Bill Text: OH SB202 | 2013-2014 | 130th General Assembly | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: To provide exceptions to the applicability of the Control Share Acquisition Act, to require board approval for Act opt-out amendments of a corporation's regulations or articles of incorporation, and to apply a three-year look-back period to ownership of shares for purposes of determining applicability of certain shareholder transaction laws.
Spectrum: Slight Partisan Bill (Republican 18-8)
Status: (Passed) 2014-07-10 - Effective Date [SB202 Detail]
Download: Ohio-2013-SB202-Introduced.html
As Introduced
A BILL
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Bill Title: To provide exceptions to the applicability of the Control Share Acquisition Act, to require board approval for Act opt-out amendments of a corporation's regulations or articles of incorporation, and to apply a three-year look-back period to ownership of shares for purposes of determining applicability of certain shareholder transaction laws.
Spectrum: Slight Partisan Bill (Republican 18-8)
Status: (Passed) 2014-07-10 - Effective Date [SB202 Detail]
Download: Ohio-2013-SB202-Introduced.html
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Senators Obhof, Kearney
Cosponsor:
Senator Seitz
To amend sections 1701.01, 1701.11, 1701.71, 1704.01, | 1 |
and 1704.05 of the Revised Code to provide | 2 |
exceptions to the applicability of the Control | 3 |
Share Acquisition Act, to require board approval | 4 |
for Act opt-out amendments of a corporation's | 5 |
regulations or articles of incorporation, and to | 6 |
apply a three-year look-back period to ownership | 7 |
of shares for purposes of determining | 8 |
applicability of certain shareholder transaction | 9 |
laws. | 10 |
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1701.01, 1701.11, 1701.71, 1704.01, | 11 |
and 1704.05 of the Revised Code be amended to read as follows: | 12 |
Sec. 1701.01. As used in sections 1701.01 to 1701.98 of the | 13 |
Revised Code, unless the context otherwise requires: | 14 |
(A) "Corporation" or "domestic corporation" means a | 15 |
corporation for profit formed under the laws of this state. | 16 |
(B) "Foreign corporation" means a corporation for profit | 17 |
formed under the laws of another state, and "foreign entity" means | 18 |
an entity formed under the laws of another state. | 19 |
(C) "State" means the United States; any state, territory, | 20 |
insular possession, or other political subdivision of the United | 21 |
States, including the District of Columbia; any foreign country or | 22 |
nation; and any province, territory, or other political | 23 |
subdivision of such foreign country or nation. | 24 |
(D) "Articles" includes original articles of incorporation, | 25 |
certificates of reorganization, amended articles, and amendments | 26 |
to any of these, and, in the case of a corporation created before | 27 |
September 1, 1851, the special charter and any amendments to it | 28 |
made by special act of the general assembly or pursuant to general | 29 |
law. | 30 |
(E) "Incorporator" means a person who signed the original | 31 |
articles of incorporation. | 32 |
(F) "Shareholder" means a person whose name appears on the | 33 |
books of the corporation as the owner of shares of the | 34 |
corporation. Unless the articles, the regulations adopted by the | 35 |
shareholders, the regulations adopted by the directors pursuant to | 36 |
division (A)(1) of section 1701.10 of the Revised Code, or the | 37 |
contract of subscription otherwise provides, "shareholder" | 38 |
includes a subscriber to shares, whether the subscription is | 39 |
received by the incorporators or pursuant to authorization by the | 40 |
directors, and such shares shall be deemed to be outstanding | 41 |
shares. | 42 |
(G) "Person" includes, without limitation, a natural person, | 43 |
a corporation, whether nonprofit or for profit, a partnership, a | 44 |
limited liability company, an unincorporated society or | 45 |
association, and two or more persons having a joint or common | 46 |
interest. | 47 |
(H) The location of the "principal office" of a corporation | 48 |
is the place named as the principal office in its articles. | 49 |
(I) The "express terms" of shares of a class are the | 50 |
statements expressed in the articles with respect to such shares. | 51 |
(J) Shares of a class are "junior" to shares of another class | 52 |
when any of their dividend or distribution rights are subordinate | 53 |
to, or dependent or contingent upon, any right of, or dividend on, | 54 |
or distribution to, shares of such other class. | 55 |
(K) "Treasury shares" means shares belonging to the | 56 |
corporation and not retired that have been either issued and | 57 |
thereafter acquired by the corporation or paid as a dividend or | 58 |
distribution in shares of the corporation on treasury shares of | 59 |
the same class; such shares shall be deemed to be issued, but they | 60 |
shall not be considered as an asset or a liability of the | 61 |
corporation, or as outstanding for dividend or distribution, | 62 |
quorum, voting, or other purposes, except, when authorized by the | 63 |
directors, for dividends or distributions in authorized but | 64 |
unissued shares of the corporation of the same class. | 65 |
(L) To "retire" a share means to restore it to the status of | 66 |
an authorized but unissued share. | 67 |
(M) "Redemption price of shares" means the amount required by | 68 |
the articles to be paid on redemption of shares. | 69 |
(N) "Liquidation price" means the amount or portion of assets | 70 |
required by the articles to be distributed to the holders of | 71 |
shares of any class upon dissolution, liquidation, merger, or | 72 |
consolidation of the corporation, or upon sale of all or | 73 |
substantially all of its assets. | 74 |
(O) "Insolvent" means that the corporation is unable to pay | 75 |
its obligations as they become due in the usual course of its | 76 |
affairs. | 77 |
(P) "Parent corporation" or "parent" means a domestic or | 78 |
foreign corporation that owns and holds of record shares of | 79 |
another corporation, domestic or foreign, entitling the holder of | 80 |
the shares at the time to exercise a majority of the voting power | 81 |
in the election of the directors of the other corporation without | 82 |
regard to voting power that may thereafter exist upon a default, | 83 |
failure, or other contingency; "subsidiary corporation" or | 84 |
"subsidiary" means a domestic or foreign corporation of which | 85 |
another corporation, domestic or foreign, is the parent. | 86 |
(Q) "Combination" means a transaction, other than a merger or | 87 |
consolidation, wherein either of the following applies: | 88 |
(1) Voting shares of a domestic corporation are issued or | 89 |
transferred in consideration in whole or in part for the transfer | 90 |
to itself or to one or more of its subsidiaries, domestic or | 91 |
foreign, of all or substantially all the assets of one or more | 92 |
corporations, domestic or foreign, with or without good will or | 93 |
the assumption of liabilities; | 94 |
(2) Voting shares of a foreign parent corporation are issued | 95 |
or transferred in consideration in whole or in part for the | 96 |
transfer of such assets to one or more of its domestic | 97 |
subsidiaries. | 98 |
"Transferee corporation" in a combination means the | 99 |
corporation, domestic or foreign, to which the assets are | 100 |
transferred, and "transferor corporation" in a combination means | 101 |
the corporation, domestic or foreign, transferring such assets and | 102 |
to which, or to the shareholders of which, the voting shares of | 103 |
the domestic or foreign corporation are issued or transferred. | 104 |
(R) "Majority share acquisition" means the acquisition of | 105 |
shares of a corporation, domestic or foreign, entitling the holder | 106 |
of the shares to exercise a majority of the voting power in the | 107 |
election of directors of such corporation without regard to voting | 108 |
power that may thereafter exist upon a default, failure, or other | 109 |
contingency, by either of the following: | 110 |
(1) A domestic corporation in consideration in whole or in | 111 |
part, for the issuance or transfer of its voting shares; | 112 |
(2) A domestic or foreign subsidiary in consideration in | 113 |
whole or in part for the issuance or transfer of voting shares of | 114 |
its domestic parent. | 115 |
(S) "Acquiring corporation" in a combination means the | 116 |
domestic corporation whose voting shares are issued or transferred | 117 |
by it or its subsidiary or subsidiaries to the transferor | 118 |
corporation or corporations or the shareholders of the transferor | 119 |
corporation or corporations; and "acquiring corporation" in a | 120 |
majority share acquisition means the domestic corporation whose | 121 |
voting shares are issued or transferred by it or its subsidiary in | 122 |
consideration for shares of a domestic or foreign corporation | 123 |
entitling the holder of the shares to exercise a majority of the | 124 |
voting power in the election of directors of such corporation. | 125 |
(T) When used in connection with a combination or a majority | 126 |
share acquisition, "voting shares" means shares of a corporation, | 127 |
domestic or foreign, entitling the holder of the shares to vote at | 128 |
the time in the election of directors of such corporation without | 129 |
regard to voting power which may thereafter exist upon a default, | 130 |
failure, or other contingency. | 131 |
(U) "An emergency" exists when the governor, or any other | 132 |
person lawfully exercising the power and discharging the duties of | 133 |
the office of governor, proclaims that an attack on the United | 134 |
States or any nuclear, atomic, or other disaster has caused an | 135 |
emergency for corporations, and such an emergency shall continue | 136 |
until terminated by proclamation of the governor or any other | 137 |
person lawfully exercising the powers and discharging the duties | 138 |
of the office of governor. | 139 |
(V) "Constituent corporation" means an existing corporation | 140 |
merging into or into which is being merged one or more other | 141 |
entities in a merger or an existing corporation being consolidated | 142 |
with one or more other entities into a new entity in a | 143 |
consolidation, whether any of the entities is domestic or foreign, | 144 |
and "constituent entity" means any entity merging into or into | 145 |
which is being merged one or more other entities in a merger, or | 146 |
an existing entity being consolidated with one or more other | 147 |
entities into a new entity in a consolidation, whether any of the | 148 |
entities is domestic or foreign. | 149 |
(W) "Surviving corporation" means the constituent domestic or | 150 |
foreign corporation that is specified as the corporation into | 151 |
which one or more other constituent entities are to be or have | 152 |
been merged, and "surviving entity" means the constituent domestic | 153 |
or foreign entity that is specified as the entity into which one | 154 |
or more other constituent entities are to be or have been merged. | 155 |
(X) "Close corporation agreement" means an agreement that | 156 |
satisfies the three requirements of division (A) of section | 157 |
1701.591 of the Revised Code. | 158 |
(Y) "Issuing public corporation" means a domestic corporation | 159 |
with fifty or more shareholders that has its principal place of | 160 |
business, its principal executive offices, assets having | 161 |
substantial value, or a substantial percentage of its assets | 162 |
within this state, and as to which no valid close corporation | 163 |
agreement exists under division (H) of section 1701.591 of the | 164 |
Revised Code. | 165 |
(Z)(1) "Control share acquisition" means the acquisition, | 166 |
directly or indirectly, by any person of shares of an issuing | 167 |
public corporation that, when added to all other shares of the | 168 |
issuing public corporation in respect of which the person may | 169 |
exercise or direct the exercise of voting power as provided in | 170 |
this division, would entitle the person, immediately after the | 171 |
acquisition, directly or indirectly, alone or with others, to | 172 |
exercise or direct the exercise of the voting power of the issuing | 173 |
public corporation in the election of directors within any of the | 174 |
following ranges of such voting power: | 175 |
(a) One-fifth or more but less than one-third of such voting | 176 |
power; | 177 |
(b) One-third or more but less than a majority of such voting | 178 |
power; | 179 |
(c) A majority or more of such voting power. | 180 |
A bank, broker, nominee, trustee, or other person that | 181 |
acquires shares in the ordinary course of business for the benefit | 182 |
of others in good faith and not for the purpose of circumventing | 183 |
section 1701.831 of the Revised Code shall, however, be deemed to | 184 |
have voting power only of shares in respect of which such person | 185 |
would be able, without further instructions from others, to | 186 |
exercise or direct the exercise of votes on a proposed control | 187 |
share acquisition at a meeting of shareholders called under | 188 |
section 1701.831 of the Revised Code. | 189 |
(2) The acquisition by any person of any shares of an issuing | 190 |
public corporation does not constitute a control share acquisition | 191 |
for the purpose of section 1701.831 of the Revised Code if the | 192 |
acquisition was or is consummated in, results from, or is the | 193 |
consequence of any of the following circumstances: | 194 |
(a) Prior to November 19, 1982; | 195 |
(b) Pursuant to a contract existing prior to November 19, | 196 |
1982; | 197 |
(c) By bequest or inheritance, by operation of law upon the | 198 |
death of an individual, or by any other transfer without valuable | 199 |
consideration, including a gift, that is made in good faith and | 200 |
not for the purpose of circumventing section 1701.831 of the | 201 |
Revised Code; | 202 |
(d) Pursuant to the satisfaction of a pledge or other | 203 |
security interest created in good faith and not for the purpose of | 204 |
circumventing section 1701.831 of the Revised Code; | 205 |
(e) Pursuant to a merger or consolidation adopted, or a | 206 |
combination or majority share acquisition authorized, by vote of | 207 |
the shareholders of the issuing public corporation in compliance | 208 |
with section 1701.78, 1701.781, 1701.79, 1701.791, or 1701.83 of | 209 |
the Revised Code, or pursuant to a merger adopted in compliance | 210 |
with section 1701.802 of the Revised Code; | 211 |
(f) The person's being entitled, immediately thereafter, to | 212 |
exercise or direct the exercise of voting power of the issuing | 213 |
public corporation in the election of directors within the same | 214 |
range theretofore attained by that person either in compliance | 215 |
with the provisions of section 1701.831 of the Revised Code or as | 216 |
a result solely of the issuing public corporation's purchase of | 217 |
shares issued by it; | 218 |
(g) The person being engaged in business as an underwriter of | 219 |
securities who acquires the shares directly from the issuing | 220 |
public corporation or an affiliate or associate of the issuing | 221 |
public corporation through its participation in good faith in a | 222 |
firm commitment underwriting registered under the "Securities Act | 223 |
of 1933," 15 U.S.C. 77a et seq., and not for the purpose of | 224 |
circumventing section 1701.831 of the Revised Code; | 225 |
(h) Pursuant to an acquisition of shares of an issuing public | 226 |
corporation if the acquisition has been approved by the board of | 227 |
directors of the issuing public corporation prior to the | 228 |
acquisition. | 229 |
The acquisition by any person of shares of an issuing public | 230 |
corporation in a manner described under division (Z)(2) of this | 231 |
section shall be deemed a control share acquisition authorized | 232 |
pursuant to section 1701.831 of the Revised Code within the range | 233 |
of voting power under division (Z)(1)(a), (b), or (c) of this | 234 |
section that such person is entitled to exercise after the | 235 |
acquisition, provided, in the case of an acquisition in a manner | 236 |
described under division (Z)(2)(c) or (d) of this section, the | 237 |
transferor of shares to such person had previously obtained any | 238 |
authorization of shareholders required under section 1701.831 of | 239 |
the Revised Code in connection with the transferor's acquisition | 240 |
of shares of the issuing public corporation. | 241 |
(3) The acquisition of shares of an issuing public | 242 |
corporation in good faith and not for the purpose of circumventing | 243 |
section 1701.831 of the Revised Code from any person whose control | 244 |
share acquisition previously had been authorized by shareholders | 245 |
in compliance with section 1701.831 of the Revised Code, or from | 246 |
any person whose previous acquisition of shares of an issuing | 247 |
public corporation would have constituted a control share | 248 |
acquisition but for division (Z)(2) or (3) of this section, does | 249 |
not constitute a control share acquisition for the purpose of | 250 |
section 1701.831 of the Revised Code unless such acquisition | 251 |
entitles the person making the acquisition, directly or | 252 |
indirectly, alone or with others, to exercise or direct the | 253 |
exercise of voting power of the corporation in the election of | 254 |
directors in excess of the range of voting power authorized | 255 |
pursuant to section 1701.831 of the Revised Code, or deemed to be | 256 |
so authorized under division (Z)(2) of this section. | 257 |
(AA) "Acquiring person" means any person who has delivered an | 258 |
acquiring person statement to an issuing public corporation | 259 |
pursuant to section 1701.831 of the Revised Code. | 260 |
(BB) "Acquiring person statement" means a written statement | 261 |
that complies with division (B) of section 1701.831 of the Revised | 262 |
Code. | 263 |
(CC)(1) "Interested shares" means the shares of an issuing | 264 |
public corporation in respect of which any of the following | 265 |
persons may exercise or direct the exercise of the voting power of | 266 |
the corporation in the election of directors: | 267 |
(a) An acquiring person; | 268 |
(b) Any officer of the issuing public corporation elected or | 269 |
appointed by the directors of the issuing public corporation; | 270 |
(c) Any employee of the issuing public corporation who is | 271 |
also a director of such corporation; | 272 |
(d) Any person that acquires such shares for valuable | 273 |
consideration during the period beginning with the date of the | 274 |
first public disclosure of a proposal for, or expression of | 275 |
interest in, a control share acquisition of the issuing public | 276 |
corporation; a transaction pursuant to section 1701.76, 1701.78, | 277 |
1701.781, 1701.79, 1701.791, 1701.83, or 1701.86 of the Revised | 278 |
Code that involves the issuing public corporation or its assets; | 279 |
or any action that would directly or indirectly result in a change | 280 |
in control of the issuing public corporation or its assets, and | 281 |
ending on the record date established by the directors pursuant to | 282 |
section 1701.45 and division (D) of section 1701.831 of the | 283 |
Revised Code, if either of the following applies: | 284 |
(i) The aggregate consideration paid or given by the person | 285 |
who acquired the shares, and any other persons acting in concert | 286 |
with the person, for all such shares exceeds two hundred fifty | 287 |
thousand dollars; | 288 |
(ii) The number of shares acquired by the person who acquired | 289 |
the shares, and any other persons acting in concert with the | 290 |
person, exceeds one-half of one per cent of the outstanding shares | 291 |
of the corporation entitled to vote in the election of directors. | 292 |
(e) Any person that transfers such shares for valuable | 293 |
consideration after the record date described in division | 294 |
(CC)(1)(d) of this section as to shares so transferred, if | 295 |
accompanied by the voting power in the form of a blank proxy, an | 296 |
agreement to vote as instructed by the transferee, or otherwise. | 297 |
(2) If any part of this division is held to be illegal or | 298 |
invalid in application, the illegality or invalidity does not | 299 |
affect any legal and valid application thereof or any other | 300 |
provision or application of this division or section 1701.831 of | 301 |
the Revised Code that can be given effect without the invalid or | 302 |
illegal provision, and the parts and applications of this division | 303 |
are severable. | 304 |
(DD) "Certificated security" and "uncertificated security" | 305 |
have the same meanings as in section 1308.01 of the Revised Code. | 306 |
(EE) "Entity" means any of the following: | 307 |
(1) A for profit corporation existing under the laws of this | 308 |
state or any other state; | 309 |
(2) Any of the following organizations existing under the | 310 |
laws of this state, the United States, or any other state: | 311 |
(a) A business trust or association; | 312 |
(b) A real estate investment trust; | 313 |
(c) A common law trust; | 314 |
(d) An unincorporated business or for profit organization, | 315 |
including a general or limited partnership; | 316 |
(e) A limited liability company; | 317 |
(f) A nonprofit corporation. | 318 |
Sec. 1701.11. (A)(1) Regulations for the government of a | 319 |
corporation, the conduct of its affairs, and the management of its | 320 |
property, consistent with law and the articles, may be adopted, | 321 |
amended, or repealed in any of the following ways: | 322 |
(a) Within ninety days after the corporation is formed, by | 323 |
the directors in accordance with division (A)(1) of section | 324 |
1701.10 of the Revised Code; | 325 |
(b) By the shareholders at a meeting held for that purpose, | 326 |
by the affirmative vote of the holders of shares entitling them to | 327 |
exercise a majority of the voting power of the corporation on the | 328 |
proposal, or if the articles or regulations that have been adopted | 329 |
so provide, by the affirmative vote of the holders entitling them | 330 |
to exercise a greater proportion than a majority of the voting | 331 |
power of the corporation on the proposal; | 332 |
(c) Without a meeting, by the written consent of the holders | 333 |
of shares entitling them to exercise two-thirds of the voting | 334 |
power of the corporation on the proposal, or if the articles or | 335 |
regulations that have been adopted so provide or permit, by the | 336 |
written consent of the holders of shares entitling them to | 337 |
exercise a greater or lesser proportion but not less than a | 338 |
majority of the voting power of the corporation on the proposal; | 339 |
(d) If and to the extent that the articles or regulations so | 340 |
provide or permit and unless a provision of the Revised Code | 341 |
reserves such authority to shareholders, by the directors, | 342 |
provided that no provision or permission in the articles or | 343 |
regulations may divest shareholders of the power, or limit the | 344 |
shareholders' power, to adopt, amend, or repeal regulations. | 345 |
(2) Any amendment of regulations and any amended or new | 346 |
regulations adopted by shareholders of an issuing public | 347 |
corporation whose directors are classified pursuant to section | 348 |
1701.57 of the Revised Code that would change or eliminate the | 349 |
classification of directors shall be adopted only by the | 350 |
shareholders at a meeting held for that purpose, by the | 351 |
affirmative vote of holders of shares entitling them to exercise | 352 |
the voting power of the corporation that is required for | 353 |
shareholders at a meeting under division (A)(1)(b) of this | 354 |
section, and also by the affirmative vote of the holders of a | 355 |
majority of disinterested shares voted on the proposal determined | 356 |
as specified in division (C)(9) of section 1704.01 of the Revised | 357 |
Code. | 358 |
(3) Any amendment of regulations and any amended or new | 359 |
regulations adopted by shareholders of an issuing public | 360 |
corporation that would provide that section 1701.831 of the | 361 |
Revised Code does not apply to control share acquisitions of | 362 |
shares of the public corporation shall be adopted: | 363 |
(a) Upon the recommendation by the affirmative vote of a | 364 |
majority of the authorized number of directors of the issuing | 365 |
public corporation in favor of such amendment or new regulation; | 366 |
and | 367 |
(b) By the shareholders at a meeting held for that purpose, | 368 |
by the affirmative vote of holders of shares entitling them to | 369 |
exercise the voting power of the corporation that is required for | 370 |
shareholders at a meeting under division (A)(1)(b) of this | 371 |
section. | 372 |
(B) Without limiting the generality of the authority | 373 |
described in division (A) of this section, the regulations may | 374 |
include provisions with respect to all of the following: | 375 |
(1) The place, if any, and time for holding, the manner of | 376 |
and authority for calling, giving notice of, and conducting, and | 377 |
the requirements of a quorum for, meetings of shareholders; | 378 |
(2) The taking of a record of shareholders or the temporary | 379 |
closing of books against transfers of shares; | 380 |
(3) The number, classification, manner of fixing or changing | 381 |
the number, qualifications, term of office, and compensation or | 382 |
manner of fixing compensation, of directors; | 383 |
(4) The place, if any, and time for holding, the manner of | 384 |
and authority for calling, giving notice of, and conducting, and | 385 |
the requirements of a quorum for, meetings of the directors; | 386 |
(5) The appointment of an executive and other committees of | 387 |
the directors, and their authority; | 388 |
(6) The titles, qualifications, duties, term of office, | 389 |
compensation or manner of fixing compensation, and the removal, of | 390 |
officers; | 391 |
(7) The terms on which new certificates for shares may be | 392 |
issued in the place of lost, stolen, or destroyed certificates; | 393 |
(8) The manner in which and conditions upon which a | 394 |
certificated security, and the conditions upon which an | 395 |
uncertificated security, and the shares represented by a | 396 |
certificated or uncertificated security, may be transferred, | 397 |
restrictions on the right to transfer the shares, and reservations | 398 |
of liens on the shares; | 399 |
(9)(a) Restrictions on the transfer and the right to transfer | 400 |
shares of either of the following: | 401 |
(i) An issuing public corporation to any person in a control | 402 |
share acquisition; | 403 |
(ii) A corporation with fifty or more shareholders to any | 404 |
person in an acquisition that would be a control share acquisition | 405 |
if the corporation were an issuing public corporation. | 406 |
(b) The restrictions on the transfer and the right to | 407 |
transfer shares described in division (B)(9)(a)(i) and (ii) of | 408 |
this section may include requirements and procedures for consent | 409 |
to an acquisition of the shares by directors based on a | 410 |
determination by the directors of the best interests of the | 411 |
corporation and its shareholders, consent to an acquisition of the | 412 |
shares by shareholders, and reasonable sanctions for a violation | 413 |
of those requirements, including the right of the corporation to | 414 |
refuse to transfer, to redeem, or to deny voting or other | 415 |
shareholder rights appurtenant to shares acquired in an | 416 |
acquisition of the shares. | 417 |
(10) Defining, limiting, or regulating the exercise of the | 418 |
authority of the corporation, the directors, or the officers; | 419 |
(11) Defining, limiting, or regulating the exercise of the | 420 |
authority of the shareholders; provided, that any amendment of the | 421 |
regulations that would change or eliminate any such provision | 422 |
shall be adopted only by the shareholders. | 423 |
(C) The shareholders of a corporation may adopt and may | 424 |
authorize the directors to adopt, either before or during an | 425 |
emergency, as that term is defined in division (U) of section | 426 |
1701.01 of the Revised Code, emergency regulations that shall be | 427 |
operative only during an emergency. The emergency regulations may | 428 |
include any provisions that are authorized to be included in | 429 |
regulations by divisions (A) and (B) of this section. In addition, | 430 |
unless expressly prohibited by the articles or the regulations, | 431 |
the emergency regulations may make any provision, notwithstanding | 432 |
any different provisions in this chapter and notwithstanding any | 433 |
different provisions in the articles or the regulations that are | 434 |
not expressly stated to be operative during an emergency, that may | 435 |
be practical or necessary with respect to the following: | 436 |
(1) The place, if any, and time for holding, the manner of | 437 |
and authority for calling, giving notice of, and conducting, and | 438 |
the requirements of a quorum for, meetings of the directors; | 439 |
(2) The creation and appointment of an executive and other | 440 |
committees of the directors and the delegation of authority to the | 441 |
committees by the board; | 442 |
(3) The creation, existence, and filling of vacancies, | 443 |
including temporary vacancies, in the office of director; | 444 |
(4) The selection, by appointment, election, or otherwise, of | 445 |
officers and other persons to serve as directors for a meeting of | 446 |
the board in the absence from the meeting of one or more of the | 447 |
directors; | 448 |
(5) The creation, existence, and filling of vacancies, | 449 |
including temporary vacancies, in any office; | 450 |
(6) The order of rank and the succession to the duties and | 451 |
authority of officers. | 452 |
(D)(1) Unless the corporation complies with division (D)(2) | 453 |
of this section, if the regulations are amended or new regulations | 454 |
are adopted other than by the shareholders at a meeting held for | 455 |
that purpose, the secretary of the corporation shall send a copy | 456 |
of the amendment or the new regulations by mail, overnight | 457 |
delivery service, or any other means of communication authorized | 458 |
by the shareholder to whom a copy of the amendment or new | 459 |
regulations is sent, to each shareholder of record as of the date | 460 |
of the adoption of the amendment or the new regulations. | 461 |
(2) Any corporation that files periodic reports with the | 462 |
United States securities and exchange commission pursuant to | 463 |
section 13 of the "Securities Exchange Act of 1934," 48 Stat. 881, | 464 |
15 U.S.C. 78m, as amended, or section 15(d) of the "Securities | 465 |
Exchange Act of 1934," 48 Stat. 881, 15 U.S.C. 78o(d), as amended, | 466 |
may satisfy the notice to shareholders of record requirement of | 467 |
division (D)(1) of this section by including a copy of the | 468 |
amendment or the new regulations in a report filed in accordance | 469 |
with those sections within twenty days after the adoption of the | 470 |
amendment or the new regulations. | 471 |
(E) No person dealing with the corporation shall be charged | 472 |
with constructive notice of the regulations. | 473 |
(F) Unless expressly prohibited by the articles or the | 474 |
regulations or unless otherwise provided by the emergency | 475 |
regulations, the following special rules shall be applicable | 476 |
during an emergency notwithstanding any different provision | 477 |
elsewhere in this chapter: | 478 |
(1) Meetings of the directors may be called by any officer or | 479 |
director. | 480 |
(2) Notice of the time and place of each meeting of the | 481 |
directors shall be given to such of the directors as it may be | 482 |
feasible to reach at the time and by the means of communication, | 483 |
written or oral, personal or mass, as may be practicable at the | 484 |
time. | 485 |
(3) The director or directors present at any meeting of the | 486 |
directors that has been duly called and notice of which has been | 487 |
duly given shall constitute a quorum for the meeting, and, in the | 488 |
absence of one or more of the directors, the director or directors | 489 |
present may appoint one or more of the officers of the corporation | 490 |
directors for the meeting. | 491 |
(4) If none of the directors attends a meeting of the | 492 |
directors that has been duly called and notice of which has been | 493 |
duly given, the officers of the corporation who are present, not | 494 |
exceeding three, in order of rank, shall be directors for the | 495 |
meeting, shall constitute a quorum for the meeting, and may | 496 |
appoint one or more of the other officers of the corporation | 497 |
directors for the meeting. | 498 |
(5) If the chief executive officer dies, is missing, or for | 499 |
any other reason is temporarily or permanently incapable of | 500 |
discharging the duties of the office, the next ranking officer who | 501 |
is available shall assume the duties and authority of the office | 502 |
of the deceased, missing, or incapacitated chief executive officer | 503 |
until such time as the directors otherwise order. | 504 |
(6) The offices of secretary and treasurer shall be deemed to | 505 |
be of equal rank, and, within the same office and as between the | 506 |
offices of secretary and treasurer, rank shall be determined by | 507 |
priority in time of the first election to the office or, if two or | 508 |
more persons have been first elected to the office at the same | 509 |
time, by seniority in age. | 510 |
Sec. 1701.71. (A)(1)(a) Except as otherwise provided in | 511 |
512 | |
division (A)(2) of this section, the shareholders, at a meeting | 513 |
held for that purpose, may adopt an amendment, including any | 514 |
amendment that could be adopted by the directors, by the | 515 |
affirmative vote of the holders of shares entitling them to | 516 |
exercise two-thirds of the voting power of the corporation on the | 517 |
proposal or, if the articles provide or permit, by the affirmative | 518 |
vote of a greater or lesser proportion, but not less than a | 519 |
majority, of such voting power, and by the affirmative vote of the | 520 |
holders of shares of any particular class that is required by the | 521 |
articles.
| 522 |
(b) Any amendment that would change or eliminate the | 523 |
classification of directors of an issuing public corporation whose | 524 |
directors are classified pursuant to section 1701.57 of the | 525 |
Revised Code shall be adopted by the shareholders only at a | 526 |
meeting expressly held for that purpose, by the affirmative votes | 527 |
required under | 528 |
by the affirmative vote of the holders of at least a majority of | 529 |
disinterested shares voted on the proposal determined as specified | 530 |
in division (C)(9) of section 1704.01 of the Revised Code. | 531 |
(c) Any amendment that would provide that section 1701.831 of | 532 |
the Revised Code does not apply to control share acquisitions of | 533 |
shares of an issuing public corporation shall be adopted: | 534 |
(i) Upon the recommendation by the affirmative vote of a | 535 |
majority of the authorized number of directors of the issuing | 536 |
public corporation in favor of such amendment; and | 537 |
(ii) By the shareholders only at a meeting expressly held for | 538 |
the purpose, by the affirmative votes required under division | 539 |
(A)(1)(a) of this section. | 540 |
(d) If, at the time an amendment to eliminate cumulative | 541 |
voting rights permitted by division (B)(10) of section 1701.69 of | 542 |
the Revised Code is acted upon by the shareholders, a corporation | 543 |
does not have issued and outstanding shares that are listed on a | 544 |
national securities exchange or are regularly quoted in an | 545 |
over-the-counter market by one or more members of a national or | 546 |
affiliated securities association, that amendment shall not be | 547 |
adopted if the votes of a sufficient number of shares are cast | 548 |
against the amendment that, if cumulatively voted at an election | 549 |
of all the directors, or all the directors of a particular class, | 550 |
as the case may be, would at the time the amendment is acted upon | 551 |
by the shareholders be sufficient to elect at least one director. | 552 |
(2) Whenever under division (B) of this section the holders | 553 |
of shares of any particular class are entitled to vote as a class | 554 |
on the adoption of an amendment, the amendment, in order to be | 555 |
adopted, must receive the affirmative vote of the holders of at | 556 |
least two-thirds of the shares of that class or, if the articles | 557 |
provide or permit, a greater or lesser proportion, but not less | 558 |
than a majority, of the shares of that class. If the proposed | 559 |
amendment would authorize any particular corporate action that, | 560 |
under any applicable provision of law or under the existing | 561 |
articles, could be authorized only by or pursuant to a specified | 562 |
vote of shareholders, the amendment, in order to be adopted, must | 563 |
receive the affirmative vote so specified. | 564 |
(B) Regardless of limitations or restrictions in the articles | 565 |
on the voting rights of the shares of any class, the holders of | 566 |
shares of a particular class, and in the cases specified in | 567 |
divisions (B)(6), (7), and (8) of this section the holders of | 568 |
shares of every class, shall be entitled to vote as a class on the | 569 |
adoption of an amendment that does any of the following: | 570 |
(1) Increases or decreases the par value of the issued shares | 571 |
of the particular class, except in the case of an amendment to the | 572 |
articles adopted by the directors pursuant to division (B)(10) of | 573 |
section 1701.70 of the Revised Code; | 574 |
(2) Changes issued shares of the particular class, whether | 575 |
with or without par value, into a lesser number of shares of the | 576 |
same class or into the same or a different number of shares of any | 577 |
other class, with or without par value, previously or then | 578 |
authorized; | 579 |
(3) Changes the express terms, or adds express terms, of the | 580 |
shares of the particular class in any manner substantially | 581 |
prejudicial to the holders of the shares; | 582 |
(4) Changes the express terms of issued shares of any class | 583 |
senior to the particular class in any manner substantially | 584 |
prejudicial to the holders of shares of the particular class; | 585 |
(5) Authorizes shares of another class that are convertible | 586 |
into, or authorizes the conversion of shares of another class | 587 |
into, shares of the particular class, or authorizes the directors | 588 |
to fix or alter conversion rights of shares of another class that | 589 |
are convertible into shares of the particular class; provided, | 590 |
however, both of the following apply: | 591 |
(a) The failure to obtain the shareholders' approval only | 592 |
prevents the conversion of the shares until the shareholders' | 593 |
approval is obtained and does not otherwise affect the | 594 |
authorization or any other express terms of the shares; | 595 |
(b) The articles may provide that no vote of the holders of | 596 |
common shares, as a class, is required in connection with the | 597 |
authorization of shares of any class that are convertible into | 598 |
common shares. | 599 |
(6) Provides, in the case of an amendment described in | 600 |
division (B)(1) or (2) of this section, that the stated capital of | 601 |
the corporation shall be reduced or eliminated as a result of the | 602 |
amendment, or provides, in the case of an amendment described in | 603 |
division (B)(5) of this section, that the stated capital of the | 604 |
corporation shall be reduced or eliminated upon the exercise of | 605 |
such conversion rights, provided that any reduction or elimination | 606 |
is consistent with section 1701.30 of the Revised Code; | 607 |
(7) Changes substantially the purposes of the corporation, or | 608 |
provides that a subsequent amendment to the articles may be | 609 |
adopted that changes substantially the purposes of the | 610 |
corporation; | 611 |
(8) Changes a corporation into a nonprofit corporation. | 612 |
(C) An amendment that changes a corporation into a nonprofit | 613 |
corporation shall contain a statement of purposes proper in the | 614 |
case of a nonprofit corporation and a statement that, after the | 615 |
effective date of the amendment, the corporation shall be subject | 616 |
to the provisions of the Revised Code relating to nonprofit | 617 |
corporations. In the case of a corporation formed on or after June | 618 |
9, 1927, the amendment also shall provide for the cancellation of | 619 |
all outstanding shares and the terms and considerations, if any, | 620 |
for the cancellation. In the case of a corporation formed prior to | 621 |
June 9, 1927, the amendment may provide for the cancellation of | 622 |
outstanding shares, but if it does not so provide, the amendment | 623 |
shall contain a provision forbidding the payment of dividends or | 624 |
distributions on any shares after the effective date of the | 625 |
amendment. | 626 |
Sec. 1704.01. As used in this chapter, unless the context | 627 |
otherwise requires: | 628 |
(A) "Corporation," "domestic corporation," "foreign | 629 |
corporation," "state," "articles," "shareholder," "person," | 630 |
"principal office," "express terms," "treasury shares," "parent | 631 |
corporation," "parent," "subsidiary corporation," "subsidiary," | 632 |
"combination," "transferee corporation," "majority share | 633 |
acquisition," "acquiring corporation," "voting shares" when used | 634 |
in connection with a combination or majority share acquisition, | 635 |
"constituent corporation," "surviving corporation," "close | 636 |
corporation agreement," and "issuing public corporation" have the | 637 |
same meanings as in section 1701.01 of the Revised Code. | 638 |
(B) "Chapter 1704. transaction" means any of the following: | 639 |
(1) A merger, consolidation, combination, or majority share | 640 |
acquisition between or involving an issuing public corporation or | 641 |
any subsidiary of an issuing public corporation and any of the | 642 |
following: | 643 |
(a) An interested shareholder; | 644 |
(b) A person, partnership, corporation, or other entity, | 645 |
however organized, whether or not it is an interested shareholder, | 646 |
that is, or after the merger, consolidation, combination, or | 647 |
majority share acquisition would be, an affiliate or associate of | 648 |
an interested shareholder. | 649 |
(2)(a) Subject to the exception in division (B)(2)(b) of this | 650 |
section, a purchase, lease, sale, distribution, dividend, | 651 |
exchange, mortgage, pledge, transfer, or other disposition of | 652 |
assets, directly or indirectly owned or controlled by the issuing | 653 |
public corporation, by, to, with, or for the benefit of an | 654 |
interested shareholder or an affiliate or associate of an | 655 |
interested shareholder in one or more transactions, if, in any of | 656 |
those transactions, the assets meet any of the following | 657 |
conditions: | 658 |
(i) The assets have an aggregate fair market value equal to | 659 |
at least five per cent of the aggregate fair market value of all | 660 |
the assets, determined on a consolidated basis, of the issuing | 661 |
public corporation; | 662 |
(ii) The assets have an aggregate fair market value equal to | 663 |
at least five per cent of the aggregate fair market value of all | 664 |
the outstanding shares of the issuing public corporation; | 665 |
(iii) The assets represent at least ten per cent of the | 666 |
earning power or income of the issuing public corporation, | 667 |
determined on a consolidated after-tax basis and after excluding | 668 |
any transaction other than in the ordinary course of business. | 669 |
(b) One or more transactions in the ordinary course of | 670 |
business of an issuing public corporation on terms no more | 671 |
favorable to the interested shareholder than those acceptable to | 672 |
third parties, as shown by contemporaneous transactions, is not a | 673 |
Chapter 1704. transaction under division (B)(2)(a) of this | 674 |
section. | 675 |
(3)(a) Subject to the exception in division (B)(3)(b) of this | 676 |
section, a purchase, lease, sale, exchange, transfer, or other | 677 |
disposition of assets directly or indirectly owned or controlled | 678 |
by the interested shareholder or an affiliate or associate of the | 679 |
interested shareholder, by, to, with, or for the benefit of the | 680 |
issuing public corporation in one or more transactions, if, in any | 681 |
of those transactions, the assets meet any of the conditions set | 682 |
forth in division (B)(2)(a)(i), (ii), or (iii) of this section. | 683 |
(b) One or more transactions in the ordinary course of | 684 |
business of an issuing public corporation on terms no more | 685 |
favorable to the interested shareholder than those acceptable to | 686 |
third parties, as shown by contemporaneous transactions, is not a | 687 |
Chapter 1704. transaction under division (B)(3)(a) of this | 688 |
section. | 689 |
(4) The issuance or transfer to an interested shareholder or | 690 |
an associate or affiliate of an interested shareholder of any | 691 |
shares, or of any rights to acquire shares, of the issuing public | 692 |
corporation or a subsidiary of the issuing public corporation by | 693 |
the issuing public corporation or a subsidiary of the issuing | 694 |
public corporation, in one or more transactions, if the shares, or | 695 |
the rights, have an aggregate fair market value equal to at least | 696 |
five per cent of the aggregate fair market value of all the | 697 |
outstanding shares of the issuing public corporation and if the | 698 |
shares, or the rights, are not issued or transferred pursuant to | 699 |
the exercise of warrants, rights, or options to purchase that have | 700 |
been issued, or pursuant to a dividend paid or a distribution | 701 |
made, proportionately to all shareholders of the issuing public | 702 |
corporation. | 703 |
(5) The adoption of a plan or proposal for the dissolution, | 704 |
winding up of the affairs, or liquidation of the issuing public | 705 |
corporation that is proposed by, on behalf of, or pursuant to a | 706 |
written or unwritten agreement, arrangement, or understanding with | 707 |
an interested shareholder or an affiliate or associate of an | 708 |
interested shareholder. | 709 |
(6) Any of the following, if the direct or indirect effect is | 710 |
to increase the proportionate share of the outstanding shares of | 711 |
the issuing public corporation or a subsidiary of the issuing | 712 |
public corporation beneficially owned by an interested shareholder | 713 |
or an affiliate or associate of an interested shareholder, unless | 714 |
the increase is the result of immaterial changes due to fractional | 715 |
share adjustments: | 716 |
(a) A reclassification of securities, including a share | 717 |
split, a share dividend or other distribution of shares, or a | 718 |
reverse share split; | 719 |
(b) A recapitalization of the issuing public corporation; | 720 |
(c) A merger, consolidation, combination, or majority share | 721 |
acquisition between or involving the issuing public corporation | 722 |
and a subsidiary of the issuing public corporation; | 723 |
(d) Any other transaction, whether or not with, into, or | 724 |
involving the interested shareholder, that is proposed by, on | 725 |
behalf of, or pursuant to a written or unwritten agreement, | 726 |
arrangement, or understanding with the interested shareholder or | 727 |
an affiliate or associate of the interested shareholder. | 728 |
(7) Receipt by an interested shareholder or an affiliate or | 729 |
associate of an interested shareholder of the direct or indirect | 730 |
benefit of a loan, advance, pension or any other employee benefit | 731 |
plan termination, guarantee, pledge, mortgage, security agreement, | 732 |
financing statement, deed of trust, or other financial assistance, | 733 |
or a tax credit or other tax advantage, provided by or through the | 734 |
issuing public corporation or any subsidiary of the issuing public | 735 |
corporation unless the interested shareholder receives the benefit | 736 |
proportionately as a holder of shares of the issuing public | 737 |
corporation. | 738 |
(C) When used in connection with a Chapter 1704. transaction: | 739 |
(1) "Affiliate" means a person that directly, or indirectly | 740 |
through one or more intermediaries, controls, is controlled by, is | 741 |
under common control with, or acts in concert with, a specified | 742 |
person. | 743 |
(2) "Announcement date" means the date of the first public | 744 |
announcement of a definitive proposal for a Chapter 1704. | 745 |
transaction. | 746 |
(3) "Associate" of a person means any of the following: | 747 |
(a) A corporation, partnership, or other entity, however | 748 |
organized, of which the person is an officer, director, or partner | 749 |
or is the beneficial owner of shares entitling that person to | 750 |
exercise at least ten per cent of the voting power in the election | 751 |
of the directors or other governing body of that corporation, | 752 |
partnership, or other entity; | 753 |
(b) A trust or other estate, including any employee stock | 754 |
ownership or benefit plan, however designated, in which the person | 755 |
has a substantial beneficial interest or as to which the person | 756 |
serves as trustee or in a similar fiduciary capacity; | 757 |
(c) A relative or spouse of the person, or a relative of the | 758 |
spouse of the person, who has the same principal residence as the | 759 |
person. | 760 |
(4) "Beneficial owner" of shares means a person who, with | 761 |
respect to particular shares, meets any of the following | 762 |
conditions: | 763 |
(a) The person directly or indirectly, alone or with others, | 764 |
including affiliates or associates of that person, beneficially | 765 |
owns the shares; | 766 |
(b) The person directly or indirectly, alone or with others, | 767 |
including affiliates or associates of that person, has the right, | 768 |
whether exercisable immediately or only after the passage of time, | 769 |
conditionally, unconditionally, or otherwise, to acquire the | 770 |
shares pursuant to a written or unwritten agreement, arrangement, | 771 |
or understanding or upon the exercise of conversion rights, | 772 |
exchange rights, warrants, calls, options, or otherwise; | 773 |
(c) The person directly or indirectly, alone or with others, | 774 |
including affiliates or associates of that person, has the right | 775 |
to vote or direct the voting of the shares pursuant to a written | 776 |
or unwritten agreement, arrangement, or understanding; | 777 |
(d) The person has a written or unwritten agreement, | 778 |
arrangement, or understanding with another person who is directly | 779 |
or indirectly a beneficial owner, or whose affiliates or | 780 |
associates are direct or indirect beneficial owners, of the | 781 |
shares, if the agreement, arrangement, or understanding is for the | 782 |
purpose of the first person's or the other person's acquiring, | 783 |
holding, disposing of, voting, or directing the voting of the | 784 |
shares to or for the benefit of the first person. A bank, broker, | 785 |
nominee, trustee, or other person who acquires shares for the | 786 |
benefit of others in the ordinary course of business in good faith | 787 |
and not for the purpose of circumventing the provisions of this | 788 |
chapter shall, however, be deemed to be the beneficial owner only | 789 |
of shares in respect of which that person, without further | 790 |
instruction from others, holds voting power. | 791 |
(5) "Consummation date" means the date on which consummation | 792 |
of a Chapter 1704. transaction occurs. | 793 |
(6) "Control," "controlled by," or "under common control | 794 |
with" refers to the possession, directly or indirectly, of the | 795 |
power to direct or cause the direction of the management and | 796 |
policies of a person, whether through the exercise of or the | 797 |
ability to exercise voting power, by contract, or otherwise, | 798 |
except that "control" of a corporation is not established for | 799 |
purposes of this division if a person, in good faith and not for | 800 |
the purpose of circumventing the provisions of this chapter, holds | 801 |
voting power as an agent, custodian, bank, broker, nominee, or | 802 |
trustee for one or more beneficial owners who do not individually | 803 |
or as a group have control of the corporation. | 804 |
(7) "Exchange Act" means the "Securities Exchange Act of | 805 |
1934," 48 Stat. 881, 15 U.S.C.A. 78a-78jj, as amended, and any | 806 |
successor or replacement legislation and amendments to the | 807 |
successor or replacement legislation. | 808 |
(8) "Interested shareholder," with respect to an issuing | 809 |
public corporation, means a person other than the issuing public | 810 |
corporation, a subsidiary of that issuing public corporation, any | 811 |
employee stock ownership or benefit plan of the issuing public | 812 |
corporation or a subsidiary of that issuing public corporation, or | 813 |
any trustee or fiduciary with respect to any such plan acting in | 814 |
such capacity who | 815 |
(a) Is the beneficial owner of a sufficient number of shares | 816 |
of the issuing public corporation that, when added to all other | 817 |
shares of the issuing public corporation in respect of which that | 818 |
person may exercise or direct the exercise of voting power, would | 819 |
entitle that person, directly or indirectly, alone or with others, | 820 |
including affiliates and associates of that person, to exercise or | 821 |
direct the exercise of ten per cent of the voting power of the | 822 |
issuing public corporation in the election of directors after | 823 |
taking into account all of that person's beneficially owned shares | 824 |
that are not currently outstanding; | 825 |
(b) At any time within the three-year period immediately | 826 |
prior to the date on which it is sought to be determined whether | 827 |
the person is an interested shareholder, was the beneficial owner | 828 |
of a sufficient number of shares of the issuing public corporation | 829 |
that, when added to all other shares of the issuing public | 830 |
corporation in respect of which that person may have exercised or | 831 |
directed the exercise of voting power at the time it beneficially | 832 |
owned such shares, entitled that person, directly or indirectly, | 833 |
alone or with others, including affiliates and associates of that | 834 |
person, to exercise or direct the exercise of ten per cent of the | 835 |
voting power of the issuing public corporation in election of | 836 |
directors after taking into account all of the person's | 837 |
beneficially owned shares that were not, at the time it | 838 |
beneficially owned such shares, currently outstanding. | 839 |
(9) "Disinterested shares" means voting shares beneficially | 840 |
owned by any person not an interested shareholder or an affiliate | 841 |
or associate of an interested shareholder. | 842 |
(10) "Share acquisition date," with respect to any person, | 843 |
means the date on which that person first becomes an interested | 844 |
shareholder of an issuing public corporation. | 845 |
(11) "Voting shares" means shares of a domestic or foreign | 846 |
corporation, entitling the holder of the shares to vote at the | 847 |
time in the election of directors of the corporation without | 848 |
regard to the voting power represented by shares that thereafter | 849 |
may exist upon a default, failure, or other contingency. | 850 |
Sec. 1704.05. This chapter does not apply to any of the | 851 |
following: | 852 |
(A) A Chapter 1704. transaction if on the interested | 853 |
shareholder's share acquisition date, the issuing public | 854 |
corporation, other than a bank as defined in section 1101.01 of | 855 |
the Revised Code, did not have a class of voting shares registered | 856 |
or traded on a national securities exchange or registered under | 857 |
section 12(g) of the Exchange Act or was not required to file | 858 |
periodic reports and information pursuant to section 15(d) of the | 859 |
Exchange Act. | 860 |
(B)(1) A Chapter 1704. transaction if the interested | 861 |
shareholder was an interested shareholder on the date immediately | 862 |
preceding the effective date of this section; except that this | 863 |
chapter shall apply, and the share acquisition date shall be the | 864 |
date, when the interested shareholder increases its beneficial | 865 |
ownership of voting power of the issuing public corporation to a | 866 |
proportion in excess of the proportion of voting power that the | 867 |
interested shareholder beneficially owned on the date immediately | 868 |
preceding the effective date of this section unless the interested | 869 |
shareholder's subsequent increase in beneficial ownership results | 870 |
from or is the consequence of any of the following circumstances: | 871 |
(a) The increase is by bequest or inheritance, by operation | 872 |
of law upon the death of any individual, or by any other transfer | 873 |
without valuable consideration, including a gift, that is made in | 874 |
good faith and not for the purpose of circumventing the provisions | 875 |
of this chapter; | 876 |
(b) The increase is pursuant to the satisfaction of a pledge | 877 |
or other security interest created in good faith and not for the | 878 |
purpose of circumventing the provisions of this chapter; | 879 |
(c) The increase is the result solely of the purchase by the | 880 |
issuing public corporation of shares issued by it; | 881 |
(d) The increase is in accordance with approval by the | 882 |
directors of the issuing public corporation before the increase | 883 |
occurred. | 884 |
(2) If this chapter would have applied to the increase of | 885 |
beneficial ownership described in division (B)(1) of this section | 886 |
but for the application of an exception described in division | 887 |
(B)(1)(a), (b), (c), or (d) of this section, this chapter shall | 888 |
apply if the interested shareholder's subsequent increase in its | 889 |
proportion of beneficial ownership is not the result or a | 890 |
consequence of any of the circumstances described in division | 891 |
(B)(1)(a), (b), (c), or (d) of this section. | 892 |
(C) A Chapter 1704. transaction if the interested shareholder | 893 |
was an interested shareholder on the date immediately preceding | 894 |
the effective date of this section and inadvertently increases its | 895 |
beneficial ownership of voting power of the issuing public | 896 |
corporation to a proportion in excess of the proportion of voting | 897 |
power that the interested shareholder beneficially owned on the | 898 |
date immediately preceding the effective date of this section, | 899 |
provided that, as soon as practicable, the interested shareholder | 900 |
divests itself of beneficial ownership of a sufficient number of | 901 |
voting shares of the issuing public corporation that the | 902 |
interested shareholder is no longer the beneficial owner of a | 903 |
proportion of voting power in excess of the proportion of voting | 904 |
power that the interested shareholder beneficially owned on the | 905 |
date immediately preceding the effective date of this section. | 906 |
(D)(1) A Chapter 1704. transaction if a person becomes an | 907 |
interested shareholder through an acquisition of voting shares | 908 |
that resulted from or was the consequence of any of the | 909 |
circumstances described in division (B)(1)(a), (b), (c), or (d) of | 910 |
this section, except that this chapter shall apply, and the share | 911 |
acquisition date shall be the date, when the interested | 912 |
shareholder increases its beneficial ownership of voting power of | 913 |
the issuing public corporation to a proportion in excess of the | 914 |
proportion of voting power that the interested shareholder | 915 |
beneficially owned on the date on which it became an interested | 916 |
shareholder unless the interested shareholder's subsequent | 917 |
increase in beneficial ownership results from or is a consequence | 918 |
of any of the circumstances described in division (B)(1)(a), (b), | 919 |
(c), or (d) of this section. | 920 |
(2) If this chapter would have applied to the acquisition of | 921 |
voting shares described in division (D)(1) of this section but for | 922 |
the application of an exception described in division (B)(1)(a), | 923 |
(b), (c), or (d) of this section, this chapter shall apply if the | 924 |
interested shareholder's subsequent increase in its proportion of | 925 |
beneficial ownership is not the result or a consequence of any of | 926 |
the circumstances described in division (B)(1)(a), (b), (c), or | 927 |
(d) of this section. | 928 |
(E) A Chapter 1704. transaction if a person became an | 929 |
interested shareholder inadvertently, provided that, as soon as | 930 |
practicable, the person divests itself of beneficial ownership of | 931 |
a sufficient number of voting shares of the issuing public | 932 |
corporation that the person no longer is an interested | 933 |
shareholder. | 934 |
(F)(1) Subject to division (F)(2) of this section, a Chapter | 935 |
1704. transaction if the original articles of the issuing public | 936 |
corporation state, or if the articles of the issuing public | 937 |
corporation have been amended in compliance with the provisions of | 938 |
section 1701.70, 1701.71, or 1701.72 of the Revised Code to state, | 939 |
by specific reference to this chapter, that this chapter does not | 940 |
apply to the corporation and if any of the following applies: | 941 |
(a) The corporation had fewer than fifty shareholders or was | 942 |
not an issuing public corporation when the statement initially was | 943 |
set forth in the articles. | 944 |
(b) No shareholder of the corporation qualified as an | 945 |
interested shareholder when the statement was initially set forth | 946 |
in the articles. | 947 |
(c) The statement was contained in an amendment to the | 948 |
articles and the amendment was approved, upon the recommendation | 949 |
by the affirmative vote of a majority of the authorized number of | 950 |
directors of the corporation in favor of such amendment, by the | 951 |
holders of two-thirds of all outstanding shares of the corporation | 952 |
entitled to vote in the election of directors and by the holders | 953 |
of two-thirds of all outstanding disinterested shares of the | 954 |
acquiring public corporation entitled to vote in the election of | 955 |
directors. | 956 |
(2) If, however, a Chapter 1704. transaction would have been | 957 |
prohibited but for the adoption of an amendment to the articles in | 958 |
compliance with division (F)(1)(b) or (c) of this section, the | 959 |
issuing public corporation shall not engage in a Chapter 1704. | 960 |
transaction for twelve months following the adoption of the | 961 |
amendment; in addition, if this chapter would have applied to a | 962 |
person who became an interested shareholder prior to the adoption | 963 |
of such an amendment, this chapter shall continue to apply to a | 964 |
Chapter 1704. transaction between the issuing public corporation | 965 |
and the interested shareholder as if the amendment had not been | 966 |
adopted. | 967 |
(G) A Chapter 1704. transaction between an acquiring public | 968 |
corporation and any employee benefit plan, or any trust under any | 969 |
employee benefit plan, established by the issuing public | 970 |
corporation, and any distribution or payment made by the employee | 971 |
benefit plan or trust to any beneficiary. | 972 |
(H) A Chapter 1704. transaction that involves any acquisition | 973 |
of securities of an issuing public corporation pursuant to an | 974 |
employee stock option plan, an employee stock purchase plan, an | 975 |
employee stock bonus plan, an employee stock ownership plan, or | 976 |
any similar plan designed to benefit one or more employees | 977 |
established by the issuing public corporation, provided the | 978 |
acquisition of the securities and the establishment of, any | 979 |
amendment to, and the administration of the plan are in good faith | 980 |
and not for the purpose of circumventing the provisions of this | 981 |
chapter. | 982 |
(I) A Chapter 1704. transaction that involves compensation | 983 |
directly or indirectly received by a director, officer, employee, | 984 |
agent, or independent contractor of an issuing public corporation | 985 |
in return for services rendered or to be rendered to the issuing | 986 |
public corporation, provided the payment of the compensation and | 987 |
the services rendered, or to be rendered, are in good faith and | 988 |
not for the purpose of circumventing the provisions of this | 989 |
chapter. | 990 |
(J) A Chapter 1704. transaction that involves any loan of | 991 |
money or property of an issuing public corporation to a director, | 992 |
officer, employee, agent, or independent contractor of the issuing | 993 |
public corporation, provided the loan is designed to encourage the | 994 |
rendering of needed, valuable, and efficient services to the | 995 |
issuing public corporation and provided the loan is made and the | 996 |
services are rendered, or are to be rendered, in good faith and | 997 |
not for the purpose of circumventing the provisions of this | 998 |
chapter. | 999 |
(K) A Chapter 1704. transaction in which an issuing public | 1000 |
corporation makes a loan of money or other property to, guarantees | 1001 |
any loan of money or other property to, or guarantees any | 1002 |
obligation of, an employee stock ownership plan, as defined in | 1003 |
Section 4975(e)(7) of the "Internal Revenue Code of 1986," 68A | 1004 |
Stat. 3, 26 U.S.C.A. 1, as amended, of the issuing public | 1005 |
corporation. | 1006 |
Section 2. That existing sections 1701.01, 1701.11, 1701.71, | 1007 |
1704.01, and 1704.05 of the Revised Code are hereby repealed. | 1008 |