Judiciary Committee
AN ACT CONCERNING THE CONNECTICUT BUSINESS CORPORATION ACT
SUMMARY: This act makes a number of changes to the statutes governing business corporations including:
1. allowing a corporation to set different record dates for providing notice of a meeting to shareholders and for determining which shareholders are entitled to vote at the meeting;
2. allowing the board of directors to authorize, and set guidelines and procedures for, a class or series of shareholders to participate remotely in meetings;
3. expanding the use of electronic documents and technologies and establishing additional rules for their use; and
4. making minor and technical changes.
EFFECTIVE DATE: October 1, 2011
§§ 1 & 3-9 — SEPARATE RECORD DATES FOR NOTICE AND VOTING
Shareholders' Meeting (§§ 4-5)
For a shareholders' meeting, the act allows the board to set (1) the record date for those entitled to notice and (2) a later record date on or before the meeting date to determine who is entitled to vote. The act allows this only if the corporate bylaws do not prohibit it and the board sets both dates at the same time. Otherwise, as under prior law, the record date is the same for determining who is entitled to notice and who can vote.
The act also applies these provisions to notice requirements for an adjourned meeting.
Bylaws (§ 5)
Under prior law, the bylaws could set or provide the manner of setting the record date for one or more voting groups to determine who is entitled to notice of a shareholders' meeting, demand a special meeting, vote, or take other action. The act allows fixing more than one record date.
Record Date for Certain Purposes (§§ 3 & 7-8)
The act allows a court ordering a meeting to set separate dates for determining who is entitled to notice and who is entitled to vote. This applies when a shareholder applies to the court for a meeting when there has been no annual meeting or the shareholders demand a special meeting.
As under prior law, for shareholders' action on a director's conflicting interest transaction, the act specifies that shareholders entitled to vote are determined as of the record date for notice of the meeting.
The law provides that appraisal rights are not available for holders of certain classes or series related to certain transactions. The act specifies that shareholders are determined based on the record date for notice.
Meeting Notices (§ 1)
The law requires corporations to notify shareholders of annual and special shareholders' meetings. The act requires the notice to include the date for determining which shareholders are entitled to vote at the meeting if the date is different from the date determining which shareholders are entitled to notice.
The act requires the notice to a class or series of shareholders to describe how remote communication may be used if the board of directors authorized the class or series to participate remotely (see below).
Shareholder Lists and Meeting Information (§§ 6 & 9)
The act requires the board to prepare an alphabetical list of shareholders entitled to vote if it sets a date for voting different from the notice date. As for the list of those entitled to notice under existing law, the act requires a list of those entitled to vote to be available for inspection. It requires the list to be available promptly after the record date for voting.
The act allows shareholders who become entitled to vote after the record date for notice to request and obtain from the corporation the notice and any information provided to shareholders for the meeting unless the information is generally available to shareholders on the corporation's website or by other generally recognized means. Under the act, if a corporation fails to provide this information, it does not affect the validity of actions at the meeting.
§ 2 — REMOTE PARTICIPATION
The act allows a class or series of shareholders to participate in a shareholders' meeting remotely if the board authorizes it, subject to guidelines and procedures the board adopts. The act deems shareholders who participate remotely to be present, and they may vote at the meeting if the corporation implements reasonable measures to:
1. verify that each person is a shareholder and
2. provide a reasonable opportunity to participate in the meeting and vote on matters submitted to the shareholders, including an opportunity to communicate and read or hear the proceedings substantially concurrent with the proceedings.
§ 9 — CORPORATE RECORDS
By law, shareholders can submit a written demand to inspect and copy certain corporate records. The act requires that the demand be signed.
Previously shareholders could request records of an action taken by a board committee acting in place of the board. The act instead allows shareholders to request excerpts from the minutes of such a committee and records of action taken by a committee without a meeting.
§§ 10-11 & 14-15—DOCUMENTS AND NOTICES
Definitions (§ 10)
The act changes a number of definitions that apply to statutes governing business corporations regarding the use of electronic documents and technologies.
1. By law, something is “conspicuous” if it is written so that a reasonable person should notice it. The act expands the definition to include something displayed or presented.
2. The act restricts “delivery” by electronic transmission to means that satisfy the act's requirements (see below).
3. It expands the definition of a “document” from anything the law requires to be delivered to the secretary of the state to (a) any tangible medium on which information is inscribed, including a writing or written instrument and (b) an electronic record.
4. It defines an “electronic record” as information stored in an electronic or other medium that is retrievable in paper form through an automated process used in conventional commercial practice (unless otherwise authorized by the act, see below). “Electronic” relates to technology with electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
5. Prior law defined “electronic transmission” as any process of communication not directly involving the physical transfer of paper that is suitable for retention, retrieval, and reproduction of information by the recipient. The act adds a requirement that the communication be retrievable in paper form by the recipient through an automated process used in conventional commercial practice (unless otherwise authorized by the act, see below).
6. By law, a “signature” includes a manual, fax, conformed, or electronic signature. The act expands this to include, with present intent to authenticate or adopt a document, (a) executing or adopting a tangible symbol to a document, including a manual, fax, or conformed signature or (b) attaching to or logically associating with an electronic transmission an electronic sound, symbol, or process, including an electronic signature in an electronic transmission.
7. The act defines “writing” as any information in a document.
Notices and Communications (§ 11)
Under prior law, notice could be communicated in person; by mail or other delivery method; or by telephone, voicemail, or other electronic means. The act instead allows a notice or other communication to be given or sent by any delivery method and sets requirements for electronic transmissions.
When Electronic Transmission is Allowed. Under the act, a notice or communication may be by electronic transmission if the (1) recipient consents or, for notices of directors meetings, the certificate of incorporation or bylaws authorize or require it and (2) electronic transmission contains or is accompanied by information that allows the recipient to determine the transmission date and that it was authorized by the sender or the sender's agent or attorney-in-fact.
Consent to Electronic Transmissions. The act allows a person to revoke consent to receive electronic transmissions by written or electronic notice to the person to whom consent was delivered. Consent is also deemed revoked if the (1) corporation cannot deliver two consecutive electronic transmissions with consent and (2) corporation's secretary, assistant secretary, transfer agent, or person responsible for giving notice or communication knows they have been unsuccessful (but inadvertently failing to treat this as a revocation does not invalidate a meeting or other action).
When an Electronic Transmission is Received. Under prior law, an electronic notice to shareholders was effective when transmitted as authorized by the shareholder and notice to others was effective when received. Under the act, any electronic transmission is received, unless the sender and recipient agree otherwise, when it (1) enters an information processing system the recipient designated or uses to receive electronic transmissions or information of the type sent and from which the recipient can retrieve it and (2) is in a form capable of being processed by that system. An electronic transmission is received even if no one is aware of it. Receipt of an electronic acknowledgment from the information processing system establishes that the transmission was received but does not on its own establish that the content sent corresponds to the content received.
Form of Electronic Transmissions. The act allows a notice or communication to be in an electronic transmission that cannot be directly reproduced by the recipient in paper form by an automated process used in conventional commercial practice only if the (1) transmission is otherwise retrievable in perceivable form and (2) sender and recipient consent in writing to this form.
Mail Delivery. The act retains existing rules for mail delivery of notice and extends them to other types of communications. Under prior law, one way a notice was considered effective was when it was received. The act adds specific rules regarding when a notice or communication in physical form is effective: the earlier of when it is (1) actually received or (2) left at a shareholder's address as listed in the corporate records, a director's residence or usual place of business, or the corporation's principal place of business.
As under prior law for notices, the act provides that laws that provide specific requirements for a communication prevail and that requirements in a certificate of incorporation or bylaws that are not inconsistent with these provisions govern.
Consenting to Action Without a Shareholders Meeting (§ 14)
The act repeals specific provisions on consent to action without a shareholders' meeting by electronic transmission, thus applying the act's general provisions on electronic communications. Prior law required electronic transmissions to contain or be accompanied by information that allows the corporation to determine the date the transmission was signed and that it was authorized by the shareholder or his or her agent or attorney-in-fact.
The act also deletes a specific requirement that written consent be delivered to the corporation's registered agent at its registered office or to the corporation's secretary at its principal office.
Proxies (§ 15)
The act repeals specific provisions on appointing a proxy by electronic transmission, thus applying the act's general provisions on electronic communications. Prior law required electronic transmissions to contain or be accompanied by information that allows the corporation to determine that it was authorized by the shareholder or his or her agent or attorney-in-fact.
Use of English in Notices or Communications (§ 11)
The act requires a notice or communication between a sender and recipient to be in English unless they agree otherwise.
§§ 12 & 23 — REGISTERED AGENTS CHANGING ADDRESS
Prior law required a registered agent changing his or her address or a registered agent of a foreign corporation changing his or her business office address to sign a statement manually or in facsimile and deliver it to the secretary of the state. The act allows any type of signature authorized under the act's definitions.
For a registered agent of a domestic corporation changing his or her address, the law requires written notice to the corporation. The act requires the agent to sign the notice.
§ 16 — DERIVATIVE ACTIONS
Under prior law, a shareholder could not begin a derivative proceeding (an action brought by a shareholder on behalf of the corporation) until there was a written demand on the corporation to take action and 90 days had passed since the demand was made. The act starts the 90 day period from the date the demand was delivered. It maintains the shareholders' ability to bring a proceeding earlier if (1) the corporation notified the shareholder that it rejects the demand or (2) irreparable injury to the corporation will result.
§§ 17-19 & 21 — SIGNING DOCUMENTS
The law allows a board member to submit certain documents asking the corporation to pay in advance certain expenses related to a proceeding in which the corporation may indemnify the board member. The act requires these documents to be signed.
The act requires certain merger and share exchange documents and assertions of appraisal rights to be signed rather than executed.
§ 22 — DELIVERY OF APPRAISAL NOTICES
The law requires corporations to send written appraisal notices regarding corporate actions requiring appraisal rights. The act specifies that notice must be delivered, rather than sent, within 10 days of the date the corporate action takes effect.
§ 25 — NO DUTY TO SEND NOTICES
The law exempts a corporation from sending notices to a shareholder if previous notices or dividend payments to the shareholder have been returned as undeliverable. The act extends this rule so that it is also triggered when notices or payments could not be delivered.
§ 26 — APPLICATION UNDER FEDERAL LAW
The act specifies that Connecticut's business corporation law applies to the maximum extent permitted by federal law if any of Connecticut's provisions are deemed to modify, limit, or supersede the federal Electronic Signatures in Global and National Commerce Act.
BACKGROUND
Electronic Signatures in Global and National Commerce Act
Congress enacted the Electronic Signatures in Global and National Commerce Act to facilitate the use of electronic records and signatures in interstate and foreign commerce by ensuring the validity and legal effect of contracts entered into electronically (15 U. S. C. § 7001 et seq. ).
This law (15 USC § 7002) allows a state statute to modify, limit, or supersede it only if the state law:
1. constitutes an enactment or adoption of the Uniform Electronic Transactions Act or
2. specifies the alternative procedures or requirements for the use or acceptance (or both) of electronic records or electronic signatures to establish the legal effect, validity, or enforceability if they satisfy certain standards and the state law makes specific reference to this act.
OLR Tracking: CR: TA: PF: ts