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Report of the Corporation Law Committee

To the Council of Delegates:

The Corporation Law Committee respectfully requests your favorable consideration of the following four legislative proposals.

A. A proposal to amend ORC § 1701.75 to clarify that a Federal Bankruptcy Court may order corporate events, such as mergers, articles amendments, etc., within the context of liquidating bankruptcies as well as reorganizations.

B. A proposal to amend ORC § 1701.18 and 1701.19 to expand the forms of consideration that may be used to purchase shares of stock, and a related amendment of ORC § 1705.09 to expand the forms of consideration that may be contributed to limited liability companies.

C. A proposal to amend ORC §§ 1701.10 and 1701.11 to allow Board amendments to the corporate Regulations if so-permitted by the corporation’s Articles or Regulations, and to amend ORC §§ 1701.01, 1701.40, 1701.41, 701.44, 7101.51, 1701.54, 1701.57, 1701.58, 1701.62, 1701.63 and 1701.831 to require shareholder approval of certain amendments to the Regulations.

D. A proposal to amend ORC §§ 121.72 and 121.75 to allow agencies to incorporate by reference future amendments to federal statutes and rules incorporated by reference and a related change to §§ 1707.01, 1707.20 and 1707.44. A new § 1707.152 is proposed to coordinate Ohio broker-dealer record keeping and financial requirements with federal law and to allow for exemptions for small broker-dealers registered only with Ohio.

 

Respectfully submitted,
Gary P. Kreider, Cincinnati
Chair

 

Exhibit A

Proposed amendment to ORC § 1701.75 to allow a corporation to take corporate actions pursuant to a decree or order of a U.S. Bankruptcy Court

Rationale for Amendment: Delaware General Corporation Law § 303 was amended in June 2004 to authorize corporations to implement any decree or order of a United States Bankruptcy Court, in either a liquidation or a reorganization proceeding, without shareholder or director approval, regardless of the existence of a plan or reorganization. The pre-revised version of DGCL § 303, similar to current ORC § 1701.75, required a confirmed plan of reorganization to take such actions without shareholder or director approval. The proposed amendment to the corresponding Ohio provision, ORC § 1701.75, parallels the expansion of the analogous Delaware statute.

Text of Proposed Amendment:
ORC § 1701.75. Judicial reorganization of corporation

(A) A corporation, a plan of reorganization of which shall have been confirmed by the decree or order of a court of competent jurisdiction pursuant to the provisions of any applicable statute of the United States relating to reorganization of corporations, If an order of relief has been entered pursuant to the Federal Bankruptcy Code, 11 U.S.C. §§ 101, et seq., or any successor statute, or if a plan of reorganization has been confirmed by the decree or order of a court of competent jurisdiction pursuant to the provisions of any other applicable statute of the United State relating to the reorganization of corporations, a corporation may put into effect and carry out the plan and the any decrees and orders of the court relative thereto, in such bankruptcy or reorganization proceeding and may take any proceeding and do any act corporate action provided in the plan or directed by such decrees and orders, without further action by its directors or shareholders. Such authority may be exercised, and such proceedings and acts corporate actions may be taken or done, as directed by such decrees or orders, by the trustee or trustees of such corporation appointed or elected in the bankruptcy or reorganization proceedings (or a majority thereof), or if none shall have been appointed or elected and acting, by designated officers of the corporation, or by a master or other representative appointed by the court, with like effect as if exercised and taken by unanimous action of the directors and shareholders of the corporation.

(B) If authorized A corporation, in the manner provided in division (A) of this section, but without limiting the generality thereof, a corporation may: amend its articles in any respect; amend or repeal its regulations or adopt new regulations; name, constitute, reconstitute, classify, or reclassify its directors and appoint directors and officers in place of or in addition to some or all of the directors or officers then in office; make any lawful change in its stated capital; make a determination of the fair value to the corporation of its assets; transfer all or a part of its assets; merge; consolidate; remove or appoint a statutory agent; authorize the granting of option rights in respect of shares and other securities; authorize the issuing of notes, bonds, and other evidences of indebtedness, whether or not convertible into shares or other securities; lease its property to any corporation; dissolve; or effect any other change authorized by this chapter.

(C) If a plan of reorganization provides for or effects an amendment to the articles is adopted or the merger, consolidation, or dissolution of a corporation is authorized in the manner provided in division (A) of this section, or if a plan decree or order having such a result is modified in respect of such amendment, merger, consolidation, or dissolution, a certificate of reorganization or an amended certificate of reorganization, as the case may be, setting forth such portions of the plan of reorganization decree or order or modification thereof as would otherwise be required to be set forth in a certificate of amendment, an agreement of merger or consolidation, or a certificate of dissolution (and, if desired, any other portions thereof) shall be filed in the office of the secretary of state and shall operate to effect such amendment, merger, consolidation, or dissolution. Such certificate shall be made, subscribed, and filed as may be directed by such decrees or orders, or, in the absence of such direction, by the president or a vice-president and the secretary or an assistant secretary. The certificate shall contain a statement that the plan of reorganization provision for the making of such certificate has been confirmed authorized by the decree or order of the court designated in the certificate or that the plan decree or order so confirmed authorized has been modified by order of such court, as the case may be.

(D) If a decree or order by the court in a bankruptcy or reorganization proceeding provides for or effects an amendment to the articles or the merger, consolidation, or dissolution of a corporation, or, if after the filing in the office of the secretary of state of a certificate of reorganization, or an amended certificate, a decree or order of court is entered which has the effect of vacating said plan, a certified copy of said decree or order shall be filed by the corporation in the office of the secretary of state.

(E) Nonassenting or dissenting shareholders shall have only such rights as are provided for in the plan of reorganization decree or order.

[See also proposed amendment to §1701.19, which is set forth in following pages.]


COMMITTEE COMMENT (2004)
The amendments to ORC § 1701.75 enable Ohio corporations to take actions pursuant to decrees or orders of U.S. Bankruptcy Courts, eliminating the requirement of a confirmed plan of reorganization and allowing implementation of such decrees and orders in liquidation proceedings as well as reorganization proceedings. The statute retains references to other Federal statutory procedures for the reorganization of corporations that may apply to Ohio corporations.

 

Exhibit B

Proposed Amendments to ORC § §1701.18 and 1701.19 to expand the range of allowable forms of consideration for shares of a corporation, and to ORC § 1705.09 to expand the range of allowable contributions by members of limited liability companies

Rationale for Amendment: Delaware General Corporation Law sections 152, 154, and 157 were amended in June 2004 to broaden the range of permissible consideration for stock to include, inter alia, any benefit to the corporation. The revised Delaware provisions, similar to those of the Model Business Corporation Act, reflect a recognition of contemporary business economics and corporate transactional practice. This proposed amendment modernizes Ohio law accordingly.

Text of Proposed Amendment:
ORC § 1701.18. Consideration for shares and liability of shareholders therefor

(A) Except as provided in the case of change of shares, share dividends or distributions, reorganization, merger, consolidation, combination, or conversion of shares or obligations into shares, the following apply:

(1) Payment of consideration for shares shall be made with money or other, property of any description, or any interest in property, actually transferred to the corporation, or, labor or services actually rendered to the corporation. , cash, property, services rendered, a promissory note, any other binding obligation to contribute cash or property or to perform services, or any other benefit to the corporation, or any combination thereof.

(2) In the case of shares with par value, other than treasury shares, the consideration shall be not less than the par value of the shares, provided that the shares may be sold and paid for at such a discount from the par value of the shares that would amount to or not exceed reasonable compensation for the sale, underwriting, or purchase of the shares, and, regardless of the discount, the shares shall be deemed to be fully paid.

(3) In the case of treasury shares with par value, the consideration may be less than the par value of the shares.

(B) Promissory notes, drafts, or other obligations of a subscriber or purchaser do not constitute payment for shares.1

(C) An agreement by a person to perform services as the consideration for shares does not, of itself, constitute the person a shareholder and does not, of itself, constitute payment for such shares prior to the performance of the services.2

(D) Except in the case of convertible shares or obligations, shares with par value shall not be issued or disposed of upon change of shares, share dividends or distributions, reorganization, merger, consolidation, exchange of shares for other shares or securities, or otherwise, if as a result the aggregate liabilities of the corporation plus its stated capital would exceed its aggregate assets or any existing excess would be increased.

(E) When shares have been issued as provided in this chapter, in the case of change of shares, share dividends or distributions, reorganization, merger, consolidation, or conversion of shares or obligations into shares, or when shares have been paid for in conformity with this section, such shares shall be deemed fully paid and nonassessable.

(F) Every person who subscribes for or purchases shares of a corporation is liable to the corporation to pay or deliver to the corporation the consideration agreed upon, and, except as provided in division (A) of this section, if the shares are with par value, the person is obligated to pay to the corporation for the shares in money or other property or services consideration not less than the full par value of the shares. The person is not liable to the corporation or its creditors in any other amount.3

(G) Every holder, whether the original or a transferee, of shares not paid for as provided in this section, who has acquired them with actual knowledge of that fact, is personally liable to the corporation for the amount unpaid on the shares, and the holder’s liability shall continue notwithstanding any transfer of the shares, until the shares are paid in full; but no holder who has acquired the shares without actual knowledge of the fact that the shares are not paid for is under any liability in respect of the shares.

(H) No pledgee or other holder of shares as collateral security is personally liable as a shareholder.

(I) No person who in fact, whether disclosed on the records of the corporation or otherwise, holds shares as executor, administrator, guardian, trustee, trustee of a voting trust, receiver, or in any other fiduciary capacity is personally liable as a shareholder, but the estate or property in the hands of such fiduciary is liable or the real or beneficial owner is liable under this section as equity may require. This section does not relieve a fiduciary from liability for a breach of trust.

(J) Except as set forth in any provision in Title LVII [57] of the Revised Code, neither a shareholder of a corporation nor a subscriber to its shares is personally liable for any debts, obligations, or liabilities of the corporation in the absence of a written, enforceable agreement that is signed by the shareholder or subscriber and that specifically undertakes liability for such debts, obligations, or liabilities.

 

ORC § 1701.19. Valuation of property or services

(A) When a determination of the fair value to a corporation of property other than money or of services is made by the incorporators, directors, or shareholders with respect to property consideration, other than cash transferred or to be transferred, or services rendered or to be rendered, paid or to be paid to the corporation as consideration for shares; or made by the directors with respect to property voluntarily contributed to the corporation; or made by the directors with respect to physical assets of the corporation which are reckoned by the directors to have a fair value to the corporation in excess of the amount at which they are carried on its books; or provided for in a plan of reorganization confirmed decree or order 4 as provided in section 1701.75 of the Revised Code or set forth in an agreement of merger or consolidation adopted as provided in section 1701.78, 1701.79, 1701.80, or 1701.801 of the Revised Code, then such determination shall be conclusive in any action or proceeding in which it is claimed that the fair value to the corporation of such consideration or property or of such services is or was less than the value so determined, unless the party asserting such claim affirmatively proves by clear and convincing evidence, and otherwise than by proving the difference between the value of such consideration or property, or of such services, and the fair value so determined, that such determination was knowingly and intentionally made, by the persons making the determination, at a value greater than the fair value of such consideration or property or of such services to the corporation.

(B) The making of an agreement to issue or dispose of shares for property or consideration other than money or for services cash or the issuance or disposition of shares in consummation of any agreement or transaction referred to in division (A) of this section shall be held to be a determination that the property, or the services, or other consideration involved have has a fair value to the corporation not less than the value required to justify the issuance or disposition of such shares.

COMMITTEE COMMENT (2004)
The amendments to ORC § 1701.18 eliminate the restriction on using a promise of future services to the corporation as allowable consideration for shares, and provide that any benefit to the corporation may constitute valid consideration. The amendments to ORC §1701.19, renders this section consistent with the amended § 1701.18.

 

ORC§ 1705.09. Form of contributions; enforcement of promise or duty to contribute; compromises

(A) The contributions of a member may be in cash, property, services rendered, a promissory note, or any other binding obligation to contribute cash or property or to perform services, or

any other benefit to the limited liability company, or any combination thereof.

(B) A promise by a member to contribute to the limited liability company is not enforceable unless it is set forth in a writing signed by the member.

(C) Except as otherwise provided in the operating agreement, a member is obligated to the limited liability company to perform any enforceable promise to contribute cash or other property or to perform services, even if he is unable to perform the promise because of death, disability, or another reason. If a member fails to make a required contribution of property or services, then, at the option of the limited liability company, the member is obligated to contribute cash equal to the portion of the value as stated in the records required to be kept under section 1705.28 of the Revised Code of the stated contribution that he has failed to make. This right of the company is in addition to and not in lieu of any other rights, including, but not limited to, the right to specific performance, that the company may have against the member under the operating agreement or applicable law.

(D) Unless otherwise provided in the operating agreement, the obligation of a member to make a contribution or to return money or other property paid or distributed in violation of this chapter may be compromised only by the consent of all of the members.

COMMITTEE COMMENT (2004)
The amendments to ORC § 1705.09(A) expand the form of consideration that can be contributed by the members to include any benefit to the limited liability company.

 

Exhibit C

Proposed Amendments to Sections 1701.10 and 1701.11 to allow Board amendments of theRegulations if permitted by the Articles or Regulations, and Proposed Amendments to Sections 1701.01, 1701.40, 1701.41, 1701.44, 1701.51, 1701.54, 1701.57, 1701.58, 1701.62, 1701.63, and 1701.831, to recognize certain matters addressed in the Regulations which will require shareholder approval for amendment:

Rationale for Amendment: Ohio law currently provides that regulations for the conduct of corporate business can be amended only by the shareholders. In Delaware and most other states, the Certificate or Articles of Incorporation may provide that directors may also adopt amendments to bylaws, which is the term used in most states for what Ohio calls "regulations." In recent years, we have experienced a number of occasions when the inability of directors to amend corporate regulations in procedural areas has created undue burden on an Ohio corporation; for example, in implementing the cyberspace amendments to chapter 1701 This has slowed the progress of many corporations to adopt statutory-approved amendments. The majority of corporations in America operate under the more liberal Delaware model.

In drafting the proposed amendments, the Corporation Law Committee was mindful of the careful balancing between our State’s interest in competing with other states as a corporate domicile and the need to facilitate corporate procedural change, versus our State’s interest in preserving the rights of shareholders to control the governance of their corporation and the current public concerns over corporate governance. Accordingly, rather than merely extending to the Directors a broad right to amend corporate regulations, the Committee has taken the approach that recognizes that certain matters addressed in a corporation’s regulations are fundamental to the relationship between the corporation and its shareholders, and should therefore require approval of the shareholders for amendment. The amendments also clarify that the directors’ authority to amend the regulations may not be exercised by an executive or other committee of the board of directors.

Text of Proposed Amendments:
ORC § 1701.01. Definitions

As used in sections 1701.01 to 1701.98 of the Revised Code, unless the context otherwise requires:

(A) "Corporation" or "domestic corporation" means a corporation for profit formed under the laws of this state.

(B) "Foreign corporation" means a corporation for profit formed under the laws of another state, and "foreign entity" means an entity formed under the laws of another state.

(C) "State" means the United States; any state, territory, insular possession, or other political subdivision of the United States, including the District of Columbia; any foreign country or nation; and any province, territory, or other political subdivision of such foreign country or nation.

(D) "Articles" includes original articles of incorporation, certificates of reorganization, amended articles, and amendments to any of these, and, in the case of a corporation created before September 1, 1851, the special charter and any amendments to it made by special act of the general assembly or pursuant to general law.

(E) "Incorporator" means a person who signed the original articles of incorporation.

(F) "Shareholder" means a person whose name appears on the books of the corporation as the owner of shares of such corporation. Unless the articles, the regulations adopted by the shareholders, regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code, or the contract of subscription otherwise provides, "shareholder" includes a subscriber to shares, whether the subscription is received by the incorporators or pursuant to authorization by the directors, and such shares shall be deemed to be outstanding shares.

(G) "Person" includes, without limitation, a natural person, a corporation, whether nonprofit or for profit, a partnership, a limited liability company, an unincorporated society or association, and two or more persons having a joint or common interest.

(H) The location of the "principal office" of a corporation is the place named as the principal office in its articles.

(I) The "express terms" of shares of a class are the statements expressed in the articles with respect to such shares.

(J) Shares of a class are "junior" to shares of another class when any of their dividend or distribution rights are subordinate to, or dependent or contingent upon, any right of, or dividend on, or distribution to, shares of such other class.

(K) "Treasury shares" means shares belonging to the corporation and not retired that have been either issued and thereafter acquired by the corporation or paid as a dividend or distribution in shares of the corporation on treasury shares of the same class; such shares shall be deemed to be issued, but they shall not be considered as an asset or a liability of the corporation, or as outstanding for dividend or distribution, quorum, voting, or other purposes, except, when authorized by the directors, for dividends or distributions in authorized but unissued shares of the corporation of the same class.

(L) To "retire" a share means to restore it to the status of an authorized but unissued share.

(M) "Redemption price of shares" means the amount required by the articles to be paid on redemption of shares.

(N) "Liquidation price" means the amount or portion of assets required by the articles to be distributed to the holders of shares of any class upon dissolution, liquidation, merger, or consolidation of the corporation, or upon sale of all or substantially all of its assets.

(O) "Insolvent" means that the corporation is unable to pay its obligations as they become due in the usual course of its affairs.

(P) "Parent corporation" or "parent" means a domestic or foreign corporation that owns and holds of record shares of another corporation, domestic or foreign, entitling the holder of the shares at the time to exercise a majority of the voting power in the election of the directors of the other corporation without regard to voting power that may thereafter exist upon a default, failure, or other contingency; "subsidiary corporation" or "subsidiary" means a domestic or foreign corporation of which another corporation, domestic or foreign, is the parent.

(Q) "Combination" means a transaction, other than a merger or consolidation, wherein either of the following applies:

(1) Voting shares of a domestic corporation are issued or transferred in consideration in whole or in part for the transfer to itself or to one or more of its subsidiaries, domestic or foreign, of all or substantially all the assets of one or more corporations, domestic or foreign, with or without good will or the assumption of liabilities;

(2) Voting shares of a foreign parent corporation are issued or transferred in consideration in whole or in part for the transfer of such assets to one or more of its domestic subsidiaries.

"Transferee corporation" in a combination means the corporation, domestic or foreign, to which the assets are transferred, and "transferor corporation" in a combination means the corporation, domestic or foreign, transferring such assets and to which, or to the shareholders of which, the voting shares of the domestic or foreign corporation are issued or transferred.

(R) "Majority share acquisition" means the acquisition of shares of a corporation, domestic or foreign, entitling the holder of the shares to exercise a majority of the voting power in the election of directors of such corporation without regard to voting power that may thereafter exist upon a default, failure, or other contingency, by either of the following:

(1) A domestic corporation in consideration in whole or in part, for the issuance or transfer of its voting shares;

(2) A domestic or foreign subsidiary in consideration in whole or in part for the issuance or transfer of voting shares of its domestic parent.

(S) "Acquiring corporation" in a combination means the domestic corporation whose voting shares are issued or transferred by it or its subsidiary or subsidiaries to the transferor corporation or corporations or the shareholders of the transferor corporation or corporations; and "acquiring corporation" in a majority share acquisition means the domestic corporation whose voting shares are issued or transferred by it or its subsidiary in consideration for shares of a domestic or foreign corporation entitling the holder of the shares to exercise a majority of the voting power in the election of directors of such corporation.

(T) When used in connection with a combination or a majority share acquisition, "voting shares" means shares of a corporation, domestic or foreign, entitling the holder of the shares to vote at the time in the election of directors of such corporation without regard to voting power which may thereafter exist upon a default, failure, or other contingency.

(U) "An emergency" exists when the governor, or any other person lawfully exercising the power and discharging the duties of the office of governor, proclaims that an attack on the United States or any nuclear, atomic, or other disaster has caused an emergency for corporations, and such an emergency shall continue until terminated by proclamation of the governor or any other person lawfully exercising the powers and discharging the duties of the office of governor.

(V) "Constituent corporation" means an existing corporation merging into or into which is being merged one or more other entities in a merger or an existing corporation being consolidated with one or more other entities into a new entity in a consolidation, whether any of the entities is domestic or foreign, and "constituent entity" means any entity merging into or into which is being merged one or more other entities in a merger, or an existing entity being consolidated with one or more other entities into a new entity in a consolidation, whether any of the entities is domestic or foreign.

(W) "Surviving corporation" means the constituent domestic or foreign corporation that is specified as the corporation into which one or more other constituent entities are to be or have been merged, and "surviving entity" means the constituent domestic or foreign entity that is specified as the entity into which one or more other constituent entities are to be or have been merged.

(X) "Close corporation agreement" means an agreement that satisfies the three requirements of division (A) of section 1701.591 [1701.59.1] of the Revised Code.

(Y) "Issuing public corporation" means a domestic corporation with fifty or more shareholders that has its principal place of business, its principal executive offices, assets having substantial value, or a substantial percentage of its assets within this state, and as to which no valid close corporation agreement exists under division (H) of section 1701.591 [1701.59.1] of the Revised Code.

(Z) (1) "Control share acquisition" means the acquisition, directly or indirectly, by any person of shares of an issuing public corporation that, when added to all other shares of the issuing public corporation in respect of which such person may exercise or direct the exercise of voting power as provided in this division, would entitle such person, immediately after such acquisition, directly or indirectly, alone or with others, to exercise or direct the exercise of the voting power of the issuing public corporation in the election of directors within any of the following ranges of such voting power:

(a) One-fifth or more but less than one-third of such voting power;

(b) One-third or more but less than a majority of such voting power;

(c) A majority or more of such voting power.

A bank, broker, nominee, trustee, or other person who acquires shares in the ordinary course of business for the benefit of others in good faith and not for the purpose of circumventing section 1701.831 [1701.83.1] of the Revised Code shall, however, be deemed to have voting power only of shares in respect of which such person would be able, without further instructions from others, to exercise or direct the exercise of votes on a proposed control share acquisition at a meeting of shareholders called under section 1701.831 [1701.83.1] of the Revised Code.

(2) The acquisition by any person of any shares of an issuing public corporation does not constitute a control share acquisition for the purpose of section 1701.831 [1701.83.1] of the Revised Code if the acquisition was or is consummated in, results from, or is the consequence of any of the following circumstances:

(a) Prior to November 19, 1982;

(b) Pursuant to a contract existing prior to November 19, 1982;

(c) By bequest or inheritance, by operation of law upon the death of an individual, or by any other transfer without valuable consideration, including a gift, that is made in good faith and not for the purpose of circumventing section 1701.831 [1701.83.1] of the Revised Code;

(d) Pursuant to the satisfaction of a pledge or other security interest created in good faith and not for the purpose of circumventing section 1701.831 [1701.83.1] of the Revised Code;

(e) Pursuant to a merger or consolidation adopted, or a combination or majority share acquisition authorized, by vote of the shareholders of the issuing public corporation in compliance with section 1701.78, 1701.781 [1701.78.1], 1701.79, 1701.791 [1701.79.1], or 1701.83 of the Revised Code;

(f) The person’s being entitled, immediately thereafter, to exercise or direct the exercise of voting power of the issuing public corporation in the election of directors within the same range theretofore attained by that person either in compliance with the provisions of section 1701.831 [1701.83.1] of the Revised Code or as a result solely of the issuing public corporation’s purchase of shares issued by it.

The acquisition by any person of shares of an issuing public corporation in a manner described under division (Z)(2) of this section shall be deemed a control share acquisition authorized pursuant to section 1701.831 [1701.83.1] of the Revised Code within the range of voting power under division (Z)(1)(a), (b), or (c) of this section that such person is entitled to exercise after such acquisition, provided, in the case of an acquisition in a manner described under division (Z)(2)(c) or (d) of this section, the transferor of shares to such person had previously obtained any authorization of shareholders required under section 1701.831 [1701.83.1] of the Revised Code in connection with such transferor’s acquisition of shares of the issuing public corporation.

(3) The acquisition of shares of an issuing public corporation in good faith and not for the purpose of circumventing section 1701.831 [1701.83.1] of the Revised Code from any person whose control share acquisition previously had been authorized by shareholders in compliance with section 1701.831 [1701.83.1] of the Revised Code, or from any person whose previous acquisition of shares of an issuing public corporation would have constituted a control share acquisition but for division (Z)(2) or (3) of this section, does not constitute a control share acquisition for the purpose of section 1701.831 [1701.83.1] of the Revised Code unless such acquisition entitles the person making the acquisition, directly or indirectly, alone or with others, to exercise or direct the exercise of voting power of the corporation in the election of directors in excess of the range of such voting power authorized pursuant to section 1701.831 [1701.83.1] of the Revised Code, or deemed to be so authorized under division (Z)(2) of this section.

(AA) "Acquiring person" means any person who has delivered an acquiring person statement to an issuing public corporation pursuant to section 1701.831 [1701.83.1] of the Revised Code.

(BB) "Acquiring person statement" means a written statement that complies with division (B) of section 1701.831 [1701.83.1] of the Revised Code.

(CC) (1) "Interested shares" means the shares of an issuing public corporation in respect of which any of the following persons may exercise or direct the exercise of the voting power of the corporation in the election of directors:

(a) An acquiring person;

(b) Any officer of the issuing public corporation elected or appointed by the directors of the issuing public corporation;

(c) Any employee of the issuing public corporation who is also a director of such corporation;

(d) Any person that acquires such shares for valuable consideration during the period beginning with the date of the first public disclosure of a proposal for, or expression of interest in, a control share acquisition of the issuing public corporation; a transaction pursuant to section 1701.76, 1701.78, 1701.781 [1701.78.1], 1701.79, 1701.791 [1701.79.1], 1701.83, or 1701.86 of the Revised Code that involves the issuing public corporation or its assets; or any action that would directly or indirectly result in a change in control of the issuing public corporation or its assets, and ending on the record date established by the directors pursuant to section 1701.45 and division (D) of section 1701.831 [1701.83.1] of the Revised Code, if either of the following applies:

(i) The aggregate consideration paid or given by the person who acquired the shares, and any other persons acting in concert with the person, for all such shares exceeds two hundred fifty thousand dollars;

(ii) The number of shares acquired by the person who acquired the shares, and any other persons acting in concert with the person, exceeds one-half of one per cent of the outstanding shares of the corporation entitled to vote in the election of directors.

(e) Any person that transfers such shares for valuable consideration after the record date described in division (CC)(1)(d) of this section as to shares so transferred, if accompanied by the voting power in the form of a blank proxy, an agreement to vote as instructed by the transferee, or otherwise.

(2) If any part of this division is held to be illegal or invalid in application, the illegality or invalidity does not affect any legal and valid application thereof or any other provision or application of this division or section 1701.831 [1701.83.1] of the Revised Code that can be given effect without the invalid or illegal provision, and the parts and applications of this division are severable.

(DD) "Certificated security" and "uncertificated security" have the same meanings as in section 1308.01 of the Revised Code.

(EE) "Entity" means any of the following:

(1) A for profit corporation existing under the laws of this state or any other state;

(2) Any of the following organizations existing under the laws of this state, the United States, or any other state:

(a) A business trust or association;

(b) A real estate investment trust;

(c) A common law trust;

(d) An unincorporated business or for profit organization, including a general or limited partnership;

(e) A limited liability company;

(f) A nonprofit corporation.

COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, division (F) of this Section has been revised to provide that a provision of the regulations which specifies that a subscriber to shares will not be considered a "shareholder" (for voting and other purposes) may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders. The reservation of this right to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

 

ORC § 1701.10 Organizational meeting of initial directors or incorporators; first meeting of shareholders; adoption of initial regulations

(A) After incorporation, all of the following apply:

(1) If the initial directors are named in the articles, the initial directors shall hold an organizational meeting, at the call of a majority of the directors, to complete the organization of the corporation by receiving subscriptions, appointing officers, adopting regulations, and carrying on any other business brought before the meeting.

(2) If the initial directors are not named in the articles, the incorporator or incorporators either shall receive subscriptions as provided in division (A) of section 1701.09 of the Revised Code or shall hold an organizational meeting at the call of a majority of the incorporators to elect directors who shall complete the organization of the corporation as provided in division (A)(1) of this section. If subscriptions for shares are received by the incorporators, the incorporators, or a majority of them, shall give not less than seven days’ written notice to the shareholders, unless written notice is waived by the shareholders, to meet at a specified time and place for the purposes of adopting regulations, electing directors, and transacting any other business. The shareholders shall meet for those purposes at the time and place specified.

(3) Notwithstanding divisions (A)(1) and (2) of this section, if regulations have not been adopted within ninety days after the formation of the corporation, regulations may be adopted only as provided in section 1701.11 of the Revised Code. by the shareholders in either of the following ways:

(a) At a meeting of shareholders called for that purpose by the directors or, if no directors have been named in the articles or elected, at a meeting of shareholders called for that purpose by at least a majority of the incorporators. The directors or incorporators shall give not less than seven days’ written notice to the shareholders, unless written notice is waived by the shareholders, to meet at a specified time and place for the purposes of adopting regulations and transacting any other business;

(b) Without a meeting, by the written consent of the holders of shares entitling them to exercise two-thirds of the voting power on the proposal.

 

(4) In no event may the directors take any action to adopt or amend regulations after the shareholders have adopted regulations.

(B) Action required or permitted by this chapter to be taken by the incorporators at an organizational meeting may be taken without a meeting if the action taken is evidenced by one or more written consents describing the action taken and signed by each incorporator.

(C) An organizational meeting may be held in or out of this state.


COMMITTEE COMMENT (2004)
Provisions relating to adoption of regulations after the initial formation period have been consolidated with similar provisions in section 1701.11(A).

 

ORC § 1701.11 Methods of adoption and amendment of regulations; subject matter; emergency regulations

(A) (1) Regulations for the government of a corporation, the conduct of its affairs, and the management of its property, consistent with law and the articles, may be adopted, amended, or repealed in any of the following ways:

(a) Within ninety days after the corporation is formed, by the directors in accordance with division (A)(1) of section 1701.10 of the Revised Code;

(b) By the shareholders at a meeting held for that purpose, by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the corporation on the proposal, or if the articles or regulations that have been adopted so provide, by the affirmative vote of the holders of shares entitling them to exercise a greater proportion than a majority of the voting power of the corporation on the proposal;

(c) Without a meeting, by the written consent of the holders of shares entitling them to exercise two-thirds of the voting power of the corporation on the proposal; or.

(2) Except as otherwise provided in division (A)(4) of this section, the regulations may be amended, or new regulations may be adopted, in either of the following ways:

(a) By the shareholders at a meeting held for that purpose, by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the corporation on the proposal;

(b) Without a meeting, by the written consent of the holders of shares entitling them to exercise two-

thirds of the voting power of the corporation on the proposal.

(3) Except as otherwise provided in division (A)(4) of this section, if the articles or regulations that have been adopted so provide or permit, regulations may be adopted or amended or new regulations may be adopted by the affirmative vote or written consent of the holders of shares entitling them to exercise a greater or lesser proportion but not less than a majority of the voting power of the corporation on the proposal;

(d) If and to the extent the articles or regulations so provide or permit and except where a provision of the Revised Code reserves such authority to the shareholders, by the directors, provided that no such provision or permission shall divest shareholders of the power, nor limit their power, to adopt, amend, or repeal regulations.

(4)(2) Any amendment of regulations and any amended or new regulations adopted by shareholders of an issuing public corporation whose directors are classified pursuant to section 1701.57 of the Revised Code that would change or eliminate the classification of directors shall be adopted only by the shareholders {only} at a meeting held for that purpose, by the affirmative vote of holders of shares entitling them to exercise the voting power of the corporation that is required for shareholders at a meeting under division (A)(1)(b)(2)(a) or (3) of this section, and also by the affirmative vote of the holders of a majority of disinterested shares voted on the proposal determined as specified in division (C)(9) of section 1704.01 of the Revised Code.

(B) Without limiting the generality of the authority described in division (A) of this section, the regulations may include provisions with respect to all of the following:

(1) The place, if any, and time for holding, the manner of and authority for calling, giving notice of, and conducting, and the requirements of a quorum for, meetings of shareholders;

(2) The taking of a record of shareholders or the temporary closing of books against transfers of shares;

(3) The number, classification, manner of fixing or changing the number, qualifications, term of office, and compensation or manner of fixing compensation, of directors;

(4) The place, if any, and time for holding, the manner of and authority for calling, giving notice of, and conducting, and the requirements of a quorum for, meetings of the directors;

(5) The appointment of an executive and other committees of the directors, and their authority;

(6) The titles, qualifications, duties, term of office, compensation or manner of fixing compensation, and the removal, of officers;

(7) The terms on which new certificates for shares may be issued in the place of lost, stolen, or destroyed certificates;

(8) The manner in which and conditions upon which a certificated security, and the conditions upon which an uncertificated security, and the shares represented by a certificated or uncertificated

security, may be transferred, restrictions on the right to transfer the shares, and reservations of liens on the shares;

(9) (a) Restrictions on the transfer and the right to transfer shares of either of the following:

(i) An issuing public corporation to any person in a control share acquisition;

(ii) A corporation with fifty or more shareholders to any person in an acquisition that would be a control share acquisition if the corporation were an issuing public corporation.

(b) The restrictions on the transfer and the right to transfer shares described in division (B)(9)(a)(i) and (ii) of this section may include requirements and procedures for consent to an acquisition of the shares by directors based on a determination by the directors of the best interests of the corporation and its shareholders, consent to an acquisition of the shares by shareholders, and reasonable sanctions for a violation of those requirements, including the right of the corporation to refuse to transfer, to redeem, or to deny voting or other shareholder rights appurtenant to shares acquired in an acquisition of the shares.

(10) Defining, limiting, or regulating the exercise of the authority of the corporation, the directors, or the officers, or all the shareholders.

(11) Defining, limiting, or regulating the exercise of the authority of the shareholders; provided that any amendment of the regulations that would change or eliminate any such provision shall be adopted only by the shareholders.

(C) The shareholders of a corporation may adopt and may authorize the directors to adopt, either before or during an emergency, as that term is defined in division (U) of section 1701.01 of the Revised Code, emergency regulations that shall be operative only during an emergency. The emergency regulations may include any provisions that are authorized to be included in regulations by divisions (A) and (B) of this section. In addition, unless expressly prohibited by the articles or the regulations, the emergency regulations may make any provision, notwithstanding any different provisions in this chapter and notwithstanding any different provisions in the articles or the regulations that are not expressly stated to be operative during an emergency, that may be practical or necessary with respect to the following:

(1) The place, if any, and time for holding, the manner of and authority for calling, giving notice of, and conducting, and the requirements of a quorum for, meetings of the directors;

(2) The creation and appointment of an executive and other committees of the directors and the delegation of authority to the committees by the board;

(3) The creation, existence, and filling of vacancies, including temporary vacancies, in the office of director;

(4) The selection, by appointment, election, or otherwise, of officers and other persons to serve as directors for a meeting of the board in the absence from the meeting of one or more of the directors;

(5) The creation, existence, and filling of vacancies, including temporary vacancies, in any office;

(6) The order of rank and the succession to the duties and authority of officers.

(D)(1) If the regulations are amended or new regulations are adopted, without a meeting of the shareholders other than by the shareholders at a meeting held for that purpose, the secretary of the corporation shall send a copy of the amendment or the new regulations by mail, overnight delivery service, or any other means of communication authorized by the shareholder to whom a copy of the amendment or new regulations are sent, to each shareholder who would have been entitled to vote on the adoption of the amendment or the new regulations and did not participate in of record as of the date of the adoption of the amendment or the new regulations.

(2) Any corporation that files periodic reports with the United States securities and exchange commission pursuant to section 13 of the "Securities Exchange Act of 1934," 116 Stat. 787, 15 U.S.C. 78m, as amended, or section 15(d) of the "Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C. 78o(d), as amended, may satisfy the notice requirement of division (D)(1) of this section by including a copy of the amendment or the new regulations in a report filed in accordance with those provisions within twenty days after the adoption of the amendment or the new regulations.

(E) No person dealing with the corporation shall be charged with constructive notice of the regulations.

(F) Unless expressly prohibited by the articles or the regulations or unless otherwise provided by the emergency regulations, the following special rules shall be applicable during an emergency notwithstanding any different provision elsewhere in this chapter:

(1) Meetings of the directors may be called by any officer or director.

(2) Notice of the time and place of each meeting of the directors shall be given to such of the directors as it may be feasible to reach at the time and by the means of communication, written or oral, personal or mass, as may be practicable at the time.

(3) The director or directors present at any meeting of the directors that has been duly called and notice of which has been duly given shall constitute a quorum for the meeting, and, in the absence of one or more of the directors, the director or directors present may appoint one or more of the officers of the corporation directors for the meeting.

(4) If none of the directors attends a meeting of the directors that has been duly called and notice of which has been duly given, the officers of the corporation who are present, not exceeding three, in order of rank, shall be directors for the meeting, shall constitute a quorum for the meeting, and may appoint one or more of the other officers of the corporation directors for the meeting.

(5) If the chief executive officer dies, is missing, or for any other reason is temporarily or permanently incapable of discharging the duties of the office, the next ranking officer who is available shall assume the duties and authority of the office of the deceased, missing, or incapacitated chief executive officer until such time as the directors shall otherwise order.

(6) The offices of secretary and treasurer shall be deemed to be of equal rank, and, within the same office and as between the offices of secretary and treasurer, rank shall be determined by priority in time of the first election to the office or, if two or more persons have been first elected to the office at the same time, by seniority in age.


COMMITTEE COMMENT (2004)
The addition of division (A)(1)(d) allows directors to amend the regulations if authority for such amendments is given by the articles or regulations, except where such authority is reserved to the shareholders under the Revised Code. This change in Ohio law is intended to permit, as is common in other states, the initial directors, ncorporators or shareholders to determine that the contents of the regulations may be subject to amendment by the directors rather than only by the shareholders, while preserving the right of the shareholders to limit this authority either by withholding such authority generally, or by shareholder adoption of amendments that include restrictions on subsequent amendments by director action. The language is intended to make it clear that the shareholders always have the power to make, alter or repeal the regulations, even though the directors may be delegated such power. Permitting directors to amend regulations is not intended to avoid or change any requirement under section 1701.591 of the Revised Code for the assent, vote, or consent of shareholders for adoption, amendment, or termination of a close corporation agreement that is set forth in the regulations.

Former divisions (A)(1), (A)(2), and (A)(3) have been consolidated to eliminate redundant language and more clearly state the vote required for approval of adoption, amendment, or repeal of the regulations.

The addition of division (D)(2) permits a simpler method of providing notice of amendments of the regulations for corporations which are subject to periodic reporting requirements under the Securities Exchange Act of 1934. This is consistent with a similar procedure which is permitted for amendments to the articles.

 

ORC § 1701.40. Calling meeting of shareholders; place of meeting; meetings via communications equipment

(A) Meetings of shareholders may be called by any of the following:

(1) The chairperson of the board, the president, or, in case of the president’s absence, death, or disability, the vice-president authorized to exercise the authority of the president;

(2) The directors by action at a meeting, or a majority of the directors acting without a meeting;

(3) Persons who hold twenty-five per cent of all shares outstanding and entitled to vote at the meeting, unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations specify for that purpose a smaller or larger proportion but not in excess of fifty per cent;

(4) Such other officers or persons as the articles or the regulations authorize to call the meetings.

(B) Meetings of shareholders may be held either within or without this state if so provided in the articles or the regulations. The articles or regulations may authorize the directors to determine that the meeting shall not be held at any physical place, but instead may be held solely by means of communications equipment as authorized by division (C) of this section. If the corporation is an issuing public corporation and the articles or regulations do not require that a meeting be held at a particular physical place and authorize the directors to fix the place of the meeting, the directors may determine that the meeting shall not be held at any physical place, but instead may be held solely by means of communications equipment as authorized by division (C) of this section. In the absence of any such provision, all meetings shall be held at the principal office of the corporation in this state.

(C) If authorized by the directors, the shareholders and proxyholders who are not physically present at a meeting of shareholders may attend a meeting of shareholders by use of communications equipment that enables the shareholder or proxyholder an opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting and to speak or otherwise participate in the proceedings contemporaneously with those physically present. Any shareholder using communications equipment will be deemed present in person at the meeting whether the meeting is to be held at a designated place or solely by means of communications equipment. The directors may adopt guidelines and procedures for the use of communications equipment in connection with a meeting of shareholders to permit the corporation to verify that a person is a shareholder or proxyholder and to maintain a record of any vote or other action.


COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, division (A)(3) of this Section has been revised to provide that a provision of the regulations which specifies the percentage of shares to be held by a shareholder in order to permit such shareholder to call a meeting of the shareholders, may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders. The reservation of this right of amendment to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

 

ORC § 1701.41. Notice of meeting

(A) Written notice stating the time, place, if any, and purposes of a meeting of the shareholders, and the means, if any, by which shareholders can be present and vote at the meeting through the use of communications equipment shall be given either by personal delivery or by mail, overnight delivery service, or any other means of communication authorized by the shareholder to whom the notice is given, not less than seven nor more than sixty days before the date of the meeting unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations specify a longer period: (1) to every shareholder of record entitled to notice of the meeting; (2) by or at the direction of the president or the secretary, or any other person required or permitted by the regulations to give that notice. If mailed or sent by overnight delivery service, the notice shall be sent to the shareholder at the shareholder’s address as it appears on the records of the corporation. If sent by another means of communication authorized by the shareholder, the notice shall be sent to the address furnished by the shareholder for those transmissions. Notice of adjournment of a meeting need not be given if the time and place, if any, to which it is adjourned and the means, if any, by which shareholders can be present and vote at the adjourned meeting through the use of communications equipment are fixed and announced at the meeting.

(B) Upon request in writing delivered either in person or by registered mail to the president or the secretary by any persons entitled to call a meeting of shareholders, that officer shall forthwith cause to be given to the shareholders entitled to notice of a meeting to be held on a date not less than seven nor more than sixty days after the receipt of the request, as the officer may fix, unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations specify a longer period for this purpose. If the notice is not given within fifteen days after the delivery or mailing of the request, or that shorter or longer period as the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations specify for this purpose, the persons calling the meeting may fix the time of meeting and give notice of the time of meeting as provided in division (A) of this section, or cause the notice to be given by any designated representative.

(C) Any authorization by a shareholder to send notices given pursuant to this chapter by any means other than in person or by mail or overnight delivery service is revocable by written notice to the corporation either by personal delivery or by mail, overnight delivery service, or any other means of communication authorized by the corporation. If sent by another means of communication authorized by the corporation, the notice shall be sent to the address furnished by the corporation for those transmissions. Any authorization by a shareholder to send notices given pursuant to this chapter by any means other than in person or by mail or overnight delivery service will be deemed to have been revoked by the shareholder if (1) the corporation has attempted to make delivery of two consecutive notices in accordance with that authorization, and (2) the secretary or an assistant secretary of the corporation, or other person responsible for giving of notice, has received notice that, or otherwise believes that, delivery has not occurred. However, an inadvertent failure to treat the inability to deliver notice as a revocation will not invalidate any meeting of shareholders or other action.


COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, divisions (A) and (B) of this Section have been revised to provide that a provision of the regulations which specifies the time period for notice of a meeting of the shareholders, may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders.. The reservation of the right of amendment to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

 

ORC § 1701.44. Qualifications of voters

(A) Except to the extent that the voting rights of the shares of any class are increased, limited, or denied by the express terms of such shares, and except as provided in scrip issued in lieu of a certificate for a fraction of a share, each outstanding share regardless of class shall entitle the holder thereof to one vote on each matter properly submitted to the shareholders for their vote, consent, waiver, release, or other action, subject to the provisions with respect to cumulative voting in section 1701.55 of the Revised Code.

Unless the articles, the regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code, or the contract of subscription for shares otherwise provide, a shareholder shall be entitled to vote even though his shares have not been fully paid, but shares upon which an installment of the consideration for such shares is overdue and unpaid shall not be voted.

COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, division (B) of this Section has been revised to provide that a provision of the regulations which specifies that a shareholder shall not be entitled to vote shares for which he has not fully paid, may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders. The reservation of the right of amendment to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

 

ORC § 1701.51. Quorum at shareholders’ meetings

Unless the articles or the regulations otherwise provide:

(A) Unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code otherwise provide, tThe shareholders present in person, by proxy, or by the use of communications equipment at any meeting of shareholders shall constitute a quorum for such meeting, but no action required by law, the articles, or the regulations to be authorized or taken by the holders of a designated proportion of the shares of any particular class or of each class, may be authorized or taken by a lesser proportion.

(B) Unless the articles or the regulations otherwise provide, tThe holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time.


COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, division (A) of this Section has been revised to provide that a provision of the regulations which specifies the requirements for a quorum at a meeting of shareholders, may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders.. The reservation of the right of amendment to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

ORC § 1701.54. Action by shareholders or directors without a meeting

(A) Unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations prohibit the authorization or taking of any action of the shareholders or of the directors without a meeting, any action that may be authorized or taken at a meeting of the shareholders or of the directors, as the case may be, may be authorized or taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by all the shareholders who would be entitled to notice of a meeting of the shareholders held for such purpose, or all the directors, respectively, which writing or writings shall be filed with or entered upon the records of the corporation. Any certificate with respect to the authorization or taking of any such action that is required to be filed in the office of the secretary of state shall recite that the authorization or taking of such action was in a writing or writings approved and signed as specified in this section.

(B) A telegram, cablegram, electronic mail, or an electronic or other transmission capable of authentication that appears to have been sent by a person described in division (A) of this section and that contains an affirmative vote or approval of that person is a signed writing for the purposes of this section. The date on which that telegram, cablegram, electronic mail, or electronic or other transmission is sent is the date on which the writing is signed.


COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, division (A) of this Section has been revised to provide that a provision of the regulations which prohibits the authorization or taking of any action of the shareholders or of the directors without a meeting, may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders. The reservation of the right of amendment to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

 

ORC § 1701.57. Term and classification of directors

(A) Unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations provide for a different term (which may not exceed three years from the date of his election and until his successor is elected), each director shall hold office until the next annual meeting of the shareholders and until his successor is elected, or until his earlier resignation, removal from office, or death.

(B) The articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations may provide:
(1) For the classification of directors into either two or three classes consisting of not less than three directors each, provided that where all shares of a corporation entitled to elect a class of directors are owned of record by one or two shareholders, the number of directors of each class may be less than three, but not less than the number of shareholders entitled to elect directors of such class;

(2) That the terms of office of the several classes need not be uniform, except that no term shall exceed the maximum period specified in division (A) of this section.


COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, divisions (A) and (B) of this Section have been revised to provide that a provision of the regulations which specifies the term of office for directors, or which provides for the classification of directors, may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders. The reservation of the right of amendment to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

ORC § 1701.58. Removal of directors and filling vacancies

(A) The office of a director becomes vacant if the director dies or resigns. A resignation shall take effect immediately or at such other time as the director may specify.

(B) The directors may remove any director and thereby create a vacancy in the board:

(1) If by order of court the director has been found to be of unsound mind, or if the director is adjudicated a bankrupt;

(2) If within sixty days, or within such other period of time as is prescribed in the articles or the regulations, from the date of the director’s election the director does not qualify by accepting in writing the director’s election to such office or by acting at a meeting of the directors, and by acquiring the qualifications specified in the articles or the regulations; or if, for such period as is prescribed in the articles or the regulations, the director ceases to hold the required qualifications.

(C) Except as otherwise provided in this division, if the shareholders have a right to vote cumulatively in the election of directors, then, unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations expressly provide that no director may be removed from office or that removal of directors requires a greater vote than that specified in this division, all the directors, all the directors of a particular class, or any individual director may be removed from office, without assigning any cause, by the vote of the holders of a majority of the voting power entitling them to elect directors in place of those to be removed, except that, unless all the directors, or all the directors of a particular class, are removed, no individual director shall be removed if the votes of a sufficient number of shares are cast against the director’s removal that, if cumulatively voted at an election of all the directors, or all the directors of a particular class, as the case may be, would be sufficient to elect at least one director. In the case of an issuing public corporation whose directors are classified pursuant to section 1701.57 of the Revised Code, the shareholders may effect a removal under this division only for cause.

(D) If the shareholders do not have the right to vote cumulatively as a result of an amendment to the articles permitted by division (B)(10) of section 1701.69 of the Revised Code, then, unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations expressly provide that no director may be removed from office or that removal of directors requires a greater vote than that specified in this division, all the directors, all the directors of a particular class, or any individual director may be removed from office, without assigning any cause, by the vote of the holders of a majority of the voting power entitling them to elect directors in place of those to be removed; except that in the case of an issuing public corporation whose directors are classified pursuant to section 1701.57 of the Revised Code, the shareholders may effect that removal only for cause.

(E) In case of any removal pursuant to division (C) or (D) of this section, a new director may be elected at the same meeting for the unexpired term of each director removed. Failure to elect a director to fill the unexpired term of any director removed is deemed to create a vacancy in the board.

(F) Unless the articles or the regulations otherwise provide, the remaining directors, though less than a majority of the whole authorized number of directors, may, by the vote of a majority of their number, fill any vacancy in the board for the unexpired term. Under this section, a vacancy exists if the shareholders increase the authorized number of directors but fail at the meeting at which such increase is authorized, or an adjournment of that meeting, to elect the additional directors provided for, or if the shareholders fail at any time to elect the whole authorized number of directors.


COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, divisions (C) and (D) of this Section have been revised to provide that a provision of the regulations which requires greater than a majority vote of the shareholders to remove and replace directors without cause, may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders. The reservation of the right of amendment to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

 

ORC § 1701.62. Quorum for directors’ meeting

Unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations otherwise provide, and subject to the exceptions, applicable during an emergency, as that term is defined in section 1701.01 of the Revised Code, for which provision is made in division (F) of section 1701.11 of the Revised Code, a majority of the whole authorized number of directors is necessary to constitute a quorum for a meeting of the directors, except that a majority of the directors in office constitutes a quorum for filling a vacancy in the board. The act of a majority of the directors present at a meeting at which a quorum is present is the act of the board, unless the act of a greater number is required by the articles, the regulations adopted by the shareholders, regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code, or the bylaws.


COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, this Section has been revised to provide that a provision of the regulations which specifies the requirements for a quorum at a meeting of the directors, or which specifies the required vote for an action of the directors, may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders.. The reservation of the right of amendment to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

 

ORC § 1701.63. Executive and other committees

(A) The regulations may provide for the creation by the directors of an executive committee or any other committee of the directors, to consist of one or more directors, and may authorize the delegation to any such committee of any of the authority of the directors, however conferred, other than the authority of filling vacancies among the directors or in any committee of the directors, and other than the authority to adopt, amend, or repeal regulations.

(B) The directors may appoint one or more directors as alternate members of any committee described in division (A) of this section, who may take the place of any absent member or members at any meeting of the particular committee.

(C) Each committee described in division (A) of this section shall serve at the pleasure of the directors, shall act only in the intervals between meetings of the directors, and shall be subject to the control and direction of the directors.

(D) Unless otherwise provided in the regulations or ordered by the directors, any committee described in division (A) of this section may act by a majority of its members at a meeting or by a writing or writings signed by all of its members.

(E) Unless participation by members of any committee described in division (A) of this section at a meeting by means of communications equipment is prohibited by the articles, the regulations, or an order of the directors, meetings of the particular committee may be held through any communications equipment if all persons participating can hear each other. Participation in a meeting pursuant to this division constitutes presence at the meeting.

(F) An act or authorization of an act by any committee described in division (A) of this section within the authority delegated to it shall be as effective for all purposes as the act or authorization of the directors.


COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, this Section has been revised to provide that an executive committee or other committee of the directors is not permitted to exercise the authority of the directors to adopt, amend, or repeal regulations.

 

ORC [§ 1701.83.1] § 1701.831. Procedure for control share acquisitions

(A) Unless the articles, regulations adopted by the shareholders, or regulations adopted by the directors under division (A)(1) of section 1701.10 of the Revised Code or the regulations of the issuing public corporation provide that this section does not apply to control share acquisitions of shares of such corporation, any control share acquisition of an issuing public corporation shall be made only with the prior authorization of the shareholders of such corporation in accordance with this section.

(B) Any person who proposes to make a control share acquisition shall deliver an acquiring person statement to the issuing public corporation at the issuing public corporation’s principal executive offices. Such acquiring person statement shall set forth all of the following:

(1) The identity of the acquiring person;

(2) A statement that the acquiring person statement is given pursuant to this section;

(3) The number of shares of the issuing public corporation owned, directly or indirectly, by the acquiring person;

(4) The range of voting power, described in division (Z)(1)(a), (b), or (c) of section 1701.01 of the Revised Code, under which the proposed control share acquisition would, if consummated, fall;

(5) A description in reasonable detail of the terms of the proposed control share acquisition;

(6) Representations of the acquiring person, together with a statement in reasonable detail of the facts upon which they are based, that the proposed control share acquisition, if consummated, will not be contrary to law, and that the acquiring person has the financial capacity to make the proposed control share acquisition.

(C) (1) Within ten days after receipt of an acquiring person statement that complies with division (B) of this section, the directors of the issuing public corporation shall call a special meeting of shareholders of the issuing public corporation for the purpose of voting on the proposed control share acquisition. Subject to division (C)(2) of this section, unless the acquiring person and the issuing public corporation agree in writing to another date, such special meeting of shareholders shall be held within fifty days after receipt by the issuing public corporation of the acquiring person statement. If the acquiring person so requests in writing at the time of delivery of the acquiring person statement, such special meetings shall be held no sooner than thirty days after receipt by the issuing public corporation of the acquiring person statement. Subject to division (C)(2) of this section, such special meeting of shareholders shall be held no later than any other special meeting of shareholders that is called, after receipt by the issuing public corporation of the acquiring person statement, in compliance with this section or section 1701.76, 1701.78, 1701.781 [1701.78.1], 1701.79, 1701.791 [1701.79.1], 1701.801 [1701.80.1], or 1701.83 of the Revised Code.

(2) If, in connection with a proposed control share acquisition, the acquiring person changes the percentage of the class of shares being sought, the consideration offered, or the security dealer’s soliciting fee; extends the expiration date of a tender offer for the shares being sought; or otherwise changes the terms of the proposed control share acquisition, then the directors of the issuing public corporation may reschedule the special meeting of shareholders required by division (C)(1) of this section. If the proposed control share acquisition is to be made pursuant to a tender offer, then the meeting may be rescheduled to a date that is not later than the expiration date of the offer. If the proposed control share acquisition is to be made other than pursuant to a tender offer, the meeting may be rescheduled to a date that is not later than ten business days after notice of the change is first given to the shareholders.

(D) Notice of the special meeting of shareholders shall be given as promptly as reasonably practicable by the issuing public corporation to all shareholders of record as of the record date set for such meeting, whether or not entitled to vote at the meeting. The notice shall include or be accompanied by both of the following:

(1) A copy of the acquiring person statement delivered to the issuing public corporation pursuant to this section;

(2) A statement by the issuing public corporation, authorized by its directors, of its position or recommendation, or that it is taking no position or making no recommendation, with respect to the proposed control share acquisition.

(E) The acquiring person may make the proposed control share acquisition if both of the following occur:

(1) The shareholders of the issuing public corporation who hold shares as of the record date of such corporation entitling them to vote in the election of directors authorize the acquisition at the special meeting held for that purpose at which a quorum is present by an affirmative vote of a majority of the voting power of such corporation in the election of directors represented at the meeting in person or by proxy, and a majority of the portion of the voting power excluding the voting power of interested shares represented at the meeting in person or by proxy. A quorum shall be deemed to be present at the special meeting if at least a majority of the voting power of the issuing public corporation in the election of directors is represented at the meeting in person or by proxy.

(2) The acquisition is consummated, in accordance with the terms so authorized, no later than three hundred sixty days following shareholder authorization of the control share acquisition.

(F) Except as expressly provided in this section, nothing in this section shall be construed to affect or impair any right, remedy, obligation, duty, power, or authority of any acquiring person, any issuing public corporation, the directors of any acquiring person or issuing public corporation, or any other person under the laws of this or any other state or of the United States.

(G) If any application of any provision of this section is for any reason held to be illegal or invalid, the illegality or invalidity shall not affect any legal and valid provision or application of this section, and the parts and applications of this section are severable.

COMMITTEE COMMENT (2004)
In connection with an amendment to Section 1701.11 allowing amendments of the regulations by the board of directors if permitted by the articles or regulations, division (A) of this Section has been revised to provide that a provision of the regulations which removes the requirement under this Section that a control share acquisition of an issuing public corporation requires prior authorization by shareholders of the acquired corporation, may be adopted by the directors or shareholders as part of the initial regulations or through an amendment or new regulations approved by the shareholders.. The reservation of the right of amendment to the shareholders is intended to recognize the particular importance of this aspect of the relationship between the corporation and its shareholders.

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