Full Text of SB1872 102nd General Assembly
SB1872ham001 102ND GENERAL ASSEMBLY | Rep. Deanne M. Mazzochi Filed: 5/7/2021
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| 1 | | AMENDMENT TO SENATE BILL 1872
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 1872 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 5. The Business Corporation Act of 1983 is | 5 | | amended by adding Article 1A as follows: | 6 | | (805 ILCS 5/Art. 1A heading new) | 7 | | ARTICLE 1A. RATIFICATION AND VALIDATION | 8 | | OF DEFECTIVE CORPORATE ACTIONS | 9 | | (805 ILCS 5/1A.05 new) | 10 | | Sec. 1A.05. Definitions. In this Article: | 11 | | "Board" means the board of directors. | 12 | | "Corporate action" means any action taken by: | 13 | | (1) or on behalf of a corporation; | 14 | | (2) the incorporators; | 15 | | (3) the board; |
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| 1 | | (4) a committee of the board; | 2 | | (5) an officer or agent of the corporation; or | 3 | | (6) the shareholders. | 4 | | "Date of the defective corporate action" means the date | 5 | | (or the approximate date, if the exact date is unknown) the | 6 | | potentially defective corporate action was purported to have | 7 | | been taken. | 8 | | "Defective corporate action" means any corporate action | 9 | | taken or purportedly taken that is, and at the time such | 10 | | corporate action was taken or purportedly taken would have | 11 | | been, within the power of the corporation without regard to | 12 | | the failure of authorization identified in item (3) of | 13 | | subsection (a) of Section 1A.15, but with respect to which | 14 | | proper documentation is not presently available, or that is or | 15 | | may be shown to have been void or voidable due to a failure or | 16 | | possible failure of authorization or of the documentation | 17 | | thereof. | 18 | | "Failure of authorization" means the failure to authorize, | 19 | | approve, or otherwise effect a corporate action in compliance | 20 | | with this Act, the articles of incorporation or by-laws, a | 21 | | corporate resolution or any plan or agreement to which the | 22 | | corporation is a party, or the disclosure set forth in any | 23 | | proxy or consent solicitation statement, if and to the extent | 24 | | such failure would render such corporate action void or | 25 | | voidable. | 26 | | "Validation effective time" with respect to any defective |
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| 1 | | corporate action ratified or validated under this Article | 2 | | means the latest of: | 3 | | (1) the time at which the ratification of the | 4 | | defective corporate action is approved by the shareholders | 5 | | or, if approval of shareholders is not required, the time | 6 | | at which the notice required by Section 1A.25 becomes | 7 | | effective; | 8 | | (2) the time at which any articles of validation filed | 9 | | in accordance with Section 1A.35 become effective; and | 10 | | (3) if the corporation or any successor entity to the | 11 | | corporation brings an application for validation under | 12 | | subsection (a) of Section 1A.40, the time at which the | 13 | | circuit court determines such validity or at such other | 14 | | time as the circuit court may determine in accordance with | 15 | | subsection (b) of Section 1A.40. | 16 | | The validation effective time shall not be affected by the | 17 | | filing or pendency of a judicial proceeding under Section | 18 | | 1A.40 or otherwise unless the corporation or any successor | 19 | | entity to the corporation initiates the application for | 20 | | validation under subsection (a) of Section 1A.40 or unless | 21 | | otherwise ordered by the circuit court. | 22 | | (805 ILCS 5/1A.10 new) | 23 | | Sec. 1A.10. Defective corporate actions. | 24 | | (a) A defective corporate action shall not be void or | 25 | | voidable if ratified in accordance with Section 1A.15 or |
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| 1 | | validated in accordance with Section 1A.40. | 2 | | (b) Ratification under Section 1A.15 or validation under | 3 | | Section 1A.40 shall not be deemed to be the exclusive means of | 4 | | ratifying or validating any defective corporate action and the | 5 | | absence or failure of ratification or validation in accordance | 6 | | with this Article shall not, of itself, affect the validity or | 7 | | effectiveness of any corporate action that was or may be shown | 8 | | to have been properly taken or ratified under common law or | 9 | | otherwise, nor shall it create a presumption that any such | 10 | | corporate action is or was a defective corporate action or | 11 | | void or voidable. | 12 | | (805 ILCS 5/1A.15 new) | 13 | | Sec. 1A.15. Ratification of defective corporate actions. | 14 | | (a) To ratify a defective corporate action under this | 15 | | Section (other than the ratification of an election or | 16 | | designation of the initial directors under subsection (b)), | 17 | | the board shall take action ratifying the action in accordance | 18 | | with Section 1A.20, stating: | 19 | | (1) the defective corporate action to be ratified; | 20 | | (2) the date of the defective corporate action; | 21 | | (3) the nature of the failure of authorization with | 22 | | respect to the defective corporate action to be ratified; | 23 | | and | 24 | | (4) that the board approves the ratification of the | 25 | | defective corporate action. |
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| 1 | | (b) If a defective corporate action to be ratified relates | 2 | | to the election or designation of the initial directors of the | 3 | | corporation, regardless of whether the initial directors are | 4 | | set forth in the articles of incorporation pursuant to item | 5 | | (1) of subsection (b) of Section 2.10, a majority of the | 6 | | persons who, at the time of the ratification, are exercising | 7 | | the powers of directors may take an action stating: | 8 | | (1) the name of the person or persons who first took | 9 | | action in the name of the corporation as the initial | 10 | | directors of the corporation; | 11 | | (2) the earlier of the date on which such person or | 12 | | persons first took such action or were purported to have | 13 | | been elected or designated as the initial directors; and | 14 | | (3) that the ratification of the election or | 15 | | designation of such person or persons as the initial | 16 | | directors is approved. | 17 | | (c) If: | 18 | | (1) any provision of this Act, the articles of | 19 | | incorporation or by-laws, any corporate resolution or any | 20 | | plan or agreement to which the corporation is a party in | 21 | | effect at the time action under subsection (a) is taken | 22 | | requires shareholder approval or would have required | 23 | | shareholder approval at the date of the occurrence of the | 24 | | defective corporate action, or | 25 | | (2) the action under subsection (a) is to ratify a | 26 | | defective corporate action due to a failure to comply with |
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| 1 | | either or both of Sections 7.85 and 11.75, | 2 | | then
the ratification of the defective corporate action | 3 | | approved in the action taken by the board under subsection (a) | 4 | | shall be submitted to the shareholders for approval. | 5 | | (d) Unless otherwise provided in the action taken by the | 6 | | board under subsection (a), after the action by the board has | 7 | | been taken and, if required, approved by the shareholders, the | 8 | | board may abandon the ratification at any time before the | 9 | | validation effective time without further action of the | 10 | | shareholders. | 11 | | (805 ILCS 5/1A.20 new) | 12 | | Sec. 1A.20. Action on ratification. | 13 | | (a) The quorum and voting requirements applicable to a | 14 | | ratifying action by the board under subsection (a) of Section | 15 | | 1A.15 shall be the quorum and voting requirements applicable | 16 | | to the corporate action proposed to be ratified at the time | 17 | | such ratifying action is taken; provided, however, that if the | 18 | | articles of incorporation or by-laws of the corporation, any | 19 | | plan or agreement to which the corporation was a party, or any | 20 | | provision of this Act, in each case as in effect as of the time | 21 | | of the defective corporate action, would have required a | 22 | | larger number or portion of directors or of specified | 23 | | directors for a quorum to be present or to approve the | 24 | | defective corporate action, such larger number or portion of | 25 | | such directors or such specified directors shall be required |
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| 1 | | for a quorum to be present or to adopt the resolutions to | 2 | | ratify the defective corporate action, as applicable, except | 3 | | that the presence or approval of any director elected, | 4 | | appointed, or nominated by holders of any class or series of | 5 | | which no shares are then outstanding, or by any person who is | 6 | | no longer a shareholder, shall not be required. | 7 | | (b) If the ratification of the defective corporate action | 8 | | requires approval by the shareholders under subsection (c) of | 9 | | Section 1A.15, and if the approval is to be given at a meeting, | 10 | | the corporation shall notify each holder of shares, regardless | 11 | | of whether entitled to vote as of: | 12 | | (1) the record date for notice of the meeting, and | 13 | | (2) the date of the occurrence of the defective | 14 | | corporate action (or, in the case of any defective | 15 | | corporate action that involved the establishment of a | 16 | | record date for notice of or voting at any meeting of | 17 | | shareholders, for informal action by shareholders in lieu | 18 | | of a meeting, or for any other purpose, the record date for | 19 | | notice of or voting at such meeting, the record date for | 20 | | informal action by written consent, or the record date for | 21 | | such other action, as the case may be), | 22 | | provided that in each case notice shall not be required to be | 23 | | given to holders of shares whose identities or addresses for | 24 | | notice cannot be determined from the records of the | 25 | | corporation. The notice must state that the purpose, or one of | 26 | | the purposes, of the meeting, is to consider ratification of a |
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| 1 | | defective corporate action and must be accompanied by: | 2 | | (A) either a copy of the action taken by the board in | 3 | | accordance with subsection (a) of Section 1A.15 or the | 4 | | information required by items (1) through (4) of | 5 | | subsection (a) of Section 1A.15, and | 6 | | (B) a statement that any claim that the ratification | 7 | | of such defective corporate action should not be | 8 | | effective, or should be effective only on certain | 9 | | conditions, shall be brought within 120 days from the | 10 | | applicable validation effective time. | 11 | | (c) The quorum and voting requirements applicable to the | 12 | | approval by the shareholders required by subsection (c) of | 13 | | Section 1A.15 shall be the quorum and voting requirements | 14 | | applicable to the corporate action proposed to be ratified at | 15 | | the time of such shareholder approval; provided, however, | 16 | | that: | 17 | | (1) If the articles of incorporation or by-laws of the | 18 | | corporation, any plan or agreement to which the | 19 | | corporation was a party, or any provision of this Act in | 20 | | effect as of the time of the defective corporate action | 21 | | would have required a larger number or portion of stock or | 22 | | of any class or series thereof or of specified | 23 | | shareholders for a quorum to be present or to approve the | 24 | | defective corporate action, the presence or approval of | 25 | | such larger number or portion of stock or of such class or | 26 | | series thereof or of such specified shareholders shall be |
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| 1 | | required for a quorum to be present or to approve the | 2 | | ratification of the defective corporate action, as | 3 | | applicable, except that the presence or approval of shares | 4 | | of any class or series of which no shares are then | 5 | | outstanding, or of any person that is no longer a | 6 | | shareholder, shall not be required. | 7 | | (2) The approval by shareholders to ratify the | 8 | | election of a director requires the affirmative vote of | 9 | | the majority of the votes of the shares which are | 10 | | represented at a meeting at which a quorum is present and | 11 | | entitled to vote on the matter, except that if the | 12 | | articles of incorporation or by-laws of the corporation | 13 | | then in effect or in effect at the time of the defective | 14 | | election require or required a larger number or portion of | 15 | | stock or of any class or series thereof or of specified | 16 | | shareholders to elect such director, the affirmative vote | 17 | | of such larger number or portion of stock or of any class | 18 | | or series thereof or of such specified shareholders shall | 19 | | be required to ratify the election of such director, | 20 | | except that the presence or approval of shares of any | 21 | | class or series of which no shares are then outstanding, | 22 | | or of any person that is no longer a shareholder, shall not | 23 | | be required. | 24 | | (3) In the event of a failure of authorization | 25 | | resulting from a failure to comply with the provisions of | 26 | | Section 7.85, the ratification of the defective corporate |
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| 1 | | action shall require the vote of shareholders set forth in | 2 | | subsection B of Section 7.85, regardless of whether such | 3 | | vote would have otherwise been required. In the event of a | 4 | | failure of authorization resulting from a failure to | 5 | | comply with Section 11.75, the ratification of the | 6 | | defective corporate action shall require the vote of | 7 | | shareholders set forth in clause (3) of subsection (a) of | 8 | | Section 11.75, regardless of whether such vote would have | 9 | | otherwise been required. | 10 | | (805 ILCS 5/1A.25 new) | 11 | | Sec. 1A.25. Notice requirements. | 12 | | (a) Unless (1) shareholder approval is required under | 13 | | subsection (c) of Section 1A.15 and (2) shareholder approval | 14 | | is to be given at a meeting of shareholders in accordance with | 15 | | subsection (b) of Section 1A.20, rather than by informal | 16 | | action of shareholders pursuant to Section 7.10, prompt notice | 17 | | of an action taken under Section 1A.15 shall be given to each | 18 | | holder of shares, regardless of whether entitled to vote, as | 19 | | of: | 20 | | (A) the date of such action by the board; and | 21 | | (B) the date of the defective corporate action | 22 | | ratified (or, in the case of any defective corporate | 23 | | action that involved the establishment of a record date | 24 | | for notice of or voting at any meeting of shareholders, | 25 | | for informal action by shareholders in lieu of a meeting, |
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| 1 | | or for any other purpose, the record date for notice of or | 2 | | voting at such meeting, the record date for informal | 3 | | action by written consent, or the record date for such | 4 | | other action, as the case may be); | 5 | | provided that in each case notice shall not be required to be | 6 | | given to holders of shares whose identities or addresses for | 7 | | notice cannot be determined from the records of the | 8 | | corporation. | 9 | | (b) The notice must contain: | 10 | | (1) either a copy of the action taken by the board in | 11 | | accordance with subsection (a) or (b) of Section 1A.15 or | 12 | | the information required by items (1) through (4) of | 13 | | subsection (a) or items (1) through (3) of subsection (b) | 14 | | of Section 1A.15, as applicable, and | 15 | | (2) a statement that any claim that the ratification | 16 | | of the defective corporate action should not be effective, | 17 | | or should be effective only on certain conditions, shall | 18 | | be brought within 120 days from the applicable validation | 19 | | effective time. | 20 | | (c) No notice under this Section is required with respect | 21 | | to any action required to be submitted to shareholders for | 22 | | approval under subsection (c) of Section 1A.15 if notice is | 23 | | given in accordance with subsection (b) of Section 1A.20. | 24 | | (d) A notice required by this Section may be given in any | 25 | | manner permitted by the by-laws of the corporation or, if the | 26 | | by-laws are silent, this Act. In addition, for any corporation |
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| 1 | | subject to the reporting requirements of Section 13 or Section | 2 | | 15(d) of the Securities Exchange Act of 1934, or the | 3 | | corresponding provisions of any subsequent federal securities | 4 | | laws, rules, or regulations, a notice required by this Section | 5 | | or by subsection (b) of Section 1A.20 may be given by means of | 6 | | a filing or furnishing of such notice with the United States | 7 | | Securities and Exchange Commission. | 8 | | (805 ILCS 5/1A.30 new) | 9 | | Sec. 1A.30. Effect of ratification and validation. From | 10 | | and after the validation effective time, and without regard to | 11 | | the 120-day period during which a claim may be brought under | 12 | | Section 1A.40: | 13 | | (1) each defective corporate action ratified in | 14 | | accordance with Section 1A.15 shall not be void or | 15 | | voidable as a result of the failure of authorization | 16 | | identified in the action taken under subsection (a) or (b) | 17 | | of Section 1A.15 and shall be deemed a valid corporate | 18 | | action effective as of the date of the defective corporate | 19 | | action; and | 20 | | (2) any corporate action taken subsequent to and in | 21 | | direct or indirect reliance on any defective corporate | 22 | | action that is ratified or validated in accordance with | 23 | | this Article and all corporate actions, including any | 24 | | subsequent defective corporate action, resulting directly | 25 | | or indirectly therefrom shall be valid as of the time |
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| 1 | | taken. | 2 | | (805 ILCS 5/1A.35 new) | 3 | | Sec. 1A.35. Filings. | 4 | | (a) If the defective corporate action ratified under this | 5 | | Article would have required under any other Section of this | 6 | | Act a filing in accordance with this Act, then, regardless of | 7 | | whether a filing was previously made in respect of such | 8 | | defective corporate action, the corporation shall make the | 9 | | correct or corrected filing otherwise required by this Act, | 10 | | and the corporation shall file articles of validation in | 11 | | accordance with this Section. | 12 | | (b) The articles of validation must set forth: | 13 | | (1) the defective corporate action that is the subject | 14 | | of the articles of validation; | 15 | | (2) the date of the defective corporate action; | 16 | | (3) the nature of the failure of authorization in | 17 | | respect of the defective corporate action; | 18 | | (4) a statement that the defective corporate action | 19 | | was ratified in accordance with Section 1A.15, including | 20 | | the date on which the board ratified such defective | 21 | | corporate action and the date, if any, on which the | 22 | | shareholders approved the ratification of such defective | 23 | | corporate action; and | 24 | | (5) the information required by subsection (c). | 25 | | (c) The articles of validation must also contain the |
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| 1 | | following information: | 2 | | (1) if a filing was previously made in respect of the | 3 | | defective corporate action and no changes to such filing | 4 | | are required to give effect to the ratification of such | 5 | | defective corporate action in accordance with Section | 6 | | 1A.15, the articles of validation must set forth (i) the | 7 | | name, title, and filing date of the filing previously made | 8 | | and any statement of correction to that filing and (ii) a | 9 | | statement that a copy of the filing previously made, | 10 | | together with any statement of correction to that filing, | 11 | | is attached as an exhibit to the articles of validation; | 12 | | (2) if a filing was previously made in respect of the | 13 | | defective corporate action and such filing requires any | 14 | | change to give effect to the ratification of such | 15 | | defective corporate action in accordance with Section | 16 | | 1A.15, the articles of validation must set forth (i) the | 17 | | name, title and filing date of the filing previously made | 18 | | and any statement of correction to that filing, (ii) a | 19 | | statement that a filing containing all of the information | 20 | | required to be included under the applicable Section or | 21 | | Sections of this Act to give effect to such defective | 22 | | corporate action is attached as an exhibit to the articles | 23 | | of validation, and (iii) the date and time that such | 24 | | filing is deemed to have become effective; or | 25 | | (3) if a filing was not previously made in respect of | 26 | | the defective corporate action and the defective corporate |
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| 1 | | action ratified under Section 1A.15 would have required a | 2 | | filing under any other Section of this Act, the articles | 3 | | of validation must set forth (i) a statement that a filing | 4 | | containing all of the information required to be included | 5 | | under the applicable Section or Sections of this Act to | 6 | | give effect to such defective corporate action is being | 7 | | filed at the same time as the articles of validation, and | 8 | | (ii) the date and time that such filing is deemed to have | 9 | | become effective. | 10 | | (805 ILCS 5/1A.40 new) | 11 | | Sec. 1A.40. Judicial proceedings regarding validity of | 12 | | corporate actions. | 13 | | (a) Upon application to the circuit court of the county in | 14 | | which either the registered office or principal office of the | 15 | | corporation is located by the corporation, any successor | 16 | | entity to the corporation, a director of the corporation, any | 17 | | shareholder, beneficial shareholder or unrestricted voting | 18 | | trust beneficial owner of the corporation, including any such | 19 | | shareholder, beneficial shareholder or unrestricted voting | 20 | | trust beneficial owner as of the date of the defective | 21 | | corporate action ratified under Section 1A.15, or any other | 22 | | person claiming to be substantially and adversely affected by | 23 | | a ratification under Section 1A.15, the circuit court may: | 24 | | (1) determine the validity and effectiveness of any | 25 | | corporate action or defective corporate action; |
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| 1 | | (2) determine the validity and effectiveness of any | 2 | | ratification under Section 1A.15; and | 3 | | (3) modify or waive any of the procedures specified in | 4 | | Section 1A.15 or Section 1A.20 to ratify a defective | 5 | | corporate action. | 6 | | (b) In connection with an action under this Section, the | 7 | | circuit court may make such findings or orders, and take into | 8 | | account any factors or considerations, regarding such matters | 9 | | as it deems proper under the circumstances. | 10 | | (c) Service of process of the application under subsection | 11 | | (a) on the corporation may be made in any manner provided by | 12 | | statute of this State or by rule of the applicable court for | 13 | | service on the corporation, and no other party need be joined | 14 | | in order for the court to adjudicate the matter. In an action | 15 | | filed by the corporation, the court may require notice of the | 16 | | action be provided to other persons specified by the court and | 17 | | permit such other persons to intervene in the action. | 18 | | (d) Notwithstanding any other provision of this Section or | 19 | | otherwise under applicable law, any action asserting that the | 20 | | ratification of any defective corporate action should not be | 21 | | effective, or should be effective only on certain conditions, | 22 | | shall be brought within 120 days of the validation effective | 23 | | time. ".
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