LeapLaw Ledger's Archives | About LeapLaw | Contact Us

---

MASSACHUSETTS GENERAL LAWS
CHAPTER 156D

On November 26, 2003, Chapter 127 of the Acts of 2003 (the "Act") was enacted and will be more commonly known as Massachusetts General Laws, Chapter 156D. Chapter 156D is the New Massachusetts Business Corporation Act that will be effective July 1, 2004 and supercedes Chapter 156B. This issue of LeapLaw's Ledger™ addresses the affects Chapter 156D has on procedural aspects of incorporating and maintaining Massachusetts corporations.

CHARTERS

Certain changes will be made in the requirements of a standard Massachusetts charter such as:

• Purpose. A statement of purpose is no longer required in the corporate charter (also known as the "articles of organization" or "articles"). If no purpose is stated, the corporation is assumed to be authorized to conduct any business permitted under Chapter 156D. (§ 2.02)
  
  
• Undesignated Stock. The articles may simply state the maximum number of shares to be authorized. Directors are authorized to designate the classes, series and terms, as necessary. (§ 6.02)
  
  
• Par Value. Par value of authorized stock is no longer required. If desired, par value must be stated in the charter. (§ 2.02)

Other Lawful Provisions: New default provisions under the Act may be modified if stated in the articles, such as:

• Annual Meetings. The purpose of annual meetings may be unlimited. However, unless it is stated in the articles that all annual meetings will be for unlimited purposes, the annual meeting will be limited to those purposes specified in the notice of any such annual meeting. (§ 7.01)
  
  
• Stockholder Consents. Written consent of stockholders may be authorized by majority consent (rather than unanimous consent) provided that the articles expressly allow for consent by the percentage of outstanding shares that would be required to approve the action at a meeting held therefor. (§ 7.04)
  
  PROCEDURAL NOTE: All consents must be delivered to the minute book within 60 days of the first signature; each signature must bear a date beside it; and notice of the consent must be given to non-consenting stockholders.
  
  
• Stockholder Quorum and Voting Requirements. The charter may increase or decrease stockholder voting requirements specified in the Act (i.e. two-thirds vs. majority votes) to permit all actions to be approved by at least a majority vote. (§ 7.27)
  
  
• Cumulative Voting. Cumulative voting may be permitted, if stated in the articles. (§ 7.28)
  
  
• Preemptive Rights. Preemptive rights may be permitted, if stated in the articles. (§ 6.30)
  
  
• Number of Directors. The articles may state that the number of directors be set at one, regardless of the number of stockholders. (§ 8.03)
  
  
• Resident Agent. The resident agent is no longer defaulted to the Clerk (designated as the "Secretary" under the Act (see "Bylaw Modifications" below)). The resident agent may still be an officer of the corporation, but must be specifically named in the articles. (§ 5.01)
  
  
• Amendment to Bylaws. The articles may provide for directors to amend the bylaws. (§ 10.20)
  
  PROCEDURAL NOTE: If directors amend bylaws, they must report any amendments to the stockholders no later than the date of the notice of the next meeting of stockholders (§ 16.21)
  

Uncommon provisions that may be stated in the articles are:

• Imposing personal liability on stockholders. (§ 2.02)
• Limiting the powers or life of the corporation. (§ 3.02)
• Limiting the consideration for which directors may issue stock. (§ 6.21)
• Limiting the ability of the directors to act by unanimous written consent. (§ 8.21)

Certain customary provisions typically included in Article 6 under Chapter 156B that are not necessary to be stated in the articles under the Act are:

• Place of Stockholder Meetings. The power to hold meetings outside Massachusetts is no longer required to be stated. (§§ 7.01 and 7.02)
  
  
• Conflicts Provisions. Customary charter provisions concerning conflicts of interest are no longer necessary (§ 8.31).
  
  
• General Partner. The power to be General Partner is no longer required to be stated. (§ 3.02(a)(9))

CHARTER AMENDMENTS

Directors may vote to amend the articles without stockholder consent for certain administrative matters, such as (§ 10.02):

• Extending the duration of the corporation if it was originally limited;
• Increasing the number of authorized shares for the purpose of a stock dividend; or to increase each share equally; provided that the corporation has only one class of stock;
• Amending the corporate suffix; and
• Restating, without amending, articles for pure housekeeping purposes. (§ 10.07)

Additionally, if no shares have been issued directors may amend the charter.

GENERAL PROCEDURAL CHANGES

• Name Reservations. Corporate names may be reserved for up to 60 days (formerly 30 days). (§ 4.02)
  
  
• Forms. Pre-printed forms of articles of organization will be revised and made available. However, conformed documents may be submitted provided that they conform in terms and order of presentation to the preprinted forms. (§ 1.20)
  
  
• Signatures. Documents will require only one officer's signature (formerly two). (§ 1.20)
  
  
• Effective Date. The effective date may be up to 90 days post-filing (formerly 30 days). (§ 1.23)
  
  
• Corporate Record Keeping. Very specific provisions regarding records to be maintained by a corporation and where those records are to be kept is provided in § 16.01 of the Act.

BYLAW MODIFICATIONS

Stockholders' Special Meetings. The charter or bylaws may specify who may call special meetings of the stockholders. Stockholders having at least 10% voting power may call a meeting unless the charter or bylaws specify a lower percentage. (§ 7.02)

Remote Communications and Electronic Meetings. Stockholder meetings may be held by means of remote or electronic communications. (§ 7.08)

Stockholder Non-Unanimous Consents. If the charter provides for consent by majority of stockholders, bylaws should conform. (§ 7.27)

Stockholder Consents, Proxies, Votes and Waivers. Stockholder consents, proxies, votes, waivers and other actions may be provided via facsimile or other electronic means. (§ 7.29)

Proxies. Unless bylaws provide otherwise, proxies are valid for 11 months under the Act. (§ 7.22)

Record Date. The Act provides for the record date to be set 70 days before a meeting or other action. Bylaws should be updated to reference 70 days or a shorter/longer time. The bylaws may fix the record date, or provide a manner for fixing the record date. Unless the bylaws provide otherwise, the directors may fix the record date. (§ 7.07)

Annual Meetings. Since the Act no longer fixes a time in which annual meetings must be held; nor limits them to be held within Massachusetts, the bylaws should provide either a date on which the annual meeting will be held or a method for fixing the date of the annual meeting (i.e. to be determined by directors). (§ 7.01)

Directors' Consents and Notices. Directors' consents, notices and waivers of notice may be provided orally (if reasonable) or via facsimile or other electronic means. (§ 1.41)

Secretary vs. Clerk. The default term for the keeper of the records under the Act is now "Secretary". However, the corporation may choose to use the term "Clerk". (§ 8.40)

FUNDAMENTAL TRANSACTIONS

Domestication. Sections 9.20-25 of the Act provide for domestication of a corporation to re-domesticate in Massachusetts or a Massachusetts corporation to re-domesticate to a state with similar provisions. This procedure differs from a merger since it does not require the establishment of a new corporation. The entity is simply adapted to the laws and requirements of the new domicile.

Conversion. Sections 9.32(d) and 9.53(e) of the Act provide for conversion that allows a domestic business corporation to convert into a completely different entity (i.e. limited liability company). Domestic entities will file Articles of Entity Conversion.

PROCEDURAL NOTE: Copies of the articles must be filed with the appropriate registries of deeds where the converting entity owns real property.

Share Exchange. Section 11.04 of the Act allows for a corporation's shares to be exchanged for shares of another corporation or property of the acquiring corporation. Stockholder approval is not required if:

(a) The corporation will survive.

(b) The articles will be unchanged except for amendments otherwise permitted to be taken without stockholder approval.

(c) Each stockholder will hold the same number of shares, with the same preferences after the exchange.

(d) The shares of the surviving corporation to be issued pursuant to the merger or exchange do not exceed 20% of the existing shares.

Parent/Subsidiary Mergers. Section 11.05 provides that where a parent corporation owns more than 90% of the subsidiary corporation, stockholders' consent is no longer required to (a) merge "downstream", allowing the parent corporation to merge into a 90% or more owned subsidiary or (b) merge any subsidiaries with each other.

FOREIGN CORPORATIONS

Part 15 of Chapter 156D repeals Chapter 156B § 181 governing foreign corporations. However, the requirements of Part 15 are substantially similar to § 181.

EXISTING MASSACHUSETTS CORPORATIONS

The only requirement of existing corporations after July 1, 2004 is to name a resident agent since the resident agent will no longer default to the clerk. In addition, an existing corporation may desire, as a result of Chapter 156D, to amend the charter and/or the bylaws as follows:

Charter Amendment. An existing corporation may opt to amend its articles to provide for (a) consent of stockholders to be approved by less than majority of the stockholders; and (b) to fix the number of directors at one.

Amendment to Bylaws. Bylaws may be amended to provide for the amendments to the charter (referenced above) and to allow (a) for meetings of stockholders to be held by remote communications; and (b) stockholders notices and consent to be provided by electronic means.

CONCLUSION

Chapter 156D significantly updates and changes the Massachusetts Business Corporation Law and affects all domestic corporations as well as foreign corporations doing business in Massachusetts. The foregoing is not intended to be an exhaustive list of the provisions of the Act, but is meant to highlight certain key elements related to procedural aspects of incorporating and maintaining Massachusetts corporations.

LeapLaw will be providing updated documents and information regarding Chapter 156D. We will also be providing necessary documents to amend current Massachusetts charters so that they may benefit from the changes in the law.

---

LeapLaw™ is part search engine, part repository and part virtual colleague. We compile and maintain information commonly sought by business lawyers and paralegals. Using LeapLaw expedites legal procedures, saving significant time and money.

For more information on becoming a LeapLaw subscriber, please contact us at 781-891-8808 or via e-mail at