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78R8247 T
By: Goolsby H.B. No. 2578
A BILL TO BE ENTITLED
AN ACT
relating to corporations; notice and voting by electronic means.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Article 1.02, Texas Business Corporation Act is
amended to read as follows:
Art. 1.02. Definitions
A. As used in this Act, unless the context otherwise
requires, the term:
(1) "Articles of incorporation" means the original or
restated articles of incorporation and all amendments thereto.
(2) "Associate," when used to indicate a relationship
with a person, means:
(a) a domestic or foreign corporation or other
entity of which the person is an officer or partner or is the
beneficial owner of 10 percent or more of a class of voting shares
or similar securities of that corporation or other entity;
(b) a trust or estate in which the person has a
substantial beneficial interest or as to which the person serves as
trustee or in a similar fiduciary capacity; or
(c) a spouse of the person or a relative of the
person, or of the person's spouse, who has the same home as the
person or who is a director or officer of such person or any of its
affiliates.
(3) "Authorized shares" means the shares of all
classes which the corporation is authorized to issue.
(4) "Cancel" means to restored issued shares to the
status of authorized but unissued shares.
(5) "Certificated shares" means shares represented by
instruments in bearer or registered form.
(6) "Conspicuous" or "conspicuously," when prescribed
for information appearing on a certificate for shares or other
securities, means the location of such information or use of type of
sufficient size, color, or character that a reasonable person
against whom such information may operate should notice it. For
example, a printed or typed statement in capitals, or boldface or
underlined type, or in type that is larger than or that contrasts in
color with that used for other statements on the same certificate,
is "conspicuous."
(7) "Consuming assets corporation" means a
corporation which is engaged in the business of exploiting assets
subject to depletion or amortization and which elects to state in
its articles of incorporation that it is a consuming assets
corporation and includes as a part of its official corporate name
the phrase "a consuming assets corporation," giving such phrase
equal prominence with the rest of the corporate name on its
financial statements and certificates representing shares. All its
certificates representing shares shall also contain a further
sentence: "This corporation is permitted by law to pay dividends
out of reserves which may impair its stated capital."
(8) "Conversion" means:
(a) the continuance of a domestic corporation as,
and in the organizational form of, a foreign corporation or other
entity; or
(b) the continuance of a foreign corporation or
other entity as, and in the organizational form of, a domestic
corporation.
(9) "Converted entity" means any domestic or foreign
corporation or other entity to which a converting entity has
converted or intends to convert as permitted by Article 5.17 of this
Act.
(10) "Converting entity" means any domestic or foreign
corporation or other entity that has converted or intends to
convert as permitted by Article 5.17 of this Act.
(11) "Corporation" or "domestic corporation" means a
corporation for profit subject to the provisions of this Act,
except a foreign corporation.
(12) "Disinterested," when used to indicate a director
or other person is disinterested in a contract, transaction, or
other matter for purposes of approval of a contract or transaction
under Article 2.35-1 of this Act and for purposes of considering the
disposition of a claim or challenge with respect to a particular
contract or transaction or to particular conduct means the director
or other person, or an associate of the director (other than the
corporation and its associates) or other person, is not a party to
the contract or transaction or is not materially involved in the
conduct that is subject to the claim or challenge and does not
otherwise have a material financial interest in the outcome of the
contract or transaction or the disposition of the claim or
challenge. A director or other person is not to be considered to be
materially involved in conduct that is subject to a claim or
challenge or to otherwise have a material financial interest in the
outcome of a contract or transaction or the disposition of the claim
or challenge solely by reason of the existence of one or more of the
following circumstances:
(a) the person was nominated or elected as a
director by persons who are interested in the contract or
transaction or who are alleged to have engaged in the conduct that
is subject to the claim or challenge;
(b) the person receives normal director's fees or
similar customary compensation, expense reimbursement, and
benefits as a director of the corporation;
(c) the person has a direct or indirect equity
interest in corporation;
(d) the corporation or its subsidiaries has an
interest in the contract or transaction or was affected by the
alleged conduct;
(e) the person or an associate or affiliate of
the person receives ordinary and reasonable compensation for
services rendered to review, make recommendation, or decided on the
disposition of the claim or challenge; or
(f) in the case of a review by the person of
alleged conduct that is subject to a claim or challenge:
(i) the person is named as a defendant in
the derivative proceeding with respect to such matter or as a person
who engaged in the alleged conduct; or
(ii) the person approved of, voted for, or
acquiesced in, as a director, the act being challenged if the act
resulted in no material personal or financial benefit to the person
and the challenging party fails to allege with particularity facts
that, if true, raise a significant prospect that the director would
be adjudged liable to the corporation or its shareholders by reason
of that conduct.
(13) "Distribution" means a transfer of money or other
property (except its own shares or rights to acquire its own
shares), or issuance of indebtedness, by a corporation to its
shareholders in the form of:
(a) a dividend on any class or series of the
corporation's outstanding shares;
(b) a purchase, redemption, or other acquisition
by the corporation, directly or indirectly, of any of its own
shares; or
(c) a payment by the corporation in liquidation
of all or a portion of its assets.
(14) "Electronic transmission" means any form of
communication, not directly involving transmission of paper, that
creates a record that may be retained, retrieved and reviewed by a
recipient thereof, and that may be directly reproduced in paper
form by such a recipient through an automated process. For purposes
of Arts. 2.26-1 and 2.37 of this Act, a written consent and the
signing thereof may be accomplished by one or more electronic
transmissions.
(15) "Foreign corporation" means a corporation for
profit organized under laws other than the laws of this State.
(16) "Independent," when used to indicate a director
or other person is independent for purposes of considering the
disposition of a claim or challenge with respect to a particular
contract or transaction or to particular conduct or alleged conduct
means:
(a) the director or other person is
disinterested;
(b) the director or other person is not an
associate (other than by reason of being a director of the
corporation or one more of its subsidiaries or associates) or
member of the immediate family of a party to the contract or
transaction that is the subject of the claim or challenge or that is
alleged to have engaged in the conduct that is subject to the claim
or challenge;
(c) the director or other person, or an associate
or member of the immediate family of the director or other person,
does not have a business, financial, or familial relationship with
a party to the contract or transaction that is the subject of the
claim or challenge or that is alleged to have engaged in conduct
that is subject to the claim or challenge, which, in each case,
could reasonably be expected to materially and adversely affect the
director's or other person's judgment with respect to the
consideration of the disposition of the matter subject to the claim
or challenge in the interests of the corporation; and
(d) the director or other person is not otherwise
shown, by a preponderance of the evidence by the person challenging
the independence of the director or other person, to be under the
controlling influence of a party to the contract or transaction
that is the subject of the claim or challenge or that is alleged to
have engaged in conduct that is subject to the claim or challenge.
A director or other person is not considered to have a
relationship that could be expected to materially and adversely
affect the director's or other person's judgment with respect to the
consideration of the disposition of a matter subject to a claim or
challenge or to otherwise be under the controlling influence of a
party to a contract or transaction that is the subject of the claim
or challenge or that is alleged to have engaged in conduct that is
subject to the claim or challenge solely by reason of the existence
of one or more of the following circumstances:
(a) the person has been nominated or elected as a
director by persons who are interested in the contract or
transaction or who are alleged to have engaged in the conduct that
is subject to the claim or challenge;
(b) the person receives normal director's fees or
similar customary compensation, expense reimbursement, and
benefits as a director of the corporation;
(c) the person has direct or indirect equity
interest in the corporation;
(d) the corporation or its subsidiaries have an
interest in the contract or transaction or were affected by the
alleged conduct;
(e) the person or an associate or affiliate of
such person receives ordinary and reasonable compensation for
services rendered to review, make recommendations, or decide on the
disposition of the claim or challenge; or
(f) the person or an associate (other than the
corporation and its associates), immediate family, member or
affiliate of the person has an ongoing business relationship with
the corporation that is not material to that person, associate,
family member, or affiliate.
(17) "Insolvency" means inability of a corporation to
pay its debts as they become due in the usual course of its
business.
(18) "Investment Company Act" means the Investment
Company act of 1940 (15 U.S.C. Sec. 80a-1 et seg.);
(19) "Merger" means (a) the division of a domestic
corporation into two or more new domestic corporations or into a
surviving corporation and one or more new or foreign corporations
or other entities, or (b) the combination of one or more domestic
corporations with one or more domestic or foreign corporations or
other entities resulting (i) one or more surviving domestic or
foreign corporations or other entities (ii) the creation of one or
more new domestic or foreign corporations or other entities, or
(iii) one or more surviving domestic or foreign corporations or
other entities and the creation of one or more new domestic or
foreign corporations or other entities.
(20) "Net assets" means the amount by which the total
assets of a corporation exceed the total debts of the corporation.
(21) "Other entity" means any entity, whether
organized for profit or not, that is a corporation (other than a
domestic or foreign corporation), limited or general partnership,
limited liability company, real estate investment trust, joint
venture, joint stock company, cooperative, association, bank,
trust, insurance company or other legal entity organized pursuant
to the laws of this state or any other state; or
(22) "Share dividend" means a dividend by a
corporation that is payable in its own authorized but unissued
shares or in treasury shares. An amendment to a corporation's
articles of incorporation to change the shares of any class or
series, whether with or without par value, into the same or a
different number of shares, either with or without par value, of the
same class or series or another class or series does not constitute
a share dividend.
(23) "Shareholder" or "holder of shares" means the
person in whose name shares issued by a corporation are registered
at the relevant time in the share transfer records maintained by the
corporation pursuant to Article 2.44 of this Act.
(24) "Shares" mean the units into which the
proprietary interests in a corporation are divided, whether
certificated or uncertificated shares.
(25) "Stated capital" means, at any particular time,
the sum of:
(a) the par value of all shares of the
corporation having a par value that have issued;
(b) the consideration fixed by the corporation in
the manner provided by Article 2.15 of this Act for all shares of
the corporation without par value that have been issued, except
such part of the consideration that is actually received therefor
(which part must be less than all of that consideration) that the
board by resolution adopted no later than sixty (60) days after the
issuance of those shares may have allocated to surplus; and
(c) such amounts not included in paragraphs (a)
and (b) of this subsection as have been transferred to stated
capital of the corporation, whether upon the payment of a share
dividend or upon adoption by the board of directors of a resolution
directing that all or part of surplus be transferred to stated
capital, minus all reductions from such sum as have been effected in
a manner permitted by law.
(26) "Subscriber" means the offeror in a subscription.
(27) "Subscription" means a memorandum in writing,
executed before or after incorporation, wherein an offer is made to
purchase and pay for a specified number of theretofore unissued
shares of a corporation.
(28) "Surplus" means the excess of the net assets of a
corporation over its stated capital.
(29) "Treasury shares" means shares of a corporation
which have been issued, have been subsequently acquired by and
belong to the corporation, and have not been canceled and restored
to the status of authorized but unissued shares. Treasury shares do
not include shares held by a corporation, either directly or
through a trust or similar arrangement, in a fiduciary capacity.
Treasury shares shall be deemed to be "issued" shares but not
"outstanding" shares and shall not be included in the total assets
of a corporation for purposes of determining its "net assets."
(30) "Uncertificated shares" means shares not
represented by instruments and the transfers of which are
registered upon books maintained for that purpose by or on behalf of
the issuing corporation.
B. Part Twelve of this Act provides definitions of terms
used in the Texas Close Corporation Law.
C. A reference in this Act to another statute is a reference
to that statute as amended.
SECTION 2. Article 2.24, Texas Business Corporation Act, is
amended by adding a new Section E to read as follows:
E. Unless the articles of incorporation or bylaws provide
otherwise, shareholders may participate in a special or an annual
meeting by use of any means of communication by which all
shareholders participating may simultaneously hear each other
during the meeting. A shareholder participating in a meeting by
this means is deemed to be present in person at the meeting.
SECTION 3. Part 2, Texas Business Corporation Act, is
amended by adding Article 2.26-1 to read as follows:
2.26-1. Notice by Electronic Transmission
A. Without limiting the manner by which notice otherwise may
be given effectively to shareholders, any notice to shareholders
given by the corporation, under any provision of this Act, the
articles of incorporation or the bylaws, shall be effective if
given by a form of electronic transmission consented to by the
shareholder to whom the notice is given. Any such consent shall be
revocable by the shareholder by written notice to the corporation.
Any such consent shall be deemed revoked if (i) the corporation is
unable to deliver by electronic transmission two consecutive
notices given by the corporation in accordance with such consent
and (ii) such inability becomes known to the secretary or an
assistant secretary of the corporation or to the transfer agent, or
other person responsible for the giving of notice; provided,
however, the inadvertent failure to treat such inability as a
revocation shall not invalidate any meeting or other action.
Notice given pursuant to this subsection shall be deemed given: (a)
if by facsimile telecommunication, when directed to a number at
which the shareholder has consented to receive notice; (b) if by
electronic mail, when directed to an electronic mail address at
which the shareholder has consented to receive notice; (c) if by a
posting on an electronic network together with separate notice to
the shareholder of such specific posting when such notice is
directed to the record address of the shareholder or to such other
address at which the shareholder has consented to receive notice,
upon the later of such posting or the giving of such separate
notice; and (d) if by any other form of electronic transmission,
when consented to by the shareholder. An affidavit of the secretary
or an assistant secretary or of the transfer agent or other agent of
the corporation that the notice has been given by a form of
electronic transmission shall, in the absence of fraud, be prima
facie evidence of the facts therein.
SECTION 4. Part Two, Texas Business Corporation Act is
amended by adding Article 2.29-1 to read as follows:
2.29-1 Electronic Voting Alternative
A. If authorized by the corporation's board of directors,
any shareholder vote to be taken by written ballot may be satisfied
by a ballot submitted by electronic transmission by the shareholder
or the shareholder's proxy, provided that any such electronic
transmission shall either set forth or be submitted with
information from which it can determined that the electronic
transmission was authorized by the shareholder or the shareholder's
proxy.
SECTION 5. Article 2.37, Texas Business Corporation Act is
amended by adding Subsection C. as follows:
C. Notwithstanding any provisions of this Act to the
contrary, a notice of the date, time, place or purpose of a regular
or special meeting of the board of directors may be given by a form
of electronic transmission consented to by the director to whom the
notice is given. Any such consent of a director shall be revocable
by the director by written notice to the corporation. Any such
consent shall be deemed revoked if (i) the corporation is unable to
deliver by electronic transmission two consecutive notices given by
the corporation in accordance with such consent and (ii) such
inability becomes known to the secretary or other person
responsible for the giving of notice; provided, however, the
inadvertent failure to treat such inability as a revocation shall
not invalidate any meeting or other action. Notice given by
electronic transmission shall be deemed given: (a) if by fascmile
telecommunication, when directed to a number at which the director
has consented to receive notice (b) if by electronic mail, when
directed to an electronic mail address at which the director has
consented to receive notice; (c) if by a posting on an electronic
network together with separate notice to the director of such
specific posting when such notice is directed to an address at which
the director has consented to receive notice, upon the later of such
posting or the giving of such separate notice; and (d) if by any
other form of electronic transmission when consented to by the
director. An affidavit of the secretary or other agent of the
corporation that the notice has been given by a form of electronic
transmission shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
SECTION 6. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2003.