|Posted:||October 26, 2021 11:21 AM|
|From:||Representative Brad Roae|
|To:||All House members|
|Subject:||Business Corporation Law and Related Provisions|
|In the near future, I will be introducing legislation to update the Pennsylvania corporation laws and related provisions of Title 15 of the Consolidated Statutes (“Title 15”). The legislation was drafted by the Title 15 Committee of the Pennsylvania Bar Association (“PBA”) and has the full support of the PBA.
For the last 20 years, the attention of the PBA was devoted to the revision of portions of Title 15 other than the Business Corporation Law (“BCL”). Fortunately, the BCL stood the test of time and functioned well during the period while other provisions of Title 15 were amended. The law of business corporations, however, continued to evolve around the country during the last 20 years, and the Title 15 Committee decided in 2017 to revisit the BCL generally. The result of the ensuing four years of study and drafting by the Title 15 Committee is the legislation I will be sponsoring.
The major issues addressed by the legislation are briefly described below. As you will see from the breadth of the list of topics below, the legislation will make important changes that will benefit Pennsylvania businesses and our economy.
I. Revisions relating to filings with the Department of State.
Most of the entity laws found in Title 15 require that at various times during the life of an entity a document must be filed with the Department of State to accomplish certain actions. The revisions to Title 15 in this regard include provisions relating to (i) annual reports by active entities, (ii) bogus filings made to harass other parties or for fraudulent or other improper purposes, (iii) the use of statements of correction, (iv) when tax clearance certificates are required for the protection of the Commonwealth, and (v) clarification of certain filings involving non-stock corporations.
II. Revisions based on changes in the Delaware General Corporation Law and Model Business Corporation Act.
The Delaware General Corporation Law (“DGCL”) and the Model Business Corporation Act (“MBCA”) are two of the leading sources of corporation law developments around the country. Both the DGCL and MBCA are under constant revision. Not surprisingly, over the past 20 years there have been significant developments in corporation law that have not been included in Title 15. The developments in the DGCL and MBCA that I am proposing include (i) a new procedure for ratifying problems that are uncovered in the affairs of an entity, such as defects in the approval of amendments to its charter or a fundamental transaction, (ii) authorization of two-step transactions in which a corporation agrees to be acquired through a tender offer followed by a merger, (iii) permitting entities to use distributed ledger (or “blockchain”) technology to maintain their records, (iv) modernizing the procedures in the BCL permitting corporations to respond to emergencies and disasters, (v) permitting a corporation to renounce in advance the requirement that a director or officer offer a corporate opportunity to the corporation before the director or officer takes advantage of the opportunity, (vi) authorizing a corporation to specify in advance where litigation involving its internal affairs may be brought, (vii) dissenters rights for preferred shares, (viii) protecting directors and officers from adverse amendments regarding indemnification, (ix) resignation of directors, (x) permitting officers or shareholders to call a meeting to elect directors whenever there are no directors in office, (xi) permitting consents by directors or shareholders without a meeting to have a delayed effective time, (xii) quorums applicable to class voting, and (xiii) record dates.
III. Revisions based on the endorsement by the Pennsylvania Supreme Court of the ALI Principles of Corporate Governance.
The Pennsylvania Supreme Court in its opinion in Cuker v. Mikalauskas, 547 Pa. 600, 692 A.2d 1042 (Pa., 1997), specifically adopted a number of sections from the ALI Principles of Corporate Governance and indicated its support for the ALI Principles more broadly. I am proposing amendments that adopt portions of the ALI Principles on several subjects including (i) an express statement of the business judgment rule along with conforming and clarifying amendments relating to fiduciary duty, (ii) how the rules on interested transactions relate to transactions with subsidiaries, (iii) clarification of some of the provisions on derivative suits.
IV. Revisions applicable to specific types of corporations.
In addition to the main provisions of the BCL that apply to all business corporations, Title 15 also includes a number of chapters that apply to specific types of corporations. The legislation includes changes that improve the provisions relating to registered corporations and benefit corporations.
V. Miscellaneous changes.
In addition to the major categories of amendments described above, I am proposing a number of other discrete amendments that do not fit into those major categories. These changes include the topics of (i) divisions, (ii) registration of foreign entities, (iii) the effect of bylaws, (iv) nonprofit corporations, and (v) a variety of minor conforming, editorial, and clarifying changes to Title 15.
I hope you will join me in co-sponsoring this important legislation to modernize our corporation law for the benefit and growth of Pennsylvania businesses.
Introduced as HB2057