[ Search ] [ Legislation ] [ Bill Summary ]
[ Home ] [ Back ] [ Bottom ]
| [ Engrossed ] | [ Enrolled ] | [ Senate Amendment 001 ] |
90_HB0613
805 ILCS 5/7.85 from Ch. 32, par. 7.85
Amends the Business Corporation Act of 1983 in relation
to the vote required for certain business combinations.
Increases the threshold share ownership level before a
shareholder is considered to be an interested shareholder
from 10% to 15%. Provides that a corporation may elect to
not be subject to the vote requirements by an action of its
board of directors within 90 days after the effective date of
this amendatory Act. Provides that a corporation may in its
articles of incorporation elect to not be subject to the vote
requirements.
LRB9002696WHpk
LRB9002696WHpk
1 AN ACT to amend the Business Corporation Act of 1983 by
2 changing Section 7.85.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Business Corporation Act of 1983 is
6 amended by changing Section 7.85 as follows:
7 (805 ILCS 5/7.85) (from Ch. 32, par. 7.85)
8 Sec. 7.85. A. Vote required for certain business
9 combinations.
10 A. This Section shall apply to any domestic corporation
11 that which (i) has any a class of equity securities
12 registered under Section 12 of the Securities Exchange Act of
13 1934 or is subject to Section 15(d) of that Act (a "reporting
14 company") and (or any subsequent provisions replacing such
15 Act), or (ii) any domestic corporation other than one
16 described in (i) that which either specifically adopts this
17 Section 7.85 in its original articles of incorporation or
18 amends its articles of incorporation to specifically adopt
19 this Section 7.85, however, the restrictions contained in
20 this Section shall not apply in the event of any of the
21 following:.
22 (1) In case of a reporting company, the
23 corporation's articles of incorporation immediately prior
24 to the time it becomes a reporting company contains a
25 provision expressly electing not to be governed by this
26 Section.
27 (2) The corporation, by action of its board of
28 directors, adopts an amendment to its by-laws within 90
29 days after the effective date of this amendatory Act of
30 1997 expressly electing not to be governed by this
31 Section, which amendment shall not be further amended by
-2- LRB9002696WHpk
1 the board of directors.
2 (3) In the case of a reporting company, the
3 corporation, by action of its shareholders, adopts an
4 amendment to its articles of incorporation or by-laws
5 expressly electing not to be governed by this Section,
6 provided that, in addition to any other vote required by
7 law, such amendment to the articles of incorporation or
8 by-laws must be approved by the affirmative vote of a
9 majority of the voting shares (as defined in paragraph B
10 of this Section 7.85). An amendment adopted under this
11 paragraph shall not be effective until 12 months after
12 the adoption of the amendment and shall not apply to a
13 business combination between the corporation and a person
14 who became an interested shareholder of the corporation
15 at the same time as or before the adoption of the
16 amendment. A by-law amendment adopted under this
17 paragraph shall not be further amended by the board of
18 directors.
19 (4) A shareholder becomes an interested shareholder
20 inadvertently and (i) as soon as practical divests
21 sufficient shares so that the shareholder ceases to be an
22 interested shareholder and (ii) would not, at any time
23 within the 3 year period immediately before a business
24 combination between the corporation and the shareholder,
25 have been an interested shareholder but for the
26 inadvertent acquisition.
27 In the case of circumstances described in subparagraphs
28 (1), (2), and (3) of this paragraph A, the election not to be
29 governed may be in whole or in part, generally, or generally
30 by types, or as to specifically identified or unidentified
31 interested shareholders. Notwithstanding any other provisions
32 of the Articles of Incorporation or the By-Laws of the
33 corporation (and notwithstanding the fact that a lesser
34 percentage may be specified by law, the Articles of
-3- LRB9002696WHpk
1 Incorporation or the By-Laws of the corporation), the
2 affirmative vote of (i) the holders of 80% or more of the
3 combined voting power of the then outstanding Voting Shares
4 voting together as a single class, and (ii) a majority of the
5 combined voting power of the then outstanding Voting Shares
6 held by Disinterested Shareholders (as hereinafter defined),
7 voting together as a single class, shall be required to
8 amend, or repeal, or to adopt any provision inconsistent
9 with, any provision in the Articles of Incorporation of the
10 corporation specifically adopting this Section 7.85.
11 B. (1) Higher vote for certain business combinations.
12 In addition to any affirmative vote required by law or the
13 articles of incorporation, except as otherwise expressly
14 provided in paragraph C B of this Section 7.85, any business
15 combination:
16 (a) any merger, consolidation or share exchange of the
17 corporation or any Subsidiary (as hereinafter defined) with
18 or involving (1) any Interested Shareholder (as hereinafter
19 defined) or (2) any other corporation (whether or not itself
20 an Interested Shareholder) which is, or after such merger,
21 consolidation or share exchange would be, an Affiliate (as
22 hereinafter defined) or an Associate (as hereinafter defined)
23 of an Interested Shareholder;
24 (b) any sale, lease, exchange, mortgage, pledge,
25 transfer or other disposition (in one transaction or a series
26 of transactions) to or with any Interested Shareholder or any
27 Affiliate or Associate of any Interested Shareholder (other
28 than the corporation or any Subsidiary) of any assets of the
29 corporation or any Subsidiary having an aggregate Fair Market
30 Value (as hereinafter defined) equal to 10% or more of the
31 corporation's consolidated net worth as of its then most
32 recent fiscal year end;
33 (c) the issuance or transfer by the corporation or any
34 Subsidiary (in one transaction or a series of transactions)
-4- LRB9002696WHpk
1 of any securities of the corporation or any Subsidiary to any
2 Interested Shareholder or any Affiliate or Associate of any
3 Interested Shareholder;
4 (d) the adoption of any plan or proposal for the
5 liquidation or dissolution of the corporation proposed by, or
6 in which anything other than cash will be received by, an
7 Interested Shareholder or any Affiliate or Associate of an
8 Interested Shareholder; or
9 (e) any reclassification of securities (including any
10 reverse share split), or recapitalization of the corporation,
11 or any merger, consolidation or share exchange of the
12 corporation with or involving any of its Subsidiaries which
13 has the effect, directly or indirectly, of increasing the
14 proportionate share of the outstanding shares of any class of
15 equity or convertible securities of the corporation or any
16 Subsidiary which is directly or indirectly owned by any
17 Interested Shareholder or any Affiliate or Associate of any
18 Interested Shareholder;
19 shall require (i) the affirmative vote of the holders of at
20 least 80% of the combined voting power of the then
21 outstanding shares of all classes and series of the
22 corporation entitled to vote generally in the election of
23 directors (the "Voting Shares"), voting together as a single
24 class (the "voting shares") (it being understood that, for
25 the purposes of this Section 7.85, each voting share shall
26 have the number of votes granted to it pursuant to the
27 corporation's articles of incorporation) and (ii) the
28 affirmative vote of a majority of the combined voting power
29 of the then outstanding voting shares held by disinterested
30 shareholders voting together as a single class.
31 (2) Definition of "Business Combination." The term
32 "business combination" as used in this Section 7.85 shall
33 mean any transaction which is referred to in any one or more
34 of clauses (a) through (e) of subparagraph (1) of this
-5- LRB9002696WHpk
1 paragraph A.
2 C B. When higher vote is not required. The provisions
3 of subparagraph (1) of paragraph B A of this Section 7.85
4 shall not be applicable to any particular business
5 combination, and such business combination shall require only
6 such affirmative vote as is required by law and any other
7 provision of the corporation's article of incorporation and
8 any resolutions of the board of directors adopted pursuant to
9 Section 6.10 if all of the conditions specified in either of
10 the following subparagraphs (1) and (2) of this paragraph C B
11 are met:
12 (1) Approval by disinterested directors. The
13 business combination shall have been approved by
14 two-thirds of the disinterested directors (as hereinafter
15 defined).
16 (2) Price and procedure requirements. All of the
17 following conditions shall have been met:
18 (a) The business combination shall provide for
19 consideration to be received by all holders of
20 common shares in exchange for all their shares, and
21 the aggregate amount of the cash and the fair market
22 value as of the date of consummation of the business
23 combination of consideration other than cash to be
24 received per share by holders of common shares in
25 such business combination shall be at least equal
26 to the higher of the following:
27 (i) (1) (if applicable) the highest per
28 share price (including any brokerage
29 commissions, transfer taxes and soliciting
30 dealers' fees) paid by the interested
31 shareholder or any affiliate or associate of
32 the interested shareholder to acquire any
33 common shares beneficially owned by the
34 interested shareholder which were acquired (a)
-6- LRB9002696WHpk
1 within the two year period immediately prior to
2 the first public announcement of the proposal
3 of the business combination (the "announcement
4 date") or (b) in the transaction in which it
5 became an interested shareholder, whichever is
6 higher; and
7 (ii) the fair market value per common
8 share on the first trading date after the
9 announcement date or on the first trading date
10 after the date of the first public announcement
11 that the interested shareholder became an
12 interested shareholder (the "Determination
13 Date"), whichever is higher.
14 (b) The business combination shall provide for
15 consideration to be received by all holders of
16 outstanding shares other than common shares in
17 exchange for all such shares, and the aggregate
18 amount of the cash and the fair market value as of
19 the date of the consummation of the business
20 combination of consideration other than cash to be
21 received per share by holders of outstanding shares
22 other than common shares shall be at least equal to
23 the highest of the following (it being intended that
24 the requirements of this subparagraph (2)(b) shall
25 be required to be met with respect to every class
26 and series of outstanding shares other than common
27 shares whether or not the interested shareholder or
28 any affiliate or associate of the interested
29 shareholder has previously acquired any shares of a
30 particular class or series):
31 (i) (1) (if applicable) the highest per
32 share price (including any brokerage
33 commissions, transfer taxes and soliciting
34 dealers' fees) paid by the interested
-7- LRB9002696WHpk
1 shareholder or any affiliate or associate of
2 the interested shareholder to acquire any
3 shares of such class or series beneficially
4 owned by the interested shareholder which were
5 acquired (a) within the 2-year period
6 immediately prior to the announcement date or
7 (b) in the transaction in which it became an
8 interested shareholder, whichever is higher;
9 (ii) (2) (if applicable) the highest
10 preferential amount per share to which the
11 holders of shares of such class or series are
12 entitled in the event of any voluntary or
13 involuntary liquidation, dissolution or winding
14 up of the corporation;
15 (iii) (3) the fair market value per share
16 of such class or series on the first trading
17 date after the announcement date or on the
18 determination date, whichever is higher; and
19 (iv) (4) an amount equal to the fair
20 market value per share of such class or series
21 determined pursuant to clause (iii) (3) times
22 the highest value obtained in calculating the
23 following quotient for each class or series of
24 which the interested shareholder has acquired
25 shares within the 2-year period ending on the
26 announcement date: (x) the highest per share
27 price (including any brokerage commissions,
28 transfer taxes and soliciting dealers' fees)
29 paid by the interested shareholder or any
30 affiliate or associate of the interested
31 Shareholder for any shares of such class or
32 series acquired within such 2-year period
33 divided by (y) the market value per share of
34 such class or series on the first day in such
-8- LRB9002696WHpk
1 2-year period on which the interested
2 shareholder or any affiliate or associate of
3 the interested shareholder acquired any shares
4 of such class or series.
5 (c) The consideration to be received by holders of
6 a particular class or series of outstanding shares shall
7 be in cash or in the same form as the interested
8 shareholder or any affiliate or associate of the
9 interested shareholder has previously paid to acquire
10 shares of such class or series beneficially owned by the
11 interested shareholder. If the interested shareholder
12 and any affiliates or associates of the interested
13 shareholder have paid for shares of any class or series
14 with varying forms of consideration, the form of
15 consideration for such class or series shall be either
16 cash or the form used to acquire the largest number of
17 shares of such class or series beneficially owned by the
18 interested shareholder.
19 (d) After such interested shareholder has become an
20 interested shareholder and prior to the consummation of
21 such business combination: (1) except as approved by
22 two-thirds of the disinterested directors, there shall
23 have been no failure to declare and pay at the regular
24 date therefor any full periodic dividends (whether or not
25 cumulative) on any outstanding shares of the corporation
26 other than the common shares; (2) there shall have been
27 (a) no reduction in the annual rate of dividends paid on
28 the common shares (except as necessary to reflect any
29 subdivision of the common shares), except as approved by
30 two-thirds of the disinterested directors, and (b) an
31 increase in such annual rate of dividends (as necessary
32 to prevent any such reduction) in the event of any
33 reclassification (including any reverse share split),
34 recapitalization, reorganization or any similar
-9- LRB9002696WHpk
1 transaction which has the effect of reducing the number
2 of outstanding common shares; and (3) such interested
3 shareholder shall not have become the beneficial owner of
4 any additional Voting Shares except as part of the
5 transaction which results in such interested shareholder
6 becoming an interested shareholder or as a result of
7 action taken by the corporation not caused, directly or
8 indirectly, by such interested shareholder.
9 (e) After such interested shareholder has become an
10 interested shareholder, such interested shareholder shall
11 not have received the benefit, directly or indirectly
12 (except proportionately as a shareholder), of any loans,
13 advances, guarantees, pledges or other financial
14 assistance or any tax credits or other tax advantages
15 provided by the corporation or any Subsidiary, whether in
16 anticipation of or in connection with such business
17 combination or otherwise.
18 (f) A proxy or information statement describing the
19 proposed business combination and complying with the
20 requirements of the Securities Exchange Act of 1934 and
21 the rules and regulations thereunder (or any subsequent
22 provisions replacing such Act, rules or regulations)
23 shall be mailed to public shareholders of the corporation
24 at least 30 days prior to the consummation of such
25 business combination (whether or not such proxy or
26 information statement is required to be mailed pursuant
27 to such Act or subsequent provisions).
28 D. C. Certain definitions. For the purposes of this
29 Section 7.85:
30 (1) A "Person" means an shall mean any individual,
31 firm, corporation, partnership, trust or other entity.
32 (2) "Interested shareholder" means (i) a shall
33 mean any person (other than the corporation and a direct
34 or indirect majority-owned subsidiary of the corporation)
-10- LRB9002696WHpk
1 that (a) is the owner of 15% or more of the outstanding
2 voting shares of the corporation or (b) is an affiliate
3 or associate of the corporation and was the owner of 15%
4 or more of the outstanding voting shares of the
5 corporation at any time within the 3 year period
6 immediately before the date on which it is sought to be
7 determined whether the person is an interested
8 shareholder and (ii) the affiliates and associates of
9 that person, provided, however, that the term "interested
10 shareholder" shall not include (x) a person who (A) owned
11 shares in excess of the 15% limitation as of January 1,
12 1997 and continued to own shares in excess of the 15%
13 limitation or would have but for action by the
14 corporation or (B) acquired the shares from a person
15 described in clause (A) by gift, inheritance, or in a
16 transaction in which no consideration was exchanged or
17 (y) a person whose ownership of shares in excess of the
18 15% limitation is the result of action taken solely by
19 the corporation, provided that the person shall be an
20 interested shareholder if thereafter the person acquires
21 additional shares of the corporation, except as a result
22 of further corporate action not caused, directly or
23 indirectly, by the person or if the person acquires
24 additional shares in transactions approved by the board
25 of directors, which approval shall include a majority of
26 the disinterested directors. For the purpose of
27 determining whether a person is an interested
28 shareholder, the voting shares of the corporation deemed
29 to be outstanding shall include shares deemed to be owned
30 by the person through application of subparagraph (3) of
31 this paragraph, but shall not include any other unissued
32 shares of the corporation that may be issuable or any
33 Subsidiary) who or which:
34 (a) is the beneficial owner, directly or
-11- LRB9002696WHpk
1 indirectly, of Voting Shares conveying 10% or more of the
2 combined voting power of the outstanding Voting Shares;
3 or
4 (b) is an Affiliate or Associate of the corporation
5 and at any time within the 2-year period immediately
6 prior to the date in question was the beneficial owner,
7 directly or indirectly, of Voting Shares conveying 10% or
8 more of the combined voting power of the then outstanding
9 Voting Shares.
10 (3) A person shall be a "beneficial owner" of any
11 Voting Shares:
12 (a) which such person or any of its Affiliates or
13 Associates beneficially owns, directly or indirectly;
14 (b) which such person or any of its Affiliates or
15 Associates has (1) the right to acquire (whether such
16 right is exercisable immediately or only after the
17 passage of time), pursuant to any agreement, arrangement,
18 or understanding, or upon the exercise of conversion
19 rights, exchange rights, warrants, or options, or
20 otherwise., or (2) the right to vote or direct the vote
21 pursuant to any agreement, arrangement or understanding;
22 or
23 (3) "Owner", including the terms "own" and "owned",
24 when used with respect to shares means a person that
25 individually or with or through (c) which are
26 beneficially owned, directly or indirectly, by any other
27 person which such person or any of its affiliates or
28 associates: has any agreement, arrangement or
29 understanding for the purpose of acquiring, holding,
30 voting or disposing of any Voting Shares.
31 (4) For the purposes of determining whether a
32 person is an interested shareholder pursuant to
33 subparagraph (2) of this paragraph C, the number of
34 Voting Shares deemed to be outstanding shall include
-12- LRB9002696WHpk
1 shares deemed owned by such person through application of
2 subparagraph (3) of this paragraph C but shall not
3 include any other Voting Shares which may be issuable to
4 other persons
5 (a) beneficially owns the shares, directly or
6 indirectly; or
7 (b) has (i) the right to acquire the shares
8 (whether the right is exercisable immediately or
9 only after the passage of time) pursuant to any
10 agreement, arrangement, or understanding, or upon
11 exercise of conversion rights, exchange rights,
12 warrants, or options, or otherwise; provided,
13 however, that a person shall not be deemed the owner
14 of shares tendered pursuant to a tender or exchange
15 offer made by the person or any of the person's
16 affiliates or associates until the tendered shares
17 are accepted for purchase or exchange or (ii) the
18 right to vote the shares pursuant to an agreement,
19 arrangement, or understanding; provided, however,
20 that a person shall not be deemed the owner of any
21 shares because of the person's right to vote the
22 shares if the agreement, arrangement, or
23 understanding to vote the shares arises solely from
24 a revocable proxy or consent given in response to a
25 proxy or consent solicitation made to 10 or more
26 persons; or
27 (c) has an agreement, arrangement, or
28 understanding for the purpose of acquiring, holding,
29 voting (except voting pursuant to a revocable proxy
30 or consent as described in clause (ii) of item (b)
31 of this subparagraph), or disposing of the shares
32 with any other person that beneficially owns, or
33 whose affiliates or associates beneficially own,
34 directly or indirectly, the shares.
-13- LRB9002696WHpk
1 (4) "Affiliate" means a person that directly, or
2 indirectly through one or more intermediaries, controls,
3 is controlled by, or is under common control with,
4 another person.
5 (5) "Associate", when used to indicate a
6 relationship with an person, means (i) a corporation or
7 organization of which the person is a director, officer,
8 or partner or is, directly or indirectly, the owner of
9 20% or more of a class of voting shares, (ii) a trust or
10 other estate in which the person has at least a 20%
11 beneficial interest or as to which the person serves as
12 trustee or in a similar fiduciary capacity, and (iii) a
13 relative or spouse of the person, or a relative of that
14 spouse who has the same residence as the person.
15 (5) "Affiliate" and "Associate" shall have the
16 respective meanings ascribed to such terms in Rule 12b-2
17 of the General Rules and Regulations under the Securities
18 Exchange Act of 1934, as amended from time to time, or
19 any successor provision (or the respective meanings last
20 ascribed thereto if there are no amended or successor
21 provisions).
22 (6) "Subsidiary" means any corporation of which a
23 majority of any class of equity security is owned,
24 directly or indirectly, by the corporation; provided,
25 however, that for the purposes of the definition of
26 interested shareholder set forth in subparagraph (2) of
27 this paragraph D C, the term "subsidiary" shall mean only
28 a corporation of which a majority of each class or equity
29 security is owned, directly or indirectly, by the
30 corporation.
31 (7) "Disinterested director" means any member of
32 the board of directors of the corporation who: (a) is
33 neither the interested shareholder nor an affiliate or
34 associate of the interested shareholder; (b) was a member
-14- LRB9002696WHpk
1 of the board of directors prior to the time that the
2 interested shareholder became an interested shareholder
3 or was a director of the corporation before January 1,
4 1997, or was recommended to succeed a disinterested
5 director by a majority of the disinterested directors
6 then in office; and (c) was not nominated for election as
7 a director by the interested shareholder or any affiliate
8 or associate of the interested shareholder.
9 (8) "Fair market value" means: (a) in the case of
10 shares, the highest closing sale price during the 30-day
11 period immediately preceding the date in question of a
12 share on the New York Stock Exchange Composite Tape, or,
13 if such shares are not quoted on the Composite Tape, on
14 the New York Stock Exchange, or, if such shares are not
15 listed on such Exchange, on the principal United States
16 securities exchange registered under the Securities
17 Exchange Act of 1934 on which such shares are listed, or,
18 if such shares are not listed on any such exchange, the
19 highest closing sale price or bid quotation with respect
20 to a share during the 30-day period preceding the date in
21 question on the National Association of Securities
22 Dealers, Inc. Automated Quotations System or any system
23 then in use, or if no such quotations are available, the
24 fair market value on the date in question of a share as
25 determined by a majority of the disinterested directors
26 in good faith; and (b) in the case of property other than
27 cash or shares, the fair market value of such property on
28 the date in question as determined by a majority of the
29 disinterested directors in good faith.
30 (9) "Disinterested shareholder" shall mean a
31 shareholder of the corporation who is not an interested
32 shareholder or an affiliate or an associate of an
33 interested shareholder.
34 (10) "Business combination" has the meaning set
-15- LRB9002696WHpk
1 forth in Section 11.75 of this Act (regardless of the
2 case of the word "only" in that Section).
3 (11) (10) In the event of any business combination
4 in which the corporation survives, the phrase "other
5 consideration other than cash to be received" as used in
6 subparagraphs (2)(a) and (2)(b) of paragraph C B of this
7 Section 7.85 shall include the common shares and the
8 shares of any other class or series retained by the
9 holders of such shares.
10 E. (11) Determinations by disinterested directors. A
11 majority of the disinterested directors shall have the power
12 to determine, for the purposes of this Section 7.85, (a)
13 whether a person is an interested shareholder, (b) the number
14 of voting shares beneficially owned by any person, (c)
15 whether a person is an affiliate or associate of another, and
16 (d) whether the transaction is the subject of any business
17 combination. assets which are the subject of any Business
18 Combination have an aggregate fair market value equal to 10%
19 or more of the corporation's consolidated net worth as of its
20 then most recent fiscal year end.
21 D. No Effect on Fiduciary Obligations of interested
22 shareholder. Nothing contained in this Section 7.85 shall be
23 construed to relieve any interested shareholder from any
24 fiduciary obligation imposed by law.
25 (Source: P.A. 84-204.)