-2,150 to 21-2,160 to increase the number of shares of
6 an authorized class or series or to authorize the creation of a class or
7 series of shares so there would be no overissue shall also be required.
8 Sec. 6. (MBCA 1.49) (a) Unless shareholder approval is required
9 under subsection (c) of section 4 of this act, prompt notice of an action
10 taken under section 4 of this act shall be given to each holder of valid
11 and putative shares, regardless of whether entitled to vote, as of (i)
12 the date of such action by the board of directors and (ii) the date of
13 the defective corporate action ratified, provided that notice shall not
14 be required to be given to holders of valid and putative shares whose
15 identities or addresses for notice cannot be determined from the records
16 of the corporation.
17 (b) The notice must contain (i) either a copy of the action taken by
18 the board of directors in accordance with subsection (a) or (b) of
19 section 4 of this act or the information required by subdivisions (a)(1)
20 through (4) or (b)(1) through (3) of section 4 of this act, as
21 applicable, and (ii) a statement that any claim that the ratification of
22 the defective corporate action and any putative shares issued as a result
23 of such defective corporate action should not be effective, or should be
24 effective only on certain conditions, must be brought within one hundred
25 twenty days from the applicable validation effective time.
26 (c) No notice under this section is required with respect to any
27 action required to be submitted to shareholders for approval under
28 subsection (c) of section 4 of this act if notice is given in accordance
29 with subsection (b) of section 5 of this act.
30 (d) A notice required by this section may be given in any manner
31 permitted by section 21-215 and, for any corporation subject to the
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1 reporting requirements of section 13 or 15(d) of the Securities Exchange
2 Act of 1934, may be given by means of a filing or furnishing of such
3 notice with the United States Securities and Exchange Commission.
4 Sec. 7. (MBCA 1.50) From and after the validation effective time,
5 and without regard to the one-hundred-twenty-day period during which a
6 claim may be brought under section 9 of this act:
7 (a) Each defective corporate action ratified in accordance with
8 section 4 of this act shall not be void or voidable as a result of the
9 failure of authorization identified in the action taken under subsection
10 (a) or (b) of section 4 of this act and shall be deemed a valid corporate
11 action effective as of the date of the defective corporate action;
12 (b) The issuance of each putative share or fraction of a putative
13 share purportedly issued pursuant to a defective corporate action
14 identified in the action taken under section 4 of this act shall not be
15 void or voidable, and each such putative share or fraction of a putative
16 share shall be deemed to be an identical share or fraction of a valid
17 share as of the time it was purportedly issued; and
18 (c) Any corporate action taken subsequent to the defective corporate
19 action ratified in accordance with sections 2 to 9 of this act in
20 reliance on such defective corporate action having been validly effected
21 and any subsequent defective corporate action resulting directly or
22 indirectly from such original defective corporate action shall be valid
23 as of the time taken.
24 Sec. 8. (MBCA 1.51) (a) If the defective corporate action ratified
25 under sections 2 to 9 of this act would have required under any other
26 section of the Nebraska Model Business Corporation Act a filing in
27 accordance with the act, then, regar