ARTICLE 1 Short Title; Definitions; Application; Certificates, Miscellaneous
Short title.
This chapter shall be known as the "Business Corporation Law".
Definitions.
(a) As used in this chapter, unless the context otherwise requires,
the term:
(1) "Authorized person" means a person, whether or not a shareholder,
officer or director, who is authorized to act on behalf of a corporation
or foreign corporation.
(2) "Bonds" includes secured and unsecured bonds, debentures, and
notes.
(3) "Certificate of incorporation" includes (A) the original
certificate of incorporation or any other instrument filed or issued
under any statute to form a domestic or foreign corporation, as amended,
supplemented or restated by certificates of amendment, merger or
consolidation or other certificates or instruments filed or issued under
any statute; or (B) a special act or charter creating a domestic or
foreign corporation, as amended, supplemented or restated.
(4) "Corporation" or "domestic corporation" means a corporation for
profit formed under this chapter, or existing on its effective date and
theretofore formed under any other general statute or by any special act
of this state for a purpose or purposes for which a corporation may be
formed under this chapter, other than a corporation which may be formed
under the cooperative corporations law.
(5) "Director" means any member of the governing board of a
corporation, whether designated as director, trustee, manager, governor,
or by any other title. The term "board" means "board of directors".
(7) "Foreign corporation" means a corporation for profit formed under
laws other than the statutes of this state, which has as its purpose or
among its purposes a purpose for which a corporation may be formed under
this chapter, other than a corporation which, if it were to be formed
currently under the laws of this state, could not be formed under this
chapter. "Authorized", when used with respect to a foreign corporation,
means having authority under article 13 (Foreign corporations) to do
business in this state.
(7-a) "Infant" means a person who has not attained the age of eighteen
years.
(8) "Insolvent" means being unable to pay debts as they become due in
the usual course of the debtor's business.
(9) "Net assets" means the amount by which the total assets exceed the
total liabilities. Stated capital and surplus are not liabilities.
(10) "Office of a corporation" means the office the location of which
is stated in the certificate of incorporation of a domestic corporation,
or in the application for authority of a foreign corporation or an
amendment thereof. Such office need not be a place where business
activities are conducted by such corporation.
(11) "Process" means judicial process and all orders, demands, notices
or other papers required or permitted by law to be personally served on
a domestic or foreign corporation, for the purpose of acquiring
jurisdiction of such corporation in any action or proceeding, civil or
criminal, whether judicial, administrative, arbitrative or otherwise, in
this state or in the federal courts sitting in or for this state.
(12) "Stated capital" means the sum of (A) the par value of all shares
with par value that have been issued, (B) the amount of the
consideration received for all shares without par value that have been
issued, except such part of the consideration therefor as may have been
allocated to surplus in a manner permitted by law, and (C) such amounts
not included in clauses (A) and (B) as have been transferred to stated
capital, whether upon the distribution of shares or otherwise, minus all
reductions from such sums as have been effected in a manner permitted by
law.
(13) "Surplus" means the excess of net assets over stated capital.
(14) "Treasury shares" means shares which have been issued, have been
subsequently acquired, and are retained uncancelled by the corporation.
Treasury shares are issued shares, but not outstanding shares, and are
not assets.
Application.
(a) This chapter applies to every domestic corporation and to every
foreign corporation which is authorized or does business in this state.
This chapter also applies to any other domestic corporation or foreign
corporation of any type or kind to the extent, if any, provided under
this chapter or any law governing such corporation and, if no such
provision for application is made, to the extent, if any, that the stock
corporation law applied to such corporation immediately prior to the
effective date of this chapter.
This chapter also applies to a corporation of any type or kind, formed
for profit under any other chapter of the laws of this state except a
chapter of the consolidated laws, to the extent that provisions of this
chapter do not conflict with the provisions of such unconsolidated law.
If an applicable provision of such unconsolidated law relates to a
matter embraced in this chapter but is not in conflict therewith, both
provisions shall apply. Any corporation to which this chapter is made
applicable by this paragraph shall be treated as a "corporation" or
"domestic corporation" as such terms are used in this chapter, except
that the purposes of any such corporation formed or formable under such
unconsolidated law shall not thereby be extended. For the purpose of
this paragraph, the effective date of this chapter as to corporations to
which this chapter is made applicable by this paragraph shall be June
one, nineteen hundred seventy-three.
This chapter shall not apply to a domestic corporation of any type or
kind heretofore or hereafter formed under the banking law, insurance
law, railroad law, transportation corporations law or cooperative
corporations law, or under any other statute or special act for a
purpose or purposes for which a corporation may be formed under any of
such laws except to the extent, if any, provided under such law. It
shall not apply, except to the extent, if any, provided under the
banking law, insurance law, railroad law, transportation corporations
law or cooperative corporations law, to a foreign corporation of any
type or kind heretofore or hereafter formed which (1) has as its purpose
or among its purposes a purpose for which a corporation may be formed
only under the insurance law, banking law, railroad law, transportation
corporations law or cooperative corporations law, and (2) is either an
authorized insurer as defined in the insurance law or does in this state
only the kind of business which can be done lawfully by a corporation
formed under the banking law, railroad law, transportation corporations
law or cooperative corporations law, as the case may be. After the
effective date of this chapter the stock corporation law shall not apply
to any corporation of any type or kind. The general corporation law
shall not apply to a corporation of any type or kind to which this
chapter applies. A reference in any statute of this state, which makes a
provision of the stock corporation law applicable to a corporation of
any type or kind, shall be deemed and construed to refer to and make
applicable the corresponding provision, if any, of this chapter.
(b) This chapter applies to commerce with foreign nations and among
the several states, and to corporations formed by or under any act of
congress, only to the extent permitted under the constitution and laws
of the United States.
(c) The enactment of this chapter shall not affect the duration of a
corporation which is existing on the effective date of this chapter.
Any such existing corporation, its shareholders, directors and officers
shall have the same rights and be subject to the same limitations,
restrictions, liabilities and penalties as a corporation formed under
this chapter, its shareholders, directors and officers.
(d) This chapter shall not affect any cause of action, liability,
penalty or action or special proceeding, which on the effective date of
this chapter, is accrued, existing, incurred or pending but the same may
be asserted, enforced, prosecuted or defended as if this chapter had not
been enacted.
(e) After the effective date of this chapter no corporation shall be
formed under the stock corporation law.
Certificates; requirements, signing, filing, effectiveness.
(a) Every certificate or other instrument relating to a domestic or
foreign corporation which is delivered to the department of state for
filing under this chapter, other than a certificate of existence under
section 1304 (Application for authority; contents), shall be in the
English language, except that the corporate name may be in another
language if written in English letters or characters.
(c) Whenever such instrument is required to set forth the date when a
certificate of incorporation was filed by the department of state, the
original certificate of incorporation is meant. This requirement shall
be satisfied, in the case of a corporation created by special act, by
setting forth the chapter number and year of passage of such act.
(d) Every such certificate required under this chapter to be signed
and delivered to the department of state shall, except as otherwise
specified in the section providing for such certificate, be signed
either by an officer, director, attorney-in-fact or duly authorized
person and include the name and the capacity in which such person signs
such certificate.
(e) If an instrument which is delivered to the department of state for
filing complies as to form with the requirements of law and there has
been attached to it the consent or approval of the state official,
department, board, agency or other body, if any, whose consent to or
approval of such instrument or the filing thereof is required by any
statute of this state and the filing fee and tax, if any, required by
any statute of this state in connection therewith have been paid, the
instrument shall be filed and indexed by the department of state. No
certificate of authentication or conformity or other proof shall be
required with respect to any verification, oath or acknowledgment of any
instrument delivered to the department of state under this chapter, if
such verification, oath or acknowledgment purports to have been made
before a notary public, or person performing the equivalent function, of
one of the states, or any subdivision thereof, of the United States or
the District of Columbia. Without limiting the effect of section four
hundred three of this chapter, filing and indexing by the department of
state shall not be deemed a finding that a certificate conforms to law,
nor shall it be deemed to constitute an approval by the department of
state of the name of the corporation or the contents of the certificate,
nor shall it be deemed to prevent any person with appropriate standing
from contesting the legality thereof in an appropriate forum.
(f) Except as otherwise provided in this chapter, such instrument
shall become effective upon the filing thereof by the department of
state.
(g) The department shall make, certify and transmit electronically a
copy of each such instrument to the clerk of the county in which the
office of the domestic or foreign corporation is or is to be located.
The county clerk shall file and index such copy.
Fees.
Except as otherwise provided, the department of state shall collect
the following fees pursuant to this chapter:
(a) For the reservation of a corporate name pursuant to section three
hundred three of this chapter, twenty dollars.
(b) For the resignation of a registered agent for service of process
pursuant to section three hundred five of this chapter, and for the
resignation for receipt for process pursuant to section three hundred
six-A of this chapter, sixty dollars.
(c) For service of process on the secretary of state pursuant to
section three hundred six, paragraph (e) of section three hundred six-A,
or three hundred seven of this chapter, forty dollars. No fee shall be
collected for process served on behalf of a county, city, town or
village or other political subdivision of the state.
(d) For filing a certificate of incorporation pursuant to section four
hundred two of this chapter, one hundred twenty-five dollars.
(e) For filing a certificate of amendment pursuant to section eight
hundred five of this chapter, sixty dollars.
(f) For filing a certificate of change pursuant to paragraph (a) of
section eight hundred five-A of this chapter, thirty dollars, and for
filing a certificate of change pursuant to paragraph (b) of section
eight hundred five-A of this chapter, five dollars.
(g) For filing a restated certificate of incorporation pursuant to
section eight hundred seven of this chapter, sixty dollars.
(h) For filing a certificate of merger or consolidation pursuant to
section nine hundred four of this chapter, or a certificate of exchange
pursuant to section nine hundred thirteen (other than paragraph (g) of
section nine hundred thirteen) of this chapter, sixty dollars.
(i) For filing a certificate of merger of a subsidiary corporation
pursuant to section nine hundred five of this chapter, or a certificate
of exchange pursuant to paragraph (g) of section nine hundred thirteen
of this chapter, sixty dollars.
(j) For filing a certificate of merger or consolidation pursuant to
section nine hundred four-a of this chapter, a certificate of merger or
consolidation pursuant to section nine hundred four-b of this chapter,
or a certificate of merger or consolidation of domestic and foreign
corporations pursuant to section nine hundred seven of this chapter,
sixty dollars.
(k) For filing a certificate of dissolution pursuant to section one
thousand three of this chapter, sixty dollars.
(l) For filing an application by a foreign corporation for authority
to do business in New York state pursuant to section thirteen hundred
four of this chapter, two hundred twenty-five dollars.
(m) For filing a certificate of amendment of an application for
authority by a foreign corporation pursuant to section thirteen hundred
nine of this chapter, sixty dollars.
(n) For filing a certificate of change of application for authority by
a foreign corporation pursuant to paragraph (b) of section thirteen
hundred nine-A of this chapter, thirty dollars, and for filing a
certificate of change pursuant to paragraph (c) of section thirteen
hundred nine-A of this chapter, five dollars.
(o) For filing a certificate of surrender of authority pursuant to
section thirteen hundred ten of this chapter, sixty dollars.
(p) For filing a statement of the termination of existence of a
foreign corporation pursuant to section thirteen hundred eleven of this
chapter, sixty dollars. There shall be no fee for the filing by an
authorized officer of the jurisdiction of incorporation of a foreign
corporation of a certificate that the foreign corporation has been
dissolved or its authority or existence has been otherwise terminated or
cancelled in the jurisdiction of its incorporation.
(q) For filing a certificate of incorporation by a professional
service corporation pursuant to section fifteen hundred three of this
chapter, one hundred twenty-five dollars.
(r) For filing a statement or amendment pursuant to section four
hundred eight of this chapter with the department of state, nine
dollars. This fee shall not apply to statements submitted through the
department of taxation and finance pursuant to paragraph eight of
section four hundred eight of this chapter.
(s) For filing any other certificate or instrument, sixty dollars.
Certificates; corrections.
Any certificate or other instrument relating to a domestic or foreign
corporation filed by the department of state under this chapter may be
corrected with respect to any informality or error apparent on the face,
incorrect statement or defect in the execution thereof including the
deletion of any matter not permitted to be stated therein. A
certificate, entitled "Certificate of correction of............ (correct
title of certificate and name of corporation)" shall be signed and
delivered to the department of state. It shall set forth the name of the
corporation, the date the certificate to be corrected was filed by the
department of state, a statement as to the nature of the informality,
error, incorrect statement or defect, the provision in the certificate
as corrected or eliminated and if the execution was defective, the
proper execution. The filing of the certificate by the department of
state shall not alter the effective time of the instrument being
corrected, which shall remain as its original effective time, and shall
not affect any right or liability accrued or incurred before such
filing. A corporate name may not be changed or corrected under this
section. The provisions of this section shall apply to all instruments
and certificates heretofore and hereafter filed with the department of
state.
Certificates as evidence.
(a) Any certificate or other instrument filed by the department of
state relating to a domestic or foreign corporation and containing
statements of fact required or permitted by law to be contained therein,
shall be received in all courts, public offices and official bodies as
prima facie evidence of such facts and of the execution of such
instrument.
(b) Whenever by the laws of any jurisdiction other than this state,
any certificate by any officer in such jurisdiction or a copy of any
instruments certified or exemplified by any such officer, may be
received as prima facie evidence of the incorporation, existence or
capacity of any foreign corporation incorporated in such jurisdiction,
or claiming so to be, such certificate when exemplified, or such copy of
such instrument when exemplified shall be received in all courts, public
offices and official bodies of this state, as prima facie evidence with
the same force as in such jurisdiction. Such certificate or certified
copy of such instrument shall be so received, without being exemplified,
if it is certified by the secretary of state, or official performing the
equivalent function as to corporate records, of such jurisdiction.
Corporate seal as evidence.
The presence of the corporate seal on a written instrument purporting
to be executed by authority of a domestic or foreign corporation shall
be prima facie evidence that the instrument was so executed.
When notice or lapse of time unnecessary; notices dispensed with
when delivery is prohibited.
(a) Whenever, under this chapter or the certificate of incorporation
or by-laws of any corporation or by the terms of any agreement or
instrument, a corporation or the board or any committee thereof is
authorized to take any action after notice to any person or persons or
after the lapse of a prescribed period of time, such action may be taken
without notice and without the lapse of such period of time, if at any
time before or after such action is completed the person or persons
entitled to such notice or entitled to participate in the action to be
taken or, in the case of a shareholder, by his attorney-in-fact, submit
a signed waiver of notice of such requirements.
(b) Whenever any notice or communication is required to be given to
any person by this chapter, the certificate of incorporation or by-laws,
or by the terms of any agreement or instrument, or as a condition
precedent to taking any corporate action and communication with such
person is then unlawful under any statute of this state or of the United
States or any regulation, proclamation or order issued under said
statutes, then the giving of such notice or communication to such person
shall not be required and there shall be no duty to apply for license or
other permission to do so. Any affidavit, certificate or other
instrument which is required to be made or filed as proof of the giving
of any notice or communication required under this chapter shall, if
such notice or communication to any person is dispensed with under this
paragraph, include a statement that such notice or communication was not
given to any person with whom communication is unlawful. Such affidavit,
certificate or other instrument shall be as effective for all purposes
as though such notice or communication had been personally given to such
person.
(c) Whenever any notice or communication is required or permitted by
this chapter to be given by mail, it shall, except as otherwise
expressly provided in this chapter, be mailed to the person to whom it
is directed at the address designated by him for that purpose or, if
none is designated, at his last known address. Such notice or
communication is given when deposited, with postage thereon prepaid, in
a post office or official depository under the exclusive care and
custody of the United States post office department. Such mailing shall
be by first class mail except where otherwise required by this chapter.
Actions or special proceedings by attorney-general.
(a) The attorney-general may maintain an action or special proceeding:
(1) To annul the corporate existence or dissolve a corporation that
has acted beyond its capacity or power or to restrain it from the doing
of unauthorized business;
(2) To annul the corporate existence or dissolve any corporation that
has not been duly formed;
(3) To restrain any person or persons from acting as a domestic or
foreign corporation within this state without being duly incorporated or
from exercising in this state any corporate rights, privileges or
franchises not granted to them by the law of the state;
(4) To procure a judgment removing a director of a corporation for
cause under section 706 (Removal of directors);
(5) To dissolve a corporation under article 11 (Judicial dissolution);
(6) To restrain a foreign corporation or to annul its authority to do
business in this state under section 1303 (Violations).
(7) Upon written application, ex parte, for an order to the supreme
court at a special term held within the judicial district where the
office of the corporation is located, and if the court so orders, to
inspect the books and records of the corporation to the extent that such
inspection is available to shareholders and directors under the law of
this state. Such application shall contain a statement that the
inspection is necessary to protect the interests of the people of this
state. This paragraph applies to every corporation, no shares of which
are listed on a national securities exchange or regularly quoted in an
over-the-counter market by one or more members of a national or an
affliated securities association. This paragraph does not apply to a
corporation all shares of which are owned either directly or through a
wholly owned subsidiary by a corporation or corporations to which this
paragraph does not apply.
(8) To collect any fines payable to the department of state pursuant
to section four hundred nine of this chapter.
(b) In an action or special proceeding brought by the attorney-general
under any of the provisions of this chapter:
(1) If an action, it is triable by jury as a matter of right.
(2) The court may confer immunity in accordance with the provisions of
section 50.20 of the criminal procedure law.
(3) A temporary restraining order to restrain the commission or
continuance of the unlawful acts which form the basis of the action or
special proceeding may be granted upon proof, by affidavit, that the
defendant or defendants have committed or are about to commit such acts.
Application for such restraining order may be made ex parte or upon such
notice as the court may direct.
(4) If the action or special proceeding is against a foreign
corporation, the attorney-general may apply to the court at any stage
thereof for the appointment of a temporary receiver of the assets in
this state of such foreign corporation, whenever it has assets or
property of any kind whatsoever, tangible or intangible, within this
state.
(5) When final judgment in such action or special proceeding is
rendered against the defendant or defendants, the court may direct the
costs to be collected by execution against any or all of the defendants
or by order of attachment or other process against the person of any
director or officer of a corporate defendant.
(6) In connection with any such proposed action or special proceeding,
the attorney-general may take proof and issue subpoenas in accordance
with the civil practice law and rules.
(c) In any such action or special proceeding against a foreign
corporation which has not designated the secretary of state as its agent
for service of process under section 304 (Statutory designation of
secretary of state as agent for service of process), any of the
following acts in this state by such foreign corporation shall
constitute the appointment by it of the secretary of state as its agent
upon whom process against such foreign corporation may be served:
(1) As used in this paragraph the term "resident" shall include
individuals, domestic corporations and foreign corporations authorized
to do business in the state.
(2) Any act done, or representation made as part of a course of the
solicitation of orders, or the issuance, or the delivery, of contracts
for, or the sale of, property, or the performance of services to
residents which involves or promotes a plan or scheme to defraud
residents in violation of the laws or the public policy of the state.
(3) Any act done as part of a course of conduct of business in the
solicitation of orders from residents for property, goods or services,
to be delivered or rendered within this state to, or on their behalf,
where the orders or contracts are executed by such residents within this
state and where such orders or contracts are accompanied or followed by
an earnest money desposit or other down payment or any installment
payment thereon or any other form of payment, which payment is either
delivered in or transmitted from the state.
(4) Any act done as part of the conduct of a course of business with
residents which defrauds such residents or otherwise involves or
promotes an attempt by such foreign corporation to circumvent the laws
of this state.
(d) Paragraphs (b), (c), (d) and (e) of section 307 (Service of
process on unauthorized foreign corporation) shall apply to process
served under paragraph (c).
Reservation of power.
The legislature reserves the right, at pleasure, to alter, amend,
suspend or repeal in whole or in part this chapter, or any certificate
of incorporation or any authority to do business in this state, of any
domestic or foreign corporation, whether or not existing or authorized
on the effective date of this chapter.
Effect of invalidity of part of chapter; severability.
If any provision of this chapter or application thereof to any person
or circumstances is held invalid, such invalidity shall not affect other
provisions or applications of this chapter which can be given effect
without the invalid provision or application, and to this end the
provisions of this chapter are declared severable.
References.
Unless otherwise stated, all references in this chapter to articles or
sections refer to the articles or sections of this chapter, and all
references in any section of this chapter to a lettered or numbered
paragraph or subparagraph refer to the paragraph or subparagraph so
lettered or numbered in such section.
ARTICLE 2 Corporate Purposes and Powers
Purposes.
(a) A corporation may be formed under this chapter for any lawful
business purpose or purposes except to do in this state any business for
which formation is permitted under any other statute of this state
unless such statute permits formation under this chapter. If,
immediately prior to the effective date of this chapter, a statute of
this state permitted the formation of a corporation under the stock
corporation law for a purpose or purposes specified in such other
statute, such statute shall be deemed and construed to permit formation
of such corporation under this chapter, and any conditions, limitations
or restrictions in such other statute upon the formation of such
corporation under the stock corporation law shall apply to the formation
thereof under this chapter.
(b) The approval of the industrial board of appeals is required for
the filing with the department of state of any certificate of
incorporation, certificate of merger or consolidation or application of
a foreign corporation for authority to do business in this state which
states as the purpose or one of the purposes of the corporation the
formation of an organization of groups of working men or women or wage
earners, or the performance, rendition or sale of services as labor
consultant or as advisor on labor-management relations or as arbitrator
or negotiator in labor-management disputes.
(c) In time of war or other national emergency, a corporation may do
any lawful business in aid thereof, notwithstanding the purpose or
purposes set forth in its certificate of incorporation, at the request
or direction of any competent governmental authority.
(d) A corporation whose statement of purposes specifically includes
the establishment or operation of a child day care center, as that term
is defined in section three hundred ninety of the social services law,
shall provide a certified copy of the certificate of incorporation, each
amendment thereto, and any certificate of merger, consolidation or
dissolution involving such corporation to the office of children and
family services within thirty days after the filing of such certificate,
amendment, merger, consolidation or dissolution with the department of
state. This requirement shall also apply to any foreign corporation
filing an application for authority under article thirteen of this
chapter, any amendments thereto, and any surrender of authority or
termination of authority in this state of such corporation.
(e) A corporation may not include as its purpose or among its purposes
the establishment or maintenance of a hospital or facility providing
health related services, as those terms are defined in article
twenty-eight of the public health law unless its certificate of
incorporation shall so state and such certificate shall have annexed
thereto the approval of the public health and health planning council.
General powers.
(a) Each corporation, subject to any limitations provided in this
chapter or any other statute of this state or its certificate of
incorporation, shall have power in furtherance of its corporate
purposes:
(1) To have perpetual duration.
(2) To sue and be sued in all courts and to participate in actions and
proceedings, whether judicial, administrative, arbitrative or otherwise,
in like cases as natural persons.
(3) To have a corporate seal, and to alter such seal at pleasure, and
to use it by causing it or a facsimile to be affixed or impressed or
reproduced in any other manner.
(4) To purchase, receive, take by grant, gift, devise, bequest or
otherwise, lease, or otherwise acquire, own, hold, improve, employ, use
and otherwise deal in and with, real or personal property, or any
interest therein, wherever situated.
(5) To sell, convey, lease, exchange, transfer or otherwise dispose
of, or mortgage or pledge, or create a security interest in, all or any
of its property, or any interest therein, wherever situated.
(6) To purchase, take, receive, subscribe for, or otherwise acquire,
own, hold, vote, employ, sell, lend, lease, exchange, transfer, or
otherwise dispose of, mortgage, pledge, use and otherwise deal in and
with, bonds and other obligations, shares, or other securities or
interests issued by others, whether engaged in similar or different
business, governmental, or other activities.
(7) To make contracts, give guarantees and incur liabilities, borrow
money at such rates of interest as the corporation may determine, issue
its notes, bonds and other obligations, and secure any of its
obligations by mortgage or pledge of all or any of its property or any
interest therein, wherever situated.
(8) To lend money, invest and reinvest its funds, and take and hold
real and personal property as security for the payment of funds so
loaned or invested.
(9) To do business, carry on its operations, and have offices and
exercise the powers granted by this chapter in any jurisdiction within
or without the United States.
(10) To elect or appoint officers, employees and other agents of the
corporation, define their duties, fix their compensation and the
compensation of directors, and to indemnify corporate personnel.
(11) To adopt, amend or repeal by-laws, including emergency by-laws
made pursuant to subdivision seventeen of section twelve of the state
defense emergency act, relating to the business of the corporation, the
conduct of its affairs, its rights or powers or the rights or powers of
its shareholders, directors or officers.
(12) To make donations, irrespective of corporate benefit, for the
public welfare or for community fund, hospital, charitable, educational,
scientific, civic or similar purposes, and in time of war or other
national emergency in aid thereof.
(13) To pay pensions, establish and carry out pension, profit-sharing,
share bonus, share purchase, share option, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions for any
or all of its directors, officers and employees.
(14) To purchase, receive, take, or otherwise acquire, own, hold,
sell, lend, exchange, transfer or otherwise dispose of, pledge, use and
otherwise deal in and with its own shares.
(15) To be a promoter, partner, member, associate or manager of other
business enterprises or ventures, or to the extent permitted in any
other jurisdiction to be an incorporator of other corporations of any
type or kind.
(16) To have and exercise all powers necessary or convenient to effect
any or all of the purposes for which the corporation is formed.
(b) No corporation shall do business in New York state under any name,
other than that appearing in its certificate of incorporation, without
compliance with the filing provisions of section one hundred thirty of
the general business law governing the conduct of business under an
assumed name.
Defense of ultra vires.
(a) No act of a corporation and no transfer of real or personal
property to or by a corporation, otherwise lawful, shall be invalid by
reason of the fact that the corporation was without capacity or power to
do such act or to make or receive such transfer, but such lack of
capacity or power may be asserted:
(1) In an action by a shareholder against the corporation to enjoin
the doing of any act or the transfer of real or personal property by or
to the corporation. If the unauthorized act or transfer sought to be
enjoined is being, or is to be, performed or made under any contract to
which the corporation is a party, the court may, if all of the parties
to the contract are parties to the action and if it deems the same to be
equitable, set aside and enjoin the performance of such contract, and in
so doing may allow to the corporation or to the other parties to the
contract, as the case may be, such compensation as may be equitable for
the loss or damage sustained by any of them from the action of the court
in setting aside and enjoining the performance of such contract;
provided that anticipated profits to be derived from the performance of
the contract shall not be awarded by the court as a loss or damage
sustained.
(2) In an action by or in the right of the corporation to procure a
judgment in its favor against an incumbent or former officer or director
of the corporation for loss or damage due to his unauthorized act.
(3) In an action or special proceeding by the attorney-general to
annul or dissolve the corporation or to enjoin it from the doing of
unauthorized business.
ARTICLE 3 Corporate Name and Service of Process
Corporate name; general.
(a) Except as otherwise provided in this chapter, the name of a
domestic or foreign corporation:
(1) Shall contain the word "corporation", "incorporated" or "limited",
or an abbreviation of one of such words; or, in the case of a foreign
corporation, it shall, for use in this state, add at the end of its name
one of such words or an abbreviation thereof.
(2) (i) Shall be such as to distinguish it from the names of
corporations of any type or kind, or a fictitious name of an authorized
foreign corporation filed pursuant to article thirteen of this chapter,
as such names appear on the index of names of existing domestic and
authorized foreign corporations of any type or kind, including
fictitious names of authorized foreign corporations filed pursuant to
article thirteen of this chapter, in the department of state, division
of corporations, or a name the right to which is reserved.
(ii) Shall be such as to distinguish it from (A) the names of domestic
limited liability companies, (B) the names of authorized foreign limited
liability companies, (C) the fictitious names of authorized foreign
limited liability companies, (D) the names of domestic limited
partnerships, (E) the names of authorized foreign limited partnerships,
or (F) the fictitious names of authorized foreign limited partnerships,
in each case, as such names appear on the index of names of existing
domestic and authorized foreign limited liability companies, including
fictitious names of authorized foreign limited liability companies, in
the department of state, or on the index of names of existing domestic
or authorized foreign limited partnerships, including fictitious names
of authorized foreign limited partnerships, in the department of state,
or names the rights to which are reserved; provided, however, that no
corporation that was formed prior to the effective date of this clause
and no foreign corporation that was qualified to do business in this
state prior to such effective date shall be required to change the name
or fictitious name it had on such effective date solely by reason of
such name or fictitious name being indistinguishable from the name or
fictitious name of any domestic or authorized foreign limited liability
company or limited partnership or from any name the right to which is
reserved by or on behalf of any domestic or foreign limited liability
company or limited partnership.
(3) Shall not contain any word or phrase, or any abbreviation or
derivative thereof, the use of which is prohibited or restricted by any
other statute of this state, unless in the latter case the restrictions
have been complied with.
(4) Shall not contain any word or phrase, or any abbreviation or
derivative thereof, in a context which indicates or implies that the
corporation, if domestic, is formed or, if foreign, is authorized for
any purpose or is possessed in this state of any power other than a
purpose for which, or a power with which, the domestic corporation may
be and is formed or the foreign corporation is authorized.
(5)(A) Shall not contain any of the following phrases, or any
abbreviation or derivative thereof:
board of trade state police urban development
chamber of commerce state trooper urban relocation
community renewal tenant relocation
(B) Shall not contain any of the following words, or any abbreviation
or derivative thereof:
acceptance endowment loan
annuity fidelity mortgage
assurance finance savings
bank guaranty surety
benefit indemnity title
bond insurance trust
casualty investment underwriter
doctor lawyer
unless the approval of the superintendent of financial services is
attached to the certificate of incorporation, or application for
authority or amendment thereof; or that the word "doctor" or "lawyer" or
an abbreviation or derivation thereof is used in the name of a
university faculty practice corporation formed pursuant to section
fourteen hundred twelve of the not-for-profit corporation law or a
professional service corporation formed pursuant to article fifteen of
this chapter, or a foreign professional service corporation authorized
to do business in this state pursuant to article fifteen-A of this
chapter, the members or shareholders of which are composed exclusively
of doctors or lawyers, respectively, or are used in a context which
clearly denotes a purpose other than the practice of law or medicine.
(6) Shall not, unless the approval of the state board of standards and
appeals is attached to the certificate of incorporation, or application
for authority or amendment thereof, contain any of the following words
or phrases, or any abbreviation or derivative thereof: union, labor,
council, industrial organization, in a context which indicates or
implies that the domestic corporation is formed or the foreign
corporation authorized as an organization of working men or women or
wage earners or for the performance, rendition or sale of services as
labor or management consultant, adviser or specialist, or as negotiator
or arbitrator in labor-management disputes.
(7) Shall not, unless the approval of the state department of social
services is attached to the certificate of incorporation, or application
for authority or amendment thereof, contain the word "blind" or
"handicapped". Such approval shall be granted by the state department of
social services, if in its opinion the word "blind" or "handicapped" as
used in the corporate name proposed will not tend to mislead or confuse
the public into believing that the corporation is organized for
charitable or non-profit purposes related to the blind or the
handicapped.
(8) Shall not contain any words or phrases, or any abbreviation or
derivation thereof in a context which will tend to mislead the public
into believing that the corporation is an agency or instrumentality of
the United States or the state of New York or a subdivision thereof or
is a public corporation.
(9) Shall not contain any word or phrase, or any abbreviation or
derivation thereof, which, separately, or in context, shall be indecent
or obscene, or shall ridicule or degrade any person, group, belief,
business or agency of government, or indicate or imply any unlawful
activity.
(10) Shall not, unless the approval of the attorney general is
attached to the certificate of incorporation, or application for
authority or amendment thereof, contain the word "exchange" or any
abbreviation or derivative thereof. Such approval shall not be granted
by the attorney general, if in his opinion the use of the word
"exchange" in the proposed corporate name would falsely imply that the
corporation conducts its business at a place where trade is carried on
in securities or commodities by brokers, dealers, or merchants.
(11) Shall not, unless the consent of the commissioner of education is
endorsed on or annexed to the certificate of incorporation, contain the
words "school;" "education;" "elementary;" "secondary;" "kindergarten;"
"prekindergarten;" "preschool;" "nursery school;" "museum;" "history;"
"historical;" "historical society;" "arboretum;" "library;" "college;"
"university" or other term restricted by section two hundred twenty-four
of the education law; "conservatory," "academy," or "institute," or any
abbreviation or derivative of such terms. Such consent shall not be
granted by the commissioner of education, if in the commissioner's
opinion, the use of such terms in the corporate name is likely to
mislead or confuse the public into believing that the corporation is
organized for non-profit educational purposes or for educational
business purposes that are not specified in the corporate purposes and
powers contained in its certificate of incorporation.
Corporate name; exceptions.
(a) Any reference to a corporation in this section except as otherwise
provided herein shall include both domestic and foreign corporations.
(b) The provisions of section 301 (Corporate name; general):
(1) Shall not require any corporation, existing or authorized under
any statute on the effective date of this chapter, to add to, modify or
otherwise change its corporate name; provided, however, that any
corporation organized or qualified to do business in this state under
this chapter which contains in its name any of the following words or
phrases or any abbreviation or derivation thereof, "community renewal",
"tenant relocation", "urban development" or "urban relocation", shall
plainly and legibly state immediately following its name in any writing
issued or authorized to be issued by it upon which its name appears,
including, but not limited to, advertising material letterheads,
business cards and building directories and signs, the phrase "not a
governmental agency".
(2) Shall not prevent a corporation with which another corporation is
merged, or which is formed by the reorganization or consolidation of one
or more other corporations or upon a sale, lease, exchange or other
disposition to a domestic corporation of all or substantially all the
assets of another domestic corporation, including its name, as provided
in paragraph (b) of Section 909 (Sale, lease, exchange or other
disposition of assets), from having the same name as any of such
corporations if at the time such other corporation was authorized or
existing under any statute of this state.
(3) Shall not prevent a foreign corporation from being authorized
under a name which is similar to the name of a corporation of any type
or kind existing or authorized under any statute, if the department of
state finds, upon proof by affidavit or otherwise as it may determine,
that a difference between such names exists in the terms or
abbreviations indicating corporate character or otherwise, that the
applicant has engaged in business as a corporation under its said name
for not less than ten consecutive years immediately prior to the date of
its application that the business to be conducted in this state is not
the same as or similar to the business conducted by the corporation with
whose name it may conflict and that the public is not likely to be
confused or deceived, and if the applicant shall agree in its
application for authority to use with its corporate name, in this state,
to be placed immediately under or following such name, the words "a
......... (name of jurisdiction of incorporation) corporation".
(4) Shall not prevent a "small business investment corporation" as
defined in an act of congress entitled "Small Business Investment Act of
1958" from including the word "investment" as part of its name if such
word is coupled with the words "small business".
(5) Shall not prevent an "investment company" as defined in an act of
congress entitled "Investment Company Act of 1940" from including the
word "finance" or "bond" as part of its name, if the approval of the
superintendent of financial services is attached to the certificate of
incorporation, application for authority, or amendment thereof.
(6) Shall not prevent a broker or dealer in securities, as defined in
an act of congress entitled "Securities Exchange Act of 1934", from
including the word "investment" as part of its name if such word is
coupled with the words "broker" or "brokers" and if such broker or
dealer is registered with the securities and exchange commission under
the provisions of section fifteen of the securities exchange act of
nineteen hundred thirty-four and is also registered with the attorney
general under the provisions of section three hundred fifty-nine-e of
the general business law.
(7) Shall not prevent an association of banks or trust companies
organized as a non-profit membership corporation for the promotion of
the interests of member banks from including the word "bankers" as part
of its corporate name.
(8) Shall not prevent a bank holding company, as long as it is
required to be registered under article III-A of the banking law or
under the federal Bank Holding Company Act, as each may be amended from
time to time, from using the words "bank", "banker" or "trusts" or any
abbreviation, derivative or combination thereof as part of its corporate
name, if the approval of the superintendent of financial services is
attached to the certificate of incorporation, application for authority,
or amendment thereof.
Reservation of name.
(a) A corporate name may be reserved by:
(1) Any person intending to form a domestic corporation.
(2) Any domestic corporation intending to change its name.
(3) Any foreign corporation intending to apply for authority to do
business in this state.
(4) Any authorized foreign corporation intending to change its name.
(5) Any person intending to incorporate a foreign corporation and to
have it apply for authority to do business in this state.
(b) A fictitious name for use pursuant to section 1301 of this
chapter, may be reserved by:
(1) Any foreign corporation intending to apply for authority to do
business in this state, pursuant to paragraph (d) of section 1301 of
this chapter.
(2) Any authorized foreign corporation intending to change its
fictitious name under which it does business in this state.
(3) Any authorized foreign corporation which has changed its corporate
name in its jurisdiction, such new corporate name not being available in
this state.
(c) Application to reserve a corporate name shall be delivered to the
department of state. It shall set forth the name and address of the
applicant, the name to be reserved and a statement of the basis under
paragraph (a) or (b) for the application. The secretary of state may
require that there be included in the application a statement as to the
nature of the business to be conducted by the corporation. If the name
is available for corporate use, the department of state shall reserve
the name for the use of the applicant for a period of sixty days and
issue a certificate of reservation. The restrictions and qualifications
set forth in subparagraphs (a) (3), (4), (5), (6) and (7) of section 301
(Corporate name; general) are not waived by the issuance of a
certificate of reservation. The certificate of reservation shall include
the name of the applicant, the name reserved and the date of the
reservation. The certificate of reservation (or in lieu thereof an
affidavit by the applicant or by his agent or attorney that the
certificate of reservation has been lost or destroyed) shall accompany
the certificate of incorporation or the application for authority when
either is delivered to the department of state.
(d) The secretary of state may extend the reservation for additional
periods of not more than sixty days each, upon the written request of
the applicant, his attorney or agent delivered to the department of
state, to be filed before the expiration of the reservation period then
in effect. Such request shall have attached to it the certificate of
reservation of name. Not more than two such extensions shall be granted.
(e) Upon the request of the applicant, delivered to the department of
state before the expiration of the reserved period, the department shall
cancel the reservation.
(f) Any application or request under this section shall be signed by
the applicant, his attorney or agent.
(g) Upon the receipt of an application to reserve a corporate name by
the department of state pursuant to this section, the department shall
confirm such receipt by mail or email to the applicant at the address or
email address set forth in such application. In addition, the department
shall include, but not be limited to including, the following
information in such mailing or email:
(1) contact information, including, but not limited to website,
address and telephone number, of the New York state small business
development center serving their region;
(2) contact information, including, but not limited to website,
address and telephone number, of the New York state entrepreneurship
assistance center serving their region;
(3) contact information, including, but not limited to the website,
address and telephone number of business mentor NY; and
(4) contact information, including, but not limited to website,
address and telephone number, of empire state development. Information
regarding empire state development shall include direction to resources
available on such website to support and assist new businesses.
Statutory designation of secretary of state as agent for service
of process.
(a) The secretary of state shall be the agent of every domestic
corporation and every authorized foreign corporation upon whom process
against the corporation may be served.
(b) No domestic or foreign corporation may be formed or authorized to
do business in this state under this chapter unless in its certificate
of incorporation or application for authority it designates the
secretary of state as such agent.
(c) Any designation by a domestic or a foreign corporation of the
secretary of state as such agent, which designation is in effect on the
effective date of this chapter, shall continue. Every domestic or
foreign corporation, existing or authorized on the effective date of
this chapter, which has not designated the secretary of state as such
agent, shall be deemed to have done so. Any designation prior to the
effective date of this chapter by a foreign corporation of an agent
other than the secretary of state shall terminate on the effective date
of this chapter.
(d) Any designated post office address to which the secretary of state
shall mail a copy of process served upon him or her as agent of a
domestic corporation or a foreign corporation, shall continue until the
filing of a certificate or other instrument under this chapter directing
the mailing to a different post office address and any designated email
address to which the secretary of state shall email notice of the fact
that process has been electronically served upon him or her as agent of
a domestic corporation or foreign corporation shall continue until the
filing of a certificate or other instrument under this chapter changing
or deleting the email address.
Electronic service of process.
The secretary of state shall advise any corporation subject to the
laws of this chapter in prominent written form as follows: (a)
electronic service of process authorized by the provisions of this
chapter is an optional program at no additional cost to the user; (b)
any corporation subject to the laws of this chapter will continue to
receive service of process by mail unless such corporation notifies the
secretary of an affirmative choice to receive service of process by way
of the program through electronic means, in which case digital copies
will be made accessible but paper documents will not be mailed; and (c)
such choice may be reversed by the corporation at any time and,
thereafter, service by mail will resume.
Registered agent for service of process.
(a) In addition to such designation of the secretary of state, every
domestic corporation or authorized foreign corporation may designate a
registered agent in this state upon whom process against such
corporation may be served. The agent shall be a natural person who is a
resident of or has a business address in this state or a domestic
corporation or foreign corporation of any type or kind formed, or
authorized to do business in this state, under this chapter or under any
other statute of this state.
(b) Any such designation of a registered agent may be made, revoked or
changed as provided in this chapter.
(c) A registered agent may resign as such agent. A certificate,
entitled "Certificate of resignation of registered agent of ..........
(name of designating corporation) under section 305 of the Business
Corporation Law", shall be signed by him and delivered to the department
of state. It shall set forth:
(1) That he resigns as registered agent for the designating
corporation.
(2) The date the certificate of incorporation or the application for
authority of the designating corporation was filed by the department of
state.
(3) That he has sent a copy of the certificate of resignation by
registered mail to the designating corporation at the post office
address on file in the department of state specified for the mailing of
process or if such address is the address of the registered agent, then
to the office of the designating corporation in the jurisdiction of its
formation or incorporation.
(d) The designation of a registered agent shall terminate thirty days
after the filing by the department of state of a certificate of
resignation or a certificate containing a revocation or change of the
designation, whichever is filed earlier. A certificate designating a new
registered agent may be delivered to the department of state by the
corporation within the thirty days or thereafter.
Service of process.
(a) Service of process on a registered agent may be made in the manner
provided by law for the service of a summons, as if the registered agent
was a defendant.
(b) (1) * Service of process on the secretary of state as agent of a
domestic or authorized foreign corporation shall be made in the manner
provided by clause (i) or (ii) of this subparagraph. Either option of
service authorized pursuant to this subparagraph shall be available at
no extra cost to the consumer.
* NB Effective until February 24, 2027
* Service of process on the secretary of state as agent of a domestic
or authorized foreign corporation shall be made in the manner provided
by clause (i), (ii) or (iii) of this subparagraph. Each option of
service authorized pursuant to this subparagraph shall be available at
no extra cost to the consumer.
* NB Effective February 24, 2027
(i) Personally delivering to and leaving with the secretary of state or
a deputy, or with any person authorized by the secretary of state to
receive such service, at the office of the department of state in the
city of Albany, duplicate copies of such process together with the
statutory fee, which fee shall be a taxable disbursement. Service of
process on such corporation shall be complete when the secretary of
state is so served. The secretary of state shall promptly send one of
such copies by certified mail, return receipt requested, to such
corporation, at the post office address, on file in the department of
state, specified for the purpose. If a domestic or authorized foreign
corporation has no such address on file in the department of state, the
secretary of state shall so mail such copy, in the case of a domestic
corporation, in care of any director named in its certificate of
incorporation at the director's address stated therein or, in the case
of an authorized foreign corporation, to such corporation at the address
of its office within this state on file in the department. (ii)
Electronically submitting a copy of the process to the department of
state together with the statutory fee, which fee shall be a taxable
disbursement, through an electronic system operated by the department of
state, provided the domestic or authorized foreign corporation has an
email address on file in the department of state to which the secretary
of state shall email a notice of the fact that process has been served
electronically on the secretary of state. Service of process on such
corporation shall be complete when the secretary of state has reviewed
and accepted service of such process. The secretary of state shall
promptly send a notice of the fact that process has been served to such
corporation at the email address on file in the department of state,
specified for the purpose and shall make a copy of the process available
to such corporation.
* (iii) Provided process is served by or on behalf of the state or a
city, town, village or other political subdivision of the state, by
electronically submitting a copy of the process to the department of
state, through an electronic system operated by and with capabilities
determined by the department of state, together with the statutory fee,
if required, which fee shall be a taxable disbursement. Service of
process on such corporation shall be complete when the secretary of
state has reviewed and accepted service of such process. The secretary
of state shall promptly either: (A) send a copy of such process by
certified mail, return receipt requested, to such corporation, at the
post office address, on file in the department of state, specified for
the purpose or, if a domestic or authorized foreign corporation has no
such address on file in the department of state, the secretary of state
shall so mail such copy, in the case of a domestic corporation, in care
of any director named in its certificate of incorporation at the
director's address stated therein or, in the case of an authorized
foreign corporation, to such corporation at the address of its office
within this state on file in the department; or (B) email a notice of
the fact that process against the corporation has been served
electronically on the secretary of state to the email address on file in
the department of state, specified for the purpose and shall make a copy
of the process available to such corporation.
* NB Effective February 24, 2027
(2) An additional service of the summons may be made pursuant to
paragraph four of subdivision (f) of section thirty-two hundred fifteen
of the civil practice law and rules.
(c) If an action or special proceeding is instituted in a court of
limited jurisdiction, service of process may be made in the manner
provided in this section if the office of the domestic or foreign
corporation is within the territorial jurisdiction of the court.
(d) Nothing in this section shall affect the right to serve process in
any other manner permitted by law.
Resignation for receipt of process.
(a) The party (or his/her legal representative) whose post office
address has been supplied by a domestic corporation or authorized
foreign corporation as its address for process may resign. A certificate
entitled "Certificate of Resignation for Receipt of Process under
Section 306-A of the Business Corporation Law" shall be signed by such
party and delivered to the department of state. It shall set forth:
(1) The name of the corporation and the date that its certificate of
incorporation or application of authority was filed by the department of
state.
(2) That the address of the party has been designated by the
corporation as the post office address to which the secretary of state
shall mail a copy of any process served on the secretary of state as
agent for such corporation, and that such party wishes to resign.
(3) That sixty days prior to the filing of the certificate of
resignation with the department of state the party has sent a copy of
the certificate of resignation for receipt of process by registered or
certified mail to the address of the registered agent of the designating
corporation, if other than the party filing the certificate of
resignation, for receipt of process, or if the resigning corporation has
no registered agent, then to the last address of the designating
corporation known to the party, specifying the address to which the copy
was sent. If there is no registered agent and no known address of the
designating corporation, the party shall attach an affidavit to the
certificate stating that a diligent but unsuccessful search was made by
the party to locate the corporation, specifying what efforts were made.
(4) That the designating corporation is required to deliver to the
department of state a certificate of amendment or change providing for
the designation by the corporation of a new address and that upon its
failure to file such certificate, its authority to do business in this
state shall be suspended, unless the corporation has previously filed a
biennial statement under section four hundred eight of this chapter, in
which case the address of the principal executive office stated in the
last filed biennial statement shall constitute the new address for
process of the corporation, and no such certificate of amendment or
change need be filed.
(b) Upon the failure of the designating corporation to file a
certificate of amendment or change providing for the designation by the
corporation of the new address after the filing of a certificate of
resignation for receipt of process with the secretary of state, its
authority to do business in this state shall be suspended unless the
corporation has previously filed a statement under section four hundred
eight of this chapter, in which case the address of the principal
executive office stated in the last filed statement, shall constitute
the new address for process of the corporation provided such address is
different from the previous address for process, and the corporation
shall not be deemed suspended.
(c) The filing by the department of state of a certificate of
amendment or change or statement under section four hundred eight of
this chapter providing for a new address by a designating corporation
shall annul the suspension and its authority to do business in this
state shall be restored and continue as if no suspension had occurred.
(d) The resignation for receipt of process shall become effective upon
the filing by the department of state of a certificate of resignation
for receipt of process.
(e) (1) In any case in which a corporation suspended pursuant to this
section would be subject to the personal or other jurisdiction of the
courts of this state under article three of the civil practice law and
rules, process against such corporation may be served upon the secretary
of state as its agent pursuant to this section. Such process may issue
in any court in this state having jurisdiction of the subject matter.
(2) Service of such process upon the secretary of state shall be made
by personally delivering to and leaving with him or his deputy, or with
any person authorized by the secretary of state to receive such service,
at the office of the department of state in the city of Albany, a copy
of such process together with the statutory fee, which fee shall be a
taxable disbursement. Such service shall be sufficient if notice thereof
and a copy of the process are:
(i) delivered personally within or without this state to such
corporation by a person and in manner authorized to serve process by law
of the jurisdiction in which service is made, or
(ii) sent by or on behalf of the plaintiff to such corporation by
registered or certified mail with return receipt requested to the last
address of such corporation known to the plaintiff.
(3) (i) Where service of a copy of process was effected by personal
service, proof of service shall be by affidavit of compliance with this
section filed, together with the process, within thirty days after such
service, with the clerk of the court in which the action or special
proceeding is pending. Service of process shall complete ten days after
such papers are filed with the clerk of the court.
(ii) Where service of a copy of process was effected by mailing in
accordance with this section, proof of service shall be by affidavit of
compliance with this section filed, together with the process, within
thirty days after receipt of the return receipt signed by the
corporation, or other official proof of delivery or of the original
envelope mailed. If a copy of the process is mailed in accordance with
this section, there shall be filed with the affidavit of compliance
either the return receipt signed by such corporation or other official
proof of delivery, if acceptance was refused by it, the original
envelope with a notation by the postal authorities that acceptance was
refused. If acceptance was refused, a copy of the notice and process
together with notice of the mailing by registered or certified mail and
refusal to accept shall be promptly sent to such corporation at the same
address by ordinary mail and the affidavit of compliance shall so state.
Service of process shall be complete ten days after such papers are
filed with the clerk of the court. The refusal to accept delivery of the
registered or certified mail or to sign the return receipt shall not
affect the validity of the service and such corporation refusing to
accept such registered or certified mail shall be charged with knowledge
of the contents thereof.
(4) Service made as provided in this section without the state shall
have the same force as personal service made within this state.
(5) Nothing in this section shall affect the right to serve process in
any other manner permitted by law.
Service of process on unauthorized foreign corporation.
(a) In any case in which a non-domiciliary would be subject to the
personal or other jurisdiction of the courts of this state under article
three of the civil practice law and rules, a foreign corporation not
authorized to do business in this state is subject to a like
jurisdiction. In any such case, process against such foreign corporation
may be served upon the secretary of state as its agent. Such process may
issue in any court in this state having jurisdiction of the subject
matter.
(b) Service of such process upon the secretary of state shall be made
in the manner provided by subparagraph one or two of this paragraph.
Either option of service authorized pursuant to this paragraph shall be
available at no extra cost to the consumer. (1) Personally delivering to
and leaving with him or his deputy, or with any person authorized by the
secretary of state to receive such service, at the office of the
department of state in the city of Albany, a copy of such process
together with the statutory fee, which fee shall be a taxable
disbursement. (2) Electronically submitting a copy of the process to the
department of state together with the statutory fee, which fee shall be
a taxable disbursement, through an electronic system operated by the
department of state. Such service shall be sufficient if notice thereof
and a copy of the process are:
(1) Delivered personally without this state to such foreign
corporation by a person and in the manner authorized to serve process by
law of the jurisdiction in which service is made, or
(2) Sent by or on behalf of the plaintiff to such foreign corporation
by registered mail with return receipt requested, at the post office
address specified for the purpose of mailing process, on file in the
department of state, or with any official or body performing the
equivalent function, in the jurisdiction of its incorporation, or if no
such address is there specified, to its registered or other office there
specified, or if no such office is there specified, to the last address
of such foreign corporation known to the plaintiff.
(c) 1. Where service of a copy of process was effected by personal
service, proof of service shall be by affidavit of compliance with this
section filed, together with the process, within thirty days after such
service, with the clerk of the court in which the action or special
proceeding is pending. Service of process shall be complete ten days
after such papers are filed with the clerk of the court.
2. Where service of a copy of process was effected by mailing in
accordance with this section, proof of service shall be by affidavit of
compliance with this section filed, together with the process, within
thirty days after receipt of the return receipt signed by the foreign
corporation, or other official proof of delivery or of the original
envelope mailed. If a copy of the process is mailed in accordance with
this section, there shall be filed with the affidavit of compliance
either the return receipt signed by such foreign corporation or other
official proof of delivery or, if acceptance was refused by it, the
original envelope with a notation by the postal authorities that
acceptance was refused. If acceptance was refused, a copy of the notice
and process together with notice of the mailing by registered mail and
refusal to accept shall be promptly sent to such foreign corporation at
the same address by ordinary mail and the affidavit of compliance shall
so state. Service of process shall be complete ten days after such
papers are filed with the clerk of the court. The refusal to accept
delivery of the registered mail or to sign the return receipt shall not
affect the validity of the service and such foreign corporation refusing
to accept such registered mail shall be charged with knowledge of the
contents thereof.
(d) Service made as provided in this section shall have the same force
as personal service made within this state.
(e) Nothing in this section shall affect the right to serve process in
any other manner permitted by law.
Records and certificates of department of state.
The department of state shall keep a record of each process served
upon the secretary of state under this chapter, including the date of
service. It shall, upon request made within ten years of such service,
issue a certificate under its seal certifying as to the receipt of the
process by an authorized person, the date and place of such service and
the receipt of the statutory fee. Process served upon the secretary of
state under this chapter shall be destroyed by him after a period of ten
years from such service.
ARTICLE 4 Formation of Corporations
Incorporators.
One or more natural persons of the age of eighteen years or over may
act as incorporators of a corporation to be formed under this chapter.
Certificate of incorporation; contents.
(a) A certificate, entitled "Certificate of incorporation of ......
(name of corporation) under section 402 of the Business Corporation
Law", shall be signed by each incorporator, with his name and address
included in such certificate and delivered to the department of state.
It shall set forth:
(1) The name of the corporation.
(2) The purpose or purposes for which it is formed, it being
sufficient to state, either alone or with other purposes, that the
purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under this chapter, provided
that it also state that it is not formed to engage in any act or
activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or approval
first being obtained. By such statement all lawful acts and activities
shall be within the purposes of the corporation, except for express
limitations therein or in this chapter, if any.
(3) The county within this state in which the office of the
corporation is to be located.
(4) The aggregate number of shares which the corporation shall have
the authority to issue; if such shares are to consist of one class only,
the par value of the shares or a statement that the shares are without
par value; or, if the shares are to be divided into classes, the number
of shares of each class and the par value of the shares having par value
and a statement as to which shares, if any, are without par value.
(5) If the shares are to be divided into classes, the designation of
each class and a statement of the relative rights, preferences and
limitations of the shares of each class.
(6) If the shares of any preferred class are to be issued in series,
the designation of each series and a statement of the variations in the
relative rights, preferences and limitations as between series insofar
as the same are to be fixed in the certificate of incorporation, a
statement of any authority to be vested in the board to establish and
designate series and to fix the variations in the relative rights,
preferences and limitations as between series and a statement of any
limit on the authority of the board of directors to change the number of
shares of any series of preferred shares as provided in paragraph (e) of
section 502 (Issue of any class of preferred shares in series).
(7) A designation of the secretary of state as agent of the
corporation upon whom process against it may be served and the post
office address within or without this state to which the secretary of
state shall mail a copy of any process against it served upon him or
her. The corporation may include an email address to which the secretary
of state shall email a notice of the fact that process against it has
been electronically served upon him or her.
(8) If the corporation is to have a registered agent, his name and
address within this state and a statement that the registered agent is
to be the agent of the corporation upon whom process against it may be
served.
(9) The duration of the corporation if other than perpetual.
(b) The certificate of incorporation may set forth a provision
eliminating or limiting the personal liability of directors to the
corporation or its shareholders for damages for any breach of duty in
such capacity, provided that no such provision shall eliminate or limit:
(1) the liability of any director if a judgment or other final
adjudication adverse to him establishes that his acts or omissions were
in bad faith or involved intentional misconduct or a knowing violation
of law or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled or that his acts violated
section 719, or
(2) the liability of any director for any act or omission prior to the
adoption of a provision authorized by this paragraph.
(c) The certificate of incorporation may set forth any provision, not
inconsistent with this chapter or any other statute of this state,
relating to the business of the corporation, its affairs, its rights or
powers, or the rights or powers of its shareholders, directors or
officers including any provision relating to matters which under this
chapter are required or permitted to be set forth in the by-laws. It is
not necessary to set forth in the certificate of incorporation any of
the powers enumerated in this chapter.
Certificate of incorporation; effect.
Upon the filing of the certificate of incorporation by the department
of state, the corporate existence shall begin, and such certificate
shall be conclusive evidence that all conditions precedent have been
fulfilled and that the corporation has been formed under this chapter,
except in an action or special proceeding brought by the
attorney-general. Notwithstanding the above, a certificate of
incorporation may set forth a date subsequent to filing, not to exceed
ninety days after filing, upon which date corporate existence shall
begin.
Organization meeting.
(a) After the corporate existence has begun, an organization meeting
of the incorporator or incorporators shall be held within or without
this state, for the purpose of adopting by-laws, electing directors to
hold office until the first annual meeting of shareholders, except as
authorized under section 704 (Classification of directors), and the
transaction of such other business as may come before the meeting. If
there are two or more incorporators, the meeting may be held at the call
of any incorporator, who shall give at least five days' notice thereof
by mail to each other incorporator, which notice shall set forth the
time and place of the meeting. Notice need not be given to any
incorporator who attends the meeting or submits a signed waiver of
notice before or after the meeting. If there are more than two
incorporators, a majority shall constitute a quorum and the act of the
majority of the incorporators present at a meeting at which a quorum is
present shall be the act of the incorporators. An incorporator may act
in person or by proxy signed by the incorporator or his
attorney-in-fact.
(b) Any action permitted to be taken at the organization meeting may
be taken without a meeting if each incorporator or his attorney-in-fact
signs an instrument setting forth the action so taken.
(c) If an incorporator dies or is for any reason unable to act, action
may be taken as provided in such event in paragraph (c) of section 615
(Written consent of shareholders, subscribers or incorporators without a
meeting).
Institution for children; approval of certificate.
Every certificate of incorporation which includes among its corporate
purposes, the authority to care for children through the establishment
or operation of an institution for destitute, delinquent, abandoned,
neglected or dependent children shall have endorsed thereon or annexed
thereto the approval of the office of children and family services.
Provided, however, nothing herein shall authorize such corporation to
place out or board out children, as those terms are defined in the
social services law, or to care for children in a facility other than an
institution possessing an operating certificate issued by the office of
children and family services. No certificate of incorporation shall be
approved pursuant to this section on or after June first, two thousand
seven.
Filing of a certificate of incorporation; facility for alcoholism
or alcohol abuse, substance abuse, substance dependence, or
chemical abuse or dependence.
Every certificate of incorporation which includes among its corporate
purposes the establishment or operation of a program of services for
alcoholism or alcohol abuse, substance abuse, substance dependence, or
chemical abuse or dependence shall have endorsed thereon or annexed
thereto the approval of the commissioner of the state office of
alcoholism and substance abuse services.
Statement; filing.
1. Except as provided in paragraph eight of this section, each
domestic corporation, and each foreign corporation authorized to do
business in this state, shall, during the applicable filing period as
determined by subdivision three of this section, file a statement
setting forth:
(a) The name and business address of its chief executive officer.
(b) The street address of its principal executive office.
(c) The post office address within or without this state to which the
secretary of state shall mail a copy of any process against it served
upon him or her. Such address shall supersede any previous address on
file with the department of state for this purpose.
(d) The number of directors constituting the board and how many
directors of such board are women.
2. Except as provided in paragraph eight of this section, such
statement shall be made on forms prescribed by the secretary of state,
and the information therein contained shall be given as of the date of
the execution of the statement. Such statement shall only request
reporting of information required under paragraph one of this section.
It shall be signed and delivered to the department of state.
3. Except as provided in paragraph eight of this section, for the
purpose of this section the applicable filing period for a corporation
shall be the calendar month during which its original certificate of
incorporation or application for authority were filed or the effective
date thereof if stated. The applicable filing period shall only occur:
(a) annually, during the period starting on April 1, 1992 and ending on
March 31, 1994; and (b) biennially, during a period starting on April 1
and ending on March 31 thereafter. Those corporations that filed between
April 1, 1992 and June 30, 1994 shall not be required to file such
statements again until such time as they would have filed, had this
subdivision not been amended.
4. The provisions of paragraph (g) of section one hundred four of this
chapter shall not be applicable to filings pursuant to this section.
5. The provisions of this section and section 409 of this article
shall not apply to a farm corporation. For the purposes of this
subdivision, the term "farm corporation" shall mean any domestic
corporation or foreign corporation authorized to do business in this
state under this chapter engaged in the production of crops, livestock
and livestock products on land used in agricultural production, as
defined in section 301 of the agriculture and markets law. However, this
exception shall not apply to farm corporations that have filed
statements with the department of state which have been submitted
through the department of taxation and finance pursuant to paragraph
eight of this section.
6. No such statement shall be accepted for filing when a certificate
of resignation for receipt of process has been filed under section three
hundred six-A of this chapter unless the corporation has stated a
different address for process which does not include the name of the
party previously designated in the address for process in such
certificate.
7. A domestic corporation or foreign corporation may amend its
statement to change the information required by subparagraphs (a) and
(b) of paragraph one of this section. Such amendment shall be made on
forms prescribed by the secretary of state. It shall be signed and
delivered to the department of state.
8. (a) The commissioner of taxation and finance and the secretary of
state may agree to allow corporations to provide the statement specified
in paragraph one of this section on tax reports filed with the
department of taxation and finance in lieu of biennial statements. This
agreement may apply to tax reports due for tax years starting on or
after January first, two thousand sixteen.
(b) If the agreement described in subparagraph (a) of this paragraph
is made, each corporation required to file the statement specified in
paragraph one of this section that is also subject to tax under article
nine or nine-A of the tax law shall include such statement annually on
its tax report filed with the department of taxation and finance in lieu
of filing a statement under this section with the department of state
and in a manner prescribed by the commissioner of taxation and finance.
However, each corporation required to file a statement under this
section must continue to file the biennial statement required by this
section with the department of state until the corporation in fact has
filed a tax report with the department of taxation and finance that
includes all required information. After that time, the corporation
shall continue to deliver annually the statement specified in paragraph
one of this section on its tax report in lieu of the biennial statement
required by this section.
(c) If the agreement described in subparagraph (a) of this paragraph
is made, the department of taxation and finance shall deliver to the
department of state for filing the statement specified in paragraph one
of this section for each corporation that files a tax report containing
such statement. The department of taxation and finance must, to the
extent feasible, also include the current name of the corporation,
department of state identification number for such corporation, the
name, signature and capacity of the signer of the statement, name and
street address of the filer of the statement, and the email address, if
any, of the filer of the statement.
Penalty for failure to file; cure.
1. Each corporation which has failed to file its statement within the
time required by this chapter after thirty days shall be shown to be
past due on the records of the department of state.
2. Each corporation which has failed to file its statement for two
years shall be shown to be delinquent on the records of the department
of state sixty days after a notice of delinquency has been mailed to the
last known address of such corporation. Such delinquency shall be
removed from the records of the department of state upon the filing of
the current statement required by section four hundred eight of this
article, and the payment of a fine of two hundred fifty dollars.
3. The notice of delinquency shall state the cure and fine for such
delinquency as determined by subdivision two of this section and the
period during which such delinquency shall be foreborne without the
imposition of such fine.
4. This section shall not apply to corporations that have submitted a
statement pursuant to paragraph eight of section four hundred eight of
this chapter.
ARTICLE 5 Corporate Finance
Authorized shares.
(a) Every corporation shall have power to create and issue the number
of shares stated in its certificate of incorporation. Such shares may be
all of one class or may be divided into two or more classes. Each class
shall consist of either shares with par value or shares without par
value, having such designation and such relative voting, dividend,
liquidation and other rights, preferences and limitations, consistent
with this chapter, as shall be stated in the certificate of
incorporation. The certificate of incorporation may deny, limit or
otherwise define the voting rights and may limit or otherwise define the
dividend or liquidation rights of shares of any class, but no such
denial, limitation or definition of voting rights shall be effective
unless at the time one or more classes of outstanding shares or bonds,
singly or in the aggregate, are entitled to full voting rights, and no
such limitation or definition of dividend or liquidation rights shall be
effective unless at the time one or more classes of outstanding shares,
singly or in the aggregate, are entitled to unlimited dividend and
liquidation rights.
(b) If the shares are divided into two or more classes, the shares of
each class shall be designated to distinguish them from the shares of
all other classes. Shares which are entitled to preference in the
distribution of dividends or assets shall not be designated as common
shares. Shares which are not entitled to preference in the distribution
of dividends or assets shall be common shares, even if identified by a
class or other designation, and shall not be designated as preferred
shares.
(c) Subject to the designations, relative rights, preferences and
limitations applicable to separate series and except as otherwise
permitted by subparagraph two of paragraph (a) of section five hundred
five of this article, each share shall be equal to every other share of
the same class. With respect to corporations owning or leasing
residential premises and operating the same on a cooperative basis,
however, provided that (1) liquidation or other distribution rights are
substantially equal per share, (2) changes in maintenance charges and
general assessments pursuant to a proprietary lease have been and are
hereafter fixed and determined on an equal per-share basis or on an
equal per-room basis or as an equal percentage of the maintenance
charges, and (3) voting rights are substantially equal per share or the
certificate of incorporation provides that the shareholders holding the
shares allocated to each apartment or dwelling unit owned by the
corporation shall be entitled to one vote in the aggregate regardless of
the number of shares allocated to the apartment or dwelling unit or the
number of shareholders holding such shares, shares of the same class
shall not be considered unequal because of variations in fees or charges
payable to the corporation upon sale or transfer of shares and
appurtenant proprietary leases that are provided for in proprietary
leases, occupancy agreements or offering plans or properly approved
amendments to the foregoing instruments.
Issue of any class of preferred shares in series.
(a) If the certificate of incorporation so provides, a corporation may
issue any class of preferred shares in series. Shares of each such
series when issued, shall be designated to distinguish them from shares
of all other series.
(b) The number of shares included in any or all series of any classes
of preferred shares and any or all of the designations, relative rights,
preferences and limitations of any or all such series may be fixed in
the certificate of incorporation, subject to the limitation that, unless
the certificate of incorporation provides otherwise, if the stated
dividends and amounts payable on liquidation are not paid in full, the
shares of all series of the same class shall share ratably in the
payment of dividends including accumulations, if any, in accordance with
the sums which would be payable on such shares if all dividends were
declared and paid in full, and in any distribution of assets other than
by way of dividends in accordance with the sums which would be payable
on such distribution if all sums payable were discharged in full.
(c) If any such number of shares or any such designation, relative
right, preference or limitation of the shares of any series is not fixed
in the certificate of incorporation, it may be fixed by the board, to
the extent authorized by the certificate of incorporation. Unless
otherwise provided in the certificate of incorporation, the number of
preferred shares of any series so fixed by the board may be increased
(but not above the total number of authorized shares of the class) or
decreased (but not below the number of shares thereof then outstanding)
by the board. In case the number of such shares shall be decreased, the
number of shares by which the series is decreased shall, unless
eliminated pursuant to paragraph (e) of this section, resume the status
which they had prior to being designated as part of a series of
preferred shares.
(d) Before the issue of any shares of a series established by the
board, a certificate of amendment under section 805 (Certificate of
amendment; contents) shall be delivered to the department of state.
Such certificate shall set forth:
(1) The name of the corporation, and, if it has been changed, the name
under which it was formed.
(2) The date the certificate of incorporation was filed by the
department of state.
(3) That the certificate of incorporation is thereby amended by the
addition of a provision stating the number, designation, relative
rights, preferences, and limitations of the shares of the series as
fixed by the board, setting forth in full the text of such provision.
(e) Action by the board to increase or decrease the number of
preferred shares of any series pursuant to paragraph (c) of this section
shall become effective by delivering to the department of state a
certificate of amendment under section 805 (Certificate of amendment;
contents) which shall set forth:
(1) The name of the corporation, and, if it has been changed, the name
under which it was formed.
(2) The date its certificate of incorporation was filed with the
department of state.
(3) That the certificate of incorporation is thereby amended to
increase or decrease, as the case may be, the number of preferred shares
of any series so fixed by the board, setting forth the specific terms of
the amendment and the number of shares so authorized following the
effectiveness of the amendment.
When no shares of any such series are outstanding, either because none
were issued or because no issued shares of any such series remain
outstanding, the certificate of amendment under section 805 may also set
forth a statement that none of the authorized shares of such series are
outstanding and that none will be issued subject to the certificate of
incorporation, and, when such certificate becomes accepted for filing,
it shall have the effect of eliminating from the certificate of
incorporation all matters set forth therein with respect to such series
of preferred shares.
Subscription for shares; time of payment, forfeiture for default.
(a) Unless otherwise provided by the terms of the subscription, a
subscription for shares of a corporation to be formed shall be
irrevocable, except with the consent of all other subscribers or the
corporation, for a period of three months from its date.
(b) A subscription, whether made before or after the formation of a
corporation, shall not be enforceable unless in writing and signed by
the subscriber.
(c) Unless otherwise provided by the terms of the subscription,
subscriptions for shares, whether made before or after the formation of
a corporation, shall be paid in full at such time, or in such
installments and at such times, as shall be determined by the board.
Any call made by the board for payment on subscriptions shall be uniform
as to all shares of the same class or of the same series. If a receiver
of the corporation has been appointed, all unpaid subscriptions shall be
paid at such times and in such installments as such receiver or the
court may direct.
(d) In the event of default in the payment of any installment or call
when due, the corporation may proceed to collect the amount due in the
same manner as any debt due the corporation or the board may declare a
forfeiture of the subscriptions. The subscription agreement may
prescribe other penalties, not amounting to forfeiture, for failure to
pay installments or calls that may become due. No forfeiture of the
subscription shall be declared as against any subscriber unless the
amount due thereon shall remain unpaid for a period of thirty days after
written demand has been made therefor. If mailed, such written demand
shall be deemed to be made when deposited in the United States mail in a
sealed envelope addressed to the subscriber at his last post office
address known to the corporation, with postage thereon prepaid. Upon
forfeiture of the subscription, if at least fifty percent of the
subscription price has been paid, the shares subscribed for shall be
offered for sale for cash or a binding obligation to pay cash at a price
at least sufficient to pay the full balance owed by the delinquent
subscriber plus the expenses incidental to such sale, and any excess of
net proceeds realized over the amount owed on such shares shall be paid
to the delinquent subscriber or to his legal representative. If no
prospective purchaser offers a cash price or a binding obligation to pay
cash sufficient to pay the full balance owed by the delinquent
subscriber plus the expenses incidental to such sale, or if less than
fifty percent of the subscription price has been paid, the shares
subscribed for shall be cancelled and restored to the status of
authorized but unissued shares and all previous payments thereon shall
be forfeited to the corporation and transferred to surplus.
(e) Notwithstanding the provisions of paragraph (d) of this section,
in the event of default in payment or other performance under the
instrument evidencing a subscriber's binding obligation to pay a portion
of the subscription price or perform services, the corporation may
pursue such remedies as are provided in such instrument or a related
agreement or under law.
Consideration and payment for shares.
(a) Consideration for the issue of shares shall consist of money or
other property, tangible or intangible; labor or services actually
received by or performed for the corporation or for its benefit or in
its formation or reorganization; a binding obligation to pay the
purchase price or the subscription price in cash or other property; a
binding obligation to perform services having an agreed value; or a
combination thereof. In the absence of fraud in the transaction, the
judgment of the board or shareholders, as the case may be, as to the
value of the consideration received for shares shall be conclusive.
(c) Shares with par value may be issued for such consideration, not
less than the par value thereof, as is fixed from time to time by the
board.
(d) Shares without par value may be issued for such consideration as
is fixed from time to time by the board unless the certificate of
incorporation reserves to the shareholders the right to fix the
consideration. If such right is reserved as to any shares, a vote of
the shareholders shall either fix the consideration to be received for
the shares or authorize the board to fix such consideration.
(e) Treasury shares may be disposed of by a corporation on such terms
and conditions as are fixed from time to time by the board.
(f) Upon distribution of authorized but unissued shares to
shareholders, that part of the surplus of a corporation which is
concurrently transferred to stated capital shall be the consideration
for the issue of such shares.
(g) In the event of a conversion of bonds or shares into shares, or in
the event of an exchange of bonds or shares for shares, with or without
par value, the consideration for the shares so issued in exchange or
conversion shall be the sum of (1) either the principal sum of, and
accrued interest on, the bonds so exchanged or converted, or the stated
capital then represented by the shares so exchanged or converted, plus
(2) any additional consideration paid to the corporation for the new
shares, plus (3) any stated capital not theretofore allocated to any
designated class or series which is thereupon allocated to the new
shares, plus (4) any surplus thereupon transferred to stated capital and
allocated to the new shares.
(h) Certificates for shares may not be issued until the amount of the
consideration therefor determined to be stated capital pursuant to
section 506 (Determination of stated capital) has been paid in the form
of cash, services rendered, personal or real property or a combination
thereof and consideration for the balance (if any) complying with
paragraph (a) of this section has been provided, except as provided in
paragraphs (e) and (f) of section 505 (Rights and options to purchase
shares; issue of rights and options to directors, officers and
employees).
(i) When the consideration for shares has been provided in compliance
with paragraph (h) of this section, the subscriber shall be entitled to
all the rights and privileges of a holder of such shares and to a
certificate representing his shares, and such shares shall be fully paid
and nonassessable.
(j) Notwithstanding that such shares may be fully paid and
nonassessable, the corporation may place in escrow shares issued for a
binding obligation to pay cash or other property or to perform future
services, or make other arrangements to restrict the transfer of the
shares, and may credit distributions in respect of the shares against
the obligation, until the obligation is performed. If the obligation is
not performed in whole or in part, the corporation may pursue such
remedies as are provided in the instrument evidencing the obligation or
a related agreement or under law.
Rights and options to purchase shares; issue of rights and
options to directors, officers and employees.
(a) (1) Except as otherwise provided in this section or in the
certificate of incorporation, a corporation may create and issue,
whether or not in connection with the issue and sale of any of its
shares or bonds, rights or options entitling the holders thereof to
purchase from the corporation, upon such consideration, terms and
conditions as may be fixed by the board, shares of any class or series,
whether authorized but unissued shares, treasury shares or shares to be
purchased or acquired or assets of the corporation.
(2) (i) In the case of a domestic corporation that has a class of
voting stock registered with the Securities and Exchange Commission
pursuant to section twelve of the Exchange Act, the terms and conditions
of such rights or options may include, without limitation, restrictions
or conditions that preclude or limit the exercise, transfer or receipt
of such rights or options by an interested shareholder or any transferee
of any such interested shareholder or that invalidate or void such
rights or options held by any such interested shareholder or any such
transferee. For the purpose of this subparagraph, the terms "voting
stock", "Exchange Act" and "interested shareholder" shall have the same
meanings as set forth in section nine hundred twelve of this chapter;
(ii) Determinations of the board of directors whether to impose,
enforce or waive or otherwise render ineffective such limitations or
conditions as are permitted by clause (i) of this subparagraph shall be
subject to judicial review in an appropriate proceeding in which the
courts formulate or apply appropriate standards in order to insure that
such limitations or conditions are imposed, enforced or waived in the
best long-term interests and short-term interests of the corporation and
its shareholders considering, without limitation, the prospects for
potential growth, development, productivity and profitability of the
corporation.
(b) The consideration for shares to be purchased under any such right
or option shall comply with the requirements of section 504
(Consideration and payment for shares).
(c) The terms and conditions of such rights or options, including the
time or times at or within which and the price or prices at which they
may be exercised and any limitations upon transferability, shall be set
forth or incorporated by reference in the instrument or instruments
evidencing such rights or options.
(d) The issue of such rights or options to one or more directors,
officers or employees of the corporation or a subsidiary or affiliate
thereof, as an incentive to service or continued service with the
corporation, a subsidiary or affiliate thereof, or to a trustee on
behalf of such directors, officers or employees, shall be authorized as
required by the policies of all stock exchanges or automated quotation
systems on which the corporation's shares are listed or authorized for
trading, or if the corporation's shares are not so listed or authorized,
by a majority of the votes cast at a meeting of shareholders by the
holders of shares entitled to vote thereon, or authorized by and
consistent with a plan adopted by such vote of shareholders. If, under
the certificate of incorporation, there are preemptive rights to any of
the shares to be thus subject to rights or options to purchase, either
such issue or such plan, if any shall also be approved by the vote or
written consent of the holders of a majority of the shares entitled to
exercise preemptive rights with respect to such shares and such vote or
written consent shall operate to release the preemptive rights with
respect thereto of the holders of all the shares that were entitled to
exercise such preemptive rights.
In the absence of preemptive rights, nothing in this paragraph shall
require shareholder approval for the issuance of rights or options to
purchase shares of the corporation in substitution for, or upon the
assumption of, rights or options issued by another corporation, if such
substitution or assumption is in connection with such other
corporation's merger or consolidation with, or the acquisition of its
shares or all or part of its assets by, the corporation or its
subsidiary.
(e) A plan adopted by the shareholders for the issue of rights or
options to directors, officers or employees shall include the material
terms and conditions upon which such rights or options are to be issued,
such as, but without limitation thereof, any restrictions on the number
of shares that eligible individuals may have the right or option to
purchase, the method of administering the plan, the terms and conditions
of payment for shares in full or in installments, the issue of
certificates for shares to be paid for in installments, any limitations
upon the transferability of such shares and the voting and dividend
rights to which the holders of such shares may be entitled, though the
full amount of the consideration therefor has not been paid; provided
that under this section no certificate for shares shall be delivered to
a shareholder, prior to full payment therefor, unless the fact that the
shares are partly paid is noted conspicuously on the face or back of
such certificate.
(f) If there is shareholder approval for the issue of rights or
options to individual directors, officers or employees, but not under an
approved plan under paragraph (e), the terms and conditions of issue set
forth in paragraph (e) shall be permissible except that the grantees of
such rights or options shall not be granted voting or dividend rights
until the consideration for the shares to which they are entitled under
such rights or options has been fully paid.
(g) If there is shareholder approval for the issue of rights and
options, such approval may provide that the board is authorized by
certificate of amendment under section 805 (Certificate of amendment;
contents) to increase the authorized shares of any class or series to
such number as will be sufficient, when added to the previously
authorized but unissued shares of such class or series, to satisfy any
such rights or options entitling the holders thereof to purchase from
the corporation authorized but unissued shares of such class or series.
(h) In the absence of fraud in the transaction, the judgment of the
board shall be conclusive as to the adequacy of the consideration,
tangible or intangible, received or to be received by the corporation
for the issue of rights or options for the purchase from the corporation
of its shares.
(i) The provisions of this section are inapplicable to the rights of
the holders of convertible shares or bonds to acquire shares upon the
exercise of conversion privileges under section 519 (Convertible shares
and bonds).
Determination of stated capital.
(a) Upon issue by a corporation of shares with a par value, the
consideration received therefor shall constitute stated capital to the
extent of the par value of such shares.
(b) Upon issue by a corporation of shares without par value, the
entire consideration received therefor shall constitute stated capital
unless the board within a period of sixty days after issue allocates to
surplus a portion, but not all, of the consideration received for such
shares. No such allocation shall be made of any portion of the
consideration received for shares without par value having a preference
in the assets of the corporation upon involuntary liquidation except all
or part of the amount, if any, of such consideration in excess of such
preference, nor shall such allocation be made of any portion of the
consideration for the issue of shares without par value which is fixed
by the shareholders pursuant to a right reserved in the certificate of
incorporation, unless such allocation is authorized by vote of the
shareholders.
(c) The stated capital of a corporation may be increased from time to
time by resolution of the board transferring all or part of the surplus
of the corporation to stated capital. The board may direct that the
amount so transferred shall be stated capital in respect of any
designated class or series of shares.
Compensation for formation, reorganization and financing.
The reasonable charges and expenses of formation or reorganization of
a corporation, and the reasonable expenses of and compensation for the
sale or underwriting of its shares may be paid or allowed by the
corporation out of the consideration received by it in payment for its
shares without thereby impairing the fully paid and nonassessable status
of such shares.
Certificates representing shares.
(a) The shares of a corporation shall be represented by certificates
or shall be uncertificated shares. Certificates shall be signed by the
chairman or a vice-chairman of the board or the president or a
vice-president and the secretary or an assistant secretary or the
treasurer or an assistant treasurer of the corporation, and may be
sealed with the seal of the corporation or a facsimile thereof. The
signatures of the officers upon a certificate may be facsimiles if: (1)
the certificate is countersigned by a transfer agent or registered by a
registrar other than the corporation itself or its employee, or (2) the
shares are listed on a registered national security exchange. In case
any officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of issue.
(b) Each certificate representing shares issued by a corporation which
is authorized to issue shares of more than one class shall set forth
upon the face or back of the certificate, or shall state that the
corporation will furnish to any shareholder upon request and without
charge, a full statement of the designation, relative rights,
preferences and limitations of the shares of each class authorized to be
issued and, if the corporation is authorized to issue any class of
preferred shares in series, the designation, relative rights,
preferences and limitations of each such series so far as the same have
been fixed and the authority of the board to designate and fix the
relative rights, preferences and limitations of other series.
(c) Each certificate representing shares shall state upon the face
thereof:
(1) That the corporation is formed under the laws of this state.
(2) The name of the person or persons to whom issued.
(3) The number and class of shares, and the designation of the series,
if any, which such certificate represents.
(d) Shares shall be transferable in the manner provided by law and in
the by-laws.
(e) The corporation may issue a new certificate for shares in place of
any certificate theretofore issued by it, alleged to have been lost or
destroyed, and the board may require the owner of the lost or destroyed
certificate, or his legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be
made against it on account of the alleged loss or destruction of any
such certificate or the issuance of any such new certificate.
(f) Unless otherwise provided by the articles of incorporation or
by-laws, the board of directors of a corporation may provide by
resolution that some or all of any or all classes and series of its
shares shall be uncertificated shares, provided that such resolution
shall not apply to shares represented by a certificate until such
certificate is surrendered to the corporation. Within a reasonable time
after the issuance or transfer of uncertificated shares, the corporation
shall send to the registered owner thereof a written notice containing
the information required to be set forth or stated on certificates
pursuant to paragraphs (b) and (c) of this section. Except as otherwise
expressly provided by law, the rights and obligations of the holders of
uncertificated shares and the rights and obligations of the holders of
certificates representing shares of the same class and series shall be
identical.
Fractions of a share or scrip authorized.
(a) A corporation may, but shall not be obliged to, issue fractions of
a share either represented by a certificate or uncertificated, which
shall entitle the holder, in proportion to his fractional holdings, to
exercise voting rights, receive dividends and participate in liquidating
distributions.
(b) As an alternative, a corporation may pay in cash the fair value of
fractions of a share as of the time when those entitled to receive such
fractions are determined.
(c) As an alternative, a corporation may issue scrip in registered or
bearer form over the manual or facsimile signature of an officer of the
corporation or of its agent, exchangeable as therein provided for full
shares, but such scrip shall not entitle the holder to any rights of a
shareholder except as therein provided. Such scrip may be issued subject
to the condition that it shall become void if not exchanged for
certificates representing full shares or uncertificated full shares
before a specified date, or subject to the condition that the shares for
which such scrip is exchangeable may be sold by the corporation and the
proceeds thereof distributed to the holders of such scrip, or subject to
any other conditions which the board may determine.
(d) A corporation may provide reasonable opportunity for persons
entitled to fractions of a share or scrip to sell such fractions of a
share or scrip or to purchase such additional fractions of a share or
scrip as may be needed to acquire a full share.
Dividends or other distributions in cash or property.
(a) A corporation may declare and pay dividends or make other
distributions in cash or its bonds or its property, including the shares
or bonds of other corporations, on its outstanding shares, except when
currently the corporation is insolvent or would thereby be made
insolvent, or when the declaration, payment or distribution would be
contrary to any restrictions contained in the certificate of
incorporation.
(b) Dividends may be declared or paid and other distributions may be
made either (1) out of surplus, so that the net assets of the
corporation remaining after such declaration, payment or distribution
shall at least equal the amount of its stated capital, or (2) in case
there shall be no such surplus, out of its net profits for the fiscal
year in which the dividend is declared and/or the preceding fiscal year.
If the capital of the corporation shall have been diminished by
depreciation in the value of its property or by losses or otherwise to
an amount less than the aggregate amount of the stated capital
represented by the issued and outstanding shares of all classes having a
preference upon the distribution of assets, the directors of such
corporation shall not declare and pay out of such net profits any
dividends upon any shares until the deficiency in the amount of stated
capital represented by the issued and outstanding shares of all classes
having a preference upon the distribution of assets shall have been
repaired. A corporation engaged in the exploitation of natural resources
or other wasting assets, including patents, or formed primarily for the
liquidation of specific assets, may declare and pay dividends or make
other distributions in excess of its surplus, computed after taking due
account of depletion and amortization, to the extent that the cost of
the wasting or specific assets has been recovered by depletion reserves,
amortization or sale, if the net assets remaining after such dividends
or distributions are sufficient to cover the liquidation preferences of
shares having such preferences in involuntary liquidation.
Share distributions and changes.
(a) A corporation may make pro rata distributions of its authorized
but unissued shares to holders of any class or series of its outstanding
shares, subject to the following conditions:
(1) If a distribution of shares having a par value is made, such
shares shall be issued at not less than the par value thereof and there
shall be transferred to stated capital at the time of such distribution
an amount of surplus equal to the aggregate par value of such shares.
(2) If a distribution of shares without par value is made, the amount
of stated capital to be represented by each such share shall be fixed by
the board, unless the certificate of incorporation reserves to the
shareholders the right to fix the consideration for the issue of such
shares, and there shall be transferred to stated capital at the time of
such distribution an amount of surplus equal to the aggregate stated
capital represented by such shares.
(3) A distribution of shares of any class or series may be made to
holders of the same or any other class or series of shares unless the
certificate of incorporation provides otherwise, provided, however, that
in the case of a corporation incorporated prior to the effective date of
subparagraph (4) of this paragraph, then so long as any shares of such
class remain outstanding a distribution of shares of any class or series
of shares of such corporation may be made only to holders of the same
class or series of shares unless the certificate of incorporation
permits distribution to holders of another class or series, or unless
such distribution is approved by the affirmative vote or the written
consent of the holders of a majority of the outstanding shares of the
class or series to be distributed.
(4) A distribution of any class or series of shares shall be subject
to the preemptive rights, if any, applicable to such shares pursuant to
this chapter.
(b) A corporation making a pro rata distribution of authorized but
unissued shares to the holders of any class or series of outstanding
shares may at its option make an equivalent distribution upon treasury
shares of the same class or series, and any shares so distributed shall
be treasury shares.
(c) A change of issued shares of any class which increases the stated
capital represented by those shares may be made if the surplus of the
corporation is sufficient to permit the transfer, and a transfer is
concurrently made, from surplus to stated capital, of an amount equal to
such increase.
(d) No transfer from surplus to stated capital need be made by a
corporation making a distribution of its treasury shares to holders of
any class of outstanding shares; nor upon a split up or division of
issued shares of any class into a greater number of shares of the same
class, or a combination of issued shares of any class into a lesser
number of shares of the same class, if there is no increase in the
aggregate stated capital represented by them.
(e) Nothing in this section shall prevent a corporation from making
other transfers from surplus to stated capital in connection with share
distributions or otherwise.
(f) Every distribution to shareholders of certificates representing a
share distribution or a change of shares which affects stated capital or
surplus shall be accompanied by a written notice (1) disclosing the
amounts by which such distribution or change affects stated capital and
surplus, or (2) if such amounts are not determinable at the time of such
notice, disclosing the approximate effect of such distribution or change
upon stated capital and surplus and stating that such amounts are not
yet determinable.
(g) When issued shares are changed in any manner which affects stated
capital or surplus, and no distribution to shareholders of certificates
representing any shares resulting from such change is made, disclosure
of the effect of such change upon the stated capital and surplus shall
be made in the next financial statement covering the period in which
such change is made that is furnished by the corporation to holders of
shares of the class or series so changed or, if practicable, in the
first notice of dividend or share distribution or change that is
furnished to such shareholders between the date of the change of shares
and the next such financial statement, and in any event within six
months of the date of such change.
Redeemable shares.
(a) Subject to the restrictions contained in section 513 (Purchase,
redemption and certain other transactions by a corporation with respect
to its own shares) and paragraph (b) of this section, a corporation may
provide in its certificate of incorporation for one or more classes or
series of shares which are redeemable, in whole or in part, at the
option of the corporation, the holder or another person or upon the
happening of a specified event.
(b) No redeemable common shares, other than shares of an open-end
investment company, as defined in an act of congress entitled
"Investment Company Act of 1940", as amended, or of a member corporation
of a national securities exchange registered under a statute of the
United States such as the Securities Exchange Act of 1934, as amended,
or of a corporation described in this paragraph, shall be issued or
redeemed unless the corporation at the time has outstanding a class of
common shares that is not subject to redemption. Any common shares of a
corporation which directly or through a subsidiary has a license or
franchise to conduct its business, which license or franchise is
conditioned upon some or all of the holders of such corporation's common
shares possessing prescribed qualifications, may be made subject to
redemption by the corporation to the extent necessary to prevent the
loss of, or to reinstate, such license or franchise.
(c) Shares of any class or series which may be made redeemable under
this section may be redeemed for cash, other property, indebtedness or
other securities of the same or another corporation, at such time or
times, price or prices, or rate or rates, and with such adjustments, as
shall be stated in the certificate of incorporation.
(d) Nothing in this section shall prevent a corporation from creating
sinking funds for the redemption or purchase of its shares to the extent
permitted by section 513 (Purchase, redemption and certain other
transactions by a corporation with respect to its own shares).
Purchase, redemption and certain other transactions by a
corporation with respect to its own shares.
(a) Notwithstanding any authority contained in the certificate of
incorporation, the shares of a corporation may not be purchased by the
corporation, or, if redeemable, convertible or exchangeable shares, may
not be redeemed, converted or exchanged, in each case for or into cash,
other property, indebtedness or other securities of the corporation
(other than shares of the corporation and rights to acquire such shares)
if the corporation is then insolvent or would thereby be made insolvent.
Shares may be purchased or redeemed only out of surplus.
(b) When its redeemable, convertible or exchangeable shares are
purchased by the corporation within the period during which such shares
may be redeemed, converted or exchanged at the option of the
corporation, the purchase price thereof shall not exceed the applicable
redemption, conversion or exchange price stated in the certificate of
incorporation. Upon a redemption, conversion or exchange, the amount
payable by the corporation for shares having a cumulative preference on
dividends may include the stated redemption, conversion or exchange
price plus accrued dividends to the next dividend date following the
date of redemption, conversion or exchange of such shares.
(c) No domestic corporation which is subject to the provisions of
section nine hundred twelve of this chapter shall purchase or agree to
purchase more than ten percent of the stock of the corporation from a
shareholder for more than the market value thereof unless such purchase
or agreement to purchase is approved by the affirmative vote of the
board of directors and a majority of the votes of all outstanding shares
entitled to vote thereon at a meeting of shareholders unless the
certificate of incorporation requires a greater percentage of the votes
of the outstanding shares to approve.
The provisions of this paragraph shall not apply when the corporation
offers to purchase shares from all holders of stock or for stock which
the holder has been the beneficial owner of for more than two years.
The terms "stock", "beneficial owner", and "market value" shall be as
defined in section nine hundred twelve of this chapter.
Agreements for purchase by a corporation of its own shares.
(a) An agreement for the purchase by a corporation of its own shares
shall be enforceable by the shareholder and the corporation to the
extent such purchase is permitted at the time of purchase by section 513
(Purchase or redemption by a corporation of its own shares).
(b) The possibility that a corporation may not be able to purchase its
shares under section 513 shall not be a ground for denying to either
party specific performance of an agreement for the purchase by a
corporation of its own shares, if at the time for performance the
corporation can purchase all or part of such shares under section 513.
Reacquired shares.
(a) Shares that have been issued and have been purchased, redeemed or
otherwise reacquired by a corporation shall be cancelled if they are
reacquired out of stated capital, or if they are converted shares, or if
the certificate of incorporation requires that such shares be cancelled
upon reacquisition.
(b) Any shares reacquired by the corporation and not required to be
cancelled may be either retained as treasury shares or cancelled by the
board at the time of reacquisition or at any time thereafter.
(c) Neither the retention of reacquired shares as treasury shares, nor
their subsequent distribution to shareholders or disposition for a
consideration shall change the stated capital. When treasury shares are
disposed of for a consideration, the surplus shall be increased by the
full amount of the consideration received.
(d) Shares cancelled under this section are restored to the status of
authorized but unissued shares. However, if the certificate of
incorporation prohibits the reissue of any shares required or permitted
to be cancelled under this section, the board by certificate of
amendment under section 805 (Certificate of amendment; contents) shall
reduce the number of authorized shares accordingly.
Reduction of stated capital in certain cases.
(a) Except as otherwise provided in the certificate of incorporation,
the board may at any time reduce the stated capital of a corporation in
any of the following ways:
(1) by eliminating from stated capital any portion of amounts
previously transferred by the board from surplus to stated capital and
not allocated to any designated class or series of shares;
(2) by reducing or eliminating any amount of stated capital
represented by issued shares having a par value which exceeds the
aggregate par value of such shares;
(3) by reducing the amount of stated capital represented by issued
shares without par value; or
(4) by applying to an otherwise authorized purchase, redemption,
conversion or exchange of outstanding shares some or all of the stated
capital represented by the shares being purchased, redeemed, converted
or exchanged, or some or all of any stated capital that has not been
allocated to any particular shares, or both. Notwithstanding the
foregoing, if the consideration for the issue of shares without par
value was fixed by the shareholders under section 504 (Consideration and
payment for shares), the board shall not reduce the stated capital
represented by such shares except to the extent, if any, that the board
was authorized by the shareholders to allocate any portion of such
consideration to surplus.
(b) No reduction of stated capital shall be made under this section
unless after such reduction the stated capital exceeds the aggregate
preferential amounts payable upon involuntary liquidation upon all
issued shares having preferential rights in the assets plus the par
value of all other issued shares with par value.
(c) When a reduction of stated capital has been effected under this
section, the amount of such reduction shall be disclosed in the next
financial statement covering the period in which such reduction is made
that is furnished by the corporation to all its shareholders or, if
practicable, in the first notice of dividend or share distribution that
is furnished to the holders of each class or series of its shares
between the date of such reduction and the next such financial
statement, and in any event to all its shareholders within six months of
the date of such reduction.
Corporate bonds.
(a) No corporation shall issue bonds except for money or other
property, tangible or intangible; labor or services actually received by
or performed for the corporation or for its benefit or in its formation
or reorganization; a binding obligation to pay the purchase price
thereof in cash or other property; a binding obligation to perform
services having an agreed value; or a combination thereof. In the
absence of fraud in the transaction, the judgment of the board as to the
value of the consideration received shall be conclusive.
(b) If a distribution of its own bonds is made by a corporation to
holders of any class or series of its outstanding shares, there shall be
concurrently transferred to the liabilities of the corporation in
respect of such bonds an amount of surplus equal to the principal amount
of, and any accrued interest on, such bonds. The amount of the surplus
so transferred shall be the consideration for the issue of such bonds.
(c) A corporation may, in its certificate of incorporation, confer
upon the holders of any bonds issued or to be issued by the corporation,
rights to inspect the corporate books and records and to vote in the
election of directors and on any other matters on which shareholders of
the corporation may vote.
Convertible or exchangeable shares and bonds.
(a) Unless otherwise provided in the certificate of incorporation, and
subject to the restrictions in section 513 (Purchase, redemption and
certain other transactions by a corporation with respect to its own
shares) and paragraphs (c) and (d) of this section, a corporation may
issue shares or bonds convertible into or exchangeable for, at the
option of the holder, the corporation or another person, or upon the
happening of a specified event, shares of any class or shares of any
series of any class or cash, other property, indebtedness or other
securities of the same or another corporation.
(b) If there is shareholder approval for the issue of bonds or shares
convertible into, or exchangeable for, shares of the corporation, such
approval may provide that the board is authorized by certificate of
amendment under section 805 (Certificate of amendment; contents) to
increase the authorized shares of any class or series to such number as
will be sufficient, when added to the previously authorized but unissued
shares of such class or series, to satisfy the conversion or exchange
privileges of any such bonds or shares convertible into, or exchangeable
for, shares of such class or series.
(c) No issue of bonds or shares convertible into, or exchangeable for,
shares of the corporation shall be made unless:
(1) A sufficient number of authorized but unissued shares, or treasury
shares, of the appropriate class or series are reserved by the board to
be issued only in satisfaction of the conversion or exchange privileges
of such convertible or exchangeable bonds or shares when issued;
(2) The aggregate conversion or exchange privileges of such
convertible or exchangeable bonds or shares when issued do not exceed
the aggregate of any shares reserved under subparagraph (1) and any
additional shares which may be authorized by the board under paragraph
(b); or
(3) In the case of the conversion or exchange of shares of common
stock other than into other shares of common stock, there remains
outstanding a class or series of common stock not subject to conversion
or exchange other than into other shares of common stock, except in the
case of corporations of the type described in the exceptions to the
provisions of paragraph (b) of section 512 (Redeemable shares).
(d) No privilege of conversion may be conferred upon, or altered in
respect to, any shares or bonds that would result in the receipt by the
corporation of less than the minimum consideration required to be
received upon the issue of new shares. The consideration for shares
issued upon the exercise of a conversion or exchange privilege shall be
that provided in paragraph (g) of section 504 (Consideration and payment
for shares).
(e) When shares have been converted or exchanged, they shall be
cancelled. When bonds have been converted or exchanged, they shall be
cancelled and not reissued except upon compliance with the provisions
governing the issue of convertible or exchangeable bonds.
Liability for failure to disclose required information.
Failure of the corporation to comply in good faith with the notice or
disclosure provisions of paragraphs (f) and (g) of section 511 (Share
distributions and changes), or paragraph (c) of section 516 (Reduction
of stated capital in certain cases), shall make the corporation liable
for any damage sustained by any shareholder in consequence thereof.
ARTICLE 6 Shareholders
By-laws.
(a) The initial by-laws of a corporation shall be adopted by its
incorporator or incorporators at the organization meeting. Thereafter,
subject to section 613 (Limitations on right to vote), by-laws may be
adopted, amended or repealed by a majority of the votes cast by the
shares at the time entitled to vote in the election of any directors.
When so provided in the certificate of incorporation or a by-law adopted
by the shareholders, by-laws may also be adopted, amended or repealed by
the board by such vote as may be therein specified, which may be greater
than the vote otherwise prescribed by this chapter, but any by-law
adopted by the board may be amended or repealed by the shareholders
entitled to vote thereon as herein provided. Any reference in this
chapter to a "by-law adopted by the shareholders" shall include a by-law
adopted by the incorporator or incorporators.
(b) The by-laws may contain any provision relating to the business of
the corporation, the conduct of its affairs, its rights or powers or the
rights or powers of its shareholders, directors or officers, not
inconsistent with this chapter or any other statute of this state or the
certificate of incorporation.
Meetings of shareholders.
* (a) Meetings of shareholders may be held at such place, within or
without this state, as may be fixed by or under the by-laws, or if not
so fixed, as determined by the board of directors. For the duration of
the state disaster emergency declared by executive order two hundred two
that began on March seventh, two thousand twenty, or until December
thirty-first, two thousand twenty-one, whichever is later, if, pursuant
to this paragraph or the by-laws of the corporation, the board of
directors is authorized to determine the place of a meeting of
shareholders, the board of directors may, in its sole discretion,
determine that the meeting be held solely by means of electronic
communication, the platform/service of which shall be the place of the
meeting for purpose of this article.
* NB Separately amended; cannot be put together
* (a) Meetings of shareholders may be held at such place, within or
without this state, as may be fixed by or under the by-laws, or if not
so fixed, as determined by the board of directors. If, pursuant to this
paragraph or the by-laws of the corporation, the board of directors is
authorized to determine the place of a meeting of shareholders, the
board of directors may, in its sole discretion, determine that the
meeting be held solely by means of electronic communication, the
platform/service of which shall be the place of the meeting for purpose
of this article.
* NB Separately amended; cannot be put together
(b) (i) A corporation may, if authorized by the board of directors:
(1) implement reasonable measures to provide shareholders not physically
present at a shareholders' meeting a reasonable opportunity to
participate in the proceedings of the meeting substantially concurrently
with such proceedings; and/or (2) provide reasonable measures to enable
shareholders to vote or grant proxies with respect to matters submitted
to the shareholders at a shareholders' meeting by means of electronic
communication; provided that the corporation shall, if applicable, (A)
implement reasonable measures to verify that each person deemed present
and permitted to vote at the meeting by means of electronic
communication is a shareholder of record and (B) keep a record of any
vote or other action taken by a shareholder participating and voting by
means of electronic communications at a shareholders' meeting. A
shareholder participating in a shareholders' meeting by this means is
deemed to be present in person at the meeting.
(ii) Nothing required in subparagraph (i) of this paragraph shall
limit, restrict or supersede other forms of voting and participation.
(iii) For purposes of this paragraph, "reasonable measures" with
respect to participating in proceedings shall include, but not be
limited to, audio webcast or other broadcast of the meeting and for
voting shall include but not be limited to telephonic and internet
voting.
(c) A meeting of shareholders shall be held annually for the election
of directors and the transaction of other business on a date fixed by or
under the by-laws. A failure to hold the annual meeting on the date so
fixed or to elect a sufficient number of directors to conduct the
business of the corporation shall not work a forfeiture or give cause
for dissolution of the corporation, except as provided in paragraph (c)
of section 1104 (Petition in case of deadlock among directors or
shareholders).
(d) Special meetings of the shareholders may be called by the board
and by such person or persons as may be so authorized by the certificate
of incorporation or the by-laws. At any such special meeting only such
business may be transacted which is related to the purpose or purposes
set forth in the notice required by section 605 (Notice of meetings of
shareholders).
(e) Except as otherwise required by this chapter, the by-laws may
designate reasonable procedures for the calling and conduct of a meeting
of shareholders, including but not limited to specifying: (i) who may
call and who may conduct the meeting, (ii) the means by which the order
of business to be conducted shall be established, (iii) the procedures
and requirements for the nomination of directors, (iv) the procedures
with respect to the making of shareholder proposals, and (v) the
procedures to be established for the adjournment of any meeting of
shareholders. No amendment of the by-laws pertaining to the election of
directors or the procedures for the calling and conduct of a meeting of
shareholders shall affect the election of directors or the procedures
for the calling or conduct in respect of any meeting of shareholders
unless adequate notice thereof is given to the shareholders in a manner
reasonably calculated to provide shareholders with sufficient time to
respond thereto prior to such meeting.
Special meeting for election of directors.
(a) If, for a period of one month after the date fixed by or under the
by-laws for the annual meeting of shareholders, or if no date has been
so fixed, for a period of thirteen months after the formation of the
corporation or the last annual meeting, there is a failure to elect a
sufficient number of directors to conduct the business of the
corporation, the board shall call a special meeting for the election of
directors. If such special meeting is not called by the board within two
weeks after the expiration of such period or if it is so called but
there is a failure to elect such directors for a period of two months
after the expiration of such period, holders of ten percent of the votes
of the shares entitled to vote in an election of directors may, in
writing, demand the call of a special meeting for the election of
directors specifying the date and month thereof, which shall not be less
than sixty nor more than ninety days from the date of such written
demand. The secretary of the corporation upon receiving the written
demand shall promptly give notice of such meeting, or if he fails to do
so within five business days thereafter, any shareholder signing such
demand may give such notice. The meeting shall be held at the place
fixed in the by-laws or, if not so fixed, at the office of the
corporation.
(b) At any such special meeting called on demand of shareholders,
notwithstanding section 608 (Quorum of shareholders), the shareholders
attending, in person or by proxy, and entitled to vote in an election of
directors shall constitute a quorum for the purpose of electing
directors, but not for the transaction of any other business.
Fixing record date.
(a) For the purpose of determining the shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to or dissent from any proposal without a meeting,
or for the purpose of determining shareholders entitled to receive
payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the by-laws may provide for fixing or, in
the absence of such provision, the board may fix, in advance, a date as
the record date for any such determination of shareholders. Such date
shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action.
(b) If no record date is fixed:
(1) The record date for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close
of business on the day next preceding the day on which notice is given,
or, if no notice is given, the day on which the meeting is held.
(2) The record date for determining shareholders for any purpose other
than that specified in subparagraph (1) shall be at the close of
business on the day on which the resolution of the board relating
thereto is adopted.
(c) When a determination of shareholders of record entitled to notice
of or to vote at any meeting of shareholders has been made as provided
in this section, such determination shall apply to any adjournment
thereof, unless the board fixes a new record date under this section for
the adjourned meeting.
Notice of meetings of shareholders.
(a) Whenever under the provisions of this chapter shareholders are
required or permitted to take any action at a meeting, notice shall be
given stating the place, date and hour of the meeting, the means of
electronic communications, if any, by which shareholders and
proxyholders may participate in the proceedings of the meeting and vote
or grant proxies at such meeting and, unless it is the annual meeting,
indicating that it is being issued by or at the direction of the person
or persons calling the meeting. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called. Notice of
any meeting of shareholders may be written or electronic. If, at any
meeting, action is proposed to be taken which would, if taken, entitle
shareholders fulfilling the requirements of section 623 (Procedure to
enforce shareholder's right to receive payment for shares) to receive
payment for their shares, the notice of such meeting shall include a
statement of that purpose and to that effect and shall be accompanied by
a copy of section 623 or an outline of its material terms. Notice of any
meeting shall be given not fewer than ten nor more than sixty days
before the date of the meeting, provided, however, that such notice may
be given by third class mail not fewer than twenty-four nor more than
sixty days before the date of the meeting, to each shareholder entitled
to vote at such meeting. If mailed, such notice is given when deposited
in the United States mail, with postage thereon prepaid, directed to the
shareholder at the shareholder's address as it appears on the record of
shareholders, or, if the shareholder shall have filed with the secretary
of the corporation a request that notices to the shareholder be mailed
to some other address, then directed to him at such other address. If
transmitted electronically, such notice is given when directed to the
shareholder's electronic mail address as supplied by the shareholder to
the secretary of the corporation or as otherwise directed pursuant to
the shareholder's authorization or instructions. An affidavit of the
secretary or other person giving the notice or of a transfer agent of
the corporation that the notice required by this section has been given
shall, in the absence of fraud, be prima facie evidence of the facts
therein stated.
(b) When a meeting is adjourned to another time or place, it shall not
be necessary, unless the by-laws require otherwise, to give any notice
of the adjourned meeting if the time and place to which the meeting is
adjourned and the means of electronic communications, if any, by which
shareholders and proxyholders may participate in the proceedings of the
meeting and/or vote or grant proxies at the meeting are announced at the
meeting at which the adjournment is taken, and at the adjourned meeting
any business may be transacted that might have been transacted on the
original date of the meeting. However, if after the adjournment the
board fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given to each shareholder of record on the
new record date entitled to notice under paragraph (a).
(c) Nothing required in paragraphs (a) and (b) of this section shall
limit, restrict or supersede other forms of voting and participation.
Waivers of notice.
Notice of meeting need not be given to any shareholder who submits a
waiver of notice whether before or after the meeting. Waiver of notice
may be written or electronic. If written, the waiver must be executed by
the shareholder or the shareholder's authorized officer, director,
employee or agent by signing such waiver or causing his or her signature
to be affixed to such waiver by any reasonable means, including, but not
limited to, facsimile signature. If electronic, the transmission of the
waiver must either set forth or be submitted with information from which
it can reasonably be determined that the transmission was authorized by
the shareholder. The attendance of any shareholder at a meeting, in
person or by proxy, without protesting prior to the conclusion of the
meeting the lack of notice of such meeting, shall constitute a waiver of
notice by such shareholder.
List of shareholders at meetings.
A list of shareholders as of the record date, certified by the
corporate officer responsible for its preparation or by a transfer
agent, shall be produced at any meeting of shareholders upon the request
thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding
thereat, shall require such list of shareholders to be produced as
evidence of the right of the persons challenged to vote at such meeting,
and all persons who appear from such list to be shareholders entitled to
vote thereat may vote at such meeting.
Quorum of shareholders.
(a) The holders of a majority of the votes of shares entitled to vote
thereat shall constitute a quorum at a meeting of shareholders for the
transaction of any business, provided that when a specified item of
business is required to be voted on by a particular class or series of
shares, voting as a class, the holders of a majority of the votes of
shares of such class or series shall constitute a quorum for the
transaction of such specified item of business.
(b) The certificate of incorporation or by-laws may provide for any
lesser quorum not less than one-third of the votes of shares entitled to
vote, and the certificate of incorporation may, under section 616
(Greater requirement as to quorum and vote of shareholders), provide for
a greater quorum.
(c) When a quorum is once present to organize a meeting, it is not
broken by the subsequent withdrawal of any shareholders.
(d) The shareholders present may adjourn the meeting despite the
absence of a quorum.
Proxies.
(a) Every shareholder entitled to vote at a meeting of shareholders or
to express consent or dissent without a meeting may authorize another
person or persons to act for him by proxy.
(b) No proxy shall be valid after the expiration of eleven months from
the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the shareholder executing it,
except as otherwise provided in this section.
(c) The authority of the holder of a proxy to act shall not be revoked
by the incompetence or death of the shareholder who executed the proxy
unless, before the authority is exercised, written notice of an
adjudication of such incompetence or of such death is received by the
corporate officer responsible for maintaining the list of shareholders.
(d) Except when other provision shall have been made by written
agreement between the parties, the record holder of shares which he
holds as pledgee or otherwise as security or which belong to another,
shall issue to the pledgor or to such owner of such shares, upon demand
therefor and payment of necessary expenses thereof, a proxy to vote or
take other action thereon.
(e) A shareholder shall not sell his vote or issue a proxy to vote to
any person for any sum of money or anything of value, except as
authorized in this section and section 620 (Agreements as to voting;
provision in certificate of incorporation as to control of directors);
provided, however, that this paragraph shall not apply to votes, proxies
or consents given by holders of preferred shares in connection with a
proxy or consent solicitation made available on identical terms to all
holders of shares of the same class or series and remaining open for
acceptance for at least twenty business days.
(f) A proxy which is entitled "irrevocable proxy" and which states
that it is irrevocable, is irrevocable when it is held by any of the
following or a nominee of any of the following:
(1) A pledgee;
(2) A person who has purchased or agreed to purchase the shares;
(3) A creditor or creditors of the corporation who extend or continue
credit to the corporation in consideration of the proxy if the proxy
states that it was given in consideration of such extension or
continuation of credit, the amount thereof, and the name of the person
extending or continuing credit;
(4) A person who has contracted to perform services as an officer of
the corporation, if a proxy is required by the contract of employment,
if the proxy states that it was given in consideration of such contract
of employment, the name of the employee and the period of employment
contracted for;
(5) A person designated by or under an agreement under paragraph (a)
of section 620.
(g) Notwithstanding a provision in a proxy, stating that it is
irrevocable, the proxy becomes revocable after the pledge is redeemed,
or the debt of the corporation is paid, or the period of employment
provided for in the contract of employment has terminated, or the
agreement under paragraph (a) of section 620 has terminated; and, in a
case provided for in subparagraphs (f) (3) or (4), becomes revocable
three years after the date of the proxy or at the end of the period, if
any, specified therein, whichever period is less, unless the period of
irrevocability is renewed from time to time by the execution of a new
irrevocable proxy as provided in this section. This paragraph does not
affect the duration of a proxy under paragraph (b).
(h) A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of shares without knowledge of the existence
of the provision unless the existence of the proxy and its
irrevocability is noted conspicuously on the face or back of the
certificate representing such shares.
(i) Without limiting the manner in which a shareholder may authorize
another person or persons to act for him as proxy pursuant to paragraph
(a) of this section, the following shall constitute a valid means by
which a shareholder may grant such authority.
(1) A shareholder may execute a writing authorizing another person or
persons to act from him as proxy. Execution may be accomplished by the
shareholder or the shareholder's authorized officer, director, employee
or agent signing such writing or causing his or her signature to be
affixed to such writing by any reasonable means including, but not
limited to, by facsimile signature.
(2) A shareholder may authorize another person or persons to act for
the shareholder as proxy by transmitting or authorizing the transmission
of a telegram, cablegram or other means of electronic transmission to
the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive
such transmission, provided that any such telegram, cablegram or other
means of electronic transmission must either set forth or be submitted
with information from which it can be reasonably determined that the
telegram, cablegram or other electronic transmission was authorized by
the shareholder. If it is determined that such telegrams, cablegrams or
other electronic transmissions are valid, the inspectors or, if there
are no inspectors, such other persons making that determination shall
specify the nature of the information upon which they relied.
(j) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to
paragraph (i) of this section may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
Selection of inspectors at shareholders' meetings.
(a) The board of directors shall appoint one or more inspectors to act
at the meeting or any adjournment thereof and make a written report
thereof. The board of directors may designate one or more persons as
alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate has been appointed, or if such persons are unable
to act at a meeting of shareholders, the person presiding at the meeting
shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his
ability.
(b) Unless otherwise provided in the certificate of incorporation or
by-laws, paragraph (a) of this section shall not apply to a corporation
that does not have a class of voting stock that is listed on a national
securities exchange or authorized for quotation on an interdealer
quotation system of a registered national securities association.
Notwithstanding the foregoing, any corporation may take the actions set
forth in paragraph (a) of this section.
Duties of inspectors at shareholders' meetings.
(a) The inspectors shall determine the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do
such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of the person presiding at the meeting or
any shareholder entitled to vote thereat, the inspectors shall make a
report in writing of any challenge, question or matter determined by
them and execute a certificate of any fact found by them. Any report or
certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
(b) In determining the validity and counting of proxies, ballots and
consents, the inspectors shall be limited to an examination of the
proxies, any envelopes submitted with those proxies and consents, any
information provided in accordance with section 609 (Proxies), ballots
and the regular books and records of the corporation, except that the
inspectors may consider other reliable information for the limited
purpose of reconciling proxies, ballots and consents submitted by or on
behalf of banks, brokers, their nominees or similar persons which
represent more votes than the holder of a proxy is authorized by the
record owner to cast or more votes than the stockholder holds of record.
If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification pursuant to paragraph (a) of this section shall specify
the precise information considered by them including the person or
persons from whom they obtained the information, when the information
was obtained, the means by which the information was obtained and the
basis for the inspectors' belief that such information is reliable.
(c) The date and time (which need not be a particular time of day) of
the opening and the closing of the polls for each matter upon which the
shareholders will vote at a meeting shall be announced by the person
presiding at the meeting at the beginning of the meeting and, if no date
and time is so announced, the polls shall close at the end of the
meeting, including any adjournment thereof. No ballot, proxies or
consents, nor any revocation thereof or changes thereto, shall be
accepted by the inspectors after the closing of polls in accordance with
section 605 (Notice of meetings of shareholders) unless the supreme
court at a special term held within the judicial district where the
office of the corporation is located upon application by a shareholder
shall determine otherwise.
(d) Unless otherwise provided in the certificate of incorporation or
by-laws, paragraphs (a) and (c) of this section shall not apply to a
corporation that does not have a class of voting stock that is listed on
a national securities exchange or authorized for quotation on an
interdealer quotation system of a registered national securities
association. Notwithstanding the foregoing, any corporation may take
the actions set forth in paragraphs (a) and (c) of this section.
Qualification of voters.
(a) Every shareholder of record shall be entitled at every meeting of
shareholders to one vote for every share standing in his name on the
record of shareholders, unless otherwise provided in the certificate of
incorporation.
(b) Treasury shares and shares held by another domestic or foreign
corporation of any type or kind, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held by
the corporation, shall not be shares entitled to vote or to be counted
in determining the total number of outstanding shares.
(c) Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him,
either in person or by proxy, without transfer of such shares into his
name. Shares held by a trustee may be voted by him, either in person or
by proxy, only after the shares have been transferred into his name as
trustee or into the name of his nominee.
(d) Shares held by or under the control of a receiver may be voted by
him without the transfer thereof into his name if authority so to do is
contained in an order of the court by which such receiver was appointed.
(e) A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee, or a nominee of the pledgee.
(f) Redeemable shares which have been called for redemption shall not
be deemed to be outstanding shares for the purpose of voting or
determining the total number of shares entitled to vote on any matter on
and after the date on which written notice of redemption has been sent
to holders thereof and a sum sufficient to redeem such shares has been
deposited with a bank or trust company with irrevocable instruction and
authority to pay the redemption price to the holders of the shares upon
surrender of certificates therefor.
(g) Shares standing in the name of another domestic or foreign
corporation of any type or kind may be voted by such officer, agent or
proxy as the by-laws of such corporation may provide, or, in the absence
of such provision, as the board of such corporation may determine.
(h) If shares are registered on the record of shareholders of a
corporation in the name of two or more persons, whether fiduciaries,
members of a partnership, joint tenants, tenants in common, tenants by
the entirety or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the secretary
of the corporation is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with
respect to voting shall have the following effect:
(1) If only one votes, the vote shall be accepted by the corporation
as the vote of all;
(2) If more than one vote, the act of the majority so voting shall be
accepted by the corporation as the vote of all;
(3) If more than one vote, but the vote is equally divided on any
particular matter, the vote shall be accepted by the corporation as a
proportionate vote of the shares; unless the corporation has evidence,
on the record of shareholders or otherwise, that the shares are held in
a fiduciary capacity. Nothing in this paragraph shall alter any
requirement that the exercise of fiduciary powers be by act of a
majority, contained in any law applicable to such exercise of powers
(including section 10-10.7 of the estates, powers and trusts law);
(4) When shares as to which the vote is equally divided are registered
on the record of shareholders of a corporation in the name of, or have
passed by operation of law or by virtue of any deed of trust or other
instrument to two or more fiduciaries, any court having jurisdiction of
their accounts, upon petition by any of such fiduciaries or by any party
in interest, may direct the voting of such shares for the best interest
of the beneficiaries. This subparagraph shall not apply in any case
where the instrument or order of the court appointing fiduciaries shall
otherwise direct how such shares shall be voted; and
(5) If the instrument or order furnished to the secretary of a
corporation shows that a tenancy is held in unequal interests, a
majority or equal division for the purposes of this paragraph shall be a
majority or equal division in interest.
(i) Notwithstanding the foregoing paragraphs, a corporation shall be
protected in treating the persons in whose names shares stand on the
record of shareholders as the owners thereof for all purposes.
Limitations on right to vote.
The certificate of incorporation may provide, except as limited by
section 501 (Authorized shares), either absolutely or conditionally,
that the holders of any designated class or series of shares shall not
be entitled to vote, or it may otherwise limit or define the respective
voting powers of the several classes or series of shares, and, except as
otherwise provided in this chapter, such provisions of such certificate
shall prevail, according to their tenor, in all elections and in all
proceedings, over the provisions of this chapter which authorizes any
action by the shareholders.
Vote of shareholders.
(a) Directors shall, except as otherwise required by this chapter or
by the by-laws or certificate of incorporation as permitted by this
chapter, be elected by a plurality of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote in the election.
(b) Whenever any corporate action, other than the election of
directors, is to be taken under this chapter by vote of the
shareholders, it shall, except as otherwise required by this chapter or
by the certificate of incorporation as permitted by this chapter or by
the specific provisions of a by-law adopted by the shareholders, be
authorized by a majority of the votes cast in favor of or against such
action at a meeting of shareholders by the holders of shares entitled to
vote thereon. Except as otherwise provided in the certificate of
incorporation or the specific provision of a by-law adopted by the
shareholders, an abstention shall not constitute a vote cast.
Written consent of shareholders, subscribers or incorporators
without a meeting.
(a) Whenever under this chapter shareholders are required or permitted
to take any action by vote, such action may be taken without a meeting
on written consent, setting forth the action so taken, signed by the
holders of all outstanding shares entitled to vote thereon or, if the
certificate of incorporation so permits, signed by the holders of
outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. In
addition, this paragraph shall not be construed to alter or modify the
provisions of any section or any provision in a certificate of
incorporation not inconsistent with this chapter under which the written
consent of the holders of less than all outstanding shares is sufficient
for corporate action.
(b) No written consent shall be effective to take the corporate action
referred to therein unless, within sixty days of the earliest dated
consent delivered in the manner required by this paragraph to the
corporation, written consents signed by a sufficient number of holders
to take action are delivered to the corporation by delivery to its
registered office in this state, its principal place of business, or an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of shareholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
shareholders who have not consented in writing.
(d) Written consent thus given by the holders of such number of shares
as is required under paragraph (a) of this section shall have the same
effect as a valid vote of holders of such number of shares, and any
certificate with respect to the authorization or taking of any such
action which is to be delivered to the department of state shall recite
that written consent has been given in accordance with this section and
that written notice has been given as and to the extent required by this
section.
(e) When there are no shareholders of record, such action may be taken
on the written consent signed by a majority in interest of the
subscribers for shares whose subscriptions have been accepted or their
successors in interest or, if no subscription has been accepted, on the
written consent signed by the incorporator or a majority of the
incorporators. When there are two or more incorporators, if any dies or
is for any reason unable to act, the other or others may act. If there
is no incorporator able to act, any person for whom an incorporator was
acting as agent may act in his stead, or if such other person also dies
or is for any reason unable to act, his legal representative may act.
Greater requirement as to quorum and vote of shareholders.
(a) The certificate of incorporation may contain provisions specifying
either or both of the following:
(1) That the proportion of votes of shares, or the proportion of votes
of shares of any class or series thereof, the holders of which shall be
present in person or by proxy at any meeting of shareholders, including
a special meeting for election of directors under section 603 (Special
meeting for election of directors), in order to constitute a quorum for
the transaction of any business or of any specified item of business,
including amendments to the certificate of incorporation, shall be
greater than the proportion prescribed by this chapter in the absence of
such provision.
(2) That the proportion of votes of shares, or votes of shares of a
particular class or series of shares, that shall be necessary at any
meeting of shareholders for the transaction of any business or of any
specified item of business, including amendments to the certificate of
incorporation, shall be greater than the proportion prescribed by this
chapter in the absence of such provision.
(b) An amendment of the certificate of incorporation which changes or
strikes out a provision permitted by this section, shall be authorized
at a meeting of shareholders by two-thirds of the votes of the shares
entitled to vote thereon, or of such greater proportion of votes of
shares, or votes of shares of a particular class or series of shares, as
may be provided specifically in the certificate of incorporation for
changing or striking out a provision permitted by this section.
(c) If the certificate of incorporation of any corporation contains a
provision authorized by this section, the existence of such provision
shall be noted conspicuously on the face or back of every certificate
for shares issued by such corporation, except that this requirement
shall not apply to any corporation having any class of any equity
security registered pursuant to Section twelve of the Securities
Exchange Act of 1934, as amended.
Voting by class or classes of shares.
(a) The certificate of incorporation may contain provisions specifying
that any class or classes of shares or of any series thereof shall vote
as a class in connection with the transaction of any business or of any
specified item of business at a meeting of shareholders, including
amendments to the certificate of incorporation.
(b) Where voting as a class is provided in the certificate of
incorporation, it shall be by the proportionate vote so provided or, if
no proportionate vote is provided, in the election of directors, by a
plurality of the votes cast at such meeting by the holders of shares of
such class entitled to vote in the election, or for any other corporate
action, by a majority of the votes cast at such meeting by the holders
of shares of such class entitled to vote thereon.
(c) Such voting by class shall be in addition to any other vote,
including vote by class, required by this chapter and by the certificate
of incorporation as permitted by this chapter.
Cumulative voting.
The certificate of incorporation of any corporation may provide that
in all elections of directors of such corporation each shareholder shall
be entitled to as many votes as shall equal the number of votes which,
except for such provisions as to cumulative voting, he would be entitled
to cast for the election of directors with respect to his shares
multiplied by the number of directors to be elected, and that he may
cast all of such votes for a single director or may distribute them
among the number to be voted for, or any two or more of them, as he may
see fit, which right, when exercised, shall be termed cumulative voting.
Powers of supreme court respecting elections.
Upon the petition of any shareholder aggrieved by an election, and
upon notice to the persons declared elected thereat, the corporation and
such other persons as the court may direct, the supreme court at a
special term held within the judicial district where the office of the
corporation is located shall forthwith hear the proofs and allegations
of the parties, and confirm the election, order a new election, or take
such other action as justice may require.
Agreements as to voting; provision in certificate of
incorporation as to control of directors.
(a) An agreement between two or more shareholders, if in writing and
signed by the parties thereto, may provide that in exercising any voting
rights, the shares held by them shall be voted as therein provided, or
as they may agree, or as determined in accordance with a procedure
agreed upon by them.
(b) A provision in the certificate of incorporation otherwise
prohibited by law because it improperly restricts the board in its
management of the business of the corporation, or improperly transfers
to one or more shareholders or to one or more persons or corporations to
be selected by him or them, all or any part of such management otherwise
within the authority of the board under this chapter, shall nevertheless
be valid:
(1) If all the incorporators or holders of record of all outstanding
shares, whether or not having voting power, have authorized such
provision in the certificate of incorporation or an amendment thereof;
and
(2) If, subsequent to the adoption of such provision, shares are
transferred or issued only to persons who had knowledge or notice
thereof or consented in writing to such provision.
(c) A provision authorized by paragraph (b) shall be valid only so
long as no shares of the corporation are listed on a national securities
exchange or regularly quoted in an over-the-counter market by one or
more members of a national or affiliated securities association.
(d) (1) Except as provided in paragraph (e), an amendment to strike
out a provision authorized by paragraph (b) shall be authorized at a
meeting of shareholders by (A) (i) for any corporation in existence on
the effective date of subparagraph (2) of this paragraph, two-thirds of
the votes of the shares entitled to vote thereon and (ii) for any
corporation in existence on the effective date of this clause the
certificate of incorporation of which expressly provides such and for
any corporation incorporated after the effective date of subparagraph
(2) of this paragraph, a majority of the votes of the shares entitled to
vote thereon or (B) in either case, by such greater proportion of votes
of shares as may be required by the certificate of incorporation for
that purpose.
(2) Any corporation may adopt an amendment of the certificate of
incorporation in accordance with the applicable clause or subclause of
subparagraph (1) of this paragraph to provide that any further amendment
of the certificate of incorporation that strikes out a provision
authorized by paragraph (b) of this section shall be authorized at a
meeting of the shareholders by a specified proportion of votes of the
shares, or votes of a particular class or series of shares, entitled to
vote thereon, provided that such proportion may not be less than a
majority.
(e) Alternatively, if a provision authorized by paragraph (b) shall
have ceased to be valid under this section, the board may authorize a
certificate of amendment under section 805 (Certificate of amendment;
contents) striking out such provision. Such certificate shall set forth
the event by reason of which the provision ceased to be valid.
(f) The effect of any such provision authorized by paragraph (b) shall
be to relieve the directors and impose upon the shareholders authorizing
the same or consenting thereto the liability for managerial acts or
omissions that is imposed on directors by this chapter to the extent
that and so long as the discretion or powers of the board in its
management of corporate affairs is controlled by any such provision.
(g) If the certificate of incorporation of any corporation contains a
provision authorized by paragraph (b), the existence of such provision
shall be noted conspicuously on the face or back of every certificate
for shares issued by such corporation.
Voting trust agreements.
(a) Any shareholder or shareholders, under an agreement in writing,
may transfer his or their shares to a voting trustee or trustees for the
purpose of conferring the right to vote thereon for a period not
exceeding ten years upon the terms and conditions therein stated. The
certificates for shares so transferred shall be surrendered and
cancelled and new certificates therefor issued to such trustee or
trustees stating that they are issued under such agreement, and in the
entry of such ownership in the record of the corporation that fact shall
also be noted, and such trustee or trustees may vote the shares so
transferred during the term of such agreement.
(b) The trustee or trustees shall keep available for inspection by
holders of voting trust certificates at his or their office or at a
place designated in such agreement or of which the holders of voting
trust certificates have been notified in writing, correct and complete
books and records of account relating to the trust, and a record
containing the names and addresses of all persons who are holders of
voting trust certificates and the number and class of shares represented
by the certificates held by them and the dates when they became the
owners thereof. The record may be in written form or any other form
capable of being converted into written form within a reasonable time.
(c) A duplicate of every such agreement shall be filed in the office
of the corporation and it and the record of voting trust certificate
holders shall be subject to the same right of inspection by a
shareholder of record or a holder of a voting trust certificate, in
person or by agent or attorney, as are the records of the corporation
under section 624 (Books and records; right of inspection, prima facie
evidence). The shareholder or holder of a voting trust certificate
shall be entitled to the remedies provided in that section.
(d) At any time within six months before the expiration of such voting
trust agreement as originally fixed or as extended one or more times
under this paragraph, one or more holders of voting trust certificates
may, by agreement in writing, extend the duration of such voting trust
agreement, nominating the same or substitute trustee or trustees, for an
additional period not exceeding ten years. Such extension agreement
shall not affect the rights or obligations of persons not parties
thereto and shall in every respect comply with and be subject to all
the provisions of this section applicable to the original voting trust
agreement.
Preemptive rights.
(a) As used in this section, the term:
(1) "Unlimited dividend rights" means the right without limitation as
to amount either to all or to a share of the balance of current or
liquidating dividends after the payment of dividends on any shares
entitled to a preference.
(2) "Equity shares" means shares of any class, whether or not
preferred as to dividends or assets, which have unlimited dividend
rights.
(3) "Voting rights" means the right to vote for the election of one or
more directors, excluding a right so to vote which is dependent on the
happening of an event specified in the certificate of incorporation
which would change the voting rights of any class of shares.
(4) "Voting shares" means shares of any class which have voting
rights, but does not include bonds on which voting rights are conferred
under section 518 (Corporate bonds).
(5) "Preemptive right" means the right to purchase shares or other
securities to be issued or subjected to rights or options to purchase,
as such right is defined in this section.
(b) (1) With respect to any corporation incorporated prior to the
effective date of subparagraph (2) of this paragraph, except as
otherwise provided in the certificate of incorporation, and except as
provided in this section, the holders of equity shares of any class, in
case of the proposed issuance by the corporation of, or the proposed
granting by the corporation of rights or options to purchase, its equity
shares of any class or any shares or other securities convertible into
or carrying rights or options to purchase its equity shares of any
class, shall, if the issuance of the equity shares proposed to be issued
or issuable upon exercise of such rights or options or upon conversion
of such other securities would adversely affect the unlimited dividend
rights of such holders, have the right during a reasonable time and on
reasonable conditions, both to be fixed by the board, to purchase such
shares or other securities in such proportions as shall be determined as
provided in this section.
(2) With respect to any corporation incorporated on or after the
effective date of this subparagraph, the holders of such shares shall
not have any preemptive right, except as otherwise expressly provided in
the certificate of incorporation.
(c) Except as otherwise provided in the certificate of incorporation,
and except as provided in this section, the holders of voting shares of
any class having any preemptive right under this paragraph on the date
immediately prior to the effective date of subparagraph (2) of paragraph
(b) of this section, in case of the proposed issuance by the corporation
of, or the proposed granting by the corporation of rights or options to
purchase, its voting shares of any class or any shares or other
securities convertible into or carrying rights or options to purchase
its voting shares of any class, shall, if the issuance of the voting
shares proposed to be issued or issuable upon exercise of such rights or
options or upon conversion of such other securities would adversely
affect the voting rights of such holders, have the right during a
reasonable time and on reasonable conditions, both to be fixed by the
board, to purchase such shares or other securities in such proportions
as shall be determined as provided in this section.
(d) The preemptive right provided for in paragraphs (b) and (c) shall
entitle shareholders having such rights to purchase the shares or other
securities to be offered or optioned for sale as nearly as practicable
in such proportions as would, if such preemptive right were exercised,
preserve the relative unlimited dividend rights and voting rights of
such holders and at a price or prices not less favorable than the price
or prices at which such shares or other securities are proposed to be
offered for sale to others, without deduction of such reasonable
expenses of and compensation for the sale, underwriting or purchase of
such shares or other securities by underwriters or dealers as may
lawfully be paid by the corporation. In case each of the shares
entitling the holders thereof to preemptive rights does not confer the
same unlimited dividend right or voting right, the board shall apportion
the shares or other securities to be offered or optioned for sale among
the shareholders having preemptive rights to purchase them in such
proportions as in the opinion of the board shall preserve as far as
practicable the relative unlimited dividend rights and voting rights of
the holders at the time of such offering. The apportionment made by the
board shall, in the absence of fraud or bad faith, be binding upon all
shareholders.
(e) Unless otherwise provided in the certificate of incorporation,
shares or other securities offered for sale or subjected to rights or
options to purchase shall not be subject to preemptive rights under
paragraph (b) or (c) of this section if they:
(1) Are to be issued by the board to effect a merger or consolidation
or offered or subjected to rights or options for consideration other
than cash;
(2) Are to be issued or subjected to rights or options under paragraph
(d) of section 505 (Rights and options to purchase shares; issue of
rights and options to directors, officers and employees);
(3) Are to be issued to satisfy conversion or option rights
theretofore granted by the corporation;
(4) Are treasury shares;
(5) Are part of the shares or other securities of the corporation
authorized in its original certificate of incorporation and are issued,
sold or optioned within two years from the date of filing such
certificate; or
(6) Are to be issued under a plan of reorganization approved in a
proceeding under any applicable act of congress relating to
reorganization of corporations.
(f) Shareholders of record entitled to preemptive rights on the record
date fixed by the board under section 604 (Fixing record date), or, if
no record date is fixed, then on the record date determined under
section 604, and no others shall be entitled to the right defined in
this section.
(g) The board shall cause to be given to each shareholder entitled to
purchase shares or other securities in accordance with this section, a
notice directed to him in the manner provided in section 605 (Notice of
meetings of shareholders) setting forth the time within which and the
terms and conditions upon which the shareholder may purchase such shares
or other securities and also the apportionment made of the right to
purchase among the shareholders entitled to preemptive rights. Such
notice shall be given personally or by mail at least fifteen days prior
to the expiration of the period during which the shareholder shall have
the right to purchase. All shareholders entitled to preemptive rights to
whom notice shall have been given as aforesaid shall be deemed
conclusively to have had a reasonable time in which to exercise their
preemptive rights.
(h) Shares or other securities which have been offered to shareholders
having preemptive rights to purchase and which have not been purchased
by them within the time fixed by the board may thereafter, for a period
of not exceeding one year following the expiration of the time during
which shareholders might have exercised such preemptive rights, be
issued, sold or subjected to rights or options to any other person or
persons at a price, without deduction of such reasonable expenses of and
compensation for the sale, underwriting or purchase of such shares by
underwriters or dealers as may lawfully be paid by the corporation, not
less than that at which they were offered to such shareholders. Any such
shares or other securities not so issued, sold or subjected to rights or
options to others during such one year period shall thereafter again be
subject to the preemptive rights of shareholders.
(i) Except as otherwise provided in the certificate of incorporation
and except as provided in this section, no holder of any shares of any
class shall as such holder have any preemptive right to purchase any
other shares or securities of any class which at any time may be sold or
offered for sale by the corporation. Unless otherwise provided in the
certificate of incorporation, holders of bonds on which voting rights
are conferred under section 518 shall have no preemptive rights.
Procedure to enforce shareholder's right to receive payment for
shares.
(a) A shareholder intending to enforce his right under a section of
this chapter to receive payment for his shares if the proposed corporate
action referred to therein is taken shall file with the corporation,
before the meeting of shareholders at which the action is submitted to a
vote, or at such meeting but before the vote, written objection to the
action. The objection shall include a notice of his election to dissent,
his name and residence address, the number and classes of shares as to
which he dissents and a demand for payment of the fair value of his
shares if the action is taken. Such objection is not required from any
shareholder to whom the corporation did not give notice of such meeting
in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which
term as used in this section means the date on which the shareholders'
vote authorizing such action was taken, or the date on which such
consent without a meeting was obtained from the requisite shareholders,
the corporation shall give written notice of such authorization or
consent by registered mail to each shareholder who filed written
objection or from whom written objection was not required, excepting any
shareholder who voted for or consented in writing to the proposed action
and who thereby is deemed to have elected not to enforce his right to
receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any
shareholder from whom written objection was not required and who elects
to dissent shall file with the corporation a written notice of such
election, stating his name and residence address, the number and classes
of shares as to which he dissents and a demand for payment of the fair
value of his shares. Any shareholder who elects to dissent from a merger
under section 905 (Merger of subsidiary corporation) or paragraph (c) of
section 907 (Merger or consolidation of domestic and foreign
corporations) or from a share exchange under paragraph (g) of section
913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan
of merger or exchange or an outline of the material features thereof
under section 905 or 913.
(d) A shareholder may not dissent as to less than all of the shares,
as to which he has a right to dissent, held by him of record, that he
owns beneficially. A nominee or fiduciary may not dissent on behalf of
any beneficial owner as to less than all of the shares of such owner, as
to which such nominee or fiduciary has a right to dissent, held of
record by such nominee or fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall
cease to have any of the rights of a shareholder except the right to be
paid the fair value of his shares and any other rights under this
section. A notice of election may be withdrawn by the shareholder at any
time prior to his acceptance in writing of an offer made by the
corporation, as provided in paragraph (g), but in no case later than
sixty days from the date of consummation of the corporate action except
that if the corporation fails to make a timely offer, as provided in
paragraph (g), the time for withdrawing a notice of election shall be
extended until sixty days from the date an offer is made. Upon
expiration of such time, withdrawal of a notice of election shall
require the written consent of the corporation. In order to be
effective, withdrawal of a notice of election must be accompanied by the
return to the corporation of any advance payment made to the shareholder
as provided in paragraph (g). If a notice of election is withdrawn, or
the corporate action is rescinded, or a court shall determine that the
shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenters' rights, he shall not
have the right to receive payment for his shares and he shall be
reinstated to all his rights as a shareholder as of the consummation of
the corporate action, including any intervening preemptive rights and
the right to payment of any intervening dividend or other distribution
or, if any such rights have expired or any such dividend or distribution
other than in cash has been completed, in lieu thereof, at the election
of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without
prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
(f) At the time of filing the notice of election to dissent or within
one month thereafter the shareholder of shares represented by
certificates shall submit the certificates representing his shares to
the corporation, or to its transfer agent, which shall forthwith note
conspicuously thereon that a notice of election has been filed and shall
return the certificates to the shareholder or other person who submitted
them on his behalf. Any shareholder of shares represented by
certificates who fails to submit his certificates for such notation as
herein specified shall, at the option of the corporation exercised by
written notice to him within forty-five days from the date of filing of
such notice of election to dissent, lose his dissenter's rights unless a
court, for good cause shown, shall otherwise direct. Upon transfer of a
certificate bearing such notation, each new certificate issued therefor
shall bear a similar notation together with the name of the original
dissenting holder of the shares and a transferee shall acquire no rights
in the corporation except those which the original dissenting
shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within
which shareholders may file their notices of election to dissent, or
within fifteen days after the proposed corporate action is consummated,
whichever is later (but in no case later than ninety days from the
shareholders' authorization date), the corporation or, in the case of a
merger or consolidation, the surviving or new corporation, shall make a
written offer by registered mail to each shareholder who has filed such
notice of election to pay for his shares at a specified price which the
corporation considers to be their fair value. Such offer shall be
accompanied by a statement setting forth the aggregate number of shares
with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate
action has been consummated, such offer shall also be accompanied by (1)
advance payment to each such shareholder who has submitted the
certificates representing his shares to the corporation, as provided in
paragraph (f), of an amount equal to eighty percent of the amount of
such offer, or (2) as to each shareholder who has not yet submitted his
certificates a statement that advance payment to him of an amount equal
to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the
corporate action has not been consummated at the time of the making of
the offer, such advance payment or statement as to advance payment shall
be sent to each shareholder entitled thereto forthwith upon consummation
of the corporate action. Every advance payment or statement as to
advance payment shall include advice to the shareholder to the effect
that acceptance of such payment does not constitute a waiver of any
dissenters' rights. If the corporate action has not been consummated
upon the expiration of the ninety day period after the shareholders'
authorization date, the offer may be conditioned upon the consummation
of such action. Such offer shall be made at the same price per share to
all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet
of the corporation whose shares the dissenting shareholder holds as of
the latest available date, which shall not be earlier than twelve months
before the making of such offer, and a profit and loss statement or
statements for not less than a twelve month period ended on the date of
such balance sheet or, if the corporation was not in existence
throughout such twelve month period, for the portion thereof during
which it was in existence. Notwithstanding the foregoing, the
corporation shall not be required to furnish a balance sheet or profit
and loss statement or statements to any shareholder to whom such balance
sheet or profit and loss statement or statements were previously
furnished, nor if in connection with obtaining the shareholders'
authorization for or consent to the proposed corporate action the
shareholders were furnished with a proxy or information statement, which
included financial statements, pursuant to Regulation 14A or Regulation
14C of the United States Securities and Exchange Commission. If within
thirty days after the making of such offer, the corporation making the
offer and any shareholder agree upon the price to be paid for his
shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate
action, whichever is later, upon the surrender of the certificates for
any such shares represented by certificates.
(h) The following procedure shall apply if the corporation fails to
make such offer within such period of fifteen days, or if it makes the
offer and any dissenting shareholder or shareholders fail to agree with
it within the period of thirty days thereafter upon the price to be paid
for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in
which the office of the corporation is located to determine the rights
of dissenting shareholders and to fix the fair value of their shares.
If, in the case of merger or consolidation, the surviving or new
corporation is a foreign corporation without an office in this state,
such proceeding shall be brought in the county where the office of the
domestic corporation, whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not
instituted within such thirty day period, all dissenter's rights shall
be lost unless the supreme court, for good cause shown, shall otherwise
direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be
paid for their shares, shall be made parties to such proceeding, which
shall have the effect of an action quasi in rem against their shares.
The corporation shall serve a copy of the petition in such proceeding
upon each dissenting shareholder who is a resident of this state in the
manner provided by law for the service of a summons, and upon each
nonresident dissenting shareholder either by registered mail and
publication, or in such other manner as is permitted by law. The
jurisdiction of the court shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination,
is entitled to receive payment for his shares. If the corporation does
not request any such determination or if the court finds that any
dissenting shareholder is so entitled, it shall proceed to fix the value
of the shares, which, for the purposes of this section, shall be the
fair value as of the close of business on the day prior to the
shareholders' authorization date. In fixing the fair value of the
shares, the court shall consider the nature of the transaction giving
rise to the shareholder's right to receive payment for shares and its
effects on the corporation and its shareholders, the concepts and
methods then customary in the relevant securities and financial markets
for determining fair value of shares of a corporation engaging in a
similar transaction under comparable circumstances and all other
relevant factors. The court shall determine the fair value of the shares
without a jury and without referral to an appraiser or referee. Upon
application by the corporation or by any shareholder who is a party to
the proceeding, the court may, in its discretion, permit pretrial
disclosure, including, but not limited to, disclosure of any expert's
reports relating to the fair value of the shares whether or not intended
for use at the trial in the proceeding and notwithstanding subdivision
(d) of section 3101 of the civil practice law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to
the proceeding and is entitled thereto for the value of his shares so
determined.
(6) The final order shall include an allowance for interest at such
rate as the court finds to be equitable, from the date the corporate
action was consummated to the date of payment. In determining the rate
of interest, the court shall consider all relevant factors, including
the rate of interest which the corporation would have had to pay to
borrow money during the pendency of the proceeding. If the court finds
that the refusal of any shareholder to accept the corporate offer of
payment for his shares was arbitrary, vexatious or otherwise not in good
faith, no interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of any
experts employed by it. Notwithstanding the foregoing, the court may, in
its discretion, apportion and assess all or any part of the costs,
expenses and fees incurred by the corporation against any or all of the
dissenting shareholders who are parties to the proceeding, including any
who have withdrawn their notices of election as provided in paragraph
(e), if the court finds that their refusal to accept the corporate offer
was arbitrary, vexatious or otherwise not in good faith. The court may,
in its discretion, apportion and assess all or any part of the costs,
expenses and fees incurred by any or all of the dissenting shareholders
who are parties to the proceeding against the corporation if the court
finds any of the following: (A) that the fair value of the shares as
determined materially exceeds the amount which the corporation offered
to pay; (B) that no offer or required advance payment was made by the
corporation; (C) that the corporation failed to institute the special
proceeding within the period specified therefor; or (D) that the action
of the corporation in complying with its obligations as provided in this
section was arbitrary, vexatious or otherwise not in good faith. In
making any determination as provided in clause (A), the court may
consider the dollar amount or the percentage, or both, by which the fair
value of the shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to
be due him, upon surrender of the certificates for any such shares
represented by certificates.
(i) Shares acquired by the corporation upon the payment of the agreed
value therefor or of the amount due under the final order, as provided
in this section, shall become treasury shares or be cancelled as
provided in section 515 (Reacquired shares), except that, in the case of
a merger or consolidation, they may be held and disposed of as the plan
of merger or consolidation may otherwise provide.
(j) No payment shall be made to a dissenting shareholder under this
section at a time when the corporation is insolvent or when such payment
would make it insolvent. In such event, the dissenting shareholder
shall, at his option:
(1) Withdraw his notice of election, which shall in such event be
deemed withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it
is liquidated, be subordinated to the rights of creditors of the
corporation, but have rights superior to the non-dissenting
shareholders, and if it is not liquidated, retain his right to be paid
for his shares, which right the corporation shall be obliged to satisfy
when the restrictions of this paragraph do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation
within thirty days after the corporation has given him written notice
that payment for his shares cannot be made because of the restrictions
of this paragraph. If the dissenting shareholder fails to exercise such
option as provided, the corporation shall exercise the option by written
notice given to him within twenty days after the expiration of such
period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment
for his shares in the manner provided herein shall exclude the
enforcement by such shareholder of any other right to which he might
otherwise be entitled by virtue of share ownership, except as provided
in paragraph (e), and except that this section shall not exclude the
right of such shareholder to bring or maintain an appropriate action to
obtain relief on the ground that such corporate action will be or is
unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice
to be given by a corporation to a shareholder under this section shall
be given in the manner provided in section 605 (Notice of meetings of
shareholders).
(m) This section shall not apply to foreign corporations except as
provided in subparagraph (e) (2) of section 907 (Merger or consolidation
of domestic and foreign corporations).
Books and records; right of inspection, prima facie evidence.
(a) Each corporation shall keep correct and complete books and records
of account and shall keep minutes of the proceedings of its
shareholders, board and executive committee, if any, and shall keep at
the office of the corporation in this state or at the office of its
transfer agent or registrar in this state, a record containing the names
and addresses of all shareholders, the number and class of shares held
by each and the dates when they respectively became the owners of record
thereof. Any of the foregoing books, minutes or records may be in
written form or in any other form capable of being converted into
written form within a reasonable time.
(b) Any person who shall have been a shareholder of record of a
corporation upon at least five days' written demand shall have the right
to examine in person or by agent or attorney, during usual business
hours, its minutes of the proceedings of its shareholders and record of
shareholders and to make extracts therefrom for any purpose reasonably
related to such person's interest as a shareholder. Holders of voting
trust certificates representing shares of the corporation shall be
regarded as shareholders for the purpose of this section. Any such
agent or attorney shall be authorized in a writing that satisfies the
requirements of a writing under paragraph (b) of section 609 (Proxies).
A corporation requested to provide information pursuant to this
paragraph shall make available such information in written form and in
any other format in which such information is maintained by the
corporation and shall not be required to provide such information in any
other format. If a request made pursuant to this paragraph includes a
request to furnish information regarding beneficial owners, the
corporation shall make available such information in its possession
regarding beneficial owners as is provided to the corporation by a
registered broker or dealer or a bank, association or other entity that
exercises fiduciary powers in connection with the forwarding of
information to such owners. The corporation shall not be required to
obtain information about beneficial owners not in its possession.
(c) An inspection authorized by paragraph (b) may be denied to such
shareholder or other person upon his refusal to furnish to the
corporation, its transfer agent or registrar an affidavit that such
inspection is not desired for a purpose which is in the interest of a
business or object other than the business of the corporation and that
he has not within five years sold or offered for sale any list of
shareholders of any corporation of any type or kind, whether or not
formed under the laws of this state, or aided or abetted any person in
procuring any such record of shareholders for any such purpose.
(d) Upon refusal by the corporation or by an officer or agent of the
corporation to permit an inspection of the minutes of the proceedings of
its shareholders or of the record of shareholders as herein provided,
the person making the demand for inspection may apply to the supreme
court in the judicial district where the office of the corporation is
located, upon such notice as the court may direct, for an order
directing the corporation, its officer or agent to show cause why an
order should not be granted permitting such inspection by the applicant.
Upon the return day of the order to show cause, the court shall hear the
parties summarily, by affidavit or otherwise, and if it appears that the
applicant is qualified and entitled to such inspection, the court shall
grant an order compelling such inspection and awarding such further
relief as to the court may seem just and proper.
(e) Upon the written request of any shareholder, the corporation shall
give or mail to such shareholder an annual balance sheet and profit and
loss statement for the preceding fiscal year, and, if any interim
balance sheet or profit and loss statement has been distributed to its
shareholders or otherwise made available to the public, the most recent
such interim balance sheet or profit and loss statement. The corporation
shall be allowed a reasonable time to prepare such annual balance sheet
and profit and loss statement.
(f) Nothing herein contained shall impair the power of courts to
compel the production for examination of the books and records of a
corporation.
(g) The books and records specified in paragraph (a) shall be prima
facie evidence of the facts therein stated in favor of the plaintiff in
any action or special proceeding against such corporation or any of its
officers, directors or shareholders.
Infant shareholders and bondholders.
(a) A corporation may treat an infant who holds shares or bonds of
such corporation as having capacity to receive and to empower others to
receive dividends, interest, principal and other payments and
distributions, to vote or express consent or dissent, in person or by
proxy, and to make elections and exercise rights relating to such shares
or bonds, unless, in the case of shares, the corporate officer
responsible for maintaining the list of shareholders or the transfer
agent of the corporation or, in the case of bonds, the treasurer or
paying officer or agent has received written notice that such holder is
an infant.
(b) An infant holder of shares or bonds of a corporation who has
received or empowered others to receive payments or distributions, voted
or expressed consent or dissent, or made an election or exercised a
right relating thereto, shall have no right thereafter to disaffirm or
avoid, as against the corporation, any such act on his part, unless
prior to such receipt, vote, consent, dissent, election or exercise, as
to shares, the corporate officer responsible for maintaining the list of
shareholders or its transfer agent or, in the case of bonds, the
treasurer or paying officer had received written notice that such holder
was an infant.
(c) This section does not limit any other statute which authorizes any
corporation to deal with an infant or limits the right of an infant to
disaffirm his acts.
Shareholders' derivative action brought in the right of the
corporation to procure a judgment in its favor.
(a) An action may be brought in the right of a domestic or foreign
corporation to procure a judgment in its favor, by a holder of shares or
of voting trust certificates of the corporation or of a beneficial
interest in such shares or certificates.
(b) In any such action, it shall be made to appear that the plaintiff
is such a holder at the time of bringing the action and that he was such
a holder at the time of the transaction of which he complains, or that
his shares or his interest therein devolved upon him by operation of
law.
(c) In any such action, the complaint shall set forth with
particularity the efforts of the plaintiff to secure the initiation of
such action by the board or the reasons for not making such effort.
(d) Such action shall not be discontinued, compromised or settled,
without the approval of the court having jurisdiction of the action. If
the court shall determine that the interests of the shareholders or any
class or classes thereof will be substantially affected by such
discontinuance, compromise, or settlement, the court, in its discretion,
may direct that notice, by publication or otherwise, shall be given to
the shareholders or class or classes thereof whose interests it
determines will be so affected; if notice is so directed to be given,
the court may determine which one or more of the parties to the action
shall bear the expense of giving the same, in such amount as the court
shall determine and find to be reasonable in the circumstances, and the
amount of such expense shall be awarded as special costs of the action
and recoverable in the same manner as statutory taxable costs.
(e) If the action on behalf of the corporation was successful, in
whole or in part, or if anything was received by the plaintiff or
plaintiffs or a claimant or claimants as the result of a judgment,
compromise or settlement of an action or claim, the court may award the
plaintiff or plaintiffs, claimant or claimants, reasonable expenses,
including reasonable attorney's fees, and shall direct him or them to
account to the corporation for the remainder of the proceeds so received
by him or them. This paragraph shall not apply to any judgment rendered
for the benefit of injured shareholders only and limited to a recovery
of the loss or damage sustained by them.
Security for expenses in shareholders' derivative action brought
in the right of the corporation to procure a judgment in its
favor.
In any action specified in section 626 (Shareholders' derivative
action brought in the right of the corporation to procure a judgment in
its favor), unless the plaintiff or plaintiffs hold five percent or more
of any class of the outstanding shares or hold voting trust certificates
or a beneficial interest in shares representing five percent or more of
any class of such shares, or the shares, voting trust certificates and
beneficial interest of such plaintiff or plaintiffs have a fair value in
excess of fifty thousand dollars, the corporation in whose right such
action is brought shall be entitled at any stage of the proceedings
before final judgment to require the plaintiff or plaintiffs to give
security for the reasonable expenses, including attorney's fees, which
may be incurred by it in connection with such action and by the other
parties defendant in connection therewith for which the corporation may
become liable under this chapter, under any contract or otherwise under
law, to which the corporation shall have recourse in such amount as the
court having jurisdiction of such action shall determine upon the
termination of such action. The amount of such security may thereafter
from time to time be increased or decreased in the discretion of the
court having jurisdiction of such action upon showing that the security
provided has or may become inadequate or excessive.
Liability of subscribers and shareholders.
(a) A holder of or subscriber for shares of a corporation shall be
under no obligation to the corporation for payment for such shares other
than the obligation to pay the unpaid portion of his subscription which
in no event shall be less than the amount of the consideration for which
such shares could be issued lawfully.
(b) Any person becoming an assignee or transferee of shares or of a
subscription for shares in good faith and without knowledge or notice
that the full consideration therefor has not been paid shall not be
personally liable for any unpaid portion of such consideration, but the
transferor shall remain liable therefor.
(c) No person holding shares in any corporation as collateral security
shall be personally liable as a shareholder but the person pledging such
shares shall be considered the holder thereof and shall be so liable.
No executor, administrator, guardian, trustee or other fiduciary shall
be personally liable as a shareholder, but the estate and funds in the
hands of such executor, administrator, guardian, trustee or other
fiduciary shall be liable.
Certain transfers or assignments by shareholders or subscribers;
effect.
Any transfer or assignment by a shareholder of his shares, or by a
subscriber for shares of his interest in the corporation, shall not
relieve him of any liability as a shareholder or subscriber if at the
time of such transfer or assignment the aggregate of the corporation's
property, exclusive of any property which it may have conveyed,
transferred, concealed, removed, or permitted to be concealed or
removed, with intent to defraud, hinder or delay its creditors, is not
at a fair valuation sufficient in amount to pay its debts, or if such
condition is imminent.
Liability of shareholders for wages due to laborers, servants or
employees.
(a) The ten largest shareholders, as determined by the fair value of
their beneficial interest as of the beginning of the period during which
the unpaid services referred to in this section are performed, of every
domestic corporation or of any foreign corporation, when the unpaid
services were performed in the state, no shares of which are listed on a
national securities exchange or regularly quoted in an over-the-counter
market by one or more members of a national or an affiliated securities
association, shall jointly and severally be personally liable for all
debts, wages or salaries due and owing to any of its laborers, servants
or employees other than contractors, for services performed by them for
such corporation. Before such laborer, servant or employee shall charge
such shareholder for such services, he shall give notice in writing to
such shareholder that he intends to hold him liable under this section.
Such notice shall be given within one hundred and eighty days after
termination of such services, except that if, within such period, the
laborer, servant or employee demands an examination of the record of
shareholders under paragraph (b) of section 624 (Books and records;
right of inspection, prima facie evidence) of this article, such notice
may be given within sixty days after he has been given the opportunity
to examine the record of shareholders. An action to enforce such
liability shall be commenced within ninety days after the return of an
execution unsatisfied against the corporation upon a judgment recovered
against it for such services. The provisions of this paragraph shall not
apply to an investment company registered as such under an act of
congress entitled "Investment Company Act of 1940."
(b) For the purposes of this section, wages or salaries shall mean all
compensation and benefits payable by an employer to or for the account
of the employee for personal services rendered by such employee. These
shall specifically include but not be limited to salaries, overtime,
vacation, holiday and severance pay; employer contributions to or
payments of insurance or welfare benefits; employer contributions to
pension or annuity funds; and any other moneys properly due or payable
for services rendered by such employee.
(c) A shareholder who has paid more than his pro rata share under this
section shall be entitled to contribution pro rata from the other
shareholders liable under this section with respect to the excess so
paid, over and above his pro rata share, and may sue them jointly or
severally or any number of them to recover the amount due from them.
Such recovery may be had in a separate action. As used in this
paragraph, "pro rata" means in proportion to beneficial share interest.
Before a shareholder may claim contribution from other shareholders
under this paragraph, he shall, unless they have been given notice by a
laborer, servant or employee under paragraph (a), give them notice in
writing that he intends to hold them so liable to him. Such notice shall
be given by him within twenty days after the date that notice was given
to him by a laborer, servant or employee under paragraph (a).
ARTICLE 7 Directors and Officers
Board of directors.
Subject to any provision in the certificate of incorporation
authorized by paragraph (b) of section 620 (Agreements as to voting;
provision in certificate of incorporation as to control of directors) or
by paragraph (b) of section 715 (Officers), the business of a
corporation shall be managed under the direction of its board of
directors, each of whom shall be at least eighteen years of age. The
certificate of incorporation or the by-laws may prescribe other
qualifications for directors.
Number of directors.
(a) The board of directors shall consist of one or more members. The
number of directors constituting the board may be fixed by the by-laws,
or by action of the shareholders or of the board under the specific
provisions of a by-law adopted by the shareholders. If not otherwise
fixed under this paragraph, the number shall be one. As used in this
article, "entire board" means the total number of directors which the
corporation would have if there were no vacancies.
(b) The number of directors may be increased or decreased by amendment
of the by-laws, or by action of the shareholders or of the board under
the specific provisions of a by-law adopted by the shareholders, subject
to the following limitations:
(1) If the board is authorized by the by-laws to change the number of
directors, whether by amending the by-laws or by taking action under the
specific provisions of a by-law adopted by the shareholders, such
amendment or action shall require the vote of a majority of the entire
board.
(2) No decrease shall shorten the term of any incumbent director.
Election and term of directors.
(a) At each annual meeting of shareholders, directors shall be elected
to hold office until the next annual meeting except as authorized by
section 704 (Classification of directors). The certificate of
incorporation may provide for the election of one or more directors by
the holders of the shares of any class or series, or by the holders of
bonds entitled to vote in the election of directors pursuant to section
518 (Corporate bonds), voting as a class.
(b) Each director shall hold office until the expiration of the term
for which he is elected, and until his successor has been elected and
qualified.
Classification of directors.
(a) The certificate of incorporation or the specific provisions of a
by-law adopted by the shareholders may provide that the directors be
divided into either two, three or four classes. All classes shall be as
nearly equal in number as possible. The terms of office of the
directors initially classified shall be as follows: that of the first
class shall expire at the next annual meeting of shareholders, the
second class at the second succeeding annual meeting, the third class,
if any, at the third succeeding annual meeting, and the fourth class, if
any, at the fourth succeeding annual meeting.
(b) At each annual meeting after such initial classification,
directors to replace those whose terms expire at such annual meeting
shall be elected to hold office until the second succeeding annual
meeting if there are two classes, the third succeeding annual meeting if
there are three classes, or the fourth succeeding annual meeting if
there are four classes.
(c) If directors are classified and the number of directors is
thereafter changed:
(1) Any newly created directorships or any decrease in directorships
shall be so apportioned among the classes as to make all classes as
nearly equal in number as possible.
(2) When the number of directors is increased by the board and any
newly created directorships are filled by the board, there shall be no
classification of the additional directors until the next annual meeting
of shareholders.
Newly created directorships and vacancies.
(a) Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the board for any reason
except the removal of directors without cause may be filled by vote of
the board. If the number of the directors then in office is less than a
quorum, such newly created directorships and vacancies may be filled by
vote of a majority of the directors then in office. Nothing in this
paragraph shall affect any provision of the certificate of incorporation
or the by-laws which provides that such newly created directorships or
vacancies shall be filled by vote of the shareholders, or any provision
of the certificate of incorporation specifying greater requirements as
permitted under section 709 (Greater requirements as to quorum and vote
of directors).
(b) Unless the certificate of incorporation or the specific provisions
of a by-law adopted by the shareholders provide that the board may fill
vacancies occurring in the board by reason of the removal of directors
without cause, such vacancies may be filled only by vote of the
shareholders.
(c) A director elected to fill a vacancy, unless elected by the
shareholders, shall hold office until the next meeting of shareholders
at which the election of directors is in the regular order of business,
and until his successor has been elected and qualified.
(d) Unless otherwise provided in the certificate of incorporation or
by-laws, notwithstanding the provisions of paragraphs (a) and (b) of
this section, whenever the holders of any class or classes of shares or
series thereof are entitled to elect one or more directors by the
certificate of incorporation, any vacancy that may be filled by the
board or a majority of the directors then in office, as the case may be,
shall be filled by a majority of the directors elected by such class or
classes or series thereof then in office, or, if no such director is in
office, then as provided in paragraph (a) or (b) of this section, as the
case may be.
Removal of directors.
(a) Any or all of the directors may be removed for cause by vote of
the shareholders. The certificate of incorporation or the specific
provisions of a by-law adopted by the shareholders may provide for such
removal by action of the board, except in the case of any director
elected by cumulative voting, or by the holders of the shares of any
class or series, or holders of bonds, voting as a class, when so
entitled by the provisions of the certificate of incorporation.
(b) If the certificate of incorporation or the by-laws so provide, any
or all of the directors may be removed without cause by vote of the
shareholders.
(c) The removal of directors, with or without cause, as provided in
paragraphs (a) and (b) is subject to the following:
(1) In the case of a corporation having cumulative voting, no director
may be removed when the votes cast against his removal would be
sufficient to elect him if voted cumulatively at an election at which
the same total number of votes were cast and the entire board, or the
entire class of directors of which he is a member, were then being
elected; and
(2) When by the provisions of the certificate of incorporation the
holders of the shares of any class or series, or holders of bonds,
voting as a class, are entitled to elect one or more directors, any
director so elected may be removed only by the applicable vote of the
holders of the shares of that class or series, or the holders of such
bonds, voting as a class.
(d) An action to procure a judgment removing a director for cause may
be brought by the attorney-general or by the holders of ten percent of
the outstanding shares, whether or not entitled to vote. The court may
bar from re-election any director so removed for a period fixed by the
court.
Quorum of directors.
Unless a greater proportion is required by the certificate of
incorporation, a majority of the entire board shall constitute a quorum
for the transaction of business or of any specified item of business,
except that the certificate of incorporation or the by-laws may fix the
quorum at less than a majority of the entire board but not less than
one-third thereof.
Action by the board.
(a) Except as otherwise provided in this chapter, any reference in
this chapter to corporate action to be taken by the board shall mean
such action at a meeting of the board.
* (b) Unless otherwise restricted by the certificate of incorporation
or the by-laws, any action required or permitted to be taken by the
board or any committee thereof may be taken without a meeting if all
members of the board or the committee consent in writing to the adoption
of a resolution authorizing the action. The resolution and the written
consents thereto by the members of the board or committee shall be filed
with the minutes of the proceedings of the board or committee. For the
duration of the state disaster emergency declared by executive order two
hundred two that began on March seventh, two thousand twenty, or until
December thirty-first, two thousand twenty-one, whichever is later,
notwithstanding any provision of law to the contrary, the written
consent of a member may be made electronically, where such consent is
submitted via electronic mail along with information from which it can
be reasonably determined that the transmission was authorized by such
member.
* NB Separately amended; cannot be put together
* (b) Unless otherwise restricted by the certificate of incorporation
or the by-laws, any action required or permitted to be taken by the
board or any committee thereof may be taken without a meeting if all
members of the board or the committee consent in writing to the adoption
of a resolution authorizing the action. The resolution and the written
consents thereto by the members of the board or committee shall be filed
with the minutes of the proceedings of the board or committee.
Notwithstanding any provision of law to the contrary, the written
consent of a member may be made electronically, where such consent is
submitted via electronic mail, text, or other secured platform for
electronic communications, along with information from which it can be
reasonably determined that the transmission was authorized by such
member.
* NB Separately amended; cannot be put together
(c) Unless otherwise restricted by the certificate of incorporation or
the by-laws, any one or more members of the board or any committee
thereof may participate in a meeting of such board or committee by means
of a conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at
a meeting.
(d) Except as otherwise provided in this chapter, the vote of a
majority of the directors present at the time of the vote, if a quorum
is present at such time, shall be the act of the board.
(e) In the case of corporations owning or leasing residential premises
and operating the same on a cooperative basis, changes including the
adoption, amendment or repeal of the by-laws by the board of directors
shall be provided to the members, stockholders, and delegates of such
corporation in writing, by physical or electronic means, within ten days
of such adoption.
(f) Upon the adoption, amendment or repeal of by-laws by the board of
directors of a corporation owning or leasing residential premises and
operating the same on a cooperative basis pursuant to subdivision (e) of
this section, where such change would have a direct effect on the
resident's occupancy or the rules of the building, the board of
directors shall post the adopted, amended, or repealed by-laws
conspicuously to ensure tenants will be aware of such adoption.
Greater requirement as to quorum and vote of directors.
(a) The certificate of incorporation may contain provisions specifying
either or both of the following:
(1) That the proportion of directors that shall constitute a quorum
for the transaction of business or of any specified item of business
shall be greater than the proportion prescribed by this chapter in the
absence of such provision.
(2) That the proportion of votes of directors that shall be necessary
for the transaction of business or of any specified item of business
shall be greater than the proportion prescribed by this chapter in the
absence of such provision.
(b) (1) An amendment of the certificate of incorporation which changes
or strikes out a provision permitted by this section shall be authorized
at a meeting of shareholders by (A) (i) for any corporation in existence
on the effective date of subparagraph (2) of this paragraph, two-thirds
of the votes of all outstanding shares entitled to vote thereon, and
(ii) for any corporation in existence on the effective date of this
clause the certificate of incorporation of which expressly provides such
and for any corporation incorporated after the effective date of
subparagraph (2) of this paragraph, a majority of the votes of all
outstanding shares entitled to vote thereon or (B) in either case, such
greater proportion of votes of shares, or votes of a class or series of
shares, as may be provided specifically in the certificate of
incorporation for changing or striking out a provision permitted by this
section.
(2) Any corporation may adopt an amendment of the certificate of
incorporation in accordance with any applicable clause or subclause of
subparagraph (1) of this paragraph to provide that any further amendment
of the certificate of incorporation that changes or strikes out a
provision permitted by this section shall be authorized at a meeting of
the shareholders by a specified proportion of the votes of the shares,
or particular class or series of shares, entitled to vote thereon,
provided that such proportion may not be less than a majority.
Place and time of meetings of the board.
Meetings of the board, regular or special, may be held at any place
within or without this state, unless otherwise provided by the
certificate of incorporation or the by-laws. The time and place for
holding meetings of the board may be fixed by or under the by-laws, or,
if not so fixed, by the board.
Notice of meetings of the board.
(a) Unless otherwise provided by the by-laws, regular meetings of the
board may be held without notice if the time and place of such meetings
are fixed by the by-laws or the board. Special meetings of the board
shall be held upon notice to the directors.
(b) The by-laws may prescribe what shall constitute notice of meeting
of the board. A notice, or waiver of notice, need not specify the
purpose of any regular or special meeting of the board, unless required
by the by-laws.
(c) Notice of a meeting need not be given to any director who submits
a signed waiver of notice whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
(d) A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. If the
by-laws so provide, notice of any adjournment of a meeting of the board
to another time or place shall be given to the directors who were not
present at the time of the adjournment and, unless such time and place
are announced at the meeting, to the other directors.
Executive committee and other committees.
(a) If the certificate of incorporation or the by-laws so provide, the
board, by resolution adopted by a majority of the entire board, may
designate from among its members an executive committee and other
committees, each consisting of one or more directors, and each of which,
to the extent provided in the resolution or in the certificate of
incorporation or by-laws, shall have all the authority of the board,
except that no such committee shall have authority as to the following
matters:
(1) The submission to shareholders of any action that needs
shareholders' approval under this chapter.
(2) The filling of vacancies in the board of directors or in any
committee.
(3) The fixing of compensation of the directors for serving on the
board or on any committee.
(4) The amendment or repeal of the by-laws, or the adoption of new
by-laws.
(5) The amendment or repeal of any resolution of the board which by
its terms shall not be so amendable or repealable.
(b) The board may designate one or more directors as alternate members
of any such committee, who may replace any absent or disqualified member
or members at any meeting of such committee.
(c) Each such committee shall serve at the pleasure of the board. The
designation of any such committee, the delegation thereto of authority,
or action by any such committee pursuant to such authority shall not
alone constitute performance by any member of the board who is not a
member of the committee in question, of his duty to the corporation
under section 717 (Duty of directors).
Interested directors.
(a) No contract or other transaction between a corporation and one or
more of its directors, or between a corporation and any other
corporation, firm, association or other entity in which one or more of
its directors are directors or officers, or have a substantial financial
interest, shall be either void or voidable for this reason alone or by
reason alone that such director or directors are present at the meeting
of the board, or of a committee thereof, which approves such contract or
transaction, or that his or their votes are counted for such purpose:
(1) If the material facts as to such director's interest in such
contract or transaction and as to any such common directorship,
officership or financial interest are disclosed in good faith or known
to the board or committee, and the board or committee approves such
contract or transaction by a vote sufficient for such purpose without
counting the vote of such interested director or, if the votes of the
disinterested directors are insufficient to constitute an act of the
board as defined in section 708 (Action by the board), by unanimous vote
of the disinterested directors; or
(2) If the material facts as to such director's interest in such
contract or transaction and as to any such common directorship,
officership or financial interest are disclosed in good faith or known
to the shareholders entitled to vote thereon, and such contract or
transaction is approved by vote of such shareholders.
(b) If a contract or other transaction between a corporation and one
or more of its directors, or between a corporation and any other
corporation, firm, association or other entity in which one or more of
its directors are directors or officers, or have a substantial financial
interest, is not approved in accordance with paragraph (a), the
corporation may avoid the contract or transaction unless the party or
parties thereto shall establish affirmatively that the contract or
transaction was fair and reasonable as to the corporation at the time it
was approved by the board, a committee or the shareholders.
(c) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board or of a committee which
approves such contract or transaction.
(d) The certificate of incorporation may contain additional
restrictions on contracts or transactions between a corporation and its
directors and may provide that contracts or transactions in violation of
such restrictions shall be void or voidable by the corporation.
(e) Unless otherwise provided in the certificate of incorporation or
the by-laws, the board shall have authority to fix the compensation of
directors for services in any capacity.
Loans to directors.
(a) A corporation may not lend money to or guarantee the obligation of
a director of the corporation unless:
(1) the particular loan or guarantee is approved by the shareholders,
with the holders of a majority of the votes of the shares entitled to
vote thereon constituting a quorum, but shares held of record or
beneficially by directors who are benefitted by such loan or guarantee
shall not be entitled to vote or to be included in the determination of
a quorum; or
(2) with respect to any corporation in existence on the effective date
of this subparagraph (2) the certificate of incorporation of which
expressly provides such and with respect to any corporation incorporated
after the effective date of this subparagraph (2), the board determines
that the loan or guarantee benefits the corporation and either approves
the specific loan or guarantee or a general plan authorizing loans and
guarantees.
(b) The fact that a loan or guarantee is made in violation of this
section does not affect the borrower's liability on the loan.
Officers.
(a) The board may elect or appoint a president, one or more
vice-presidents, a secretary and a treasurer, and such other officers as
it may determine, or as may be provided in the by-laws.
(b) The certificate of incorporation may provide that all officers or
that specified officers shall be elected by the shareholders instead of
by the board.
(c) Unless otherwise provided in the certificate of incorporation or
the by-laws, all officers shall be elected or appointed to hold office
until the meeting of the board following the next annual meeting of
shareholders or, in the case of officers elected by the shareholders,
until the next annual meeting of shareholders.
(d) Each officer shall hold office for the term for which he is
elected or appointed, and until his successor has been elected or
appointed and qualified.
(e) Any two or more offices may be held by the same person. When all
of the issued and outstanding stock of the corporation is owned by one
person, such person may hold all or any combination of offices.
(f) The board may require any officer to give security for the
faithful performance of his duties.
(g) All officers as between themselves and the corporation shall have
such authority and perform such duties in the management of the
corporation as may be provided in the by-laws or, to the extent not so
provided, by the board.
(h) An officer shall perform his duties as an officer in good faith
and with that degree of care which an ordinarily prudent person in a
like position would use under similar circumstances. In performing his
duties, an officer shall be entitled to rely on information, opinions,
reports or statements including financial statements and other financial
data, in each case prepared or presented by:
(1) one or more other officers or employees of the corporation or of
any other corporation of which at least fifty percentum of the
outstanding shares of stock entitling the holders thereof to vote for
the election of directors is owned directly or indirectly by the
corporation, whom the officer believes to be reliable and competent in
the matters presented, or
(2) counsel, public accountants or other persons as to matters which
the officer believes to be within such person's professional or expert
competence, so long as in so relying he shall be acting in good faith
and with such degree of care, but he shall not be considered to be
acting in good faith if he has knowledge concerning the matter in
question that would cause such reliance to be unwarranted. A person who
so performs his duties shall have no liability by reason of being or
having been an officer of the corporation.
Removal of officers.
(a) Any officer elected or appointed by the board may be removed by
the board with or without cause. An officer elected by the shareholders
may be removed, with or without cause, only by vote of the shareholders,
but his authority to act as an officer may be suspended by the board for
cause.
(b) The removal of an officer without cause shall be without prejudice
to his contract rights, if any. The election or appointment of an
officer shall not of itself create contract rights.
(c) An action to procure a judgment removing an officer for cause may
be brought by the attorney-general or by ten percent of the votes of the
outstanding shares, whether or not entitled to vote. The court may bar
from re-election or reappointment any officer so removed for a period
fixed by the court.
Duty of directors.
(a) A director shall perform his duties as a director, including his
duties as a member of any committee of the board upon which he may
serve, in good faith and with that degree of care which an ordinarily
prudent person in a like position would use under similar circumstances.
In performing his duties, a director shall be entitled to rely on
information, opinions, reports or statements including financial
statements and other financial data, in each case prepared or presented
by:
(1) one or more officers or employees of the corporation or of any
other corporation of which at least fifty percentum of the outstanding
shares of stock entitling the holders thereof to vote for the election
of directors is owned directly or indirectly by the corporation, whom
the director believes to be reliable and competent in the matters
presented,
(2) counsel, public accountants or other persons as to matters which
the director believes to be within such person's professional or expert
competence, or
(3) a committee of the board upon which he does not serve, duly
designated in accordance with a provision of the certificate of
incorporation or the by-laws, as to matters within its designated
authority, which committee the director believes to merit confidence,
so long as in so relying he shall be acting in good faith and with such
degree of care, but he shall not be considered to be acting in good
faith if he has knowledge concerning the matter in question that would
cause such reliance to be unwarranted. A person who so performs his
duties shall have no liability by reason of being or having been a
director of the corporation.
(b) In taking action, including, without limitation, action which may
involve or relate to a change or potential change in the control of the
corporation, a director shall be entitled to consider, without
limitation, (1) both the long-term and the short-term interests of the
corporation and its shareholders and (2) the effects that the
corporation's actions may have in the short-term or in the long-term
upon any of the following:
(i) the prospects for potential growth, development, productivity and
profitability of the corporation;
(ii) the corporation's current employees;
(iii) the corporation's retired employees and other beneficiaries
receiving or entitled to receive retirement, welfare or similar benefits
from or pursuant to any plan sponsored, or agreement entered into, by
the corporation;
(iv) the corporation's customers and creditors; and
(v) the ability of the corporation to provide, as a going concern,
goods, services, employment opportunities and employment benefits and
otherwise to contribute to the communities in which it does business.
Nothing in this paragraph shall create any duties owed by any director
to any person or entity to consider or afford any particular weight to
any of the foregoing or abrogate any duty of the directors, either
statutory or recognized by common law or court decisions.
For purposes of this paragraph, "control" shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of the corporation, whether through the
ownership of voting stock, by contract, or otherwise.
List of directors and officers.
(a) If a shareholder of a corporation, in person or by his attorney or
agent, or a representative of the district attorney or of the secretary
of state, the attorney general, or other state official, makes a written
demand on a corporation to inspect a current list of its directors and
officers, the corporation shall, within two business days after receipt
of the demand and for a period of one week thereafter, make the list
available for such inspection at its office during usual business hours.
(b) Upon refusal by the corporation to make a current list of its
directors and officers available, as provided in paragraph (a), the
person making a demand for such list may apply, ex parte, to the supreme
court at a special term held within the judicial district where the
office of the corporation is located for an order directing the
corporation to make such list available. The court may grant such order
or take such other action as it may deem just and proper.
Liability of directors in certain cases.
(a) Directors of a corporation who vote for or concur in any of the
following corporate actions shall be jointly and severally liable to the
corporation for the benefit of its creditors or shareholders, to the
extent of any injury suffered by such persons, respectively, as a result
of such action:
(1) The declaration of any dividend or other distribution to the
extent that it is contrary to the provisions of paragraphs (a) and (b)
of section 510 (Dividends or other distributions in cash or property).
(2) The purchase of the shares of the corporation to the extent that
it is contrary to the provisions of section 513 (Purchase or redemption
by a corporation of its own shares).
(3) The distribution of assets to shareholders after dissolution of
the corporation without paying or adequately providing for all known
liabilities of the corporation, excluding any claims not filed by
creditors within the time limit set in a notice given to creditors under
articles 10 (Non-judicial dissolution) or 11 (Judicial dissolution).
(4) The making of any loan contrary to section 714 (Loans to
directors).
(b) A director who is present at a meeting of the board, or any
committee thereof, when action specified in paragraph (a) is taken shall
be presumed to have concurred in the action unless his dissent thereto
shall be entered in the minutes of the meeting, or unless he shall
submit his written dissent to the person acting as the secretary of the
meeting before the adjournment thereof, or shall deliver or send by
registered mail such dissent to the secretary of the corporation
promptly after the adjournment of the meeting. Such right to dissent
shall not apply to a director who voted in favor of such action. A
director who is absent from a meeting of the board, or any committee
thereof, when such action is taken shall be presumed to have concurred
in the action unless he shall deliver or send by registered mail his
dissent thereto to the secretary of the corporation or shall cause such
dissent to be filed with the minutes of the proceedings of the board or
committee within a reasonable time after learning of such action.
(c) Any director against whom a claim is successfully asserted under
this section shall be entitled to contribution from the other directors
who voted for or concurred in the action upon which the claim is
asserted.
(d) Directors against whom a claim is successfully asserted under this
section shall be entitled, to the extent of the amounts paid by them to
the corporation as a result of such claims:
(1) Upon payment to the corporation of any amount of an improper
dividend or distribution, to be subrogated to the rights of the
corporation against shareholders who received such dividend or
distribution with knowledge of facts indicating that it was not
authorized by section 510, in proportion to the amounts received by them
respectively.
(2) Upon payment to the corporation of any amount of the purchase
price of an improper purchase of shares, to have the corporation rescind
such purchase of shares and recover for their benefit, but at their
expense, the amount of such purchase price from any seller who sold such
shares with knowledge of facts indicating that such purchase of shares
by the corporation was not authorized by section 513.
(3) Upon payment to the corporation of the claim of any creditor by
reason of a violation of subparagraph (a) (3), to be subrogated to the
rights of the corporation against shareholders who received an improper
distribution of assets.
(4) Upon payment to the corporation of the amount of any loan made
contrary to section 714, to be subrogated to the rights of the
corporation against a director who received the improper loan.
(e) A director shall not be liable under this section if, in the
circumstances, he performed his duty to the corporation under paragraph
(a) of section 717.
(f) This section shall not affect any liability otherwise imposed by
law upon any director.
Action against directors and officers for misconduct.
(a) An action may be brought against one or more directors or officers
of a corporation to procure a judgment for the following relief:
(1) Subject to any provision of the certificate of incorporation
authorized pursuant to paragraph (b) of section 402, to compel the
defendant to account for his official conduct in the following cases:
(A) The neglect of, or failure to perform, or other violation of his
duties in the management and disposition of corporate assets committed
to his charge.
(B) The acquisition by himself, transfer to others, loss or waste of
corporate assets due to any neglect of, or failure to perform, or other
violation of his duties.
(C) In the case of directors or officers of a benefit corporation
organized under article seventeen of this chapter: (i) the failure to
pursue the general public benefit purpose of a benefit corporation or
any specific public benefit set forth in its certificate of
incorporation; (ii) the failure by a benefit corporation to deliver or
post an annual report as required by section seventeen hundred eight of
article seventeen of this chapter; or (iii) the neglect of, or failure
to perform, or other violation of his or her duties or standard of
conduct under article seventeen of this chapter.
(2) To set aside an unlawful conveyance, assignment or transfer of
corporate assets, where the transferee knew of its unlawfulness.
(3) To enjoin a proposed unlawful conveyance, assignment or transfer
of corporate assets, where there is sufficient evidence that it will be
made.
(b) An action may be brought for the relief provided in this section,
and in paragraph (a) of section 719 (Liability of directors in certain
cases) by a corporation, or a receiver, trustee in bankruptcy, officer,
director or judgment creditor thereof, or, under section 626
(Shareholders' derivative action brought in the right of the corporation
to procure a judgment in its favor), by a shareholder, voting trust
certificate holder, or the owner of a beneficial interest in shares
thereof.
(c) This section shall not affect any liability otherwise imposed by
law upon any director or officer.
Nonexclusivity of statutory provisions for indemnification of
directors and officers.
The indemnification and advancement of expenses granted pursuant to,
or provided by, this article shall not be deemed exclusive of any other
rights to which a director or officer seeking indemnification or
advancement of expenses may be entitled, whether contained in the
certificate of incorporation or the by-laws or, when authorized by such
certificate of incorporation or by-laws, (i) a resolution of
shareholders, (ii) a resolution of directors, or (iii) an agreement
providing for such indemnification, provided that no indemnification may
be made to or on behalf of any director or officer if a judgment or
other final adjudication adverse to the director or officer establishes
that his acts were committed in bad faith or were the result of active
and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or
other advantage to which he was not legally entitled. Nothing contained
in this article shall affect any rights to indemnification to which
corporate personnel other than directors and officers may be entitled by
contract or otherwise under law.
Authorization for indemnification of directors and officers.
(a) A corporation may indemnify any person made, or threatened to be
made, a party to an action or proceeding (other than one by or in the
right of the corporation to procure a judgment in its favor), whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the corporation served in
any capacity at the request of the corporation, by reason of the fact
that he, his testator or intestate, was a director or officer of the
corporation, or served such other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in any
capacity, against judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees actually and necessarily
incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted, in good faith, for a purpose
which he reasonably believed to be in, or, in the case of service for
any other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best interests of
the corporation and, in criminal actions or proceedings, in addition,
had no reasonable cause to believe that his conduct was unlawful.
(b) The termination of any such civil or criminal action or proceeding
by judgment, settlement, conviction or upon a plea of nolo contendere,
or its equivalent, shall not in itself create a presumption that any
such director or officer did not act, in good faith, for a purpose which
he reasonably believed to be in, or, in the case of service for any
other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best interests of
the corporation or that he had reasonable cause to believe that his
conduct was unlawful.
(c) A corporation may indemnify any person made, or threatened to be
made, a party to an action by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he, his
testator or intestate, is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of any other corporation of any type or kind,
domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him in connection with the defense or settlement of such
action, or in connection with an appeal therein, if such director or
officer acted, in good faith, for a purpose which he reasonably believed
to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other
enterprise, not opposed to, the best interests of the corporation,
except that no indemnification under this paragraph shall be made in
respect of (1) a threatened action, or a pending action which is settled
or otherwise disposed of, or (2) any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation,
unless and only to the extent that the court in which the action was
brought, or, if no action was brought, any court of competent
jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled
to indemnity for such portion of the settlement amount and expenses as
the court deems proper.
(d) For the purpose of this section, a corporation shall be deemed to
have requested a person to serve an employee benefit plan where the
performance by such person of his duties to the corporation also imposes
duties on, or otherwise involves services by, such person to the plan or
participants or beneficiaries of the plan; excise taxes assessed on a
person with respect to an employee benefit plan pursuant to applicable
law shall be considered fines; and action taken or omitted by a person
with respect to an employee benefit plan in the performance of such
person's duties for a purpose reasonably believed by such person to be
in the interest of the participants and beneficiaries of the plan shall
be deemed to be for a purpose which is not opposed to the best interests
of the corporation.
Payment of indemnification other than by court award.
(a) A person who has been successful, on the merits or otherwise, in
the defense of a civil or criminal action or proceeding of the character
described in section 722 shall be entitled to indemnification as
authorized in such section.
(b) Except as provided in paragraph (a), any indemnification under
section 722 or otherwise permitted by section 721, unless ordered by a
court under section 724 (Indemnification of directors and officers by a
court), shall be made by the corporation, only if authorized in the
specific case:
(1) By the board acting by a quorum consisting of directors who are
not parties to such action or proceeding upon a finding that the
director or officer has met the standard of conduct set forth in section
722 or established pursuant to section 721, as the case may be, or,
(2) If a quorum under subparagraph (1) is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs;
(A) By the board upon the opinion in writing of independent legal
counsel that indemnification is proper in the circumstances because the
applicable standard of conduct set forth in such sections has been met
by such director or officer, or
(B) By the shareholders upon a finding that the director or officer
has met the applicable standard of conduct set forth in such sections.
(c) Expenses incurred in defending a civil or criminal action or
proceeding may be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount as, and
to the extent, required by paragraph (a) of section 725.
Indemnification of directors and officers by a court.
(a) Notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary resolution of the board or of
the shareholders in the specific case under section 723 (Payment of
indemnification other than by court award), indemnification shall be
awarded by a court to the extent authorized under section 722
(Authorization for indemnification of directors and officers), and
paragraph (a) of section 723. Application therefor may be made, in every
case, either:
(1) In the civil action or proceeding in which the expenses were
incurred or other amounts were paid, or
(2) To the supreme court in a separate proceeding, in which case the
application shall set forth the disposition of any previous application
made to any court for the same or similar relief and also reasonable
cause for the failure to make application for such relief in the action
or proceeding in which the expenses were incurred or other amounts were
paid.
(b) The application shall be made in such manner and form as may be
required by the applicable rules of court or, in the absence thereof, by
direction of a court to which it is made. Such application shall be upon
notice to the corporation. The court may also direct that notice be
given at the expense of the corporation to the shareholders and such
other persons as it may designate in such manner as it may require.
(c) Where indemnification is sought by judicial action, the court may
allow a person such reasonable expenses, including attorneys' fees,
during the pendency of the litigation as are necessary in connection
with his defense therein, if the court shall find that the defendant has
by his pleadings or during the course of the litigation raised genuine
issues of fact or law.
Other provisions affecting indemnification of directors and
officers.
(a) All expenses incurred in defending a civil or criminal action or
proceeding which are advanced by the corporation under paragraph (c) of
section 723 (Payment of indemnification other than by court award) or
allowed by a court under paragraph (c) of section 724 (Indemnification
of directors and officers by a court) shall be repaid in case the person
receiving such advancement or allowance is ultimately found, under the
procedure set forth in this article, not to be entitled to
indemnification or, where indemnification is granted, to the extent the
expenses so advanced by the corporation or allowed by the court exceed
the indemnification to which he is entitled.
(b) No indemnification, advancement or allowance shall be made under
this article in any circumstance where it appears:
(1) That the indemnification would be inconsistent with the law of the
jurisdiction of incorporation of a foreign corporation which prohibits
or otherwise limits such indemnification;
(2) That the indemnification would be inconsistent with a provision of
the certificate of incorporation, a by-law, a resolution of the board or
of the shareholders, an agreement or other proper corporate action, in
effect at the time of the accrual of the alleged cause of action
asserted in the threatened or pending action or proceeding in which the
expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(3) If there has been a settlement approved by the court, that the
indemnification would be inconsistent with any condition with respect to
indemnification expressly imposed by the court in approving the
settlement.
(c) If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or action by the
shareholders, the corporation shall, not later than the next annual
meeting of shareholders unless such meeting is held within three months
from the date of such payment, and, in any event, within fifteen months
from the date of such payment, mail to its shareholders of record at the
time entitled to vote for the election of directors a statement
specifying the persons paid, the amounts paid, and the nature and status
at the time of such payment of the litigation or threatened litigation.
(d) If any action with respect to indemnification of directors and
officers is taken by way of amendment of the by-laws, resolution of
directors, or by agreement, then the corporation shall, not later than
the next annual meeting of shareholders, unless such meeting is held
within three months from the date of such action, and, in any event,
within fifteen months from the date of such action, mail to its
shareholders of record at the time entitled to vote for the election of
directors a statement specifying the action taken.
(e) Any notification required to be made pursuant to the foregoing
paragraph (c) or (d) of this section by any domestic mutual insurer
shall be satisfied by compliance with the corresponding provisions of
section one thousand two hundred sixteen of the insurance law.
(f) The provisions of this article relating to indemnification of
directors and officers and insurance therefor shall apply to domestic
corporations and foreign corporations doing business in this state,
except as provided in section 1320 (Exemption from certain provisions).
Insurance for indemnification of directors and officers.
(a) Subject to paragraph (b), a corporation shall have power to
purchase and maintain insurance:
(1) To indemnify the corporation for any obligation which it incurs as
a result of the indemnification of directors and officers under the
provisions of this article, and
(2) To indemnify directors and officers in instances in which they may
be indemnified by the corporation under the provisions of this article,
and
(3) To indemnify directors and officers in instances in which they may
not otherwise be indemnified by the corporation under the provisions of
this article provided the contract of insurance covering such directors
and officers provides, in a manner acceptable to the superintendent of
financial services, for a retention amount and for co-insurance.
(b) No insurance under paragraph (a) may provide for any payment,
other than cost of defense, to or on behalf of any director or officer:
(1) if a judgment or other final adjudication adverse to the insured
director or officer establishes that his acts of active and deliberate
dishonesty were material to the cause of action so adjudicated, or that
he personally gained in fact a financial profit or other advantage to
which he was not legally entitled, or
(2) in relation to any risk the insurance of which is prohibited under
the insurance law of this state.
(c) Insurance under any or all subparagraphs of paragraph (a) may be
included in a single contract or supplement thereto. Retrospective rated
contracts are prohibited.
(d) The corporation shall, within the time and to the persons provided
in paragraph (c) of section 725 (Other provisions affecting
indemnification of directors or officers), mail a statement in respect
of any insurance it has purchased or renewed under this section,
specifying the insurance carrier, date of the contract, cost of the
insurance, corporate positions insured, and a statement explaining all
sums, not previously reported in a statement to shareholders, paid under
any indemnification insurance contract.
(e) This section is the public policy of this state to spread the risk
of corporate management, notwithstanding any other general or special
law of this state or of any other jurisdiction including the federal
government.
Annual reports for certain transactions required.
(a) A condominium created pursuant to the real property law or a
cooperative housing corporation created pursuant to this chapter, shall,
at least once each year:
(1) require that each director, as defined in paragraph five of
subdivision (a) of section one hundred two of this chapter, receive a
copy of section seven hundred thirteen of this chapter; and
(2) submit an annual report to the shareholders, which shall be signed
by each such director, containing information on any contracts made,
entered into, or otherwise voted on by the board of directors where one
or more of the directors was an interested director, pursuant to section
seven hundred thirteen of this chapter.
(b) The annual report required by subdivision (a) of this section
shall include, but not be limited to, the following:
(1) a list of all contracts voted on by the board of directors,
including information on the contract recipient, contract amount, and
the purpose of entering into the contract;
(2) the record of each meeting including director attendance, voting
records for contracts, and how each director voted on such contracts;
and
(3) the date of each vote on each contract, and the date the contract
would be and remain valid.
(c) If the annual report required by subdivision (a) of this section
would, notwithstanding the requirements of this section, contain no
information because of the absence of any actions taken by the board
that would otherwise qualify for inclusion in such annual report, then
the board shall instead submit to the shareholders a document, signed by
each director, indicating: "No actions taken by the board were subject
to the annual report required pursuant to section 727 of the Business
Corporation Law".
ARTICLE 8 Amendments and Changes
Right to amend certificate of incorporation.
(a) A corporation may amend its certificate of incorporation, from
time to time, in any and as many respects as may be desired, if such
amendment contains only such provisions as might be lawfully contained
in an original certificate of incorporation filed at the time of making
such amendment.
(b) In particular, and without limitation upon such general power of
amendment, a corporation may amend its certificate of incorporation,
from time to time, so as:
(1) To change its corporate name.
(2) To enlarge, limit or otherwise change its corporate purposes.
(3) To specify or change the location of the office of the
corporation.
(4) To specify or change the post office address to which the
secretary of state shall mail a copy of any process against the
corporation served upon him.
(5) To make, revoke or change the designation of a registered agent,
or to specify or change the address of its registered agent.
(6) To extend the duration of the corporation or, if the corporation
ceased to exist because of the expiration of the duration specified in
its certificate of incorporation, to revive its existence.
(7) To increase or decrease the aggregate number of shares, or shares
of any class or series, with or without par value, which the corporation
shall have authority to issue.
(8) To remove from authorized shares any class of shares, or any
shares of any class, whether issued or unissued.
(9) To increase the par value of any authorized shares of any class
with par value, whether issued or unissued.
(10) To reduce the par value of any authorized shares of any class
with par value, whether issued or unissued.
(11) To change any authorized shares, with or without par value,
whether issued or unissued, into a different number of shares of the
same class or into the same or a different number of shares of any one
or more classes or any series thereof, either with or without par value.
(12) To fix, change or abolish the designation of any authorized class
or any series thereof or any of the relative rights, preferences and
limitations of any shares of any authorized class or any series thereof,
whether issued or unissued, including any provisions in respect of any
undeclared dividends, whether or not cumulative or accrued, or the
redemption of any shares, or any sinking fund for the redemption or
purchase of any shares, or any preemptive right to acquire shares or
other securities.
(13) As to the shares of any preferred class, then or theretofore
authorized, which may be issued in series, to grant authority to the
board or to change or revoke the authority of the board to establish and
designate series and to fix the number of shares and the relative
rights, preferences and limitation as between series.
(14) To strike out, change or add any provision, not inconsistent with
this chapter or any other statute, relating to the business of the
corporation, its affairs, its rights or powers, or the rights or powers
of its shareholders, directors or officers, including any provision
which under this chapter is required or permitted to be set forth in the
by-laws, except that a certificate of amendment may not be filed wherein
the duration of the corporation shall be reduced.
(15) To specify, change or delete the email address to which the
secretary of state shall email a notice of the fact that process against
the corporation has been electronically served upon him or her.
(c) A corporation created by special act may accomplish any or all
amendments permitted in this article, in the manner and subject to the
conditions provided in this article.
Reduction of stated capital by amendment.
(a) A corporation may reduce its stated capital by an amendment of its
certificate of incorporation under section 801 (Right to amend
certificate of incorporation) which:
(1) Reduces the par value of any issued shares with par value.
(2) Changes issued shares under subparagraph (b) (11) of section 801
that results in a reduction of stated capital.
(3) Removes from authorized shares, shares that have been issued,
reacquired and cancelled by the corporation.
(b) This section shall not prevent a corporation from reducing its
stated capital in any other manner permitted by this chapter.
Authorization of amendment or change.
(a) Amendment or change of the certificate of incorporation may be
authorized by vote of the board, followed by vote of a majority of all
outstanding shares entitled to vote thereon at a meeting of
shareholders; provided, however, that, whenever the certificate of
incorporation requires action by the board of directors, by the holders
of any class or series of shares, or by the holders of any other
securities having voting power by the vote of a greater number or
proportion than is required by any section of this article, the
provision of the certificate of incorporation requiring such greater
vote shall not be altered, amended, or repealed except by such greater
vote; and provided further that an amendment to the certificate of
incorporation for the purpose of reducing the requisite vote by the
holders of any class or series of shares or by the holders of any other
securities having voting power that is otherwise provided for in any
section of this chapter that would otherwise require more than a
majority of the votes of all outstanding shares entitled to vote thereon
shall not be adopted except by the vote of such holders of class or
series of shares or by such holders of such other securities having
voting power that is at least equal to that which would be required to
take the action provided in such other section of this chapter.
(b) Alternatively, any one or more of the following changes may be
authorized by or pursuant to authorization of the board:
(1) To specify or change the location of the corporation's office.
(2) To specify or change the post office address to which the
secretary of state shall mail a copy of any process against the
corporation served upon him.
(3) To make, revoke or change the designation of a registered agent,
or to specify or change the address of its registered agent.
(4) To specify, change or delete the email address to which the
secretary of state shall email a notice of the fact that process against
the corporation has been electronically served upon him or her.
(c) This section shall not alter the vote required under any other
section for the authorization of an amendment referred to therein, nor
alter the authority of the board to authorize amendments under any other
section.
(d) Amendment or change of the certificate of incorporation of a
corporation which has no shareholders of record, no subscribers for
shares whose subscriptions have been accepted and no directors may be
authorized by the sole incorporator or a majority of the incorporators.
Class voting on amendment.
(a) Notwithstanding any provision in the certificate of incorporation,
the holders of shares of a class shall be entitled to vote and to vote
as a class upon the authorization of an amendment and, in addition to
the authorization of the amendment by a majority of the votes of all
outstanding shares entitled to vote thereon, the amendment shall be
authorized by a majority of the votes of all outstanding shares of the
class when a proposed amendment would:
(1) Exclude or limit their right to vote on any matter, except as such
right may be limited by voting rights given to new shares then being
authorized of any existing or new class or series.
(2) Change their shares under subparagraphs (b) (10), (11) or (12) of
section 801 (Right to amend certificate of incorporation) or provide
that their shares may be converted into shares of any other class or
into shares of any other series of the same class, or alter the terms or
conditions upon which their shares are convertible or change the shares
issuable upon conversion of their shares, if such action would adversely
affect such holders, or
(3) Subordinate their rights, by authorizing shares having preferences
which would be in any respect superior to their rights.
(b) If any proposed amendment referred to in paragraph (a) would
adversely affect the rights of the holders of shares of only one or more
series of any class, but not the entire class, then only the holders of
those series whose rights would be affected shall be considered a
separate class for the purposes of this section.
Certificate of amendment; contents.
(a) To accomplish any amendment, a certificate of amendment, entitled
"Certificate of amendment of the certificate of incorporation of
...................................(name of corporation) under section
805 of the Business Corporation Law", shall be signed and delivered to
the department of state. It shall set forth:
(1) The name of the corporation and, if it has been changed, the name
under which it was formed.
(2) The date its certificate of incorporation was filed by the
department of state.
(3) Each amendment effected thereby, setting forth the subject matter
of each provision of the certificate of incorporation which is to be
amended or eliminated and the full text of the provision or provisions,
if any, which are to be substituted or added.
(4) If an amendment provides for a change of shares, the number, par
value and class of issued shares changed, the number, par value and
class of issued shares resulting from such change, the number, par value
and class of unissued shares changed, the number, par value and class of
unissued shares resulting from such change and the terms of each such
change. If an amendment makes two or more such changes, a like statement
shall be included in respect to each change.
(5) If any amendment reduces stated capital, then a statement of the
manner in which the same is effected and the amounts from which and to
which stated capital is reduced.
(6) The manner in which the amendment of the certificate of
incorporation was authorized. If the amendment was authorized under
paragraph (d) of section eight hundred three of this chapter, then a
statement that the corporation does not have any shareholders of record
or any subscribers for shares whose subscriptions have been accepted and
no directors.
(b) Any number of amendments or changes may be included in one
certificate under this section. Such certificate may also include any
amendments or changes permitted by other sections and in that case the
certificate shall set forth any additional statement required by any
other section specifying the contents of a certificate to effect such
amendment or change.
(c) In the case of a change of shares, the shares resulting from such
change, shall upon the filing of the certificate of amendment, be deemed
substituted for the shares changed, in accordance with the stated terms
of change.
Certificate of change; contents.
(a) Any one or more of the changes authorized by paragraph (b) of
section 803 (Authorization of amendment or change) may be accomplished
by filing a certificate of change which shall be entitled "Certificate
of change of .......... (name of corporation) under section 805-A of
the Business Corporation Law" and shall be signed and delivered to the
department of state. It shall set forth:
(1) The name of the corporation, and if it has been changed, the name
under which it was formed.
(2) The date its certificate of incorporation was filed by the
department of state.
(3) Each change effected thereby.
(4) The manner in which the change was authorized.
(b) A certificate of change which changes only the post office address
to which the secretary of state shall mail a copy of any process against
a corporation served upon him or her, and/or the email address to which
the secretary of state shall email a notice of the fact that process
against it has been electronically served upon the secretary of state
and/or the address of the registered agent, provided such address being
changed is the address of a person, partnership or other corporation
whose address, as agent, is the address to be changed, and/or the email
address being changed is the email address of a person, partnership or
corporation whose email address, as agent, is the email address to be
changed, or who has been designated as registered agent for such
corporation, may be signed and delivered to the department of state by
such agent. The certificate of change shall set forth the statements
required under subparagraphs (a) (1), (2) and (3) of this section; that
a notice of the proposed change was mailed to the corporation by the
party signing the certificate not less than thirty days prior to the
date of delivery to the department and that such corporation has not
objected thereto; and that the party signing the certificate is the
agent of such corporation to whose address the secretary of state is
required to mail copies of process, and/or the agent of the corporation
to whose email address the secretary of state is required to mail a
notice of the fact that process against it has been electronically
served upon the secretary of state, and/or the registered agent, if such
be the case. A certificate signed and delivered under this paragraph
shall not be deemed to effect a change of location of the office of the
corporation in whose behalf such certificate is filed.
Provisions as to certain proceedings.
(a) The department of state shall not file a certificate of amendment
reviving the existence of a corporation unless the consent of the state
tax commission to the revival is delivered to the department. If the
name of the corporation being revived is not available under section 301
(Corporate name; general) for use by a corporation then being formed
under this chapter, the certificate of amendment shall change the name
to one which is available for such use.
(b) The following provisions shall apply to amendments and changes
under this article, except under section 808 (Reorganization under act
of congress):
(1) The stated capital in respect of any shares without par value
resulting from a change of issued shares shall be the amount of stated
capital in respect of the shares changed or, if such stated capital is
reduced by the amendment, the reduced amount stated in the certificate
of amendment. No corporation shall change issued shares into both shares
with par value and shares without par value unless the stated capital in
respect of the shares so changed or, if such stated capital is reduced
by the amendment, the reduced amount of stated capital stated in the
certificate of amendment, exceeds the par value of the shares with par
value resulting from such change; and the amount of such excess shall be
the stated capital in respect of the shares without par value resulting
from such change.
(2) No corporation shall increase the aggregate par value of its
issued shares with par value, unless, after giving effect to such
increase, the stated capital is at least equal to the amount required by
subparagraph (a) (12) of section 102 (Definitions).
(3) No reduction of stated capital shall be made by amendment unless
after such reduction the stated capital exceeds the aggregate
preferential amount payable upon involuntary liquidation upon all issued
shares having preferential rights in assets plus the par value of all
other issued shares with par value.
(4) Any changes that may be made in the relative rights, preferences
and limitations of the authorized shares of any class by any certificate
of amendment which does not eliminate such shares from authorized shares
or change them into shares of another class, shall not for the purpose
of any statute or rule of law effect an issue of a new class of shares.
(5) No amendment or change shall affect any existing cause of action
in favor of or against the corporation, or any pending suit to which it
shall be a party, or the existing rights of persons other than
shareholders; and in the event the corporate name shall be changed, no
suit brought by or against the corporation under its former name shall
abate for that reason.
(6) A holder of any adversely affected shares who does not vote for or
consent in writing to the taking of such action shall, subject to and by
complying with the provisions of section 623 (Procedure to enforce
shareholder's right to receive payment for shares), have the right to
dissent and to receive payment for such shares, if the certificate of
amendment (A) alters or abolishes any preferential right of such shares
having preferences; or (B) creates, alters or abolishes any provision or
right in respect of the redemption of such shares or any sinking fund
for the redemption or purchase of such shares; or (C) alters or
abolishes any preemptive right of such holder to acquire shares or other
securities; or (D) excludes or limits the right of such holder to vote
on any matter, except as such right may be limited by the voting rights
given to new shares then being authorized of any existing or new class.
Restated certificate of incorporation.
(a) A corporation, when authorized by the board, may restate in a
single certificate the text of its certificate of incorporation without
making any amendment or change thereby, except that it may include any
one or more of the amendments or changes which may be authorized by the
board without a vote of shareholders under this chapter. Alternatively,
a corporation may restate in a single certificate the text of its
certificate of incorporation as amended thereby to effect any one or
more of the amendments or changes authorized by this chapter, when
authorized by the required vote of the holders of shares entitled to
vote thereon.
(b) A restated certificate of incorporation, entitled "Restated
certificate of incorporation ....... (name of corporation) under section
807 of the Business Corporation Law", shall be signed and delivered to
the department of state. It shall set forth:
(1) The name of the corporation and, if it has been changed, the name
under which it was formed.
(2) The date its certificate of incorporation was filed by the
department of state.
(3) If the restated certificate restates the text of the certificate
of incorporation without making any amendment or change, then a
statement that the text of the certificate of incorporation is thereby
restated without amendment or change to read as therein set forth in
full.
(4) If the restated certificate restates the text of the certificate
of incorporation as amended or changed thereby, then a statement that
the certificate of incorporation is amended or changed to effect one or
more of the amendments or changes authorized by this chapter, specifying
each such amendment or change and that the text of the certificate of
incorporation is thereby restated as amended or changed to read as
therein set forth in full.
(5) If an amendment, effected by the restated certificate, provides
for a change of issued shares, the number and kind of shares changed,
the number and kind of shares resulting from such change and the terms
of change. If any amendment makes two or more such changes, a like
statement shall be included in respect to each such change.
(6) If the restated certificate contains an amendment which effects a
reduction of stated capital, then a statement of the manner in which the
same is effected and the amounts from which and to which stated capital
is reduced.
(7) The manner in which the restatement of the certificate of
incorporation was authorized.
(c) A restated certificate need not include statements as to the
incorporator or incorporators, the original subscribers for shares or
the first directors.
(d) Any amendment or change under this section shall be subject to any
other section, not inconsistent with this section, which would be
applicable if a separate certificate were filed to effect such amendment
or change.
(e) Notwithstanding that the corporation would be required by any
statute to secure from any state official, department, board, agency or
other body, any consent or approval to the filing of its certificate of
incorporation or a certificate of amendment, such consent or approval
shall not be required with respect to the restated certificate if such
certificate makes no amendment and if any previously required consent or
approval had been secured.
(f) Upon filing by the department, the original certificate of
incorporation shall be superseded and the restated certificate of
incorporation, including any amendments and changes made thereby, shall
be the certificate of incorporation of the corporation.
Reorganization under act of congress.
(a) Whenever a plan of reorganization of a corporation has been
confirmed by a decree or order of a court in proceedings under any
applicable act of congress relating to reorganization of corporations,
the corporation shall have authority, without action of its shareholders
or board, to put into effect and carry out the plan and decree and
orders of the court relative thereto, and take any proceeding and any
action for which provision is made in any statute governing the
corporation or for which provision is or might be made in its
certificate of incorporation or by-laws and which is provided for in
such plan or directed by any such decree or order.
(b) Such authority may be exercised, and such proceedings and actions
may be taken, as may be directed by any such decree or order, by the
trustee or trustees of such corporation appointed in the reorganization
proceedings, or if none is acting, by any person or persons designated
or appointed for the purpose by any such decree or order, with like
effect as if exercised and taken by unanimous action of the board and
shareholders of the corporation.
(c) Any certificate, required or permitted by law to be filed or
recorded to accomplish any corporate purpose, shall be signed, and
verified or acknowledged, under any such decree or order, by such
trustee or trustees or the person or persons referred to in paragraph
(b), and shall certify that provision for such certificate is contained
in the plan of reorganization or in a decree or order of the court
relative thereto, and that the plan has been confirmed, as provided in
an applicable act of congress, specified in the certificate, with the
title and venue of the proceeding and the date when the decree or order
confirming the plan was made, and such certificate shall be delivered to
the department of state.
(d) A shareholder of any such corporation shall have no right to
receive payment for his shares and only such rights, if any, as are
provided in the plan of reorganization.
(e) Notwithstanding section 504 (Consideration and payment for
shares), such corporation may, after the confirmation of such plan,
issue its shares, bonds and other securities for the consideration
specified in the plan of reorganization and may issue warrants or other
optional rights for the purchase of shares upon such terms and
conditions as may be set forth in such plan.
(f) If after the filing of any such certificate by the department of
state, the decree or order of confirmation of the plan of reorganization
is reversed or vacated or such plan is modified, such other or further
certificates shall be executed and delivered to the department of state
as may be required to conform to the plan of reorganization as finally
confirmed or to the decree or order as finally made.
(g) Except as otherwise provided in this section, no certificate filed
by the department of state hereunder shall confer on any corporation any
powers other than those permitted to be conferred on a corporation
formed under this chapter.
(h) If, in any proceeding under any applicable act of congress
relating to reorganization of corporations, a decree or order provides
for the formation of a new domestic corporation or for the authorization
of a new foreign corporation to do business in this state under a name
the same as or similar to that of the corporation being reorganized, the
certificate of incorporation of the new domestic corporation or the
application of the new foreign corporation shall set forth that it is
being delivered pursuant to such decree or order and be endorsed with
the consent of the court having jurisdiction of the proceeding. After
such certificate of incorporation or application has been filed, the
corporation being reorganized shall not continue the use of its name
except in connection with the reorganization proceeding and as may be
necessary to adjust and wind up its affairs, and thirty days after such
filing, the reorganized domestic corporation shall be automatically
dissolved or the authority of the reorganized foreign corporation to
transact business in this state shall cease. To the extent that the
adjustment and winding up of the affairs of such dissolved corporation
is not accomplished as a part of the proceeding or prescribed by the
decree or order of such court, it shall proceed in accordance with the
provisions of article 10 (Non-judicial dissolution).
(i) This section shall not relieve any corporation from securing from
any state official, department, board, agency or other body, any consent
or approval required by any statute.
ARTICLE 9 Merger or Consolidation; Guarantee; Disposition of Assets; Share Exchanges
Power of merger or consolidation.
(a) Two or more domestic corporations may, as provided in this
chapter:
(1) Merge into a single corporation which shall be one of the
constituent corporations; or
(2) Consolidate into a single corporation which shall be a new
corporation to be formed pursuant to the consolidation.
(b) Whenever used in this article:
(1) "Merger" means a procedure of the character described in
subparagraph (a) (1).
(2) "Consolidation" means a procedure of the character described in
subparagraph (a) (2).
(3) "Constituent corporation" means an existing corporation that is
participating in the merger or consolidation with one or more other
corporations.
(4) "Surviving corporation" means the constituent corporation into
which one or more other constituent corporations are merged.
(5) "Consolidated corporation" means the new corporation into which
two or more constituent corporations are consolidated.
(6) "Constituent entity" means a domestic or foreign corporation or
other business entity, that is participating in the merger or
consolidation with one or more domestic or foreign corporations.
(7) "Other business entity" means any person other than a natural
person, general partnership (including any registered limited liability
partnership or registered foreign limited liability partnership) or a
domestic or foreign business corporation.
(8) "Person" means any association, corporation, joint stock company,
estate, general partnership (including any registered limited liability
partnership or foreign limited liability partnership), limited
association, limited liability company (including a professional service
limited liability company), foreign limited liability company (including
a foreign professional service limited liability company), joint
venture, limited partnership, natural person, real estate investment
trust, business trust or other trust, custodian, nominee or any other
individual or entity in its own or any representative capacity.
(c) One or more domestic corporations and one or more other business
entities, or one or more foreign corporations and one or more other
business entities may as provided by any other applicable statute and
this chapter:
(1) Merge into a single domestic or foreign corporation or other
business entity, which shall be one of the constituent entities; or
(2) Consolidate into a single domestic or foreign corporation or other
business entity, which shall be a new domestic or foreign corporation or
other business entity to be formed pursuant to the consolidation.
Plan of merger or consolidation.
(a) The board of each corporation proposing to participate in a merger
or consolidation under section 901 (Power of merger or consolidation)
shall adopt a plan of merger or consolidation, setting forth:
(1) The name of each constituent entity and, if the name of any of
them has been changed, the name under which it was formed; and the name
of the surviving corporation, or the name, or the method of determining
it, of the consolidated corporation.
(2) As to each constituent corporation, the designation and number of
outstanding shares of each class and series, specifying the classes and
series entitled to vote and further specifying each class and series, if
any, entitled to vote as a class; and, if the number of any such shares
is subject to change prior to the effective date of the merger or
consolidation, the manner in which such change may occur.
(3) The terms and conditions of the proposed merger or consolidation,
including the manner and basis of converting the shares of each
constituent corporation into shares, bonds or other securities of the
surviving or consolidated corporation, or the cash or other
consideration to be paid or delivered in exchange for shares of each
constituent corporation, or a combination thereof.
(4) In case of merger, a statement of any amendments or changes in the
certificate of incorporation of the surviving corporation to be effected
by such merger; in case of consolidation, all statements required to be
included in a certificate of incorporation for a corporation formed
under this chapter, except statements as to facts not available at the
time the plan of consolidation is adopted by the board.
(5) Such other provisions with respect to the proposed merger or
consolidation as the board considers necessary or desirable.
Authorization by shareholders.
(a) The board of each constituent corporation, upon adopting such plan
of merger or consolidation, shall submit such plan to a vote of
shareholders in accordance with the following:
(1) Notice of meeting shall be given to each shareholder of record, as
of the record date fixed pursuant to section 604 (Fixing record date),
whether or not entitled to vote. A copy of the plan of merger or
consolidation or an outline of the material features of the plan shall
accompany such notice.
(2) The plan of merger or consolidation shall be adopted at a meeting
of shareholders by (i) for corporations in existence on the effective
date of this clause the certificate of incorporation of which expressly
provides such or corporations incorporated after the effective date of
subclause (A) of clause (ii) of this subparagraph, a majority of the
votes of the shares entitled to vote thereon or (ii) for other
corporations in existence on the effective date of this clause,
two-thirds of the votes of all outstanding shares entitled to vote
thereon. Notwithstanding any provision in the certificate of
incorporation, the holders of shares of a class or series of a class
shall be entitled to vote together and to vote as a separate class if
both of the following conditions are satisfied:
(A) such shares will remain outstanding after the merger or
consolidation or will be converted into the right to receive shares of
stock of the surviving or consolidated corporation or another
corporation, and
(B) the certificate or articles of incorporation of the surviving or
consolidated corporation or of such other corporation immediately after
the effectiveness of the merger or consolidation would contain any
provision which, is not contained in the certificate of incorporation of
the corporation and which, if contained in an amendment to the
certificate of incorporation, would entitle the holders of shares of
such class or such one or more series to vote and to vote as a separate
class thereon pursuant to section 804 (Class voting on amendment).
In such case, in addition to the authorization of the merger or
consolidation by the requisite number of votes of all outstanding shares
entitled to vote thereon pursuant to the first sentence of this
subparagraph (2), the merger or consolidation shall be authorized by a
majority of the votes of all outstanding shares of the class entitled to
vote as a separate class. If any provision referred to in subclause (B)
of clause (ii) of this subparagraph would affect the rights of the
holders of shares of only one or more series of any class but not the
entire class, then only the holders of those series whose rights would
be affected shall together be considered a separate class for purposes
of this section.
(b) Notwithstanding shareholder authorization and at any time prior to
the filing of the certificate of merger or consolidation, the plan of
merger or consolidation may be abandoned pursuant to a provision for
such abandonment, if any, contained in the plan of merger or
consolidation.
Certificate of merger or consolidation; contents.
(a) After adoption of the plan of merger or consolidation by the board
and shareholders of each constituent corporation, unless the merger or
consolidation is abandoned in accordance with paragraph (b) of section
903 (Authorization by shareholders), a certificate of merger or
consolidation, entitled "Certificate of merger (or consolidation) of
......and ..... into ..... (names of corporations) under section 904 of
the Business Corporation Law", shall be signed on behalf of each
constituent corporation and delivered to the department of state. It
shall set forth:
(1) The statements required by subparagraphs (a) (1), (2) and (4) of
section 902 (Plan of merger or consolidation).
(2) The effective date of the merger or consolidation if other than
the date of filing of the certificate of merger or consolidation by the
department of state.
(3) In the case of consolidation, any statement required to be
included in a certificate of incorporation for a corporation formed
under this chapter but which was omitted under subparagraph (a) (4) of
section 902.
(4) The date when the certificate of incorporation of each constituent
corporation was filed by the department of state.
(5) The manner in which the merger or consolidation was authorized
with respect to each constituent corporation.
(b) The surviving or consolidated corporation shall thereafter cause a
copy of such certificate, certified by the department of state, to be
filed in the office of the clerk of each county in which the office of a
constituent corporation, other than the surviving corporation, is
located, and in the office of the official who is the recording officer
of each county in this state in which real property of a constituent
corporation, other than the surviving corporation, is situated.
Merger or consolidation of corporations with other business
entities; certificate of merger or consolidation.
(a) After adoption of the agreement of merger or consolidation by the
board and shareholders of each corporation participating in the merger
or consolidation, unless the merger or consolidation is abandoned in
accordance with paragraph (b) of section nine hundred three of this
article, subdivision (d) of section one thousand two of the limited
liability company law or other applicable statute, and the surviving or
resulting entity is a corporation, foreign corporation, or other
business entity for which the laws of this state do not provide for the
filing of a certificate of merger or consolidation with the department
of state, a certificate of merger or consolidation, entitled
"Certificate of merger (or consolidation) of ..... and..... into .....
(names of constituent entities) under section nine hundred four-a of the
business corporation law," shall be signed on behalf of each constituent
entity and delivered to the department of state. It shall set forth:
(1) The name of each constituent entity and, if the name of any of
them has been changed, the name under which it was formed;
(2) The date when the certificate of incorporation or articles of
organization of each domestic constituent entity was filed by the
department of state;
(3) If a constituent entity is a foreign business corporation or
foreign other business entity, the jurisdiction and date of filing of
its initial certificate of incorporation or formation document, if any
and the date when its application for authority was filed by the
department of state or if no such application has been filed, a
statement to such effect and (if the constituent foreign corporation is
the surviving entity) that it is not to do business in this state until
an application for such authority shall have been filed with the
department of state;
(4) A statement that an agreement of merger or consolidation has been
approved and executed by each constituent entity;
(5) The name of the surviving or consolidated corporation;
(6) If the surviving or resulting entity is a domestic corporation, in
case of a merger, a statement of any amendments or changes in the
certificate of incorporation of the surviving corporation to be effected
by such merger; in case of consolidation, all statements required to be
included in a certificate of incorporation for a corporation formed
under this chapter;
(7) If the surviving or resulting entity is a foreign corporation or
other business entity, an agreement that the surviving or consolidated
foreign corporation or other business entity may be served with process
in this state in any action or special proceeding for the enforcement of
any liability or obligation of any domestic or foreign entity,
previously amenable to suit in this state, which is a constituent entity
in such merger or consolidation, and for the enforcement, as provided in
this chapter, of the right of shareholders or members of any constituent
domestic entity to receive payment for their interests against the
surviving or consolidated corporation;
(8) If the surviving or resulting entity is a foreign corporation or
other business entity, a designation of the secretary of state as its
agent upon whom process against it may be served in the manner set forth
in paragraph (b) of section three hundred six of this chapter, in any
action or special proceeding, and a post office address, within or
without this state, to which the secretary of state shall mail a copy of
any process against it served upon him or her. The corporation may
include an email address to which the secretary of state shall email a
notice of the fact that process against it has been electronically
served upon him or her. Such post office address shall supersede any
prior address designated as the address to which process shall be mailed
and such email address shall supersede any prior email address
designated as the email address to which a notice shall be sent;
(9) If the surviving or resulting entity is a foreign corporation, an
agreement that, subject to the provisions of section six hundred
twenty-three of this chapter, section one thousand five of the limited
liability company law and any applicable statute, the surviving or
consolidated foreign corporation will promptly pay to the shareholders
of each constituent domestic corporation and owners of any constituent
other business entity the amount, if any, to which they shall be
entitled under the provisions of this chapter and the limited liability
company law or any applicable statute relating to the right of
shareholders, owners and members to receive payment for their interests;
(10) The effective date of the merger or consolidation if other than
the date of filing of the certificate of merger or consolidation by the
department of state;
(11) For each foreign corporation, foreign limited liability company
or other business entity, a statement that such merger or consolidation
is permitted by its jurisdiction of incorporation or organization and is
in compliance therewith;
(12) That the agreement of merger or consolidation is on file at a
place of business of the surviving or resulting domestic or foreign
corporation and shall state the address thereof.
(b) The surviving or consolidated domestic or foreign corporation
shall thereafter cause a copy of such certificate, certified by the
department of state, to be filed in the office of the clerk of each
county in which each office of a participating domestic or foreign
corporation, other than the surviving corporation, is located, and in
the office of the official who is the recording officer of each county
in this state in which real property of a participating domestic or
foreign corporation, other than the surviving corporation, is situated.
Merger or consolidation of business corporations into
non-profit corporations.
(a) A domestic business corporation may be merged or consolidated into
a domestic corporation formed under section two hundred one (Purposes)
of the not-for-profit corporation law and authorized to do business
under article forty-three of the insurance law.
(b) With respect to procedure, including approval by members or
authorization by shareholders, the domestic not-for-profit corporation
shall comply with the not-for-profit corporation law and the domestic
business corporation shall comply with the provisions of this chapter.
(c) The plan of merger or consolidation, pursuant to this section,
shall set forth all matters required by section nine hundred two of the
not-for-profit corporation law or section 902 (Plan of merger or
consolidation) and the terms and conditions of the proposed merger or
consolidation, including the manner and basis of converting shares,
bonds or other securities in each constituent corporation into
membership or other interest of the surviving or consolidated
corporation, or the cash or other consideration to be paid or delivered
in exchange for shares, bonds or other securities in each constituent
corporation, or a combination thereof.
(d) After adoption of the plan of merger or consolidation by the board
and shareholders or members of each constituent corporation, unless the
merger or consolidation is abandoned in accordance with paragraph (b) of
section 903 (Authorization by shareholders) and paragraph (b) of section
nine hundred three of the not-for-profit corporation law, a certificate
of merger or consolidation, entitled "Certificate of merger (or
consolidation) of ........ and.......... into ........... (names of
corporations) under section 904-b of the Business Corporation Law",
shall be signed on behalf of each constituent corporation and delivered
to the department of state.
(e) The certificate required to be filed pursuant to this section
shall set forth the statements required by paragraph (a) of section nine
hundred four of the not-for-profit corporation law or paragraph (a) of
section nine hundred four (Adoption of the plan of merger or
consolidation).
(f) No certificate shall be filed pursuant to this section until an
order approving the plan of merger or consolidation and authorizing the
filing of the certificate has been made by the supreme court, as
provided in section nine hundred seven of the not-for-profit corporation
law.
(g) Upon the filing of the certificate of merger or consolidation by
the department of state or on such date subsequent thereto, not to
exceed thirty days, as shall be set forth in such certificate, the
merger or consolidation shall be effected.
(h) The surviving or consolidated domestic corporation shall
thereafter cause a copy of such certificate, certified by the department
of state, to be filed in the office of the clerk of each county in which
the office of a constituent corporation, other than the surviving
corporation, is located, and in the office of the official who is the
recording officer of each county in this state in which real property of
a constituent corporation, other than the surviving corporation, is
situated.
(i) When such merger or consolidation has been effected, it shall be
subject to the not-for-profit corporation law and the effect of such
merger or consolidation shall be the same as in the case of the merger
or consolidation of domestic corporations under section nine hundred
five of the not-for-profit corporation law, except that in subparagraph
three of paragraph (b) of such section the word "member" shall be read
to include the word "shareholder" as the latter is defined in this
chapter.
Merger of parent and subsidiary corporations.
(a) Any domestic corporation owning at least ninety percent of the
outstanding shares of each class of another domestic corporation or
corporations may either merge such other corporation or corporations
into itself without the authorization of the shareholders of any such
corporation or merge itself and one or more of such other corporations
into one of such other corporations with the authorization of the parent
corporation's shareholders in accordance with paragraph (a) of section
903 (Authorization by shareholders). In either case, the board of such
parent corporation shall adopt a plan of merger, setting forth:
(1) The name of each corporation to be merged and the name of the
surviving corporation, and if the name of any of them has been changed,
the name under which it was formed.
(2) The designation and number of outstanding shares of each class of
each corporation to be merged and the number of such shares of each
class, if any, owned by the surviving corporation; and if the number of
any such shares is subject to change prior to the effective date of the
merger, the manner in which such change may occur.
(3) The terms and conditions of the proposed merger, including the
manner and basis of converting the shares of each subsidiary corporation
to be merged not owned by the parent corporation into shares, bonds or
other securities of the surviving corporation, or the cash or other
consideration to be paid or delivered in exchange for shares of each
such subsidiary corporation, or a combination thereof.
(4) If the parent corporation is not the surviving corporation,
provision for the pro rata issuance of shares of the surviving
corporation to the shareholders of the parent corporation on surrender
of any certificates therefor.
(5) If the parent corporation is not the surviving corporation, a
statement of any amendments or changes in the certificate of
incorporation of the surviving corporation to be effected by the merger.
(6) Such other provisions with respect to the proposed merger as the
board considers necessary or desirable.
(b) If the surviving corporation is the parent corporation, a copy of
such plan of merger or an outline of the material features thereof shall
be given, personally or by mail, to all holders of shares of each
subsidiary corporation to be merged not owned by the parent corporation,
unless the giving of such copy or outline has been waived by such
holders.
(c) A certificate of merger, entitled "Certificate of merger of .....
into ..... (names of corporations) under section 905 of the Business
Corporation Law", shall be signed and delivered to the department of
state by the surviving corporation. If the surviving corporation is the
parent corporation and such corporation does not own all shares of each
subsidiary corporation to be merged, such certificate shall be delivered
not less than thirty days after the giving of a copy or outline of the
material features of the plan of merger to shareholders of each such
subsidiary corporation, or at any time after the waiving thereof by the
holders of all of the outstanding shares of each such subsidiary
corporation not owned by the surviving corporation. The certificate
shall set forth:
(1) The statements required by subparagraphs (a) (1), (2), (4) and (5)
of this section.
(2) The effective date of the merger if other than the date of filing
of the certificate of merger by the department of state.
(3) The date when the certificate of incorporation of each constituent
corporation was filed by the department of state.
(4) A statement that the plan of merger was adopted by the board of
directors of the parent corporation.
(5) If the surviving corporation is the parent corporation and such
corporation does not own all the shares of each subsidiary corporation
to be merged, either the date of the giving to holders of shares of each
such subsidiary corporation not owned by the surviving corporation of a
copy of the plan of merger or an outline of the material features
thereof, or a statement that the giving of such copy or outline has been
waived, if such is the case.
(6) If the parent corporation is not the surviving corporation, a
statement that the proposed merger has been approved by the shareholders
of the parent corporation in accordance with paragraph (a) of section
903 (Authorization by shareholders).
(d) The surviving corporation shall thereafter cause a copy of such
certificate, certified by the department of state, to be filed in the
office of the clerk of each county in which the office of a constituent
corporation, other than the surviving corporation, is located, and in
the office of the official who is the recording officer of each county
in this state in which real property of a constituent corporation, other
than the surviving corporation, is situated.
(e) Paragraph (b) of section 903 (Authorization by shareholders) shall
apply to a merger under this section.
(f) The right of merger granted by this section to certain
corporations shall not preclude the exercise by such corporations of any
other right of merger or consolidation under this article.
Effect of merger or consolidation.
(a) Upon the filing of the certificate of merger or consolidation by
the department of state or on such date subsequent thereto, not to
exceed thirty days, as shall be set forth in such certificate, the
merger or consolidation shall be effected.
(b) When such merger or consolidation has been effected:
(1) Such surviving or consolidated corporation shall thereafter,
consistently with its certificate of incorporation as altered or
established by the merger or consolidation, possess all the rights,
privileges, immunities, powers and purposes of each of the constituent
corporations.
(2) All the property, real and personal, including subscriptions to
shares, causes of action and every other asset of each of the
constituent entities, shall vest in such surviving or consolidated
corporation without further act or deed.
(3) The surviving or consolidated corporation shall assume and be
liable for all the liabilities, obligations and penalties of each of the
constituent entities. No liability or obligation due or to become due,
claim or demand for any cause existing against any such constituent
entity, or any shareholder, member, officer or director thereof, shall
be released or impaired by such merger or consolidation. No action or
proceeding, whether civil or criminal, then pending by or against any
such constituent entity, or any shareholder, member, officer or director
thereof, shall abate or be discontinued by such merger or consolidation,
but may be enforced, prosecuted, settled or compromised as if such
merger or consolidation had not occurred, or such surviving or
consolidated corporation may be substituted in such action or special
proceeding in place of any constituent entity.
(4) In the case of a merger, the certificate of incorporation of the
surviving corporation shall be automatically amended to the extent, if
any, that changes in its certificate of incorporation are set forth in
the plan of merger; and, in the case of a consolidation, the statements
set forth in the certificate of consolidation and which are required or
permitted to be set forth in a certificate of incorporation of a
corporation formed under this chapter shall be its certificate of
incorporation.
Merger or consolidation of domestic and foreign corporations.
(a) One or more foreign corporations and one or more domestic
corporations may be merged or consolidated into a corporation of this
state or of another jurisdiction, if such merger or consolidation is
permitted by the laws of the jurisdiction under which each such foreign
corporation is incorporated. With respect to such merger or
consolidation, any reference in paragraph (b) of section 901 (Power of
merger or consolidation) to a corporation shall, unless the context
otherwise requires, include both domestic and foreign corporations.
(b) With respect to procedure, including the requirement of share-
holder authorization, each domestic corporation shall comply with the
provisions of this chapter relating to merger or consolidation of
domestic corporations, and each foreign corporation shall comply with
the applicable provisions of the law of the jurisdiction under which it
is incorporated.
(c) The procedure for the merger of a subsidiary corporation or
corporations under section 905 (Merger of parent and subsidiary
corporations) shall be available where either a subsidiary corporation
or the corporation owning at least ninety percent of the outstanding
shares of each class of a subsidiary is a foreign corporation, and such
merger is permitted by the laws of the jurisdiction under which such
foreign corporation is incorporated.
(d) If the surviving or consolidated corporation is, or is to be, a
domestic corporation, a certificate of merger or consolidation shall be
signed and delivered to the department of state as provided in section
904 (Certificate of merger or consolidation; contents) or 905 (Merger of
parent and subsidiary corporations), as the case may be. In addition to
the matters specified in such sections, the certificate shall set forth
as to each constituent foreign corporation the jurisdiction and date of
its incorporation and the date when its application for authority to do
business in this state was filed by the department of state, and its
fictitious name used in this state pursuant to article thirteen of this
chapter, if applicable, or, if no such application has been filed, a
statement to such effect.
(e) If the surviving or consolidated corporation is, or is to be,
formed under the law of any jurisdiction other than this state:
(1) It shall comply with the provisions of this chapter relating to
foreign corporations if it is to do business in this state.
(2) It shall deliver to the department of state a certificate,
entitled "Certificate of merger (or consolidation) of ..... and .....
into ..... (names of corporations) under section 907 of the Business
Corporation Law", which shall be signed on behalf of each constituent
domestic and foreign corporation. It shall set forth:
(A) If the procedure for the merger or consolidation of a constituent
domestic corporation was effected in compliance with sections 902 (Plan
of merger or consolidation) and 903 (Authorization by shareholders), the
following:
(i) The statements required by subparagraphs (a) (1) and (2) of
section 902.
(ii) The effective date of the merger or consolidation if other than
the date of filing of the certificate of merger or consolidation by the
department of state.
(iii) The manner in which the merger or consolidation was authorized
with respect to each constituent domestic corporation and that the
merger or consolidation is permitted by the laws of the jurisdiction of
each constituent foreign corporation and is in compliance therewith.
(B) If the procedure for the merger of a subsidiary corporation was
effected in compliance with section 905, the following:
(i) The statements required by subparagraphs (a) (1), (2), (4) and (5)
of section 905.
(ii) The effective date of the merger if other than the date of filing
of the certificate of merger by the department of state.
(iii) If the surviving foreign corporation is the parent corporation
and such corporation does not own all the shares of a subsidiary do-
mestic corporation being merged, either the date of the giving to hold-
ers of shares of each subsidiary domestic corporation not owned by the
surviving foreign corporation of a copy of the plan of merger or an
outline of the material features thereof, or a statement that the giving
of such copy or outline has been waived, if such is the case.
(iv) That the merger is permitted by the laws of the jurisdiction of
each constituent foreign corporation and is in compliance therewith.
(v) If the parent domestic corporation is not the surviving
corporation, a statement that the proposed merger has been approved by
the shareholders of the parent domestic corporation in accordance with
paragraph (a) of section 903 (Authorization by shareholders).
(C) The jurisdiction and date of incorporation of the surviving or
consolidated foreign corporation, the date when its application for
authority to do business in this state was filed by the department of
state, and its fictitious name used in this state pursuant to article
thirteen of this chapter, if applicable, or, if no such application has
been filed, a statement to such effect and that it is not to do business
in this state until an application for such authority shall have been
filed by such department.
(D) The date when the certificate of incorporation of each constituent
domestic corporation was filed by the department of state and the
jurisdiction and date of incorporation of each constituent foreign
corporation, other than the surviving or consolidated foreign
corporation, and, in the case of each such corporation authorized to do
business in this state, the date when its application for authority was
filed by the department of state.
(E) An agreement that the surviving or consolidated foreign
corporation may be served with process in this state in any action or
special proceeding for the enforcement of any liability or obligation of
any domestic corporation or of any foreign corporation, previously
amenable to suit in this state, which is a constituent corporation in
such merger or consolidation, and for the enforcement, as provided in
this chapter, of the right of shareholders of any constituent domestic
corporation to receive payment for their shares against the surviving or
consolidated corporation.
(F) An agreement that, subject to the provisions of section 623
(Procedure to enforce shareholder's right to receive payment for
shares), the surviving or consolidated foreign corporation will promptly
pay to the shareholders of each constituent domestic corporation the
amount, if any, to which they shall be entitled under the provisions of
this chapter relating to the right of shareholders to receive payment
for their shares.
(G) A designation of the secretary of state as its agent upon whom
process against it may be served in the manner set forth in paragraph
(b) of section 306 (Service of process), in any action or special
proceeding, and a post office address, within or without this state, to
which the secretary of state shall mail a copy of any process against it
served upon him or her. The corporation may include an email address to
which the secretary of state shall email a notice of the fact that
process against it has been electronically served upon him or her. Such
post office address shall supersede any prior address designated as the
address to which process shall be mailed and such email address shall
supersede any prior email address designated as the email address to
which a notice shall be sent.
(H)(i) A certification that all fees and taxes (including penalties
and interest) administered by the department of taxation and finance
which are then due and payable by each constituent domestic corporation
have been paid and that a cessation franchise tax report (estimated or
final) through the anticipated date of the merger or consolidation
(which return, if estimated, shall be subject to amendment) has been
filed by each constituent domestic corporation and (ii) an agreement
that the surviving or consolidated foreign corporation will within
thirty days after the filing of the certificate of merger or
consolidation file the cessation franchise tax report, if an estimated
report was previously filed, and promptly pay to the department of
taxation and finance all fees and taxes (including penalties and
interest), if any, due to the department of taxation and finance by each
constituent domestic corporation.
(f) Upon the filing of the certificate of merger or consolidation by
the department of state or on such date subsequent thereto, not to
exceed ninety days, as shall be set forth in such certificate, the
merger or consolidation shall be effected.
(g) The surviving or consolidated domestic corporation or foreign
corporation shall thereafter cause a copy of such certificate, certified
by the department of state, to be filed in the office of the clerk of
each county in which the office of a constituent corporation other than
the surviving corporation is located, and in the office of the official
who is the recording officer of each county in this state in which real
property of a constituent corporation, other than the surviving
corporation, is situated.
(h) If the surviving or consolidated corporation is, or is to be,
formed under the law of this state, the effect of such merger or
consolidation shall be the same as in the case of the merger or
consolidation of domestic corporations under section 906 (Effect of
merger or consolidation). If the surviving or consolidated corporation
is, or is to be, incorporated under the law of any jurisdiction other
than this state, the effect of such merger or consolidation shall be the
same as in the case of the merger or consolidation of domestic
corporations, except in so far as the law of such other jurisdiction
provides otherwise.
Guarantee authorized by shareholders.
A guarantee may be given by a corporation, although not in furtherance
of its corporate purposes, when authorized at a meeting of shareholders
by two-thirds of the votes of all outstanding shares entitled to vote
thereon. If authorized by a like vote, such guarantee may be secured by
a mortgage or pledge of, or the creation of a security interest in, all
or any part of the corporate property, or any interest therein, wherever
situated.
Sale, lease, exchange or other disposition of assets.
(a) A sale, lease, exchange or other disposition of all or
substantially all the assets of a corporation, if not made in the usual
or regular course of the business actually conducted by such
corporation, shall be authorized only in accordance with the following
procedure:
(1) The board shall authorize the proposed sale, lease, exchange or
other disposition and direct its submission to a vote of shareholders.
(2) Notice of meeting shall be given to each shareholder of record,
whether or not entitled to vote.
(3) The shareholders shall approve such sale, lease, exchange or other
disposition and may fix, or may authorize the board to fix, any of the
terms and conditions thereof and the consideration to be received by the
corporation therefor, which may consist in whole or in part of cash or
other property, real or personal, including shares, bonds or other
securities of any other domestic or foreign corporation or corporations,
by vote at a meeting of shareholders of (A) for corporations in
existence on the effective date of this clause the certificate of
incorporation of which expressly provides such or corporations
incorporated after the effective date of this clause, a majority of the
votes of all outstanding shares entitled to vote thereon or (B) for
other corporations in existence on the effective date of this clause,
two-thirds of the votes of all outstanding shares entitled to vote
thereon.
(b) A recital in a deed, lease or other instrument of conveyance
executed by a corporation to the effect that the property described
therein does not constitute all or substantially all of the assets of
the corporation, or that the disposition of the property affected by
said instrument was made in the usual or regular course of business of
the corporation, or that the shareholders have duly authorized such
disposition, shall be presumptive evidence of the fact so recited.
(c) An action to set aside a deed, lease or other instrument of
conveyance executed by a corporation affecting real property or real and
personal property may not be maintained for failure to comply with the
requirements of paragraph (a) unless the action is commenced and a
notice of pendency of action is filed within one year after such
conveyance, lease or other instrumment is recorded or within six months
after this subdivision takes effect, whichever date occurs later.
(d) Whenever a transaction of the character described in paragraph (a)
involves a sale, lease, exchange or other disposition of all or
substantially all the assets of the corporation, including its name, to
a new corporation formed under the same name as the existing
corporation, upon the expiration of thirty days from the filing of the
certificate of incorporation of the new corporation, with the consent of
the state tax commission attached, the existing corporation shall be
automatically dissolved, unless, before the end of such thirty-day
period, such corporation has changed its name. The adjustment and
winding up of the affairs of such dissolved corporation shall proceed in
accordance with the provisions of article 10 (Non-judicial dissolution).
(e) The certificate of incorporation of a corporation formed under the
authority of paragraph (d) shall set forth the name of the existing
corporation, the date when its certificate of incorporation was filed by
the department of state, and that the shareholders of such corporation
have authorized the sale, lease, exchange or other disposition of all or
substantially all the assets of such corporation, including its name, to
the new corporation to be formed under the same name as the existing
corporation.
(f) Notwithstanding shareholder approval, the board may abandon the
proposed sale, lease, exchange or other disposition without further
action by the shareholders, subject to the rights, if any, of third
parties under any contract relating thereto.
Right of shareholder to receive payment for shares upon merger or
consolidation, or sale, lease, exchange or other disposition of
assets, or share exchange.
(a) A shareholder of a domestic corporation shall, subject to and by
complying with section 623 (Procedure to enforce shareholder's right to
receive payment for shares), have the right to receive payment of the
fair value of his shares and the other rights and benefits provided by
such section, in the following cases:
(1) Any shareholder entitled to vote who does not assent to the taking
of an action specified in clauses (A), (B) and (C).
(A) Any plan of merger or consolidation to which the corporation is a
party; except that the right to receive payment of the fair value of his
shares shall not be available:
(i) To a shareholder of the parent corporation in a merger authorized
by section 905 (Merger of parent and subsidiary corporations), or
paragraph (c) of section 907 (Merger or consolidation of domestic and
foreign corporations); or
(ii) To a shareholder of the surviving corporation in a merger
authorized by this article, other than a merger specified in subclause
(i), unless such merger effects one or more of the changes specified in
subparagraph (b) (6) of section 806 (Provisions as to certain
proceedings) in the rights of the shares held by such shareholder; or
(iii) Notwithstanding subclause (ii) of this clause, to a shareholder
for the shares of any class or series of stock, which shares or
depository receipts in respect thereof, at the record date fixed to
determine the shareholders entitled to receive notice of the meeting of
shareholders to vote upon the plan of merger or consolidation, were
listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc.
(B) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation which requires
shareholder approval under section 909 (Sale, lease, exchange or other
disposition of assets) other than a transaction wholly for cash where
the shareholders' approval thereof is conditioned upon the dissolution
of the corporation and the distribution of substantially all of its net
assets to the shareholders in accordance with their respective interests
within one year after the date of such transaction.
(C) Any share exchange authorized by section 913 in which the
corporation is participating as a subject corporation; except that the
right to receive payment of the fair value of his shares shall not be
available to a shareholder whose shares have not been acquired in the
exchange or to a shareholder for the shares of any class or series of
stock, which shares or depository receipt in respect thereof, at the
record date fixed to determine the shareholders entitled to receive
notice of the meeting of shareholders to vote upon the plan of exchange,
were listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by
the National Association of Securities Dealers, Inc.
(2) Any shareholder of the subsidiary corporation in a merger
authorized by section 905 or paragraph (c) of section 907, or in a share
exchange authorized by paragraph (g) of section 913, who files with the
corporation a written notice of election to dissent as provided in
paragraph (c) of section 623.
(3) Any shareholder, not entitled to vote with respect to a plan of
merger or consolidation to which the corporation is a party, whose
shares will be cancelled or exchanged in the merger or consolidation for
cash or other consideration other than shares of the surviving or
consolidated corporation or another corporation.
Mortgage or pledge of, or security interest in, corporate
property.
The board may authorize any mortgage or pledge of, or the creation of
a security interest in, all or any part of the corporate property, or
any interest therein, wherever situated. Unless the certificate of
incorporation provides otherwise, no vote or consent of shareholders
shall be required to approve such action by the board.
Requirements relating to certain business combinations.
(a) For the purposes of this section:
(1) "Affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified person.
(2) "Announcement date", when used in reference to any business
combination, means the date of the first public announcement of the
final, definitive proposal for such business combination.
(3) "Associate", when used to indicate a relationship with any person,
means (A) any corporation or organization of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner
of ten percent or more of any class of voting stock, (B) any trust or
other estate in which such person has a substantial beneficial interest
or as to which such person serves as trustee or in a similar fiduciary
capacity, and (C) any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person.
(4) "Beneficial owner", when used with respect to any stock, means a
person:
(A) that, individually or with or through any of its affiliates or
associates, beneficially owns such stock, directly or indirectly; or
(B) that, individually or with or through any of its affiliates or
associates, has (i) the right to acquire such stock (whether such right
is exercisable immediately or only after the passage of time), pursuant
to any agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise; provided, however, that a person
shall not be deemed the beneficial owner of stock tendered pursuant to a
tender or exchange offer made by such person or any of such person's
affiliates or associates until such tendered stock is accepted for
purchase or exchange; or (ii) the right to vote such stock pursuant to
any agreement, arrangement or understanding (whether or not in writing);
provided, however, that a person shall not be deemed the beneficial
owner of any stock under this item if the agreement, arrangement or
understanding to vote such stock (X) arises solely from a revocable
proxy or consent given in response to a proxy or consent solicitation
made in accordance with the applicable rules and regulations under the
Exchange Act and (Y) is not then reportable on a Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(C) that has any agreement, arrangement or understanding (whether or
not in writing), for the purpose of acquiring, holding, voting (except
voting pursuant to a revocable proxy or consent as described in item
(ii) of clause (B) of this subparagraph), or disposing of such stock
with any other person that beneficially owns, or whose affiliates or
associates beneficially own, directly or indirectly, such stock.
(5) "Business combination", when used in reference to any domestic
corporation and any interested shareholder of such corporation, means:
(A) any merger or consolidation of such corporation or any subsidiary
of such corporation with (i) such interested shareholder or (ii) any
other corporation (whether or not itself an interested shareholder of
such corporation) which is, or after such merger or consolidation would
be, an affiliate or associate of such interested shareholder;
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
such interested shareholder or any affiliate or associate of such
interested shareholder of assets of such corporation or any subsidiary
of such corporation (i) having an aggregate market value equal to ten
percent or more of the aggregate market value of all the assets,
determined on a consolidated basis, of such corporation, (ii) having an
aggregate market value equal to ten percent or more of the aggregate
market value of all the outstanding stock of such corporation, or (iii)
representing ten percent or more of the earning power or net income
determined on a consolidated basis, of such corporation;
(C) the issuance or transfer by such corporation or any subsidiary of
such corporation (in one transaction or a series of transactions) of any
stock of such corporation or any subsidiary of such corporation which
has an aggregate market value equal to five percent or more of the
aggregate market value of all the outstanding stock of such corporation
to such interested shareholder or any affiliate or associate of such
interested shareholder except pursuant to the exercise of warrants or
rights to purchase stock offered, or a dividend or distribution paid or
made, pro rata to all shareholders of such corporation;
(D) the adoption of any plan or proposal for the liquidation or
dissolution of such corporation proposed by, or pursuant to any
agreement, arrangement or understanding (whether or not in writing)
with, such interested shareholder or any affiliate or associate of such
interested shareholder;
(E) any reclassification of securities (including, without limitation,
any stock split, stock dividend, or other distribution of stock in
respect of stock, or any reverse stock split), or recapitalization of
such corporation, or any merger or consolidation of such corporation
with any subsidiary of such corporation, or any other transaction
(whether or not with or into or otherwise involving such interested
shareholder), proposed by, or pursuant to any agreement, arrangement or
understanding (whether or not in writing) with, such interested
shareholder or any affiliate or associate of such interested
shareholder, which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class or series
of voting stock or securities convertible into voting stock of such
corporation or any subsidiary of such corporation which is directly or
indirectly owned by such interested shareholder or any affiliate or
associate of such interested shareholder, except as a result of
immaterial changes due to fractional share adjustments; or
(F) any receipt by such interested shareholder or any affiliate or
associate of such interested shareholder of the benefit, directly or
indirectly (except proportionately as a shareholder of such corporation)
of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by or
through such corporation.
(6) "Common stock" means any stock other than preferred stock.
(7) "Consummation date", with respect to any business combination,
means the date of consummation of such business combination, or, in the
case of a business combination as to which a shareholder vote is taken,
the later of the business day prior to the vote or twenty days prior to
the date of consummation of such business combination.
(8) "Control", including the terms "controlling", "controlled by" and
"under common control with", means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting stock, by contract, or otherwise. A person's beneficial ownership
of ten percent or more of a corporation's outstanding voting stock shall
create a presumption that such person has control of such corporation.
Notwithstanding the foregoing, a person shall not be deemed to have
control of a corporation if such person holds voting stock, in good
faith and not for the the purpose of circumventing this section, as an
agent, bank, broker, nominee, custodian or trustee for one or more
beneficial owners who do not individually or as a group have control of
such corporation.
(9) "Exchange Act" means the Act of Congress known as the Securities
Exchange Act of 1934, as the same has been or hereafter may be amended
from time to time.
(10) "Interested shareholder", when used in reference to any domestic
corporation, means any person (other than such corporation or any
subsidiary of such corporation) that
(A) (i) is the beneficial owner, directly or indirectly, of twenty
percent or more of the outstanding voting stock of such corporation; or
(ii) is an affiliate or associate of such corporation and at any time
within the five-year period immediately prior to the date in question
was the beneficial owner, directly or indirectly, of twenty percent or
more of the then outstanding voting stock of such corporation; provided
that
(B) for the purpose of determining whether a person is an interested
shareholder, the number of shares of voting stock of such corporation
deemed to be outstanding shall include shares deemed to be beneficially
owned by the person through application of subparagraph four of this
paragraph but shall not include any other unissued shares of voting
stock of such corporation which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(11) "Market value", when used in reference to stock or property of
any domestic corporation, means:
(A) in the case of stock, the highest closing sale price during the
thirty-day period immediately preceding the date in question of a share
of such stock on the composite tape for New York stock exchange-listed
stocks, or, if such stock is not quoted on such composite tape or if
such stock is not listed on such exchange, on the principal United
States securities exchange registered under the Exchange Act on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of
such stock during the thirty-day period preceding the date in question
on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations
are available, the fair market value on the date in question of a share
of such stock as determined by the board of directors of such
corporation in good faith; and
(B) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by the
board of directors of such corporation in good faith.
(12) "Preferred stock" means any class or series of stock of a
domestic corporation which under the by-laws or certificate of
incorporation of such corporation is entitled to receive payment of
dividends prior to any payment of dividends on some other class or
series of stock, or is entitled in the event of any voluntary
liquidation, dissolution or winding up of the corporation to receive
payment or distribution of a preferential amount before any payments or
distributions are received by some other class or series of stock.
(14) "Stock" means:
(A) any stock or similar security, any certificate of interest, any
participation in any profit sharing agreement, any voting trust
certificate, or any certificate of deposit for stock; and
(B) any security convertible, with or without consideration, into
stock, or any warrant, call or other option or privilege of buying stock
without being bound to do so, or any other security carrying any right
to acquire, subscribe to or purchase stock.
(15) "Stock acquisition date", with respect to any person and any
domestic corporation, means the date that such person first becomes an
interested shareholder of such corporation.
(16) "Subsidiary" of any person means any other corporation of which a
majority of the voting stock is owned, directly or indirectly, by such
person.
(17) "Voting stock" means shares of capital stock of a corporation
entitled to vote generally in the election of directors.
(b) Notwithstanding anything to the contrary contained in this chapter
(except the provisions of paragraph (d) of this section), no domestic
corporation shall engage in any business combination with any interested
shareholder of such corporation for a period of five years following
such interested shareholder's stock acquisition date unless such
business combination or the purchase of stock made by such interested
shareholder on such interested shareholder's stock acquisition date is
approved by the board of directors of such corporation prior to such
interested shareholder's stock acquisition date. If a good faith
proposal is made in writing to the board of directors of such
corporation regarding a business combination, the board of directors
shall respond, in writing, within thirty days or such shorter period, if
any, as may be required by the Exchange Act, setting forth its reasons
for its decision regarding such proposal. If a good faith proposal to
purchase stock is made in writing to the board of directors of such
corporation, the board of directors, unless it responds affirmatively in
writing within thirty days or such shorter period, if any, as may be
required by the Exchange Act, shall be deemed to have disapproved such
stock purchase.
(c) Notwithstanding anything to the contrary contained in this chapter
(except the provisions of paragraphs (b) and (d) of this section), no
domestic corporation shall engage at any time in any business
combination with any interested shareholder of such corporation other
than a business combination specified in any one of subparagraph (1),
(2) or (3):
(1) A business combination approved by the board of directors of such
corporation prior to such interested shareholder's stock acquisition
date, or where the purchase of stock made by such interested shareholder
on such interested shareholder's stock acquisition date had been
approved by the board of directors of such corporation prior to such
interested shareholder's stock acquisition date.
(2) A business combination approved by the affirmative vote of the
holders of a majority of the outstanding voting stock not beneficially
owned by such interested shareholder or any affiliate or associate of
such interested shareholder at a meeting called for such purpose no
earlier than five years after such interested shareholder's stock
acquisition date.
(3) A business combination that meets all of the following conditions:
(A) The aggregate amount of the cash and the market value as of the
consummation date of consideration other than cash to be received per
share by holders of outstanding shares of common stock of such
corporation in such business combination is at least equal to the higher
of the following:
(i) the highest per share price paid by such interested shareholder at
a time when he was the beneficial owner, directly or indirectly, of five
percent or more of the outstanding voting stock of such corporation, for
any shares of common stock of the same class or series acquired by it
(X) within the five-year period immediately prior to the announcement
date with respect to such business combination, or (Y) within the
five-year period immediately prior to, or in, the transaction in which
such interested shareholder became an interested shareholder, whichever
is higher; plus, in either case, interest compounded annually from the
earliest date on which such highest per share acquisition price was paid
through the consummation date at the rate for one-year United States
treasury obligations from time to time in effect; less the aggregate
amount of any cash dividends paid, and the market value of any dividends
paid other than in cash, per share of common stock since such earliest
date, up to the amount of such interest; and
(ii) the market value per share of common stock on the announcement
date with respect to such business combination or on such interested
shareholder's stock acquisition date, whichever is higher; plus interest
compounded annually from such date through the consummation date at the
rate for one-year United States treasury obligations from time to time
in effect; less the aggregate amount of any cash dividends paid, and the
market value of any dividends paid other than in cash, per share of
common stock since such date, up to the amount of such interest.
(B) The aggregate amount of the cash and the market value as of the
consummation date of consideration other than cash to be received per
share by holders of outstanding shares of any class or series of stock,
other than common stock, of such corporation is at least equal to the
highest of the following (whether or not such interested shareholder has
previously acquired any shares of such class or series of stock):
(i) the highest per share price paid by such interested shareholder at
a time when he was the beneficial owner, directly or indirectly, of five
percent or more of the outstanding voting stock of such corporation, for
any shares of such class or series of stock acquired by it (X) within
the five-year period immediately prior to the announcement date with
respect to such business combination, or (Y) within the five-year period
immediately prior to, or in, the transaction in which such interested
shareholder became an interested shareholder, whichever is higher; plus,
in either case, interest compounded annually from the earliest date on
which such highest per share acquisition price was paid through the
consummation date at the rate for one-year United States treasury
obligations from time to time in effect; less the aggregate amount of
any cash dividends paid, and the market value of any dividends paid
other than in cash, per share of such class or series of stock since
such earliest date, up to the amount of such interest;
(ii) the highest preferential amount per share to which the holders of
shares of such class or series of stock are entitled in the event of any
voluntary liquidation, dissolution or winding up of such corporation,
plus the aggregate amount of any dividends declared or due as to which
such holders are entitled prior to payment of dividends on some other
class or series of stock (unless the aggregate amount of such dividends
is included in such preferential amount); and
(iii) the market value per share of such class or series of stock on
the announcement date with respect to such business combination or on
such interested shareholder's stock acquisition date, whichever is
higher; plus interest compounded annually from such date through the
consummation date at the rate for one-year United States treasury
obligations from time to time in effect; less the aggregate amount of
any cash dividends paid, and the market value of any dividends paid
other than in cash, per share of such class or series of stock since
such date, up to the amount of such interest.
(C) The consideration to be received by holders of a particular class
or series of outstanding stock (including common stock) of such
corporation in such business combination is in cash or in the same form
as the interested shareholder has used to acquire the largest number of
shares of such class or series of stock previously acquired by it, and
such consideration shall be distributed promptly.
(D) The holders of all outstanding shares of stock of such corporation
not beneficially owned by such interested shareholder immediately prior
to the consummation of such business combination are entitled to receive
in such business combination cash or other consideration for such shares
in compliance with clauses (A), (B) and (C) of this subparagraph.
(E) After such interested shareholder's stock acquisition date and
prior to the consummation date with respect to such business
combination, such interested shareholder has not become the beneficial
owner of any additional shares of voting stock of such corporation
except:
(i) as part of the transaction which resulted in such interested
shareholder becoming an interested shareholder;
(ii) by virtue of proportionate stock splits, stock dividends or other
distributions of stock in respect of stock not constituting a business
combination under clause (E) of subparagraph five of paragraph (a) of
this section;
(iii) through a business combination meeting all of the conditions of
paragraph (b) of this section and this paragraph; or
(iv) through purchase by such interested shareholder at any price
which, if such price had been paid in an otherwise permissible business
combination the announcement date and consummation date of which were
the date of such purchase, would have satisfied the requirements of
clauses (A), (B) and (C) of this subparagraph.
(d) The provisions of this section shall not apply:
(1) to any business combination of a domestic corporation that does
not have a class of voting stock registered with the Securities and
Exchange Commission pursuant to section twelve of the Exchange Act,
unless the certificate of incorporation provides otherwise; or
(2) to any business combination of a domestic corporation whose
certificate of incorporation has been amended to provide that such
corporation shall be subject to the provisions of this section, which
did not have a class of voting stock registered with the Securities and
Exchange Commission pursuant to section twelve of the Exchange Act on
the effective date of such amendment, and which is a business
combination with an interested shareholder whose stock acquisition date
is prior to the effective date of such amendment; or
(3) to any business combination of a domestic corporation (i) the
original certificate of incorporation of which contains a provision
expressly electing not to be governed by this section, or (ii) which
adopts an amendment to such corporation's by-laws prior to March
thirty-first, nineteen hundred eighty-six, expressly electing not to be
governed by this section, or (iii) which adopts an amendment to such
corporation's by-laws, approved by the affirmative vote of a majority of
votes of the outstanding voting stock of such corporation, excluding the
voting stock of interested shareholders and their affiliates and
associates, expressly electing not to be governed by this section,
provided that such amendment to the by-laws shall not be effective until
eighteen months after such vote of such corporation's shareholders and
shall not apply to any business combination of such corporation with an
interested shareholder whose stock acquisition date is on or prior to
the effective date of such amendment; or
(4) to any business combination of a domestic corporation with an
interested shareholder of such corporation which became an interested
shareholder inadvertently, if such interested shareholder (i) as soon as
practicable, divests itself of a sufficient amount of the voting stock
of such corporation so that it no longer is the beneficial owner,
directly or indirectly, of twenty percent or more of the outstanding
voting stock of such corporation, and (ii) would not at any time within
the five-year period preceding the announcement date with respect to
such business combination have been an interested shareholder but for
such inadvertent acquisition; or
(5) to any business combination with an interested shareholder who was
the beneficial owner, directly or indirectly, of five percent or more of
the outstanding voting stock of such corporation on October thirtieth,
nineteen hundred eighty-five, and remained so to such interested
shareholder's stock acquisition date.
Share exchanges.
(a) (1) Two domestic corporations may, as provided in this section,
participate in the consummation of a plan for binding share exchanges.
(2) Whenever used in this article:
(A) "Acquiring corporation" means a corporation that is participating
in a procedure pursuant to which such corporation is acquiring all of
the outstanding shares of one or more classes of a subject corporation.
(B) "Subject corporation" means a corporation that is participating in
a procedure pursuant to which all of the outstanding shares of one or
more classes of such corporation are being acquired by an acquiring
corporation.
(b) The board of the acquiring corporation and the board of the
subject corporation shall adopt a plan of exchange, setting forth:
(1) The name of the acquiring corporation and the name of the subject
corporation, and, if the name of either of them has been changed, the
name under which it was formed;
(2) As to the acquiring corporation and the subject corporation, the
designation and number of outstanding shares of each class and series,
specifying the classes and series entitled to vote and further
specifying each class and series, if any, entitled to vote as a class;
and, if the number of any such shares is subject to change prior to the
effective date of the exchange, the manner in which such change may
occur;
(3) The terms and conditions of the proposed exchange, including the
manner and basis of exchanging the shares to be acquired for shares,
bonds or other securities of the acquiring corporation, or the cash or
other consideration to be paid or delivered in exchange for such shares
to be acquired, or a combination thereof; and
(4) Such other provisions with respect to the proposed exchange as the
board considers necessary or desirable.
(c) The board of the subject corporation, upon adopting the plan of
exchange, shall submit such plan, except as provided in paragraph (g) of
this section, to a vote of shareholders in accordance with the
following:
(1) Notice of meeting shall be given to each shareholder of record, as
of the record date fixed pursuant to section 604 (Fixing record date),
whether or not entitled to vote. A copy of the plan of exchange or an
outline of the material features of the plan shall accompany such
notice.
(2) (A) The plan of exchange shall be adopted at a meeting of
shareholders by (i) for any corporation in existence on the effective
date of subclause (ii) of this clause, two-thirds of the votes of all
outstanding shares entitled to vote thereon and (ii) for any corporation
in existence on the effective date of this subclause the certificate of
incorporation of which expressly provides such and for any corporation
incorporated after the effective date of this subclause, a majority of
the votes of all outstanding shares entitled to vote thereon.
Notwithstanding any provision in the certificate of incorporation, the
holders of shares of a class or series of a class shall be entitled to
vote together and to vote as a separate class if both of the following
conditions are satisfied:
1. Such shares will be converted into shares of the acquiring
corporation, and
2. The certificate or articles of incorporation of the acquiring
corporation immediately after the share exchange would contain any
provision which is not contained in the certificate of incorporation of
the subject corporation and which, if contained in an amendment to the
certificate of incorporation of the subject corporation, would entitle
the holders of shares of such class or such one or more series to vote
and to vote as a separate class thereon pursuant to section 804 (Class
voting on amendment).
In such case, in addition to the authorization of the exchange by the
proportion of votes indicated above of all outstanding shares entitled
to vote thereon, the exchange shall be authorized by a majority of the
votes of all outstanding shares of the class entitled to vote as a
separate class. If any provision referred to in subclause 2 of this
clause (A) would affect the rights of the holders of shares of only one
or more series of any class but not the entire class, then only the
holders of those series whose rights would be affected shall together be
considered a separate class for purposes of this section.
Notwithstanding shareholder authorization and at any time prior to the
filing of the certificate of exchange, the plan of exchange may be
abandoned pursuant to a provision for such abandonment, if any,
contained in the plan of exchange.
(B) Any corporation may adopt an amendment of the certificate of
incorporation which provides that such plan of exchange shall be adopted
at a meeting of the shareholders by vote of a specified proportion of
the holders of outstanding shares, or class or series of shares,
entitled to vote thereon, provided that such proportion may not be less
than a majority and subject to the second sentence of clause (A) of
this subparagraph (2).
(d) After adoption of the plan of exchange by the board of the
acquiring corporation and the board of the subject corporation and by
the shareholders of the subject corporation entitled to vote thereon,
unless the exchange is abandoned in accordance with paragraph (c), a
certificate of exchange, entitled "Certificate of exchange of shares of
..............., subject corporation, for shares of .............,
acquiring corporation, or other consideration, under section 913 of the
Business Corporation Law", shall be signed on behalf of each corporation
and delivered to the department of state. It shall set forth:
(1) the statements required by subparagraphs (1) and (2) of paragraph
(b) of this section;
(2) the effective date of the exchange if other than the date of
filing of the certificate of exchange by the department of state;
(3) the date when the certificate of incorporation of each corporation
was filed by the department of state;
(4) the designation of the shares to be acquired by the acquiring
corporation and a statement of the consideration for such shares; and
(5) the manner in which the exchange was authorized with respect to
each corporation.
(e) Upon the filing of the certificate of exchange by the department
of state or on such date subsequent thereto, not to exceed thirty days,
as shall be set forth in such certificate, the exchange shall be
effected. When such exchange has been effected, ownership of the shares
to be acquired pursuant to the plan of exchange shall vest in the
acquiring corporation, whether or not the certificates for such shares
have been surrendered for exchange, and the acquiring corporation shall
be entitled to have new certificates registered in its name or at its
direction. Shareholders whose shares have been so acquired shall become
entitled to the shares, bonds or other securities of the acquiring
corporation, or the cash or other consideration, required to be paid or
delivered in exchange for such shares pursuant to the plan. Subject to
any terms of the plan regarding surrender of certificates theretofore
evidencing the shares so acquired and regarding whether such
certificates shall thereafter evidence securities of the acquiring
corporation, such certificates shall thereafter evidence only the right
to receive the consideration required to be paid or delivered in
exchange for such shares pursuant to the plan or, in the case of
dissenting shareholders, their rights under section 910 (Right of
shareholder to receive payment for shares upon merger or consolidation,
or sale, lease, exchange or other disposition of assets, or share
exchange) and section 623 (Procedure to enforce shareholder's right to
receive payment for shares).
(f) (1) A foreign corporation and a domestic corporation may
participate in a share exchange, but, if the subject corporation is a
foreign corporation, only if such exchange is permitted by the laws of
the jurisdiction under which such foreign corporation is incorporated.
With respect to such exchange, any reference in subparagraph (2) of
paragraph (a) of this section to a corporation shall, unless the context
otherwise requires, include both domestic and foreign corporations, and
the provisions of paragraphs (b), (c), (d) and (e) of this section shall
apply, except to the extent otherwise provided in this paragraph.
(2) With respect to procedure, including the requirement of
shareholder authorization, a domestic corporation shall comply with the
provisions of this chapter relating to share exchanges in which domestic
corporations are participating, and a foreign corporation shall comply
with the applicable provisions of the law of the jurisdiction under
which it is incorporated.
(3) If the subject corporation is a foreign corporation, the
certificate of exchange shall set forth, in addition to the matters
specified in paragraph (d), the jurisdiction and date of incorporation
of such corporation and a statement that the exchange is permitted by
the laws of the jurisdiction of such corporation and is in compliance
therewith.
(g) (1) Any corporation owning at least ninety percent of the
outstanding common shares, having full voting rights, of another
corporation may acquire by exchange the remainder of such outstanding
common shares, without the authorization of the shareholders of any such
corporation and with the effect provided for in paragraph (e) of this
section. The board of the acquiring corporation shall adopt a plan of
exchange, setting forth the matters specified in paragraph (b) of this
section. A copy of such plan of exchange or an outline of the material
features thereof shall be given, personally or by mail, to all holders
of shares of the subject corporation that are not owned by the acquiring
corporation, unless the giving of such copy or outline has been waived
by such holders.
(2) A certificate of exchange, entitled "Certificate of exchange of
shares of .........., subject corporation, for shares of ..........,
acquiring corporation, or other consideration, under paragraph (g) of
section 913 of the Business Corporation Law" and complying with the
provisions of paragraph (d) and, if applicable, subparagraph (3) of
paragraph (f) shall be signed, verified and delivered to the department
of state by the acquiring corporation, but not less than thirty days
after the giving of a copy or outline of the material features of the
plan of exchange to shareholders of the subject corporation, or at any
time after the waiving thereof by the holders of all the outstanding
shares of the subject corporation not owned by the acquiring
corporation.
(3) The right of exchange of shares granted by this paragraph to
certain corporations shall not preclude the exercise by such
corporations of any other right of exchange under this article.
(4) The procedure for the exchange of shares of a subject corporation
under this paragraph (g) of this section shall be available where either
the subject corporation or the acquiring corporation is a foreign
corporation, and, in case the subject corporation is a foreign
corporation, where such exchange is permitted by the laws of the
jurisdiction under which such foreign corporation is incorporated.
(h) This section does not limit the power of a domestic or foreign
corporation to acquire all or part of the shares of one or more classes
of another domestic or foreign corporation by means of a voluntary
exchange or otherwise.
(i) (1) A binding share exchange pursuant to this section shall
constitute a "business combination" pursuant to section nine hundred
twelve of this chapter (Requirements relating to certain business
combinations) if the subject corporation is a domestic corporation and
the acquiring corporation is an "interested shareholder" of the subject
corporation, as such term is defined in section nine hundred twelve of
this chapter.
(2) With respect to convertible securities and other securities
evidencing a right to acquire shares of a subject corporation, a binding
share exchange pursuant to this section shall have the same effect on
the rights of the holders of such securities as a merger of the subject
corporation.
(3) A binding share exchange pursuant to this section which is
effectuated on or after September first, nineteen hundred ninety-one is
intended to have the same effect as a "merger" in which the subject
corporation is a surviving corporation, within the meaning of any
provision of the certificate of incorporation, bylaws or other contract
or instrument by which the subject corporation was bound on September
first, nineteen hundred eighty-six, unless it is apparent on the face of
such instrument that the term "merger" was not intended to include a
binding share exchange.
ARTICLE 10 Non-judicial Dissolution
Authorization of dissolution.
(a) A corporation may be dissolved under this article. Such
dissolution shall be authorized at a meeting of shareholders by (i) for
corporations the certificate of incorporation of which expressly
provides such or corporations incorporated after the effective date of
paragraph (b) of this section, a majority of the votes of all
outstanding shares entitled to vote thereon or (ii) for other
corporations, two-thirds of the votes of all outstanding shares entitled
to vote thereon, except, in either case, as otherwise provided under
section 1002 (Dissolution under provision in certificate of
incorporation).
(b) Any corporation may adopt an amendment of the certificate of
incorporation providing that such dissolution shall be authorized at a
meeting of shareholders by a specified proportion of votes of all
outstanding shares entitled to vote thereon, provided that such
proportion may not be less than a majority.
Dissolution under provision in certificate of incorporation.
(a) The certificate of incorporation may contain a provision that any
shareholder, or the holders of any specified number or proportion of
shares or votes of shares, or of any specified number or proportion of
shares or votes of shares of any class or series thereof, may require
the dissolution of the corporation at will or upon the occurrence of a
specified event. If the certificate of incorporation contains such a
provision, a certificate of dissolution under section 1003 (Certificate
of dissolution; contents) may be signed, verified and delivered to the
department of state as provided in section 104 (Certificate;
requirements, signing, filing, effectiveness) when authorized by a
holder or holders of the number or proportion of shares or votes of
shares specified in such provision, given in such manner as may be
specified therein, or if no manner is specified therein, when authorized
on written consent signed by such holder or holders; or such certificate
may be signed, verified and delivered to the department by such holder
or holders or by such of them as are designated by them.
(b) An amendment of the certificate of incorporation which adds a
provision permitted by this section, or which changes or strikes out
such a provision, shall be authorized at a meeting of shareholders by
vote of all outstanding shares, whether or not otherwise entitled to
vote on any amendment, or of such lesser proportion of shares and of
such class or series of shares, but not less than a majority of all
outstanding shares entitled to vote on any amendment, as may be provided
specifically in the certificate of incorporation for adding, changing or
striking out a provision permitted by this section.
(c) If the certificate of incorporation of any corporation contains a
provision authorized by this section, the existence of such provision
shall be noted conspicuously on the face or back of every certificate
for shares issued by such corporation.
Certificate of dissolution; contents.
(a) A certificate of dissolution, entitled "Certificate of dissolution
of ......... (name of corporation) under section 1003 of the Business
Corporation Law", shall be signed and delivered to the department of
state. It shall set forth:
(1) The name of the corporation and, if its name has been changed, the
name under which it was formed.
(2) The date its certificate of incorporation was filed by the
department of state.
(3) The name and address of each of its officers and directors.
(4) That the corporation elects to dissolve.
(5) The manner in which the dissolution was authorized.
Certificate of dissolution; filing.
(a) The department shall not file such certificate unless the consent
of the state department of taxation and finance to the dissolution is
attached thereto. Upon such filing, the corporation is dissolved.
(b) Notwithstanding paragraph (a) of this section, with respect to any
corporation that has done business in the city of New York and incurred
liability for any tax or charge under chapter six, seven, eight, ten,
eleven, twelve, thirteen, fourteen, fifteen, twenty-one, twenty-four,
twenty-five or twenty-seven of title eleven of the administrative code
of the city of New York, the department shall not file such certificate
unless the consent of the commissioner of finance of the city of New
York to the dissolution is also attached thereto.
Procedure after dissolution.
(a) After dissolution:
(1) The corporation shall carry on no business except for the purpose
of winding up its affairs.
(2) The corporation shall proceed to wind up its affairs, with power
to fulfill or discharge its contracts, collect its assets, sell its
assets for cash at public or private sale, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its
business.
(3) After paying or adequately providing for the payment of its
liabilities:
(A) The corporation, if authorized at a meeting of shareholders by a
majority of the votes of all outstanding shares entitled to vote thereon
may sell its remaining assets, or any part thereof, for shares, bonds or
other securities or partly for cash and partly for shares, bonds or
other securities, and distribute the same among the shareholders
according to their respective rights. In the case of a sale under this
subparagraph where the consideration is in whole or in part other than
cash, any shareholder, entitled to vote thereon, who does not vote for
or consent in writing to such sale, shall, subject to and by complying
with the provisions of section 623 (Procedure to enforce shareholder's
right to receive payment for shares), have the right to receive payment
for his shares. Section 909 (Sale, lease, exchange or other disposition
of assets) is not applicable to a sale of assets under this paragraph.
(B) The corporation, whether or not it has made a sale under
subparagraph (A), may distribute any remaining assets, in cash or in
kind or partly each, among its shareholders according to their
respective rights.
(b) When there are no shareholders, upon dissolution all subscriptions
for shares shall be cancelled and all obligations of the corporation to
issue shares or of the subscribers to pay their subscriptions shall
terminate, except for such payments as may be required to enable the
corporation to pay its liabilities.
(c) Upon the winding up of the affairs of the corporation, any assets
distributable to a creditor or shareholder who is unknown or cannot be
found, or who is under disability and for whom there is no legal
representative, shall be paid to the state comptroller as abandoned
property within six months from the date fixed for the payment of the
final liquidating distribution, and be subject to the provisions of the
abandoned property law.
Corporate action and survival of remedies after dissolution.
(a) A dissolved corporation, its directors, officers and shareholders
may continue to function for the purpose of winding up the affairs of
the corporation in the same manner as if the dissolution had not taken
place, except as otherwise provided in this chapter or by court order.
In particular, and without limiting the generality of the foregoing:
(1) The directors of a dissolved corporation shall not be deemed to be
trustees of its assets; title to such assets shall not vest in them, but
shall remain in the corporation until transferred by it in its corporate
name.
(2) Dissolution shall not change quorum or voting requirements for the
board or shareholders, or provisions regarding election, appointment,
resignation or removal of, or filling vacancies among, directors or
officers, or provisions regarding amendment or repeal of by-laws or
adoption of new by-laws.
(3) Shares may be transferred and determinations of shareholders for
any purpose may be made without closing the record of shareholders until
such time, if any, as such record may be closed, and either the board or
the shareholders may close it.
(4) The corporation may sue or be sued in all courts and participate
in actions and proceedings, whether judicial, administrative,
arbitrative or otherwise, in its corporate name, and process may be
served by or upon it.
(b) The dissolution of a corporation shall not affect any remedy
available to or against such corporation, its directors, officers or
shareholders for any right or claim existing or any liability incurred
before such dissolution, except as provided in sections 1007 (Notice to
creditors; filing or barring claims) or 1008 (Jurisdiction of supreme
court to supervise dissolution and liquidation).
Notice to creditors; filing or barring claims.
(a) At any time after dissolution, the corporation may give a notice
requiring all creditors and claimants, including any with unliquidated
or contingent claims and any with whom the corporation has unfulfilled
contracts, to present their claims in writing and in detail at a
specified place and by a specified day, which shall not be less than six
months after the first publication of such notice. Such notice shall be
published at least once a week for two successive weeks in a newspaper
of general circulation in the county in which the office of the
corporation was located at the date of dissolution. On or before the
date of the first publication of such notice, the corporation shall mail
a copy thereof, postage prepaid and addressed to his last known address,
to each person believed to be a creditor of or claimant against the
corporation whose name and address are known to or can with due
diligence be ascertained by the corporation. The giving of such notice
shall not constitute a recognition that any person is a proper creditor
or claimant, and shall not revive or make valid, or operate as a
recognition of the validity of, or a waiver of any defense or
counterclaim in respect of any claim against the corporation, its
assets, directors, officers or shareholders, which has been barred by
any statute of limitations or become invalid by any cause, or in respect
of which the corporation, its directors, officers or shareholders, has
any defense or counterclaim.
(b) Any claims which shall have been filed as provided in such notice
and which shall be disputed by the corporation may be submitted for
determination to the supreme court under section 1008 (Jurisdiction of
supreme court to supervise dissolution and liquidation). A claim filed
by the trustee or paying agent for the holders of bonds or coupons shall
have the same effect as if filed by the holder of any such bond or
coupon. Any person whose claim is, at the date of the first publication
of such notice, barred by any statute of limitations is not a creditor
or claimant entitled to any notice under this section or section 1008.
The claim of any such person and all other claims which are not timely
filed as provided in such notice except claims which are the subject of
litigation on the date of the first publication of such notice, and all
claims which are so filed but are disallowed by the court under section
1008, shall be forever barred as against the corporation, its assets,
directors, officers and shareholders, except to such extent, if any, as
the court may allow them against any remaining assets of the corporation
in the case of a creditor who shows satisfactory reason for his failure
to file his claim as so provided. If the court requires a further notice
under section 1008, any reference to a notice in this section shall, to
the extent that the court so orders, mean such further notice, except
that a claim which has been filed in accordance with a notice under this
section need not be refiled under such further notice.
(c) Notwithstanding this section and section 1008, tax claims and
other claims of this state, of the United States and of the department
of finance of the city of New York shall not be required to be filed
under those sections, and such claims shall not be barred because not so
filed, and distribution of the assets of the corporation, or any part
thereof, may be deferred until determination of any such claims.
(d) Laborer's wages shall be preferred claims and entitled to payment
before any other creditors out of the assets of the corporation in
excess of valid prior liens or encumbrances.
Jurisdiction of supreme court to supervise dissolution and
liquidation.
(a) At any time after the filing of a certificate of dissolution under
this article the supreme court in the judicial district where the office
of the corporation was located at the date of its dissolution, in a
special proceeding instituted under this section, upon the petition of
the corporation, or, in a situation approved by the court, upon the
petition of a creditor, claimant, director, officer, shareholder,
subscriber for shares, incorporator or the attorney-general, may suspend
or annul the dissolution or continue the liquidation of the corporation
under the supervision of the court and may make all such orders as it
may deem proper in all matters in connection with the dissolution or the
winding up of the affairs of the corporation, and in particular, and
without limitation of the generality thereof, in respect of the
following:
(1) The determination of the validity of the authorization of the
dissolution of the corporation and of the execution and delivery of the
certificate of dissolution under this article.
(2) The adequacy of the notice given to creditors and claimants and if
it is determined to have been inadequate, the requirement of such
further notice as the court may deem proper.
(3) The determination of the validity and amount or invalidity of any
claims which have been presented to the corporation.
(4) The barring of all creditors and claimants who have not timely
filed claims as provided in any such notice, or whose claims have been
disallowed by the court, as against the corporation, its assets,
directors, officers and shareholders.
(5) The determination and enforcement of the liability of any
director, officer, shareholder or subscriber for shares, to the
corporation or for the liabilities of the corporation.
(6) The payment, satisfaction or compromise of claims against the
corporation, the retention of assets for such purpose, and the
determination of the adequacy of provisions made for payment of the
liabilities of the corporation.
(7) The disposition or destruction of records, documents and papers of
the corporation.
(8) The appointment and removal of a receiver under article 12
(Receivership) who may be a director, officer or shareholder of the
corporation.
(9) The issuance of injunctions for one or more of the purposes and as
provided in section 1115 (Injunction).
(10) The return of subscription payments to subscribers for shares,
and the making of distributions, in cash or in kind or partly each, to
the shareholders.
(11) The payment to the state comptroller, as abandoned property, of
assets under paragraph (c) of section 1005 (Procedure after
dissolution).
(b) Orders under this section may be entered ex parte, except that if
such special proceeding was not instituted upon petition of the
corporation, notice shall be given to the corporation in such manner as
the court may direct. Notice shall be given to such other persons
interested, and in such manner, as the court may deem proper, of any
hearings and of the entry of any orders on such matters as the court
shall deem proper. All orders made by the court under this section shall
be binding upon the attorney-general, the corporation, its officers,
directors, shareholders, subscribers for shares, incorporators,
creditors and claimants.
(c) (1) Simultaneously with the institution of such special proceeding
for annulment of the dissolution, the petitioner shall apply to the
department of state to reserve the corporation name to the corporation.
If such name shall not be available for use, the petitioner forthwith
upon being notified thereof shall apply to such department for the
reservation of another and available name and any judgment or order of
annulment made in such proceeding shall order and direct the petitioner
to execute a certificate of change of the corporate name to such other
name.
(2) The clerk of the court, or such other person as the court may
direct, shall transmit a certified copy of the judgment or order of
annulment of the dissolution, together with the certificate of change of
corporate name in the appropriate case, to the department of state, and
a certified copy of such judgment or order to the clerk of the county in
which the office of the corporation was located on the date of the
dissolution. Upon filing by the department of state, the annulment of
dissolution shall be effected.
Applicability to dissolution under other provisions.
The provisions of sections 1005 (Procedure after dissolution), 1006
(Corporate action and survival of remedies after dissolution), 1007
(Notice to creditors; filing or barring claims) and 1008 (Jurisdiction
of supreme court to supervise dissolution and liquidation) shall apply
to a corporation dissolved by expiration of its period of duration or
under section two hundred three-a of the tax law.
ARTICLE 11 Judicial Dissolution
Attorney-general's action for judicial dissolution.
(a) The attorney-general may bring an action for the dissolution of a
corporation upon one or more of the following grounds:
(1) That the corporation procured its formation through fraudulent
misrepresentation or concealment of a material fact.
(2) That the corporation has exceeded the authority conferred upon it
by law, or has violated any provision of law whereby it has forfeited
its charter, or carried on, conducted or transacted its business in a
persistently fraudulent or illegal manner, or by the abuse of its powers
contrary to the public policy of the state has become liable to be
dissolved.
(b) An action under this section is triable by jury as a matter of
right.
(c) The enumeration in paragraph (a) of grounds for dissolution shall
not exclude actions or special proceedings by the attorney-general or
other state officials for the annulment or dissolution of a corporation
for other causes as provided in this chapter or in any other statute of
this state.
Directors' petition for judicial dissolution.
If a majority of the board adopts a resolution that finds that the
assets of a corporation are not sufficient to discharge its liabilities
or that a dissolution will be beneficial to the shareholders, it may
present a petition for its dissolution.
Shareholders' petition for judicial dissolution.
(a) If the shareholders of a corporation adopt a resolution stating
that they find that its assets are not sufficient to discharge its
liabilities, or that they deem a dissolution to be beneficial to the
shareholders, the shareholders or such of them as are designated for
that purpose in such resolution may present a petition for its
dissolution.
(b) A shareholders' meeting to consider such a resolution may be
called, notwithstanding any provision in the certificate of
incorporation, by the holders of shares representing ten percent of the
votes of all outstanding shares entitled to vote thereon, or if the
certificate of incorporation authorizes a lesser proportion of votes of
shares to call the meeting, by such lesser proportion. A meeting under
this paragraph may not be called more often than once in any period of
twelve consecutive months.
(c) Such a resolution may be adopted at a meeting of shareholders by
vote of a majority of the votes of all outstanding shares entitled to
vote thereon or if the certificate of incorporation requires a greater
proportion of votes to adopt such a resolution, by such greater
proportion.
Petition in case of deadlock among directors or shareholders.
(a) Except as otherwise provided in the certificate of incorporation
under section 613 (Limitations on right to vote), the holders of shares
representing one-half of the votes of all outstanding shares of a
corporation entitled to vote in an election of directors may present a
petition for dissolution on one or more of the following grounds:
(1) That the directors are so divided respecting the management of the
corporation's affairs that the votes required for action by the board
cannot be obtained.
(2) That the shareholders are so divided that the votes required for
the election of directors cannot be obtained.
(3) That there is internal dissension and two or more factions of
shareholders are so divided that dissolution would be beneficial to the
shareholders.
(b) If the certificate of incorporation provides that the proportion
of votes required for action by the board, or the proportion of votes of
shareholders required for election of directors, shall be greater than
that otherwise required by this chapter, such a petition may be
presented by the holders of shares representing more than one-third of
the votes of all outstanding shares entitled to vote on non-judicial
dissolution under section 1001 (Authorization of dissolution).
(c) Notwithstanding any provision in the certificate of incorporation,
any holder of shares entitled to vote at an election of directors of a
corporation, may present a petition for its dissolution on the ground
that the shareholders are so divided that they have failed, for a period
which includes at least two consecutive annual meeting dates, to elect
successors to directors whose terms have expired or would have expired
upon the election and qualification of their successors.
Petition for judicial dissolution under special circumstances.
(a) The holders of shares representing twenty percent or more of the
votes of all outstanding shares of a corporation, other than a
corporation registered as an investment company under an act of congress
entitled "Investment Company Act of 1940", no shares of which are listed
on a national securities exchange or regularly quoted in an
over-the-counter market by one or more members of a national or an
affiliated securities association, entitled to vote in an election of
directors may present a petition of dissolution on one or more of the
following grounds:
(1) The directors or those in control of the corporation have been
guilty of illegal, fraudulent or oppressive actions toward the
complaining shareholders;
(2) The property or assets of the corporation are being looted,
wasted, or diverted for non-corporate purposes by its directors,
officers or those in control of the corporation.
(b) The court, in determining whether to proceed with involuntary
dissolution pursuant to this section, shall take into account:
(1) Whether liquidation of the corporation is the only feasible means
whereby the petitioners may reasonably expect to obtain a fair return on
their investment; and
(2) Whether liquidation of the corporation is reasonably necessary for
the protection of the rights and interests of any substantial number of
shareholders or of the petitioners.
(c) In addition to all other disclosure requirements, the directors or
those in control of the corporation, no later than thirty days after the
filing of a petition hereunder, shall make available for inspection and
copying to the petitioners under reasonable working conditions the
corporate financial books and records for the three preceding years.
(d) The court may order stock valuations be adjusted and may provide
for a surcharge upon the directors or those in control of the
corporation upon a finding of wilful or reckless dissipation or transfer
of assets or corporate property without just or adequate compensation
therefor.
Contents of petition for judicial dissolution.
A petition for dissolution shall specify the section or sections of
this article under which it is authorized and state the reasons why the
corporation should be dissolved. It shall be verified by the petitioner
or by one of the petitioners.
Order to show cause; issuance; publication, service, filing.
(a) Upon the presentation of such a petition, the court shall make an
order requiring the corporation and all persons interested in the
corporation to show cause before it, or before a referee designated in
the order, at a time and place therein specified, not less than four
weeks after the granting of the order, why the corporation should not be
dissolved. In connection therewith, the court may order the corporation,
its officers and directors, to furnish the court with a schedule of all
information, known or ascertainable with due diligence by them, deemed
pertinent by the court, including a statement of the corporate assets
and liabilities, and the name and address of each shareholder and of
each creditor and claimant, including any with unliquidated or
contingent claims and any with whom the corporation has unfulfilled
contracts.
(b) A copy of the order to show cause shall be published as prescribed
therein, at least once in each of the three weeks before the time
appointed for the hearing thereon, in one or more newspapers, specified
in the order, of general circulation in the county in which the office
of the corporation is located at the date of the order.
(c) A copy of the order to show cause shall be served upon the state
tax commission and the corporation and upon each person named in the
petition, or in any schedule provided for in paragraph (a), as a
shareholder, creditor or claimant, except upon a person whose address is
stated to be unknown, and cannot with due diligence be ascertained by
the corporation. The service shall be made personally, at least ten days
before the time appointed for the hearing, or by mailing a copy of the
order, postage prepaid, at least twenty days before the time so
appointed, addressed to the person to be served at his last known
address.
(d) A copy of the order to show cause and the petition shall be filed,
within ten days after the order is entered, with the clerk of the county
where the office of the corporation is located at the date of the order.
A copy of each schedule furnished to the court under this section shall,
within ten days thereafter, be filed with such clerk.
(e) Publication, service and filing provided for in this section shall
be effected by the corporation or such other persons as the court may
order.
Amending papers.
At any stage, before final order, the court may grant an order
amending the petition or any other paper filed in the action or special
proceeding, with like effect as though originally filed as amended, or
otherwise as the court may direct.
Referee.
If a referee was not designated in the order to show cause, the court,
in its discretion, may appoint a referee when or after the order is
returnable. The court may at any time appoint a successor referee.
Hearing and decision.
At the time and place specified in the order to show cause, or at any
other time and place to which the hearing is adjourned, the court or the
referee shall hear the allegations and proofs of the parties and
determine the facts. The decision of the court or the report of the
referee shall be made and filed with the clerk of the court with all
convenient speed.
Application for final order.
When the hearing is before a referee, a motion for a final order must
be made to the court upon notice to each party to the action or special
proceeding who has appeared therein. The notice of motion may be served
as prescribed for the service of papers upon an attorney in an action in
such court. When the hearing is before the court, a motion for a final
order may be made at the hearing or at such time and upon such notice as
the court prescribes.
Judgment or final order of dissolution.
(a) In an action or special proceeding under this article if, in the
court's discretion, it shall appear that the corporation should be
dissolved, it shall make a judgment or final order dissolving the
corporation.
(b) In making its decision, the court shall take into consideration
the following criteria:
(1) In an action brought by the attorney-general, the interest of the
public is of paramount importance.
(2) In a special proceeding brought by directors or shareholders, the
benefit to the shareholders of a dissolution is of paramount importance.
(3) In a special proceeding brought under section 1104 (Petition in
case of deadlock among directors or shareholders) or section 1104-a
(Petition for judicial dissolution under special circumstances)
dissolution is not to be denied merely because it is found that the
corporate business has been or could be conducted at a profit.
(c) If the judgment or final order shall provide for a dissolution of
the corporation, the court may, in its discretion, provide therein for
the distribution of the property of the corporation to those entitled
thereto according to their respective rights.
(d) The clerk of the court or such other person as the court may
direct shall transmit certified copies of the judgment or final order of
dissolution to the department of state and to the clerk of the county in
which the office of the corporation was located at the date of the
judgment or order. Upon filing by the department of state, the
corporation shall be dissolved.
(e) The corporation shall promptly thereafter transmit a certified
copy of the judgment or final order to the clerk of each other county in
which its certificate of incorporation was filed.
Venue.
An action or special proceeding under this article shall be brought in
the supreme court in the judicial district in which the office of the
corporation is located at the time of the service on the corporation of
a summons in such action or of the presentation to the court of the
petition in such special proceeding.
Preservation of assets; appointment of receiver.
At any stage of an action or special proceeding under this article,
the court may, in its discretion, make all such orders as it may deem
proper in connection with preserving the property and carrying on the
business of the corporation, including the appointment and removal of a
receiver under article 12 (Receivership), who may be a director, officer
or shareholder of the corporation.
Certain sales, transfers, security interests and judgments void.
A sale, mortgage, conveyance or other transfer of, or the creation of
a security interest in, any property of a corporation made, without
prior approval of the court, after service upon the corporation of a
summons in an action, or of an order to show cause in a special
proceeding, under this article in payment of or as security for an
existing or prior debt or for any other or for no consideration, or a
judgment thereafter rendered against the corporation by confession or
upon the acceptance of any offer, shall be void as against such persons
and to such extent, if any, as the court shall determine.
Injunction.
(a) At any stage of an action or special proceeding under this
article, the court may, in its discretion, grant an injunction,
effective during the pendency of the action or special proceeding or
such shorter period as it may specify in the injunction, for one or more
of the following purposes:
(1) Restraining the corporation and its directors and officers from
transacting any unauthorized business and from exercising any corporate
powers, except by permission of the court.
(2) Restraining the corporation and its directors and officers from
collecting or receiving any debt or other property of the corporation,
and from paying out or otherwise transferring or delivering any property
of the corporation, except by permission of the court.
(3) Restraining the creditors of the corporation from beginning any
action against the corporation, or from taking any proceedings in an
action theretofore commenced, except by permission of the court. Such
injunction shall have the same effect and be subject to the same
provisions of law as if each creditor upon whom it is served was named
therein.
Discontinuance of action or special proceeding.
An action or special proceeding for the dissolution of a corporation
may be discontinued at any stage when it is established that the cause
for dissolution did not exist or no longer exists. In such event, the
court shall dismiss the action or special proceeding and direct any
receiver to redeliver to the corporation all its remaining property.
Applicability of other provisions.
(a) Subject to the provisions of this article, the provisions of
sections 1005 (Procedure after dissolution), 1006 (Corporate action and
survival of remedies after dissolution), 1007 (Notice to creditors;
filing or barring claims) and 1008 (Jurisdiction of supreme court to
supervise dissolution and liquidation) shall apply to a corporation
dissolved under this article.
(b) Any orders provided for in section 1008, may be made at any stage
of an action or special proceeding for dissolution of a corporation
under this article, and if the corporation is dissolved under this
article, the court may retain jurisdiction for the purpose of making
such orders, after the dissolution, in such action or special
proceeding. The court may also make such orders in separate special
proceedings, as provided in section 1008.
(c) Notice to creditors and claimants, provided for in section 1007,
may also be given, by order of the court, at any stage of an action or
special proceeding for dissolution of a corporation under this article.
Purchase of petitioner's shares; valuation.
(a) In any proceeding brought pursuant to section eleven hundred
four-a of this chapter, any other shareholder or shareholders or the
corporation may, at any time within ninety days after the filing of such
petition or at such later time as the court in its discretion may allow,
elect to purchase the shares owned by the petitioners at their fair
value and upon such terms and conditions as may be approved by the
court, including the conditions of paragraph (c) herein. An election
pursuant to this section shall be irrevocable unless the court, in its
discretion, for just and equitable considerations, determines that such
election be revocable.
(b) If one or more shareholders or the corporation elect to purchase
the shares owned by the petitioner but are unable to agree with the
petitioner upon the fair value of such shares, the court, upon the
application of such prospective purchaser or purchasers or the
petitioner, may stay the proceedings brought pursuant to section 1104-a
of this chapter and determine the fair value of the petitioner's shares
as of the day prior to the date on which such petition was filed,
exclusive of any element of value arising from such filing but giving
effect to any adjustment or surcharge found to be appropriate in the
proceeding under section 1104-a of this chapter. In determining the fair
value of the petitioner's shares, the court, in its discretion, may
award interest from the date the petition is filed to the date of
payment for the petitioner's share at an equitable rate upon judicially
determined fair value of his shares.
(c) In connection with any election to purchase pursuant to this
section:
(1) If such election is made beyond ninety days after the filing of
the petition, and the court allows such petition, the court, in its
discretion, may award the petitioner his reasonable expenses incurred in
the proceeding prior to such election, including reasonable attorneys'
fees;
(2) The court, in its discretion, may require, at any time prior to
the actual purchase of petitioner's shares, the posting of a bond or
other acceptable security in an amount sufficient to secure petitioner
for the fair value of his shares.
ARTICLE 12 Receivership
Action by judgment creditor for sequestration.
Where final judgment for a sum of money has been rendered against a
corporation, and an execution issued thereupon to the sheriff of the
county where the corporation does its general business, or where its
office is located, has been returned wholly or partly unsatisfied, the
judgment creditor may maintain an action to procure a judgment
sequestrating the property of the corporation and providing for a
distribution thereof.
Appointment of receiver of property of a domestic or foreign
corporation.
(a) A receiver of the property of a corporation can be appointed only
by the court, and in one of the following cases:
(1) An action or special proceeding brought under article 10
(Non-judicial dissolution) or 11 (Judicial dissolution).
(2) An action under section 1201 (Action by judgment creditor for
sequestration).
(3) An action brought by the attorney-general or by a shareholder to
preserve the assets of a corporation, which has no officer within this
state qualified to administer them.
(4) An action to preserve the assets in this state, of any kind,
tangible or intangible, of a foreign corporation which has been
dissolved, nationalized or its authority or existence otherwise
terminated or cancelled in the jurisdiction of its incorporation or
which has ceased to do business, brought by any creditor or shareholder
of such corporation or by one on whose behalf an order of attachment
against the property of such corporation has been issued.
(b) A receiver shall be subject to the control of the court at all
times and may be removed by the court at any time.
(c) All actions or special proceedings brought by or against a
receiver shall have a preference upon the calendars of all courts next
in order to actions or special proceedings brought by the people of the
state of New York.
Temporary and permanent receiver.
(a) At any stage before final judgment or final order in an action or
special proceeding brought under this article, the court may appoint one
or more receivers of the property of the corporation or of the property
in this state of a foreign corporation against which an action has been
brought under subparagraph (a) (4) of section 1202 (Appointment of
receiver of property of a domestic or foreign corporation). Notice of an
application for the appointment of a receiver shall be given to the
attorney-general and to such other persons and in such manner as the
court directs. The determination by the court of the necessity or
advisability of appointing a receiver or an attorney for a receiver, and
the allowance of expenses, commissions or compensation to the receiver
or his attorney, shall be subject to review on appeal. This provision
shall not affect any other right to review on appeal.
(b) A receiver appointed by or under a final judgment or order in an
action or special proceeding, or a temporary receiver who is continued
by the final judgment or order, is a permanent receiver. The court may
confer upon a temporary receiver the powers, and subject him to the
duties of a permanent receiver, or so much thereof as it deems proper.
Oath and security.
(a) A receiver, before entering upon his duties, shall:
(1) Take and subscribe an oath that he will faithfully, honestly and
impartially discharge the trust committed to him, and the oath shall be
filed with the clerk of the court in which the action or special
proceeding is pending.
(2) File with the clerk of such court a bond to the people, with at
least two sufficient sureties or a bond executed by any fidelity or
surety company authorized by the laws of this state to transact
business, in a penalty fixed by the court appointing him, conditioned
for the faithful discharge of his duties as receiver. The court may at
any time direct a receiver to give a new bond with new sureties and with
like condition.
Designation of depositories by court.
All orders appointing a receiver of a corporation shall designate
therein one or more places of deposit, wherein all funds of the
corporation not needed for immediate disbursement shall be deposited and
no other deposits and no investment of such funds shall be made, except
upon the order of the court.
Powers of permanent receiver.
(a) A permanent receiver, upon qualifying under section 1204 (Oath and
security), shall be vested with title to all the property of the
corporation wherever situated or of the property in this state of a
foreign corporation against which an action or special proceeding has
been brought under subparagraph (a) (4) of section 1202 (Appointment of
receiver of property of a domestic or foreign corporation), for the
benefit of the creditors and shareholders of the corporation.
(b) A permanent receiver shall have the power:
(1) To sue in his own name or otherwise for the recovery of the
property, debts and causes of action of the corporation. No set-off or
counterclaim shall be allowed in any such action for any demand unless
it was owing by the corporation to the defendant before the commencement
of the action or special proceeding in which the receiver was appointed
or unless it shall have been incurred by the receiver subsequent to his
appointment.
(2) To sell at public or private sale all the property vested in him,
in such manner and on such terms and conditions as the court shall
direct, and to make necessary transfers and conveyances thereof.
(3) To examine on oath, to be administered by him, any person
concerning any matter pertaining to or affecting the receivership.
(4) To settle or compound any demands by or against the receivership.
(c) When more than one receiver is appointed, all provisions in this
article in reference to one receiver shall apply to them.
(d) When more than one receiver is appointed, the debts and property
of the corporation may be collected and received by any of them; when
more than two receivers are appointed, the powers and rights conferred
on them may be exercised by any two.
(e) When more than one receiver is appointed, the survivor or
survivors of such receivers shall have all the powers and right of the
receivers.
Duties of receiver upon appointment.
(a) Upon appointment and qualification, a receiver shall have the
following duties:
(1) To give immediate notice of his appointment by publication once a
week for two successive weeks in two newspapers of general circulation
in the county where the office of the corporation is located or, in the
case of a foreign corporation against which an action has been brought
under subparagraph (a) (4) of section 1202 (Appointment of receiver of
property of a domestic or foreign corporation), in a newspaper of
general circulation as directed by the court, requiring:
(A) All persons indebted to the corporation to render an account of
all debts owing by them to the corporation and to pay the same to the
receiver at a specified place and by a specified day.
(B) All persons having in their possession any property of the
corporation to deliver the same to the receiver at the specified place
and by the specified day.
(C) All creditors and claimants, including any with unliquidated or
contingent claims and any with whom the corporation has unfulfilled
contracts, to present their claims to the receiver in writing and in
detail at a specified place and by a specified day, which shall not be
less than six months after the first publication of such notice.
Whenever a receiver is appointed in dissolution proceedings under
article 10 (Non-judicial dissolution) or article 11 (Judicial
dissolution), section 1007 (Notice to creditors; filing or barring
claims) shall apply and shall control the giving of notice to creditors
and claimants and the filing and barring of claims.
(2) To call a general meeting of the creditors of the corporation
within four months from the date of his appointment by a notice to be
published as directed in subparagraph (a) (1), setting forth the time
and place of such meeting, which time shall be not more than two months,
nor less than one month after the first publication of such notice. At
such meeting, or at an adjournment thereof, the receiver shall present a
statement of all accounts and demands for and against the corporation,
its subsisting contracts, and the money and other assets in his hands.
(3) To keep true books of account of all moneys received and expended
by him as receiver, which books shall be open for inspection at
reasonable times by creditors or other persons interested therein. On or
before the first day of February in each year, for the preceding
calendar year, and at such other times as the court shall direct, the
receiver shall file with the clerk of the court by which he was
appointed a verified statement showing the assets received, the
disposition thereof, the money on hand, all payments made, specifying
the persons to whom paid and the purpose of the payments, the amount
necessary to be retained to meet necessary expenses and claims against
the receiver, and the distributive share in the remainder of each person
interested therein. A copy of such statement shall be served by the
receiver upon the attorney-general within five days after the filing
thereof.
Penalty for concealing property from receiver.
Any persons having possession of property belonging to the
corporation, who shall wrongfully withhold such property from the
receiver after the day specified in the notice given under section 1207
(Duties of receiver upon appointment), shall forfeit to the receiver
double the value of such property, and the same may be recovered in an
action by the receiver.
Recovery of assets.
(a) Whenever a receiver, by verified petition to the supreme court at
a special term held in the judicial district in which he was appointed
shall show that he has good reason to believe that any person has in his
possession or under his control, or has wrongfully concealed, withheld
or disposed of, any property of the corporation, or that any person can
testify concerning such facts, the court, with or without notice, shall
make an order requiring such person to appear before the court or a
referee, at a time and place designated, and submit to an examination
concerning such facts. In such order, or at any time thereafter, in its
discretion, the court may enjoin and restrain such person from disposing
of any property of the corporation in his possession or under his
control.
(b) In any examination under such order, the court may confer immunity
in accordance with the provisions of section 50.20 of the criminal
procedure law; provided that no immunity shall be conferred except upon
twenty-four hours prior written notice to the appropriate district
attorney having an official interest therein.
(c) A person so ordered to appear shall be entitled to the same fees
and mileage, to be paid at the time of serving the order, as are allowed
by law to witnesses subpoenaed to attend and testify in an action in the
supreme court, and shall be subject to the same penalties upon failure
to appear and testify in obedience to such order as are provided by law
in the case of witnesses who fail to obey a subpoena to appear and
testify in an action.
(d) A person appearing for examination in obedience to such order
shall be sworn, and shall be entitled to be represented on such
examination by counsel, and may be cross-examined, or may make a
voluntary statement in his own behalf concerning the subject of his
examination.
(e) The testimony taken under such order shall be signed and sworn to
by the person examined, and be filed in the office of the clerk of the
county where the action or proceeding is pending. If it shall appear
that any person is wrongfully concealing or withholding, or has in his
possession or under his control, any property of the corporation, on
notice to him, the court may make an order requiring him forthwith to
deliver it to the receiver, subject to the further order of the court.
Order of payment by receiver.
(a) Laborers' wages shall be preferred claims and entitled to payment
before any other creditors out of the assets of the corporation in
excess of valid prior liens or encumbrances.
(b) The receiver shall subject to any prior liens or encumbrances
distribute the residue of the moneys in his hands, among the creditors
whose claims have been proved and allowed, as follows:
(1) All debts due by such corporation to the United States, and all
debts entitled to a preference under the laws of the United States.
(2) All debts that may be owing by the corporation as trustee.
(3) Judgments against the corporation, to the extent of the value of
the real property on which they are liens.
(4) All other creditors, in proportion to their respective demands,
without preference to specialty debts.
Final distribution by receiver.
(a) If there remains property of the corporation after the first
distribution, the receiver shall, within one year thereafter, make a
final distribution among the creditors entitled thereto. Notice that
such distribution will be the final distribution to creditors shall be
published once a week for two consecutive weeks in a newspaper of
general circulation in the county where the office of the corporation is
located.
(b) A creditor or claimant who failed to prove his claim before the
first distribution and who proves it before the final one shall receive
the sum he would have been entitled to on the first distribution before
any further distribution shall be made to other creditors or claimants.
(c) Unless the court shall otherwise direct, no other distribution
shall be made thereafter to creditors, except to those having pending
actions against the corporation or the receiver.
(d) After the final distribution to creditors, the receiver shall not
be answerable to any creditor or claimant, unless his claim shall have
been proved before or at the time specified in the notice of the final
distribution.
Disposition of moneys retained; surplus; unclaimed
distributions.
(a) When any action pending at the time of the final distribution
shall be terminated, the receiver shall apply the moneys retained by him
to the payment of the amount recovered, and his necessary charges and
expenses incurred therein.
(b) After the final distribution to creditors and after deducting his
charges and expenses, the receiver shall distribute any surplus among
the shareholders of the corporation, in accordance with their respective
rights.
(c) Any portion of the assets distributable to a creditor or
shareholder who is unknown or cannot be found, or who is under
disability and for whom there is no legal representative, shall be paid
by the receiver to the state comptroller as abandoned property within
six months from the date fixed for the payment of the final liquidating
distribution, and be subject to the provisions of the abandoned property
law.
Omission or default of receiver.
Upon notice to the attorney-general and upon such notice to creditors
or others interested as the court shall direct, the court may, in the
furtherance of justice, relieve a receiver from any omission or default,
on such conditions as may be imposed, and, on compliance therewith,
confirm his action.
Application by attorney-general for removal of receiver and to
close receivership.
(a) Whenever he deems it to be to the advantage of the shareholders,
creditors or other persons interested in the assets of any corporation
for which a receiver has been appointed, the attorney-general may move:
(1) For an order removing the receiver and appointing another in his
stead;
(2) To compel the receiver to account;
(3) For such other and additional orders as may facilitate the closing
of the receivership.
Resignation by receiver; filling any vacancy.
(a) A receiver may petition the court appointing him for an order to
show cause why he should not be permitted to resign.
(b) The petition shall be accompanied by a verified account of all the
assets of the corporation received by him, of all payments or other
disposition thereof made by him, of the remaining assets of the
corporation in respect to which he was appointed receiver and the
situation of the same, and of all his transactions as receiver.
Thereupon, the court shall grant an order directing notice to be given
to the sureties on his official bond and to all persons interested in
the property of the corporation to show cause, at a time and place
specified, why the receiver should not be permitted to resign. Such
notice shall be published once in each week for six successive weeks in
one or more newspapers as the court shall direct. If it shall appear
that the proceedings of the receiver in the discharge of his trust have
been fair and honest and that there is no good cause to the contrary,
the court shall make an order permitting such receiver to resign.
Thereupon he shall be discharged and his powers as receiver shall cease,
but he shall remain subject to any liability incurred prior to the
making of such order. The court, in its discretion, may require the
expense of such proceeding to be paid by the receiver presenting the
petition.
(c) Any vacancy created by resignation, removal, death or otherwise,
may be filled by the court, and the property of the receivership shall
be delivered to the remaining receivers or, if there are none, to the
successor appointed by the court. The court may summarily enforce
delivery by order in the action or special proceeding in which the
receiver was appointed.
Final accounting; notice; duty of attorney-general.
(a) Within one year after qualifying, the receiver shall apply to the
court for a final settlement of his accounts and for an order for
distribution, or, upon notice to the attorney-general, for an extension
of time, setting forth the reasons therefor. If the receiver has not so
applied for a settlement of his accounts or for such extension of time,
the attorney-general or any creditor or shareholder may apply for an
order that the receiver show cause why an accounting and distribution
should not be had, and after the expiration of eighteen months from the
time the receiver qualified, it shall be the duty of the
attorney-general to apply for such an order on notice to the receiver.
(b) Before presenting a final account, the receiver shall give notice
of his intention to file it by publication, under subparagraph (a) (1)
of section 1207 (Duties of receiver upon appointment), setting forth the
time and place of filing and presentation to the court. The receiver
shall also give not less than eight days' written notice to the sureties
on his official bond.
(c) Upon presentation of such account, the court shall hear the
allegations, objections and proofs of all parties interested and allow
or disallow such account, in whole or in part, and make a final order.
The court may refer the account and the hearing, in whole or in part, to
a referee who shall report thereon to the court.
Commissions.
(a) A receiver shall be entitled, in addition to his necessary
expenses, to such commissions upon the sums received and disbursed as
may be allowed by the court, as follows:
(1) On the first twenty thousand dollars, not exceeding five percent;
(2) On the next eighty thousand dollars, not exceeding two and
one-half percent; and
(3) On the remainder, not exceeding one percent.
(b) If the commissions of the receiver so computed do not amount to
one hundred dollars, the court in its discretion may allow such sum not
exceeding one hundred dollars as shall be reasonable.
(c) When more than one receiver shall be appointed, the compensation
herein provided shall be divided between them, as the court directs.
Special provisions relating to actions or special proceedings
against foreign corporations.
(a) In any action or special proceeding brought against a foreign
corporation under this article, the following provisions shall apply:
(1) Service of the summons in such action may be made personally
within the state of New York, by delivery of the same to any officer or
director of the corporation, or by publication pursuant to an order
obtained as hereinafter provided.
(2) An order directing service by publication of the summons shall be
made upon application of a plaintiff in any such action and shall be
founded upon a verified complaint, alleging that the defendant is a
foreign corporation and has or may have or may be entitled to assets,
credits, choses in action or other property, tangible or intangible
within the state and that such corporation has been dissolved,
nationalized or that its authority or existence has been terminated or
cancelled in the jurisdiction of its incorporation, or that it has
ceased to do business, and upon an affidavit reciting that personal
service of the summons cannot be effected within the state with due
diligence and that a temporary receiver of its property within the state
of New York has been appointed pursuant to this article in such action
and that a copy of the order appointing the receiver has been served
personally by or on behalf of such receiver upon a person, firm or
corporation holding property, tangible or intangible, of the said
foreign corporation, or against whom a claim or demand in favor of such
foreign corporation exists and that demand therefor has been made upon
such person, firm or corporation by or on behalf of such receiver.
(3) The order directing service of the summons shall require the
publication thereof in a newspaper published in the state of New York in
the English language at least once a week for four successive weeks, and
shall also require the mailing on or before the date of the first
publication of a copy of the summons, complaint and order to the
corporation at its last known principal or head office in the state or
country of its incorporation.
(4) In any such action, the summons shall be served personally or an
order directing service thereof by publication shall be obtained and the
first publication thereof made within sixty days after the appointment
of the temporary receiver, and if served by publication, the service
shall be made complete by the continuance thereof.
(5) If served by publication, service of the summons shall be deemed
complete on the date of the last publication. The action shall be deemed
commenced upon the issuance of the summons. The order appointing the
receiver and the papers upon which the same is granted shall be filed in
the office of the clerk of the court where the action is triable within
ten days after the order is made.
(6) In the event that the defendant defaults in answering, or if after
a trial the court is satisfied that the defendant has ceased to do
business by reason of any thing or matter whatsoever, or that it has
been dissolved, nationalized, or its authority or existence has been
otherwise terminated or cancelled, the court shall thereupon direct
judgment, appointing a permanent receiver and directing the receiver to
liquidate the assets, credits, choses in action and property, tangible
and intangible, in the state of New York of the said defendant, in the
manner provided in this article.
(7) The time between the cessation of business by the corporation or
its dissolution or nationalization or the termination or cancellation of
its authority or existence and the appointment of a receiver in this
state pursuant to this article, whichever time is longer, plus three
years after such appointment, shall not be a part of the time limited by
domestic or foreign law for the commencement of an action or for the
assertion of a claim therein by or on behalf of or against said
corporation or by or against said receiver, whether or not said action
or claim has heretofore been barred by any statute of limitations of
this state or of any other state or country.
(8) The existence of and causes of action of or against such
corporation existing at the time of its dissolution, nationalization, or
the termination or cancellation of its authority or existence, or
arising thereafter, shall not be deemed ended, abated or affected
thereby, nor shall actions brought by or against such corporation or a
receiver appointed hereunder or any remedy therein be deemed to have
ended or abated or to have been affected by reason of such dissolution,
nationalization, or termination or cancellation of its authority or
existence. This provision shall apply to all property, tangible and
intangible, debts, demands, and choses in action of such corporation
within the state of New York, and to all litigation heretofore or
hereafter brought in the courts of the state or of the United States to
which the corporation or the receiver of said corporation appointed
pursuant to the provisions of this article is a party. Any receiver
appointed pursuant to the provisions of this article may be substituted
for such corporation in any action or proceeding pending in the courts
of the state or of the United States to which such corporation is a
party and may intervene in any action or proceeding which relates to or
affects any of the assets or claims of the corporation and revive any
action which shall have heretofore or which may hereafter have abated,
and such dissolution, nationalization, or termination or cancellation of
its authority or existence in the jurisdiction of its incorporation, or
any confiscatory law or decree thereof, shall not be deemed to have any
extra-territorial effect or validity as to the property, tangible or
intangible, debts, demands or choses in action of such corporation
within the state or any debts or obligations owing to such corporation
from persons, firms or corporations residing, sojourning or doing
business in the state. Nothing contained in this subdivision shall be
deemed to validate claims for or causes of action or actions to recover
property located in or moneys payable in the jurisdiction of
incorporation which are unenforcible under the laws of such
jurisdiction.
(9) If any receiver or trustee has heretofore been appointed in this
state for such corporation or its property in any action or proceeding,
either before or supplementary to judgment, otherwise than in an action
brought pursuant to this article, such receiver or trustee may be
appointed or continued as the receiver in any action brought pursuant to
the provisions of this article.
(10) The appointment of a receiver or the pendency of an action for
the appointment of such receiver, shall until such receiver shall be
discharged or until such action shall have terminated, be a bar to any
subsequent application or action for the appointment of a receiver of
the assets of the same corporation.
(11) An action shall be commenced within three years from the
discovery by the plaintiff or his predecessor in interest, of any asset
of said corporation in the state of New York.
ARTICLE 13 Foreign Corporations
Authorization of foreign corporations.
(a) A foreign corporation shall not do business in this state until it
has been authorized to do so as provided in this article. A foreign
corporation may be authorized to do in this state any business which may
be done lawfully in this state by a domestic corporation, to the extent
that it is authorized to do such business in the jurisdiction of its
incorporation, but no other business.
(b) Without excluding other activities which may not constitute doing
business in this state, a foreign corporation shall not be considered to
be doing business in this state, for the purposes of this chapter, by
reason of carrying on in this state any one or more of the following
activities:
(1) Maintaining or defending any action or proceeding, whether
judicial, administrative, arbitrative or otherwise, or effecting
settlement thereof or the settlement of claims or disputes.
(2) Holding meetings of its directors or its shareholders.
(3) Maintaining bank accounts.
(4) Maintaining offices or agencies only for the transfer, exchange
and registration of its securities, or appointing and maintaining
trustees or depositaries with relation to its securities.
(c) The specification in paragraph (b) does not establish a standard
for activities which may subject a foreign corporation to service of
process under this chapter or any other statute of this state.
(d) A foreign corporation whose corporate name is not acceptable for
authorization pursuant to sections 301 and 302 of this chapter, may
submit in its application for authority pursuant to section 1304 of this
chapter, a fictitious name under which it shall do business in this
state. A fictitious name submitted pursuant to this section shall be
subject to the provisions of subparagraphs (2) through (9) of paragraph
(a) of section 301 and 302 of this chapter. A foreign corporation
authorized to do business in this state under a fictitious name pursuant
to this section, shall use such fictitious name in all of its dealings
with the secretary of state and in the conduct of its business in this
state. The provisions of section one hundred thirty of the general
business law shall not apply to any fictitious name filed by a foreign
corporation pursuant to this section, and a filing under section one
hundred thirty of the general business law shall not constitute the
adoption of a fictitious name.
Application to existing authorized foreign corporations.
Every foreign corporation which on the effective date of this chapter
is authorized to do business in this state under a certificate of
authority heretofore issued to it by the secretary of state shall
continue to have such authority. Such foreign corporation, its
shareholders, directors and officers shall have the same rights,
franchises and privileges and shall be subject to the same limitations,
restrictions, liabilities and penalties as a foreign corporation
authorized under this chapter, its shareholders, directors and officers
respectively. Reference in this chapter to an application for authority
shall, unless the context otherwise requires, include the statement and
designation and any amendment thereof required to be filed by the
secretary of state under prior statutes to obtain a certificate of
authority.
Violations.
The attorney-general may bring an action to restrain a foreign
corporation from doing in this state without authority any business for
the doing of which it is required to be authorized in this state, or
from doing in this state any business not set forth in its application
for authority or certificate of amendment filed by the department of
state. The attorney-general may bring an action or special proceeding to
annul the authority of a foreign corporation doing in this state any
business not set forth in its application for authority or certificate
of amendment or the authority of which was obtained through fraudulent
misrepresentation or concealment of a material fact or to enjoin or
annul the authority of any foreign corporation which within this state
contrary to law has done or omitted any act which if done by a domestic
corporation would be a cause for its dissolution under section 1101
(Attorney-general's action for judicial dissolution) or to annul the
authority of a foreign corporation that has been dissolved or had its
authority or existence otherwise terminated or cancelled in the
jurisdiction of its incorporation. The attorney-general shall deliver a
certified copy of the order of annulment to the department of state.
Upon the filing thereof by the department of state the authority of the
foreign corporation to do business in this state shall be annulled. The
secretary of state shall continue as agent of the foreign corporation
upon whom process against it may be served in any action or special
proceeding based upon any liability or obligation incurred by the
foreign corporation within the state prior to the filing of the
certified copy of the order of annulment by the department of state.
Application for authority; contents.
(a) A foreign corporation may apply for authority to do business in
this state. An application, entitled "Application for authority of
...... (name of corporation) under section 1304 of the Business
Corporation Law", shall be signed and delivered to the department of
state. It shall set forth:
(1) The name of the foreign corporation.
(2) The fictitious name the corporation agrees to use in this state
pursuant to section 1301 of this chapter, if applicable.
(3) The jurisdiction and date of its incorporation.
(4) The purpose or purposes for which it is formed, it being
sufficient to state, either alone or with other purposes, that the
purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under this chapter, provided
that it also state that it is not formed to engage in any act or
activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or approval
first being obtained. By such statement all lawful acts and activities
shall be within the purposes of the corporation, except for express
limitations therein or in this chapter, if any.
(5) The county within this state in which its office is to be located.
(6) A designation of the secretary of state as its agent upon whom
process against it may be served and the post office address within or
without this state to which the secretary of state shall mail a copy of
any process against it served upon him or her. The corporation may
include an email address to which the secretary of state shall email a
notice of the fact that process against it has been electronically
served upon him or her.
(7) If it is to have a registered agent, his name and address within
this state and a statement that the registered agent is to be its agent
upon whom process against it may be served.
(8) A statement that the foreign corporation has not since its
incorporation or since the date its authority to do business in this
state was last surrendered, engaged in any activity in this state,
except as set forth in paragraph (b) of section 1301 (Authorization of
foreign corporations), or in lieu thereof the consent of the state tax
commission to the filing of the application, which consent shall be
attached thereto.
(b) Attached to the application for authority shall be a certificate
by an authorized officer of the jurisdiction of its incorporation that
the foreign corporation is an existing corporation. If such certificate
is in a foreign language, a translation thereof under oath of the
translator shall be attached thereto.
Application for authority; effect.
Upon filing by the department of state of the application for
authority the foreign corporation shall be authorized to do in this
state any business set forth in the application. Such authority shall
continue so long as it retains its authority to do such business in the
jurisdiction of its incorporation and its authority to do business in
this state has not been surrendered, suspended or annulled in accordance
with law.
Powers of authorized foreign corporations.
An authorized foreign corporation shall have such powers as are
permitted by the laws of the jurisdiction of its incorporation but no
greater powers than those of a domestic corporation formed for the
business set forth in the application for authority.
Tenure of real property.
A foreign corporation may acquire and hold real property in this state
in furtherance of its corporate purposes and may convey the same by deed
or otherwise in the same manner as a domestic corporation.
Amendments or changes.
(a) An authorized foreign corporation may amend or change its
application for authority from time to time in any and as many of the
following respects as may be desired if the amendments contain only such
provisions as might be lawfully contained in an application for
authority at the time of making such amendment:
(1) To change its corporate name if such change has been effected
under the laws of the jurisdiction of its incorporation.
(2) To change its fictitious name filed pursuant to paragraph (d) of
section 1301 of this chapter, to another fictitious name, if its true
corporate name is not available for use in this state.
(3) To delete its fictitious name filed pursuant to paragraph (d) of
section 1301 of this chapter, if its true corporate name is now
available for use in this state.
(4) To adopt a fictitious name when the corporate name is changed and
is not available in this state.
(5) To enlarge, limit or otherwise change the business which it
proposes to do in this state.
(6) To change the location of its office in this state.
(7) To specify or change the post office address to which the
secretary of state shall mail a copy of any process against it served
upon him.
(8) To make, revoke or change the designation of a registered agent or
to specify or change his address.
(9) To change the jurisdiction of its incorporation if such change has
been effected under laws permitting such a change to occur.
(10) To specify, change or delete the email address to which the
secretary of state shall email a notice of the fact that process against
the corporation has been electronically served upon him or her.
Certificate of amendment; contents, effect.
(a) To accomplish such amendment a certificate, entitled "Certificate
of amendment of application for authority of ......(name of corporation)
under section 1309 of the Business Corporation Law", shall be signed and
delivered to the department of state. It shall set forth:
(1) The name of the foreign corporation as it appears on the index of
names of existing domestic and authorized foreign corporations of any
type or kind in the department of state, division of corporations and
the fictitious name the corporation has agreed to use in this state
pursuant to paragraph (d) of section 1301 of this chapter.
(2) The jurisdiction of its incorporation. If the jurisdiction of its
incorporation has been changed, a statement that the change of
jurisdiction has been effected under laws permitting such a change to
occur, citing such laws, and including the date the change in
jurisdiction was so effected; and a statement that annexed to this
certificate of amendment of application for authority is the certificate
required by paragraph (b) of this section.
(3) The date it was authorized to do business in this state.
(4) Each amendment effected thereby.
(5) If the true corporate name of the foreign corporation is to be
changed, a statement that the change of name has been effected under the
laws of the jurisdiction of its incorporation and the date the change
was so effected.
(6) If the business it proposes to do in this state is to be enlarged,
limited or otherwise changed, a statement that it is authorized to do in
the jurisdiction of its incorporation the business which it proposes to
do in this state.
(b) If the jurisdiction of its incorporation has been changed, annexed
to the certificate of amendment of application for authority shall be a
certificate by an authorized officer of the new jurisdiction of its
incorporation that such foreign corporation is an existing corporation
domiciled in that jurisdiction. If the annexed certificate by an
authorized officer is not in the English language, there shall be
attached thereto a translation thereof in the English language under
oath of the translator.
(c) If an authorized foreign corporation has changed its name in the
jurisdiction of its incorporation, or has changed its jurisdiction of
incorporation, it shall deliver to the department of state within twenty
days after the change became effective in that jurisdiction a
certificate of amendment under paragraph (a) of this section. Upon its
failure to deliver such certificate, its authority to do business in
this state shall upon the expiration of said twenty days be suspended.
The filing by the department of state of a certificate of amendment
changing the corporate name or jurisdiction of incorporation within one
hundred twenty days after the effective date of the change of name in
the jurisdiction of its incorporation or of the change of jurisdiction
of its incorporation effected under laws permitting such a change to
occur shall annul the suspension, and its authority to do business in
this state shall be restored and continue as if no suspension had
occurred. The secretary of state shall continue as agent of the foreign
corporation upon whom process against the foreign corporation may be
served in the manner set forth in paragraph (b) of section 306 (Service
of process), in any action or special proceeding based upon any
liability or obligation incurred by it within this state before the
filing of the certificate of amendment changing the corporate name or
changing the jurisdiction of incorporation.
Certificate of change; contents.
(a) In lieu of a certificate of amendment, an authorized foreign
corporation, upon compliance with this section, may make any or all of
the following changes in its application for authority:
(1) To change the location of its office in this state.
(2) To specify or change the post office address to which the
secretary of state shall mail a copy of any process against it served
upon him.
(3) To make, revoke or change the designation of a registered agent or
specify or change his address.
(4) To specify, change or delete the email address to which the
secretary of state shall email a notice of the fact that process against
the corporation has been electronically served upon him or her.
(b) To accomplish such change, a certificate entitled "Certificate of
change of application for authority of .......... (name of corporation)
under section 1309-A of the Business Corporation Law" shall be signed
and delivered to the department of state.
It shall set forth:
(1) The name of the foreign corporation as it appears on the index of
names of existing domestic and authorized foreign corporations of any
type or kind in the department of state, division of corporations and
the fictitious name the corporation has agreed to use in this state
pursuant to paragraph (d) of section 1301 of this chapter.
(2) The jurisdiction of its incorporation.
(3) The date it was authorized to do business in this state.
(4) Each change effected thereby.
(c) A certificate of change of application for authority which changes
only the post office address to which the secretary of state shall mail
a copy of any process against an authorized foreign corporation served
upon him or her, and/or the email address to which the secretary of
state shall email a notice of the fact that process against it has been
electronically served upon the secretary of state and/or which changes
the address of its registered agent, provided such address is the
address of a person, partnership or other corporation whose address, as
agent, is the address to be changed, and/or the email address being
changed is the email address of a person, partnership or corporation
whose email address, as agent, is the email address to be changed,
and/or who has been designated as registered agent for such authorized
foreign corporation, may be signed and delivered to the department of
state by such agent. The certificate of change of application for
authority shall set forth the statements required under subparagraphs
(1), (2), (3) and (4) of paragraph (b) of this section; that a notice of
the proposed change was mailed by the party signing the certificate to
the authorized foreign corporation not less than thirty days prior to
the date of delivery to the department and that such corporation has not
objected thereto; and that the party signing the certificate is the
agent of such foreign corporation to whose address the secretary of
state is required to mail copies of process, and/or the agent of such
foreign corporation to whose email address the secretary of state is
required to mail a notice of the fact that process against it has been
electronically served on the secretary of state and/or the registered
agent, if such be the case. A certificate signed and delivered under
this paragraph shall not be deemed to effect a change of location of the
office of the corporation in whose behalf such certificate is filed.
Surrender of authority.
(a) An authorized foreign corporation may surrender its authority. A
certificate, entitled "Certificate of surrender of authority of ........
(name of corporation) under section 1310 of the Business Corporation
Law", shall be signed and delivered to the department of state. It shall
set forth:
(1) The name of the foreign corporation as it appears on the index of
names of existing domestic and authorized foreign corporations of any
type or kind in the department of state, division of corporations or,
the fictitious name the corporation has agreed to use in this state
pursuant to paragraph (d) of section 1301 of this chapter.
(2) The jurisdiction of its incorporation.
(3) The date it was authorized to do business in this state.
(4) That it surrenders its authority to do business in this state.
(5) That it revokes the authority of its registered agent, if any,
previously designated and consents that process against it in any action
or special proceeding based upon any liability or obligation incurred by
it within this state before the filing of the certificate of surrender
may be served on the secretary of state after the filing thereof in the
manner set forth in paragraph (b) of section 306 (Service of process).
(6) A post office address within or without this state to which the
secretary of state shall mail a copy of any process against it served
upon him or her. The corporation may include an email address to which
the secretary of state shall email a notice of the fact that process
against it has been electronically served upon him or her.
(b) The department shall not file such certificate unless the consent
of the state tax commission to the surrender of authority is attached
thereto.
(c) The authority of the foreign corporation to do business in this
state shall terminate on the filing by the department of state of the
certificate of surrender of authority.
(d) The post office address and/or the email address specified under
subparagraph (6) of paragraph (a) of this section may be changed. A
certificate, entitled "Certificate of amendment of certificate of
surrender of authority of ........ (name of corporation) under section
1310 of the Business Corporation Law", shall be signed as provided in
paragraph (a) of this section and delivered to the department of state.
It shall set forth:
(1) The name of the foreign corporation.
(2) The jurisdiction of its incorporation.
(3) The date its certificate of surrender of authority was filed by
the department of state.
(4) The changed post office address, within or without this state, to
which the secretary of state shall mail a copy of any process against it
served upon him or her and/or the changed email address to which the
secretary of state shall email a notice of the fact that process against
it has been electronically served upon him or her.
Termination of existence.
When an authorized foreign corporation is dissolved or its authority
or existence is otherwise terminated or cancelled in the jurisdiction of
its incorporation or when such foreign corporation is merged into or
consolidated with another foreign corporation, a certificate of the
secretary of state, or official performing the equivalent function as to
corporate records, of the jurisdiction of incorporation of such foreign
corporation attesting to the occurrence of any such event or a certified
copy of an order or decree of a court of such jurisdiction directing the
dissolution of such foreign corporation, the termination of its
existence or the cancellation of its authority shall be delivered to the
department of state. The filing of the certificate, order or decree
shall have the same effect as the filing of a certificate of surrender
of authority under section 1310 (Surrender of authority). The secretary
of state shall continue as agent of the foreign corporation upon whom
process against it may be served in the manner set forth in paragraph
(b) of section 306 (Service of process), in any action or special
proceeding based upon any liability or obligation incurred by the
foreign corporation within this state prior to the filing of such
certificate, order or decree and he or she shall promptly cause a copy
of any such process to be mailed by certified mail, return receipt
requested, to such foreign corporation at the post office address on
file in his or her office specified for such purpose or a notice of the
fact that process against such foreign corporation has been served on
him or her to be emailed to the foreign corporation at the email address
on file in his or her office specified for such purpose. The post office
address and/or email address may be changed by signing and delivering to
the department of state a certificate of change setting forth the
statements required under section 1309-A (Certificate of change;
contents) to effect a change in the post office address and/or email
address under subparagraph (a) (7) or (10) of section 1308 (Amendments
or changes).
Actions or special proceedings by unauthorized foreign
corporations.
(a) A foreign corporation doing business in this state without
authority shall not maintain any action or special proceeding in this
state unless and until such corporation has been authorized to do
business in this state and it has paid to the state all fees and taxes
imposed under the tax law or any related statute, as defined in section
eighteen hundred of such law, as well as penalties and interest charges
related thereto, accrued against the corporation. This prohibition shall
apply to any successor in interest of such foreign corporation.
(b) The failure of a foreign corporation to obtain authority to do
business in this state shall not impair the validity of any contract or
act of the foreign corporation or the right of any other party to the
contract to maintain any action or special proceeding thereon, and shall
not prevent the foreign corporation from defending any action or special
proceeding in this state.
Actions or special proceedings by foreign corporations.
An action or special proceeding may be maintained by a foreign
corporation, in like manner and subject to the same limitations, as an
action or special proceeding brought by a domestic corporation, except
as otherwise prescribed by statute.
Actions or special proceedings against foreign corporations.
(a) An action or special proceeding against a foreign corporation may
be maintained by a resident of this state or by a domestic corporation
of any type or kind for any cause of action.
(b) Except as otherwise provided in this article, an action or special
proceeding against a foreign corporation may be maintained by another
foreign corporation of any type or kind or by a non-resident in the
following cases only:
(1) Where it is brought to recover damages for the breach of a
contract made or to be performed within this state, or relating to
property situated within this state at the time of the making of the
contract.
(2) Where the subject matter of the litigation is situated within this
state.
(3) Where the cause of action arose within this state, except where
the object of the action or special proceeding is to affect the title of
real property situated outside this state.
(4) Where, in any case not included in the preceding subparagraphs, a
non-domiciliary would be subject to the personal jurisdiction of the
courts of this state under section 302 of the civil practice law and
rules.
(5) Where the defendant is a foreign corporation doing business or
authorized to do business in this state.
(c) Paragraph (b) does not apply to a corporation which was formed
under the laws of the United States and which maintains an office in
this state.
Record of shareholders.
(a) Any resident of this state who shall have been a shareholder of
record of a foreign corporation doing business in this state upon at
least five days' written demand may require such foreign corporation to
produce a record of its shareholders setting forth the names and
addresses of all shareholders, the number and class of shares held by
each and the dates when they respectively became the owners of record
thereof and shall have the right to examine in person or by agent or
attorney at the office of the foreign corporation in this state or at
the office of its transfer agent or registrar in this state or at such
other place in the county in this state in which the foreign corporation
is doing business as may be designated by the foreign corporation,
during the usual business hours, the record of shareholders or an exact
copy thereof certified as correct by the corporate officer or agent
responsible for keeping or producing such record and to make extracts
therefrom. Resident holders of voting trust certificates representing
shares of the foreign corporation shall for the purpose of this section
be regarded as shareholders. Any such agent or authority shall be
authorized in a writing that satisfies the requirements of a writing
under paragraph (b) of section 609 (proxies). A corporation requested to
provide information pursuant to this paragraph shall make available such
information in the format in which such information is maintained by the
corporation and shall not be required to provide such information in any
other format. If a request made pursuant to this paragragh includes a
request to furnish information regarding beneficial owners, the
corporation shall make available such information in its possession
regarding beneficial owners as is provided to the corporation by a
registered broker or dealer or a bank, association or other entity that
exercises fiduciary powers in connection with the forwarding of
information to such owners. The corporation shall not be required to
obtain information about beneficial owners not in its possession.
(b) An examination authorized by paragraph (a) may be denied to such
shareholder or other person upon his refusal to furnish to the foreign
corporation or its transfer agent or registrar an affidavit that such
inspection is not desired for a purpose which is in the interest of a
business or object other than the business of the foreign corporation
and that such shareholder or other person has not within five years sold
or offered for sale any list of shareholders of any corporation of any
type or kind, whether or not formed under the laws of this state, or
aided or abetted any person in procuring any such record of shareholders
for any such purpose.
(c) Upon refusal by the foreign corporation or by an officer or agent
of the foreign corporation to produce for examination or to permit an
examination of the record of shareholders as herein provided, the person
making the demand for production and examination may apply to the
supreme court in the judicial district where the office of the foreign
corporation within this state is located, upon such notice as the court
may direct, for an order directing the foreign corporation, its officer
or agent, to show cause why an order should not be granted directing
such production and permitting such examination by the applicant. Upon
the return day of the order to show cause, the court shall hear the
parties summarily, by affidavit or otherwise, and if it appears that the
applicant is qualified and entitled to such examination, the court shall
grant an order compelling such production for examination and awarding
such further relief as to the court may seem just and proper.
(d) Nothing herein contained shall impair the power of courts to
compel the production for examination of the books of a foreign
corporation. The record of shareholders specified in paragraph (a) shall
be prima facie evidence of the facts therein stated in favor of the
plaintiff in any action or special proceeding against such foreign
corporation or any of its officers, directors or shareholders.
Voting trust records.
(a) A voting trustee, appointed under a voting trust agreement to vote
the shares of a foreign corporation doing business in this state, who
either has an office in this state or has designated a transfer agent
within this state, shall produce for examination and permit to be
examined in this state, at the office of the foreign corporation or at
his office or at the office of such transfer agent, a record of voting
trust certificate holders setting forth their names, alphabetically
arranged, and addresses, the number and class of shares represented by
the certificates held by them respectively and the dates when they
respectively became the owners thereof, upon the written demand of any
resident of this state who shall have been a voting trust certificate
holder or a shareholder of the foreign corporation for at least six
months immediately preceding his demand, or of any resident of this
state holding, or thereunto authorized in writing by the holders of, at
least five percent of any class of the outstanding shares of such
foreign corporation, either directly or as holders of voting trust
certificates for such shares, subject to the same terms and conditions
set forth with respect to the right of examination of the record of
shareholders of the foreign corporation in section 1315 (Record of
shareholders).
(b) The voting trustee shall deposit an exact copy of the voting trust
agreement with the foreign corporation at its office in this state or at
the office of the transfer agent in this state.
(c) The copy of the voting trust agreement shall be subject to the
same right of examination by voting trust certificate holders and by
shareholders of the foreign corporation as is the record of shareholders
of a corporation under section 624 (Books and records; right of
inspection, prima facie evidence).
(d) Upon refusal by a voting trustee or his transfer agent to produce
for examination or to permit an examination of the record of voting
trust certificate holders or of such copy of the voting trust agreement
as herein provided, the person making the demand may apply to the
supreme court, upon such notice as the court may direct, for an order
directing the voting trustee or his transfer agent to show cause why an
order should not be granted directing such production and permitting
such examination. Upon the return day of the order to show cause, the
court shall hear the parties summarily, by affidavit or otherwise, and
if it appears that the applicant is entitled to such examination, the
court shall grant an order compelling such production for examination
and awarding such further relief as to the court may seem just and
proper.
(e) Where the voting trust agreement shall vest in the voting trustee
the right to vote the shares of a foreign corporation which has an
office in this state for the doing of business and either the principal
business operation of which is conducted within this state or the
greater part of its property is located within this state, the voting
trust agreement is an express trust created under the laws of this state
and the supreme court upon the petition of a voting trust certificate
holder may exercise such power over the trustee named therein as is
granted to the court by section one hundred twelve of the real property
law.
Liabilities of directors and officers of foreign corporations.
(a) Except as otherwise provided in this chapter, the directors and
officers of a foreign corporation doing business in this state are
subject, to the same extent as directors and officers of a domestic
corporation, to the provisions of:
(1) Section 719 (Liability of directors in certain cases) except
subparagraph (a) (3) thereof, and
(2) Section 720 (Action against directors and officers for
misconduct.)
(b) Any liability imposed by paragraph (a) may be enforced in, and
such relief granted by, the courts in this state, in the same manner as
in the case of a domestic corporation.
Liability of foreign corporations for failure to disclose
required information.
A foreign corporation doing business in this state shall, in the same
manner as a domestic corporation, disclose to its shareholders of record
who are residents of this state the information required under paragraph
(c) of section 510 (Dividends or other distributions in cash or
property), paragraphs (f) and (g) of section 511 (Share distributions
and changes), paragraph (d) of section 515 (Reacquired shares),
paragraph (c) of section 516 (Reduction of stated capital in certain
cases), and shall be liable as provided in section 520 (Liability for
failure to disclose required information) for failure to comply in good
faith with these requirements.
Applicability of other provisions.
(a) In addition to articles 1 (Short title; definitions; application;
certificates; miscellaneous) and 3 (Corporate name and service of
process) and the other sections of article 13 (foreign corporations),
the following provisions, to the extent provided therein, shall apply to
a foreign corporation doing business in this state, its directors,
officers and shareholders:
(1) Section 623 (Procedure to enforce shareholder's right to receive
payment for shares).
(2) Section 626 (Shareholders' derivative action brought in the right
of the corporation to procure a judgment in its favor).
(3) Section 627 (Security for expenses in shareholders' derivative
action brought in the right of the corporation to procure a judgment in
its favor).
(4) Section 630 (Liability of shareholders for wages due to laborers,
servants or employees).
(5) Sections 721 ( Nonexclusivity of statutory provisions for
indemnification of directors and officers) through 726 (Insurance for
indemnification of directors and officers), inclusive.
(6) Section 808 (Reorganization under act of congress).
(7) Section 907 (Merger or consolidation of domestic and foreign
corporations).
Exemption from certain provisions.
(a) Notwithstanding any other provision of this chapter, a foreign
corporation doing business in this state which is authorized under this
article, its directors, officers and shareholders, shall be exempt from
the provisions of paragraph (e) of section 1316 (Voting trust records),
subparagraph (a) (1) of section 1317 (Liabilities of directors and
officers of foreign corporations), section 1318 (Liability of foreign
corporations for failure to disclose required information) and
subparagraph (a) (4) of section 1319 (Applicability of other provisions)
if when such provision would otherwise apply:
(1) Shares of such corporation were listed on a national securities
exchange, or
(2) Less than one-half of the total of its business income for the
preceding three fiscal years, or such portion thereof as the foreign
corporation was in existence, was allocable to this state for franchise
tax purposes under the tax law.
ARTICLE 15 Professional Service Corporations
Definitions.
As used in this article, unless the context otherwise requires, the
term: (a) "licensing authority" means the regents of the university of
the state of New York or the state education department, as the case may
be, in the case of all professions licensed under title eight of the
education law, and the appropriate appellate division of the supreme
court in the case of the profession of law.
(b) "Profession" includes any practice as an attorney and
counselor-at-law, or as a licensed physician, and those occupations
designated in title eight of the education law.
(c) "Professional service" means any type of service to the public
which may be lawfully rendered by a member of a profession within the
purview of his or her profession.
(d) "Professional service corporation" means a corporation organized
under this article.
(e) "Officer" does not include the secretary or an assistant secretary
of a corporation having only one shareholder.
(f) "Other business entity" means any person other than a natural
person, general partnership or a domestic or foreign business
corporation, and includes a professional service limited liability
company formed pursuant to the provisions of the New York limited
liability company law.
(g) "Design professional service corporation" means a corporation
organized under this article practicing professional engineering,
architecture, landscape architecture, geology, or land surveying, or
practicing any combination of such professions. The provisions of this
article applicable to professional service corporations shall apply to
design professional service corporations except to the extent that any
provision is either inconsistent with a provision expressly applying to
design professional service corporations or not relevant thereto.
(h) "Design professional" means an individual licensed and registered
pursuant to title eight of the education law to practice professional
engineering, architecture, landscape architecture, geology or land
surveying.
(i) "Employee stock ownership plan" (ESOP) means a defined
contribution plan established pursuant to Section 4975(e)(7) of the
Internal Revenue Code.
Corporations organized under other provisions of law.
The provisions of this article shall not apply to corporations
heretofore or hereafter duly organized under any other provision of law.
Organization.
(a) Notwithstanding any other provision of law, one or more
individuals duly authorized by law to render the same professional
service within the state may organize, or cause to be organized, a
professional service corporation for pecuniary profit under this article
for the purpose of rendering the same professional service, except that
one or more individuals duly authorized by law to practice professional
engineering, architecture, landscape architecture, land surveying or
geology within the state may organize, or cause to be organized, a
professional service corporation or a design professional service
corporation for pecuniary profit under this article for the purpose of
rendering such professional services as such individuals are authorized
to practice.
(b) The certificate of incorporation of a professional service
corporation shall meet the requirements of this chapter and (i) shall
state the profession or professions to be practiced by such corporation
and the names and residence addresses of all individuals who are to be
the original shareholders, directors and officers of such corporation,
and (ii) shall have attached thereto a certificate or certificates
issued by the licensing authority certifying that each of the proposed
shareholders, directors and officers is authorized by law to practice a
profession which the corporation is being organized to practice and, if
applicable, that one or more of such individuals is authorized to
practice each profession which the corporation will be authorized to
practice.
(b-1) The certificate of incorporation of a design professional
service corporation shall meet the requirements of this chapter,
provided that shareholders may include employee stock ownership plans
(ESOPs) and employees of the corporation not licensed as design
professionals, and provided further however that:
(i) greater than seventy-five percent of the outstanding shares of
stock of the corporation are owned by design professionals and an ESOP
(or ESOPs) with greater than seventy-five percent of the plan's voting
trustees or greater than seventy-five percent of the plan's committee
members being design professionals,
(ii) an ESOP, either in part or in its entirety, shall not constitute
part of the greater than seventy-five percent owned by design
professionals unless greater than seventy-five percent of the plan's
voting trustees or greater than seventy-five percent of the plan's
committee members are design professionals,
(iii) greater than seventy-five percent of the directors are design
professionals,
(iv) greater than seventy-five percent of the officers are design
professionals,
(v) the president, the chairperson of the board of directors and the
chief executive officer or officers are design professionals, and
(vi) the single largest shareholder is either a design professional or
an ESOP with greater than seventy-five percent of the plan's voting
trustees being design professionals and greater than seventy-five
percent of the plan's committee members being design professionals.
(b-2) The certificate of incorporation of a design professional
service corporation shall:
(i) state the profession or professions to be practiced by such
corporation,
(ii) state the names and residence addresses of all individuals or
ESOPs who are to be the original shareholders, directors and officers of
such corporation,
(iii) indicate the profession or professions of each original
shareholder, director and officer who is a design professional,
(iv) state the ownership interest of each original shareholder, and
(v) indicate the names of the original officers and directors who are
the president, the chairperson of the board of directors and the chief
executive officer or officers.
(b-3) The certificate of incorporation of a design professional
service corporation shall have attached thereto a certificate or
certificates issued by the licensing authority certifying that each of
the proposed shareholders, directors and officers who is listed as a
design professional is authorized by law to practice a profession which
the corporation is being organized to practice and, if applicable, that
one or more of such individuals is authorized to practice each
profession which the corporation will be authorized to practice. The
attached certificate or certificates shall also certify that the
president, the chairperson of the board of directors and the chief
executive officer or officers are authorized by law to practice a
profession which the corporation is being organized to practice.
(b-4) The certificate of incorporation of a design professional
service corporation shall also have attached thereto a certificate or
certificates issued by the licensing authority certifying that each of
the shareholders, officers, directors and owners have been deemed to
have been of good moral character as may be established by the
regulations of the commissioner of education.
(b-5) On or after January first, two thousand twelve, the state
education department and the department of state shall allow an existing
professional service corporation organized under this article and
practicing professional engineering, architecture, landscape
architecture, geology or land surveying, or practicing any combination
of such professions to become a design professional service corporation
as defined in this article, provided the professional service
corporation meets all of the requirements to become a design
professional service corporation, including that its name shall end with
the words "design professional corporation" or the abbreviation
"D.P.C.", by amending its certificate of incorporation so that it
contains the following statements:
(1) the names and residence addresses of all individuals or ESOPs who
will be the shareholders, directors and officers of the original design
professional service corporation; and
(2) the profession or professions of each shareholder, director and
officer who is a design professional of the original design professional
service corporation; and
(3) the ownership interest of each shareholder of the original design
professional service corporation; and
(4) the names of the officers and directors who will be the president,
the chairperson of the board of directors and the chief executive
officer or officers of the original design professional service
corporation.
(i) The certificate of amendment shall have attached thereto a
certificate or certificates issued by the licensing authority certifying
that each of the proposed shareholders, directors and officers who is
listed as a design professional is authorized by law to practice a
profession which the corporation is organized to practice and, if
applicable, that one or more of such individuals is authorized to
practice each profession which the corporation will be authorized to
practice. The attached certificate or certificates shall also certify
that the proposed president, the chairperson of the board of directors
and the chief executive officer or officers are authorized by law to
practice a profession which the corporation is organized to practice.
(ii) The certificate of amendment shall also have attached thereto a
certificate or certificates issued by the licensing authority certifying
that each of the proposed shareholders, officers, directors and owners
listed have been deemed to have been of good moral character as may be
established by the regulations of the commissioner of education.
(iii) The certificate of amendment shall also have attached thereto:
(A) a tax clearance issued by the department of taxation and finance
certifying that the existing professional service corporation is current
with respect to payment of its state tax liabilities and (B) a
certificate of good standing from the state education department
certifying that the existing professional service corporation is
authorized to provide professional services without restriction.
(b-6) (1) Prior to the first day of March, two thousand nineteen, the
state education department and the department of state shall allow an
existing business corporation organized under article four of this
chapter to become a professional service corporation as defined in this
article for the purpose of practicing professional geology, provided
that the surviving corporation meet all of the requirements to become a
professional service corporation, including that the name of a
professional service corporation shall end with the words "professional
corporation" or the abbreviation "P.C." by amending its certificate of
incorporation so that it contains the following:
(i) the names and residence addresses of all individuals who will be
the original shareholders, directors and officers of the professional
service corporation;
(ii) a statement that the professional service corporation is formed
pursuant to this section; and
(iii) a statement that the amendment shall not effect a dissolution of
the corporation, but shall be deemed a continuation of its corporate
existence, without affecting its then existing property rights or
liabilities or the liabilities of its members or officers as such, but
thereafter it shall have only such rights, powers and privileges, and be
subject only to such other duties and liabilities, as a corporation
created for the same purposes under this article.
(2) The certificate of amendment shall have attached thereto a
certificate or certificates issued by the licensing authority certifying
that each of the proposed shareholders, directors and officers listed:
(i) is authorized by law to practice a profession which the
corporation is organized to practice and, if applicable, that one or
more of such individuals is authorized to practice each profession which
the corporation will be authorized to practice; and
(ii) has been deemed to be of good moral character as may be
established by the regulations of the commissioner of education.
(3) The certificate of amendment shall also have attached thereto a
tax clearance issued by the department of taxation and finance
certifying that the existing business corporation is current with
respect to payment of its state tax liabilities.
(4) Notwithstanding any provision of law to the contrary, any
corporation formed under this section shall be required to comply with
all applicable laws, rules, or regulations relating to the practice of a
profession under title eight of the education law.
(b-7) (1) Prior to the first day of March, two thousand nineteen, the
state education department and the department of state shall allow an
existing business corporation organized under article four of this
chapter to become a design professional service corporation as defined
in this article for the purpose of practicing professional geology,
provided that the surviving corporation meet all of the requirements to
become a design professional service corporation, including that the
name shall end with the words "design professional service corporation"
or the abbreviation "D.P.C." by amending its certificate of
incorporation so that it contains the following:
(i) the names and residence addresses of all individuals or ESOPs who
will be the original shareholders, directors and officers of the
professional service corporation;
(ii) a statement that the design professional service corporation is
formed pursuant to this section;
(iii) the profession or profession of each shareholder, director and
officer who is a design professional of the original design professional
service corporation;
(iv) the names of the officers and directors who will be the
president, the chairperson of the board of directors and the chief
executive officer or officers of the original design professional
service corporation;
(v) the ownership interest of each shareholder of the original design
professional service corporation; and
(vi) a statement that the amendment shall not effect a dissolution of
the corporation, but shall be deemed a continuation of its corporate
existence, without affecting its then existing property rights or
liabilities or the liabilities of its members or officers as such, but
thereafter it shall have only such rights, powers and privileges, and be
subject only to such other duties and liabilities, as a corporation
created for the same purposes under this article.
(2) The certificate of amendment shall have attached thereto a
certificate or certificates issued by the licensing authority certifying
that each of the proposed shareholders, directors and officers listed:
(i) is authorized by law to practice a profession which the
corporation is organized to practice and, if applicable, that one or
more of such individuals is authorized to practice each profession which
the corporation will be authorized to practice; and
(ii) has been deemed to be of good moral character as may be
established by the regulations of the commissioner of education.
(3) The certificate of amendment shall also have attached thereto a
tax clearance issued by the department of taxation and finance
certifying that the existing business corporation is current with
respect to payment of its state tax liabilities.
(4) Notwithstanding any provision of law to the contrary, any
corporation formed under this section shall be required to comply with
all applicable laws, rules, or regulations relating to the practice of a
profession under title eight of the education law.
(c) A certified copy of the certificate of incorporation and of each
amendment thereto shall be filed by the corporation with the licensing
authority within thirty days after the filing of such certificate or
amendment with the department of state.
(d) A professional service corporation, including a design
professional service corporation, other than a corporation authorized to
practice law, shall be under the supervision of the regents of the
university of the state of New York and be subject to disciplinary
proceedings and penalties, and its certificate of incorporation shall be
subject to suspension, revocation or annulment for cause, in the same
manner and to the same extent as is provided with respect to individuals
and their licenses, certificates, and registrations in title eight of
the education law relating to the applicable profession. Notwithstanding
the provisions of this paragraph, a professional service corporation
authorized to practice medicine shall be subject to the prehearing
procedures and hearing procedures as is provided with respect to
individual physicians and their licenses in title II-A of article two of
the public health law.
(e) A corporation authorized to practice law shall be subject to the
regulation and control of, and its certificate of incorporation shall be
subject to suspension, revocation or annulment for cause by, the
appellate division of the supreme court and the court of appeals in the
same manner and to the same extent provided in the judiciary law with
respect to individual attorneys and counselors-at-law. Such corporation
need not qualify for any certification under section four hundred
sixty-four of the judiciary law, take an oath of office under section
four hundred sixty-six of such law or register under section four
hundred sixty-seven of such law.
(f) The order of suspension, revocation or annulment of the
certificate of incorporation of a professional service corporation
pursuant to paragraphs (d) and (e) of this section shall be effective
upon the filing of such order with the department of state.
(g) The practices of creative arts therapy, marriage and family
therapy, mental health counseling, and psychoanalysis shall not be
deemed the same professional service for the purpose of paragraph (a) of
this section, notwithstanding that such practices are all licensed under
article one hundred sixty-three of the education law.
(h) Any firm established for the business purpose of incorporating as
a professional service corporation formed to lawfully engage in the
practice of public accountancy, as such practice is defined under
article one hundred forty-nine of the education law shall be required to
show (1) that a simple majority of the ownership of the firm, in terms
of financial interests and voting rights held by the firm's owners,
belongs to individuals licensed to practice public accountancy in some
state, and (2) that all shareholders of a professional service
corporation whose principal place of business is in this state, and who
are engaged in the practice of public accountancy in this state, hold a
valid license issued under section seventy-four hundred four of the
education law. For purposes of this paragraph, "financial interest"
means capital stock, capital accounts, capital contributions, capital
interest, or interest in undistributed earnings of a business entity.
Although firms registered with the education department may include
non-licensee owners, a registered firm and its owners must comply with
rules promulgated by the state board of regents. Notwithstanding the
foregoing, a firm incorporated under this section may not have
non-licensee owners if the firm's name includes the words "certified
public accountant," or "certified public accountants," or the
abbreviations "CPA" or "CPAs". Each non-licensee owner of a firm that is
incorporated under this section shall be a natural person who actively
participates in the business of the firm or its affiliated entities. For
purposes of this subdivision, "actively participate" means to provide
services to clients or to otherwise individually take part in the
day-to-day business or management of the firm or an affiliated entity.
Such a firm shall have attached to its certificate of incorporation a
certificate or certificates demonstrating the firm's compliance with
this paragraph, in lieu of the certificate or certificates required by
subparagraph (ii) of paragraph (b) of this section.
Rendering of professional service.
(a) No professional service corporation, including a design
professional service corporation, may render professional services
except through individuals authorized by law to render such professional
services as individuals.
(b) Each final plan and report made or issued by a corporation
practicing one or more of the professions of professional engineering,
architecture, landscape architecture, land surveying or geology shall
bear the name and seal of one or more professional engineers,
architects, landscape architects, land surveyors or professional
geologists, respectively, who are in responsible charge of such plan or
report.
(c) Each report, diagnosis, prognosis, and prescription made or issued
by a corporation practicing medicine, dentistry, podiatry, optometry,
ophthalmic dispensing, veterinary medicine, pharmacy, nursing,
physiotherapy or chiropractic shall bear the signature of one or more
physicians, dentists, podiatrists, optometrists, ophthalmic dispensers,
veterinarians, pharmacists, nurses, physiotherapists, or chiropractors,
respectively, who are in responsible charge of such report, diagnosis,
prognosis, or prescription.
(d) Each record, transcript, report and hearing report prepared by a
corporation practicing certified shorthand reporting shall bear the
signature of one or more certified shorthand reporters who are in
responsible charge of such record, transcript, report, or hearing
report.
(e) Each corporation practicing public accounting or certified public
accounting shall maintain records indicating the identity of each public
accountant or certified public accountant, respectively, who was
responsible for each report or statement which is issued prepared or
examined by such corporation.
(f) Each opinion prepared by a corporation practicing law shall bear
the signature of one or more attorneys and counsellors-at-law who are in
responsible charge of such opinion.
(g) In addition to the requirements in subdivisions (b) through (f),
inclusive, each document prepared by a corporation which under the
rules, regulations, laws or customs of the applicable profession is
required to bear the signature of an individual in responsible charge of
such document, shall be signed by one or more such individuals.
Professional relationships and liabilities.
(a) (i) Each shareholder, employee or agent of a professional service
corporation and a design professional service corporation shall be
personally and fully liable and accountable for any negligent or
wrongful act or misconduct committed by him or by any person under his
direct supervision and control while rendering professional services on
behalf of such corporation.
(ii) An employee stock ownership plan owning greater than twenty-five
percent of the outstanding shares of a design professional service
corporation organized under paragraph (b-1) of section fifteen hundred
three of this article shall be under the supervision of the regents of
the university of the state of New York, shall register with the state
education department and shall be issued a certificate granting such
employee stock ownership plan the authority to hold shares of such
corporation. Such certificate shall be subject to professional
misconduct provisions as set forth in article one hundred thirty of the
education law. In addition, the failure to maintain an active
registration with the state education department shall also subject such
certificate to discipline as provided above. The secretary of state
shall be the designated agent for service of process in any disciplinary
matter involving a registered employee stock ownership plan.
(iii) Any such employee stock ownership plan shall not influence, or
attempt to influence, any decisions that fall within a design
professional's scope of practice.
(b) The relationship of an individual to a professional service
corporation or a design professional service corporation with which such
individual is associated, whether as shareholder, director, officer,
employee or agent, shall not modify or diminish the jurisdiction over
him of the licensing authority and in the case of an attorney and
counsellor-at-law, the other courts of this state.
Purposes of incorporation.
No professional service corporation or design professional service
corporation shall engage in any business other than the rendering of the
professional services for which it was incorporated; provided that such
corporation may invest its funds in real estate, mortgages, stocks,
bonds or any other type of investments.
Issuance of shares.
(a) A professional service corporation may issue shares only to
individuals who are authorized by law to practice in this state a
profession which such corporation is authorized to practice and who are
or have been engaged in the practice of such profession in such
corporation or a predecessor entity, or who will engage in the practice
of such profession in such corporation within thirty days of the date
such shares are issued. No shareholder of a professional service
corporation shall enter into a voting trust agreement, proxy, or any
other type agreement vesting in another person, other than another
shareholder of the same corporation or a person who would be eligible to
become a shareholder if employed by the corporation, the authority to
exercise voting power of any or all of his shares. All shares issued,
agreements made, or proxies granted in violation of this section shall
be void.
(b) A design professional service corporation may issue shares to
individuals who are authorized by law to practice in this state a
profession which such corporation is authorized to practice and who are
or have been engaged in the practice of such profession in such
corporation or a predecessor entity, or who will engage in the practice
of such profession in such corporation within thirty days of the date
such shares are issued. A design professional service corporation may
also issue shares to employee stock ownership plans (ESOPs) and
employees of the corporation not licensed as design professionals,
provided that:
(i) greater than seventy-five percent of the outstanding shares of
stock of the corporation are owned by design professionals and an ESOP
(or ESOPs) with greater than seventy-five percent of the plan's voting
trustees or greater than seventy-five percent of the plan's committee
members being design professionals,
(ii) an ESOP, either in part or in its entirety, shall not constitute
part of the greater than seventy-five percent owned by design
professionals unless greater than seventy-five percent of the plan's
voting trustees or greater than seventy-five percent of the plan's
committee members are design professionals,
(iii) greater than seventy-five percent of the directors are design
professionals,
(iv) greater than seventy-five percent of the officers are design
professionals,
(v) the president, the chairperson of the board of directors and the
chief executive officer or officers are design professionals, and
(vi) the single largest shareholder is either a design professional or
an ESOP with greater than seventy-five percent of the plan's voting
trustees being design professionals and greater than seventy-five
percent of the plan's committee members being design professionals.
No shareholder of a design professional service corporation shall
enter into a voting trust agreement, proxy or any other type of
agreement vesting in another person, other than another shareholder of
the same corporation, the authority to exercise voting power of any or
all of his or her shares. All shares issued, agreements made or proxies
granted in violation of this section shall be void.
(c) Any firm established for the business purpose of incorporating as
a professional service corporation pursuant to paragraph (h) of section
fifteen hundred three of this article may issue shares to individuals
who are authorized by law to practice in this state the profession which
such corporation is authorized to practice or who will engage in the
practice of such profession in such corporation within thirty days of
the date such shares are issued and may also issue shares to employees
of the corporation not licensed as certified public accountants,
provided that:
(i) at least a simple majority of the outstanding shares of stock of
the corporation are owned by certified public accountants,
(ii) at least a simple majority of the directors are certified public
accountants,
(iii) at least a simple majority of the officers are certified public
accountants,
(iv) the president, the chairperson of the board of directors and the
chief executive officer or officers are certified public accountants. No
shareholder of a professional service corporation established pursuant
to paragraph (h) of section fifteen hundred three of this article shall
enter into a voting trust agreement, proxy or any other type of
agreement vesting in another person, the authority to exercise voting
power of any or all of his or her shares. All agreements made or proxies
granted in violation of this section shall be void.
Directors and officers.
(a) No individual may be a director or officer of a professional
service corporation unless he is authorized by law to practice in this
state a profession which such corporation is authorized to practice and
is either a shareholder of such corporation or engaged in the practice
of his profession in such corporation.
(b) The directors and officers of a design professional service
corporation may include individuals who are not design professionals,
provided however that greater than seventy-five percent of the
directors, greater than seventy-five percent of the officers and the
president, the chairperson of the board of directors and the chief
executive officer or officers are authorized by law to practice in this
state a profession which such corporation is authorized to practice, and
are either shareholders of such corporation or engaged in the practice
of their professions in such corporation.
(c) The directors and officers of any firm established for the
business purpose of incorporating as a professional service corporation
pursuant to paragraph (h) of section fifteen hundred three of this
article may include individuals who are not licensed to practice public
accountancy in any state, provided however that at least a simple
majority of the directors, at least a simple majority of the officers
and the president, the chairperson of the board of directors and the
chief executive officer or officers are authorized by law to practice in
any state the profession which such corporation is authorized to
practice, and are either shareholders of such corporation or engaged in
the practice of their professions in such corporation.
Disqualification of shareholders, directors, officers and
employees.
If any shareholder, director, officer or employee of a professional
service corporation, including a design professional service
corporation, who has been rendering professional service to the public
becomes legally disqualified to practice his or her profession within
this state, he or she shall sever all employment with, and financial
interests (other than interests as a creditor) in, such corporation
forthwith or as otherwise provided in section 1510 of this article. All
provisions of law regulating the rendering of professional services by a
person elected or appointed to a public office shall be applicable to a
shareholder, director, officer and employee of such corporation in the
same manner and to the same extent as if fully set forth herein. Such
legal disqualification to practice his or her profession within this
state shall be deemed to constitute an irrevocable offer by the
disqualified shareholder to sell his or her shares to the corporation,
pursuant to the provisions of section 1510 of this article or of the
certificate of incorporation, by-laws or agreement among the corporation
and all shareholders, whichever is applicable. Compliance with the terms
of such offer shall be specifically enforceable in the courts of this
state. A professional service corporation's failure to enforce
compliance with this provision shall constitute a ground for forfeiture
of its certificate of incorporation and its dissolution.
Death or disqualification of shareholders.
(a) A professional service corporation, including a design
professional service corporation, shall purchase or redeem the shares of
a shareholder in case of his death or disqualification pursuant to the
provisions of section 1509 of this article, within six months after the
appointment of the executor or administrator or other legal
representative of the estate of such deceased shareholder, or within six
months after such disqualification, at the book value of such shares as
of the end of the month immediately preceding the death or
disqualification of the shareholder as determined from the books and
records of the corporation in accordance with its regular method of
accounting. The certificate of incorporation, the by-laws of the
corporation or an agreement among the corporation and all shareholders
may modify this section by providing for a shorter period of purchase or
redemption, or an alternate method of determining the price to be paid
for the shares, or both. If the corporation shall fail to purchase or
redeem such shares within the required period, a successful plaintiff in
an action to recover the purchase price of such shares shall also be
awarded reasonable attorneys' fees and costs. Limitations on the
purchase or redemption of shares set forth in section 513 of this
chapter shall not apply to the purchase or redemption of shares pursuant
to this section. Nothing herein contained shall prevent a corporation
from paying pension benefits or other deferred compensation to or on
behalf of a former or deceased officer, director or employee thereof as
otherwise permitted by law. The provisions of this section shall not be
deemed to require the purchase of the shares of a disqualified
shareholder where the period of disqualification is for less than six
months, and the shareholder again becomes eligible to practice his
profession within six months from the date of disqualification.
(b) Notwithstanding the provisions of paragraph (a) of this section,
the corporation shall not be required to purchase or redeem the shares
of a deceased or disqualified shareholder if such shares, within the
time limit prescribed by paragraph (a) of this section, are sold or
transferred to another professional pursuant to the provisions of
section 1511 of this article.
Transfer of shares.
(a) No shareholder of a professional service corporation, including a
design professional service corporation, may sell or transfer his or her
shares in such corporation except to another individual who is eligible
to have shares issued to him or her by such corporation or except in
trust to another individual who would be eligible to receive shares if
he or she were employed by the corporation. Nothing herein contained
shall be construed to prohibit the transfer of shares by operation of
law or by court decree. No transferee of shares by operation of law or
court decree may vote the shares for any purpose whatsoever except with
respect to corporate action under sections 909 and 1001 of this chapter.
The restriction in the preceding sentence shall not apply, however,
where such transferee would be eligible to have shares issued to him or
her if he or she were an employee of the corporation and, if there are
other shareholders, a majority of such other shareholders shall fail to
redeem the shares so transferred, pursuant to section 1510 of this
article, within sixty days of receiving written notice of such transfer.
Any sale or transfer, except by operation of law or court decree or
except for a corporation having only one shareholder, may be made only
after the same shall have been approved by the board of directors, or at
a shareholders' meeting specially called for such purpose by such
proportion, not less than a majority, of the outstanding shares as may
be provided in the certificate of incorporation or in the by-laws of
such professional service corporation. At such shareholders' meeting the
shares held by the shareholder proposing to sell or transfer his or her
shares may not be voted or counted for any purpose, unless all
shareholders consent that such shares be voted or counted. The
certificate of incorporation or the by-laws of the professional service
corporation, or the professional service corporation and the
shareholders by private agreement, may provide, in lieu of or in
addition to the foregoing provisions, for the alienation of shares and
may require the redemption or purchase of such shares by such
corporation at prices and in a manner specifically set forth therein.
The existence of the restrictions on the sale or transfer of shares, as
contained in this article and, if applicable, in the certificate of
incorporation, by-laws, stock purchase or stock redemption agreement,
shall be noted conspicuously on the face or back of every certificate
for shares issued by a professional service corporation. Any sale or
transfer in violation of such restrictions shall be void.
(b) A design professional service corporation shall purchase or redeem
the shares of a non-design professional shareholder in the case of his
or her termination of employment within thirty days after such
termination. A design professional service corporation shall not be
required to purchase or redeem the shares of a terminated non-design
professional shareholder if such shares, within thirty days after such
termination, are sold or transferred to another employee of the
corporation pursuant to this article.
(c) A firm established for the business purpose of incorporating as a
professional service corporation pursuant to paragraph (h) of section
fifteen hundred three of this article, shall purchase or redeem the
shares of a non-licensed professional shareholder in the case of his or
her termination of employment within thirty days after such termination.
A firm established for the business purpose of incorporating as a
professional service corporation pursuant to paragraph (h) of section
fifteen hundred three of this article, shall not be required to purchase
or redeem the shares of a terminated non-licensed professional
shareholder if such shares, within thirty days after such termination,
are sold or transferred to another employee of the corporation pursuant
to this article.
Corporate name.
(a) Notwithstanding any other provision of law, the name of a
professional service corporation, including a design professional
service corporation, may contain any word which, at the time of
incorporation, could be used in the name of a partnership practicing a
profession which the corporation is authorized to practice, and may not
contain any word which could not be used by such a partnership.
Provided, however, the name of a professional service corporation may
not contain the name of a deceased person unless
(1) such person's name was part of the corporate name at the time of
such person's death; or
(2) such person's name was part of the name of an existing partnership
and at least two-thirds of such partnership's partners become
shareholders of the corporation.
(b) The name of a professional service corporation shall end with the
words "Professional Corporation" or the abbreviation "P.C." The name of
a design professional service corporation shall end with the words
"design professional corporation" or the abbreviation "D.P.C." The
provisions of subparagraph one of paragraph (a) of section 301 of this
chapter shall not apply to a professional service corporation.
Business corporation law applicable.
This chapter, except article 13 and article 15-A, shall be applicable
to a professional service corporation, including a design professional
service corporation, except to the extent that the provisions thereof
conflict with this article. A professional service corporation,
including a design professional service corporation, may consolidate or
merge only with another corporation organized under this article or
authorized to do business in this state under article 15-A of this
chapter or authorized and registered to practice the same profession, or
in the case of a design professional service corporation one or more
professions as provided in paragraph (e) of section 1501 of this
article, pursuant to the applicable provisions of subdivision six of
section seventy-two hundred nine of the education law, subdivision four
of section seventy-three hundred seven of the education law or
subdivision four of section seventy-three hundred twenty-seven of the
education law, or may be a member of a professional service limited
liability company, a foreign professional service limited liability
company, a registered limited liability partnership or foreign limited
liability partnership, and only if all of the professions practiced by
such corporations, limited liability companies or limited liability
partnerships could be practiced by a single corporation organized under
this article.
Triennial statement.
(a) Each professional service corporation shall, at least once every
three years on or before the date prescribed by the licensing authority,
furnish a statement to the licensing authority listing the name and
residence address of each shareholder, director and officer of such
corporation and certifying that all such individuals are authorized by
law in this state to practice a profession which such corporation is
authorized to practice. The statement shall be signed by the president
or any vice-president of the corporation and attested to by the
secretary or any assistant secretary of the corporation.
(b) Each design professional service corporation shall, at least once
every three years on or before the date prescribed by the licensing
authority, furnish a statement to the licensing authority listing the
names and residence addresses of each shareholder, director and officer
of such corporation and certify as the date of certification and at all
times over the entire three year period that:
(i) greater than seventy-five percent of the outstanding shares of
stock of the corporation are and were owned by design professionals and
an ESOP (or ESOPs) with greater than seventy-five percent of the plan's
voting trustees or greater than seventy-five percent of the plan's
committee members being design professionals,
(ii) greater than seventy-five percent of the directors are and were
design professionals,
(iii) greater than seventy-five percent of the officers are and were
design professionals,
(iv) the president, the chairperson of the board of directors and the
chief executive officer or officers are and were design professionals,
and
(v) the single largest shareholder is and was either a design
professional or an ESOP with greater than seventy-five percent of the
plan's voting trustees being design professionals and greater than
seventy-five percent of the plan's committee members being design
professionals.
The statement shall be signed by the president or any design
professional vice-president and attested to by the secretary or any
assistant secretary of the corporation.
(c) Each firm established for the business purpose of incorporating as
a professional service corporation pursuant to paragraph (h) of section
fifteen hundred three of this article shall, at least once every three
years on or before the date prescribed by the licensing authority,
furnish a statement to the licensing authority listing the names and
residence addresses of each shareholder, director and officer of such
corporation and certify as the date of certification and at all times
over the entire three year period that:
(i) at least a simple majority of the outstanding shares of stock of
the corporation are and were owned by certified public accountants,
(ii) at least a simple majority of the directors are and were
certified public accountants,
(iii) at least a simple majority of the officers are and were
certified public accountants,
(iv) the president, the chairperson of the board of directors and the
chief executive officer or officers are and were certified public
accountants.
The statement shall be signed by the president or any certified public
accountant vice-president and attested to by the secretary or any
assistant secretary of the corporation.
Regulation of professions.
This article shall not repeal, modify or restrict any provision of the
education law or the judiciary law regulating the professions referred
to therein except to the extent in conflict herewith.
Corporate mergers, consolidations and other reorganizations.
(a) Notwithstanding any inconsistent provision of this article, and
subject to the limitations in paragraph (d) of this section, a
professional service corporation, including a design professional
service corporation, pursuant to the provisions of article nine of this
chapter, may be merged or consolidated with another corporation formed
pursuant to the provisions of this chapter, with a corporation
authorized and registered to practice the same profession pursuant to
the applicable provisions of subdivision six of section seventy-two
hundred nine of the education law (engineer or land surveyor),
subdivision four of section seventy-three hundred seven of the education
law (architect) or subdivision four of section seventy-three hundred
twenty-seven of the education law (landscape architect) of articles one
hundred forty-five, one hundred forty-seven and one hundred forty-eight
of the education law, or with a foreign corporation, or other business
entity practicing the same profession or professions in this state or
the state of its formation, or may be otherwise reorganized, provided
that the corporation which survives or which is formed pursuant thereto
is a professional service corporation, a design professional service
corporation, a professional service limited liability company or a
foreign professional service corporation practicing the same profession
or professions in this state or the state of incorporation or, if one of
the original corporations is authorized to practice pursuant to the
provisions of either subdivision six of section seventy-two hundred
nine, subdivision four of section seventy-three hundred seven or
subdivision four of section seventy-three hundred twenty-four of the
education law, a corporation authorized and registered to practice the
same profession pursuant to the applicable provisions of subdivision six
of section seventy-two hundred nine of the education law (engineer or
land surveyor), subdivision four of section seventy-three hundred seven
of the education law (architect) of articles one hundred forty-five, one
hundred forty-seven and one hundred forty-eight or subdivision four of
section seventy-three hundred twenty-seven of the education law.
(b) If the surviving business entity is a professional corporation,
the restrictions on the issuance, transfer or sale of shares of a
professional service corporation or a design professional service
corporation shall be suspended for a period not exceeding thirty days
with respect to any issuance, transfer or sale of shares made pursuant
to such merger, consolidation or reorganization, provided that: (i) no
person who would not be eligible to be a shareholder in the absence of
this section shall vote the shares of or receive any distribution from
such corporation; (ii) after such merger, consolidation or
reorganization, any professional service corporation or a design
professional service corporation which survives or which is created
thereby shall be subject to all of the provisions of this article; and
(iii) shares thereafter only may be held by persons who are eligible to
receive shares of such professional service corporation, design
professional service corporation or such other corporation authorized
and registered to practice the same profession pursuant to the
applicable provisions of subdivision six of section seventy-two hundred
nine of the education law (engineer or land surveyor), subdivision four
of section seventy-three hundred seven of the education law (architect)
or subdivision four of section seventy-three hundred twenty-seven of the
education law (landscape architect) of articles one hundred forty-five,
one hundred forty-seven and one hundred forty-eight of the education
law, which survives. Nothing herein contained shall be construed as
permitting the practice of a profession in this state by a corporation
which is not incorporated pursuant to the provisions of this article or
authorized to do business in this state pursuant to the provisions of
article fifteen-A of this chapter, authorized pursuant to subdivision
six of section seventy-two hundred nine of the education law, authorized
pursuant to subdivision four of section seventy-three hundred seven of
the education law, authorized pursuant to subdivision four of section
seventy-three hundred twenty-seven of the education law or authorized
and registered to practice a profession pursuant to the applicable
provisions of article one hundred forty-five, one hundred forty-seven or
one hundred forty-eight of the education law. For the purposes of this
section, other reorganizations shall be limited to those reorganizations
defined in paragraph one of subsection (a) of section three hundred
sixty-eight of the internal revenue code.
(c) If the surviving business entity is a professional service limited
liability company, the restrictions on the issuance, transfer or sale of
membership interests of a professional service limited liability company
other than the requirements of the first two sentences of subdivision
(c) of section twelve hundred eleven of the limited liability company
law, shall be suspended for a period not exceeding thirty days with
respect to any issuance, transfer or sale of membership interests made
pursuant to such merger or consolidation, provided that: (i) no person
or business entity who would not be eligible to be a member in the
absence of this section shall vote or receive any distribution from such
limited liability company; (ii) after such merger or consolidation, any
professional service limited liability company that survives or that is
created thereby shall be subject to all the provisions of the limited
liability company law; and (iii) membership interests thereafter may be
held only by persons or business entities who are eligible to be a
member of such professional service limited liability company. Nothing
herein contained shall be construed as permitting the practice of a
profession in this state by a limited liability company that is not
formed pursuant to the provisions of the limited liability company law
or authorized to do business in the state pursuant to the provisions of
article thirteen of the limited liability company law.
(d) Notwithstanding the provisions contained in paragraphs (a), (b)
and (c) of this section, no design professional service corporation
shall be merged or consolidated with any entity unless such entity is a
professional business organization lawfully organized to provide
professional services pursuant to articles one hundred forty-five, one
hundred forty-seven and one hundred forty-eight of the education law.
ARTICLE 15-A Foreign Professional Service Corporations
Definitions.
As used in this article, unless the context otherwise requires, the
term:
(a) "Licensing authority" means the regents of the university of the
state of New York or the state education department, as the case may be,
in the case of all professions licensed under title eight of the
education law, and the appropriate appellate division of the supreme
court in the case of the profession of law.
(b) "Profession" includes any practice as an attorney and
counsellor-at-law, or as a licensed physician, and those professions
designated in title eight of the education law.
(c) "Professional service" means any type of service to the public
which may be lawfully rendered by a member of a profession within the
purview of his profession.
(d) "Foreign professional service corporation" means a professional
service corporation, whether or not denominated as such, organized under
the laws of a jurisdiction other than this state, all of the
shareholders, directors and officers of which are authorized and
licensed to practice the profession for which such corporation is
licensed to do business; except that all shareholders, directors and
officers of a foreign professional service corporation which provides
health services in this state shall be licensed in this state. A foreign
professional service corporation formed to lawfully engage in the
practice of public accountancy as a firm, as such practice is defined
under article one hundred forty-nine of the education law, or equivalent
state law, shall be required to show (1) that a simple majority of the
ownership of the firm, in terms of financial interests and voting rights
held by the firm's owners, belongs to individuals licensed to practice
public accountancy in some state, and (2) that all shareholders of a
foreign professional service corporation whose principal place of
business is in this state, and who are engaged in the practice of public
accountancy in this state, hold a valid license issued under section
seventy-four hundred four of the education law. For purposes of this
paragraph, "financial interest" means capital stock, capital accounts,
capital contributions, capital interest, or interest in undistributed
earnings of a business entity. Although firms registered with the
education department may include non-licensee owners, a registered firm
and its owners must comply with rules promulgated by the state board of
regents. Notwithstanding the foregoing, a firm registered with the
education department may not have non-licensee owners if the firm's name
includes the words "certified public accountant," or "certified public
accountants," or the abbreviations "CPA" or "CPAs". Each non-licensee
owner of a firm that is operating under this section shall be a natural
person who actively participates in the business of the firm or its
affiliated entities, provided each beneficial owner of an equity
interest in such entity is a natural person who actively participates in
the business conducted by the firm or its affiliated entities. For
purposes of this paragraph, "actively participate" means to provide
services to clients or to otherwise individually take part in the
day-to-day business or management of the firm or an affiliated entity.
(e) "Officer" does not include the secretary or an assistant secretary
of a corporation having only one shareholder.
Rendering of professional service.
(a) No foreign professional service corporation may render
professional services in this state except through individuals
authorized by law to render such professional services as individuals in
this state.
(b) Each final plan, drawing and report made or issued by a foreign
professional service corporation practicing professional engineering,
architecture, landscape architecture, geology or land surveying shall
bear the name and seal of one or more professional engineers,
architects, landscape architects, professional geologists or land
surveyors, respectively, who are in responsible charge of such plan or
report.
(c) Each report, diagnosis, prognosis, and prescription made or issued
by a foreign professional service corporation practicing medicine,
dentistry, podiatry, optometry, ophthalmic dispensing, veterinary
medicine, pharmacy, nursing, physiotherapy or chiropractic shall bear
the signature of one or more physicians, dentists, podiatrists,
optometrists, ophthalmic dispensers, veterinarians, pharmacists, nurses,
physiotherapists, or chiropractors, respectively, who are in responsible
charge of such report, diagnosis, prognosis, or prescription.
(d) Each record, transcript, report and hearing report prepared by a
foreign professional service corporation practicing certified shorthand
reporting shall bear the signature of one or more certified shorthand
reporters who are in responsible charge of such record, transcript,
report, or hearing report.
(e) Each report and statement prepared by a foreign professional
service corporation practicing public accounting or certified public
accounting shall bear the signature of one or more public accountants or
certified public accountants, respectively, who are in responsible
charge of such report or statement.
(f) Each opinion prepared by a foreign professional service
corporation practicing law shall bear the signature of one or more
attorneys and counsellors-at-law who are in responsible charge of such
opinion.
(g) In addition to the requirements in paragraphs (b) through (f)
inclusive herein, each document prepared by a foreign professional
service corporation which under the rules, regulations, laws or customs
of the applicable profession is required to bear the signature of an
individual in responsible charge of such document, shall be signed by
one or more such individuals licensed to practice in this state.
Professional relationships and liabilities.
(a) Each shareholder, employee or agent of a foreign professional
service corporation who performs professional services in this state on
behalf of the corporation shall be personally and fully liable and
accountable for any negligent or wrongful act or misconduct committed by
him or by any person under his direct supervision and control while
rendering such professional services, and shall bear professional
responsibility for compliance by such corporation with all laws, rules
and regulations governing the practice of the profession in this state.
(b) The relationship of an individual to a foreign professional
service corporation with which such individual is associated, whether as
shareholder, director, officer, employee or agent, shall not modify or
diminish the jurisdiction over him of the licensing authority and in the
case of an attorney and counsellor-at-law, the other courts of this
state.
Foreign professional service corporation.
No foreign professional service corporation shall engage in any
business in this state other than the rendering of the professional
services for which it is incorporated and is authorized to do business
in this state; provided that such corporation may invest its funds in
real estate, mortgages, stocks, bonds or any other type of investments.
Business corporation law applicable.
Except for the provisions of sections thirteen hundred three, thirteen
hundred four, thirteen hundred sixteen, thirteen hundred seventeen and
thirteen hundred twenty, this chapter shall be applicable to a foreign
professional service corporation to the extent that the provisions
thereof are not in conflict with the provisions of this article. A
foreign professional service corporation may practice in this state, or
may consolidate or merge with another corporation, or may be a member of
a professional service limited liability company, a foreign professional
service limited liability company, a registered limited liability
partnership or foreign limited liability partnership, only if all of the
professions practiced by such corporations, limited liability companies
or limited liability partnerships could be practiced by a single
professional service corporation organized in this state; and, further,
only if such foreign professional service corporation is domiciled in a
state or territory of the United States the laws of which, at the time
of application by such corporation under section fifteen hundred thirty
of this article, contain a reciprocal provision under which professional
service corporations domiciled in this state may similarly apply for the
privilege of doing business in any such state or territory; provided
further however, that nothing herein shall authorize a foreign
professional service corporation practicing professional engineering,
land surveying, geology, architecture and/or landscape architecture to
be a member or partner of a professional service limited liability
company, a foreign professional service limited liability company, a
registered limited liability partnership or a foreign limited liability
partnership unless all of the shareholders, directors and officers of
such foreign professional service corporation are licensed to practice
one or more of such professions in this state.
Filing requirements.
(a) A foreign professional service corporation may apply for authority
to do business in this state. An application entitled "Application for
Authority of .......... (name of corporation) under Section fifteen
hundred thirty of the Business Corporation Law," shall be signed and
delivered to the department of state. It shall set forth:
(1) The name of the foreign professional service corporation. If the
name does not end with the words "Professional Corporation" or the
abbreviation "P.C.", it shall in addition to the foregoing set forth the
name to be used in this state, ending with the words "Professional
Corporation" or the abbreviation "P.C."
(2) The jurisdiction and date of its incorporation.
(3) A statement of the profession or professions to be practiced in
this state and a statement that the foreign professional service
corporation is authorized to practice such profession or professions in
the jurisdiction of its incorporation.
(4) The name, address and license number of each person within the
foreign professional service corporation who is licensed to practice the
profession or professions in this state.
(5) The city, incorporated village or town and the county within this
state in which its office is to be located.
(6) A designation of the secretary of state as its agent upon whom
process against it may be served and the post office address within or
without this state to which the secretary of state shall mail a copy of
any process against it served upon him.
(7) If it is to have a registered agent, his name and address within
this state and a statement that the registered agent is to be its agent
upon whom process against it may be served.
(8) A statement that the foreign professional service corporation has
not since its incorporation or since the date its authority to do
business in this state was last surrendered, engaged in any activity in
this state, or in lieu thereof, the consent of the state tax commission
to the filing of the application, which consent shall be attached
thereto.
(b) Attached to the application for authority shall be:
(1) A certificate by an authorized officer of the jurisdiction of its
incorporation that the foreign professional service corporation is an
existing corporation.
(2) A certificate or certificates issued by the licensing authority
that each individual within the corporation intending to practice the
profession or professions in this state is licensed to practice said
profession or professions in this state. In order to obtain said
certificate or certificates, a copy of the certificate of incorporation
shall be furnished to the licensing authority.
(3) A certificate or certificates issued by the licensing authority in
the case of a foreign professional service corporation providing health
services that each shareholder, officer and director of the foreign
professional service corporation is licensed to practice said profession
in this state.
(c) The fee for filing the application for authority shall be two
hundred dollars, payable to the department of state, and the fee for a
certificate of authority issued by the state education department shall
be fifty dollars.
Annual statement.
Each foreign professional service corporation shall, at least once of
each year on or before the date prescribed by the licensing authority,
furnish a statement to the licensing authority listing the name and
residence address of each shareholder, director, officer and corporate
employee licensed by such licensing authority and certifying that such
individuals intending to practice a profession which such foreign
professional service corporation is authorized to practice in this state
are licensed to practice said profession in this state. In the case of a
foreign professional service corporation providing health services, such
statement shall also certify that each shareholder, officer and director
of the corporation is licensed to practice said profession in this
state. The statement shall be signed by the president or any
vice-president of the corporation and attested to by the secretary or
any assistant secretary of the corporation.
Regulation of professions.
(a) This article shall not repeal, modify or restrict any provision of
the education law or the judiciary law or any rules or regulations
adopted thereunder regulating the professions referred to therein except
to the extent in conflict herewith.
(b) A foreign professional service corporation, other than a foreign
professional service corporation authorized to practice law, shall be
under the supervision of the regents of the university of the state of
New York and be subject to disciplinary proceedings and penalties, and
its authority to do business shall be subject to suspension, revocation
or annulment for cause, in the same manner and to the same extent as is
provided with respect to individuals and their licenses, certificates,
and registrations in title eight of the education law relating to the
applicable profession. Notwithstanding the provisions of this
subdivision, a foreign professional service corporation authorized to
practice medicine shall be subject to the prehearing procedures and
hearing procedures as is provided with respect to individual physicians
and their licenses in Title II-A of article two of the public health
law.
(c) A foreign professional service corporation authorized to practice
law shall be subject to the regulation and control of, and its authority
to do business shall be subject to suspension, revocation or annulment
for cause by, the appellate division of the supreme court and the court
of appeals in the same manner and to the same extent provided in the
judiciary law with respect to individual attorneys and
counselors-at-law. Such corporation need not qualify for any
certification under section four hundred sixty-four of the judiciary
law, take an oath of office under section four hundred sixty-six of such
law or register under section four hundred sixty-seven of such law.
Licensing of individuals.
No officer, director, shareholder or employee of a foreign
professional service corporation shall practice his or her profession in
this state unless such individual is duly licensed to practice such
profession in this state.
ARTICLE 16 Security Takeover Disclosure Act
Short title.
This article shall be known as the security takeover disclosure act.
Definitions.
As used in this article, the following terms shall have the following
meanings:
(a) "Takeover bid" means the acquisition of or offer to acquire by an
offeror from an offeree, pursuant to a tender offer or request or
invitation for tenders, any equity security of a target company, if
after acquisition thereof the offeror would, directly or indirectly, be
a beneficial owner of more than five percent of any class of the issued
and outstanding equity securities of such target company.
Such term does not include:
(1) Bids made by a dealer for his own account in the ordinary course
of his business of buying and selling such security;
(2) An offer to acquire such equity security solely in exchange for
other securities, or the acquisition of such equity security pursuant to
such offer, for the sole account of the offeror, in good faith and not
for the purpose of avoiding this section, and not involving any public
offering of such other securities within the meaning of section four of
title one of the "Securities Act of 1933", (48 Stat. 77, 15 U.S.C. 77 d
(2)); as amended;
(3) Any other offer to acquire an equity security, or the acquisition
of such equity security pursuant to such offer, for the sole account of
the offeror, from not more than fifty offerees, in good faith and not
for the purpose of avoiding the provisions of this article;
(4) Any offer or class of offer where, prior to making the offer, the
offeror beneficially owns, directly or indirectly, a majority of the
voting equity securities of the target company;
(b) "Offeror" means a person who makes, or in any way participates or
aids in making, a takeover bid, and includes persons acting jointly or
in concert, or who intend to exercise jointly or in concert any voting
rights attached to the securities for which such takeover bid is made.
An "offeror" includes an issuer of securities whose securities are or
are to be the subject of a takeover bid whether or not the issuer, upon
acquisition, will become the beneficial owner of such securities. "An
offeror" does not include any bank or broker-dealer in securities
loaning funds to the offeror in the ordinary course of the business of
the bank or broker-dealer in securities and not otherwise participating
in the takeover bid, or any bank, broker-dealer in securities, attorney,
accountant or consultant furnishing information or advice to an offeror
and not otherwise participating in the takeover bid.
(c) "Offeree" means the beneficial owner, residing in this state, of
securities which an offeror acquires or offers to acquire in connection
with a takeover bid.
(d) "Target company" means a corporation, organized under the laws of
this state and having its principal executive offices or significant
business operations located within this state.
(e) "Equity security" means any stock, bond, or other obligation of a
target company, the holder of which has the right to vote for the
election of members of the board of directors, or those exercising a
similar function if the target company is not a corporation, of such
target company. Equity security includes any security convertible into
an equity security, and also includes any right, option or warrant to
purchase an equity security.
Disclosure requirement.
(a) No offeror shall make a takeover bid unless as soon as practicable
on the date of commencement of the takeover bid he files with the
attorney general at his New York city office and delivers to the target
company at its principal executive offices a registration statement
containing the information required by section sixteen hundred three of
this article.
(b) An offeror shall make full and fair disclosure to offerees of the
material information set forth in the registration statement filed
pursuant to subdivision (a) of this section.
(c) No solicitation or recommendation to the offerees of a target
company to accept or reject a takeover bid shall be made by or on behalf
of an offeror or a target company unless at the time copies of such
solicitation or recommendation are first published, sent or given to
such offerees, the person making such solicitation or recommendation has
filed copies of the solicitation or recommendation with the attorney
general at his New York city office.
Contents of registration statement.
(a) The registration statement required to be filed pursuant to
subdivision (a) of section sixteen hundred two of this article shall
include:
1. Copies of all prospectuses, brochures, advertisements, circulars,
letters, or other matter by means of which the offeror proposes to
disclose to offerees all information material to a decision to accept or
reject the offer;
2. The identity and background of all persons on whose behalf the
acquisition of any equity security of the target company has been or is
to be effected;
3. The exact title and number of shares outstanding of the class of
equity securities being sought, the number of such securities being
sought and the consideration being offered therefor;
4. The source and amount of funds or other consideration used or to be
used in acquiring any equity security, including a statement describing
any securities, other than the existing capital stock or long term debt
of the offeror, which are being offered in exchange for the equity
securities of the target company and also including copies of all loan
or credit agreements and letters of commitment used or to be used to
secure financing for the acquisition of any equity security of the
target company;
5. A statement of any plans or proposals which the offeror, upon
gaining control, may have to liquidate the target company, sell its
assets, effect a merger or consolidation of it, or make any other major
change in its business, corporate structure, management personnel, or
policies of employment;
6. The number of shares of any equity security of the target company
of which each offeror is beneficial or record owner or has a right to
acquire, directly or indirectly, together with the name and address of
each person defined in this section as an offeror;
7. Particulars as to any contracts, arrangements, or understandings to
which an offeror is party with respect to any equity security of the
target company, including without limitation transfers of any equity
security, joint ventures, loans or option arrangements, puts and calls,
guarantees of loan, guarantees against loss, guarantees of profits,
division of losses or profits, or the giving or withholding of proxies,
naming the persons with whom such contracts, arrangements, or
understandings have been entered into;
8. Complete information on the organization and operations of the
offeror, including without limitation the year of organization, form of
organization, jurisdiction in which it is organized, a description of
each class of the offeror's capital stock and of its long term debt,
financial statements for the current period and for the three most
recent annual accounting periods, a description of pending legal
proceedings other than routine litigation to which the offeror or any of
its subsidiaries is a party or of which any of their property is the
subject, a brief description of the business done and projected by the
offeror and its subsidiaries and the general development of such
business over the past five years, the names of all directors and
executive officers together with biographical summaries of each for the
preceding three years to date;
9. A statement as to the potential impact, if any, of the offeror's
plans or proposals on the residents of New York state, including any
material change in the location of the target company's offices or
business activities within this state; any plant or facility relocation;
any plant or facility closings; any significant reduction in the
workforce at an individual plant or facility; any other material change
in the number, job classification, compensation, or other terms and
conditions of employment of persons employed by the target company in
this state; any material change in the relationships of the target
company with suppliers or customers within this state, or any other
material changes in the target company's business, corporate structure,
management, personnel or activities which would have a substantial
impact on residents of this state;
10. Particulars as to any pension plans; profit sharing plans; savings
plans; educational opportunities; relocation adjustments; labor
relations records, including violations of the federal national labor
relations act, occupational safety and health act of 1970, fair labor
standards act, or employee retirement and income security act, as
amended, finally adjudicated or settled within five years of the
commencement of the takover bid; earnings and dividend growth; community
activities; and charitable, cultural, educational and civic
contributions of the offeror;
11. If the offeror is a natural person, information concerning his
identity and background, including without limitation financial
statements for the current and three preceding years, a description of
his business activities and affiliations during that time period, and a
description of any pending legal or administrative proceedings, other
than routine and immaterial litigation, to which the offeror is a party
or of which any of his property is the subject; and
12. If debt securities or preferred stock are either offered in the
takeover bid or used as a source of funds in making the takeover bid,
the investment rating, if any, by a generally recognized rating service
of such debt security or preferred stock.
(b) If any material change occurs in the facts set forth in the
registration statement required by subdivision (a) of section sixteen
hundred two of this article, the offeror who filed such statement shall
promptly notify the attorney general and the target company of such
change in writing or by telephone confirmed in writing and shall amend
the registration statement to reflect such change promptly but not later
than the date such change is first published, sent or given to offerees.
(c) The attorney general may permit the omission of any information
required by subdivision (a) of this section to be included in the
registration statement if he determines that such information is
immaterial or otherwise unnecessary for the protection of offerees.
Enforcement.
(a) The attorney general may conduct such investigation as he deems
necessary concerning any takeover bid for the purpose of determining
compliance with the requirements of this article. As part of such
investigation the attorney general may require persons to file
statements in writing and under oath with his office, subpoena
witnesses, compel their attendance, examine them under oath and require
the production of books, records, documents and papers.
(b) In the event the attorney general determines that any person is
violating or about to violate any provision of this article, or any
order, rule or regulation issued pursuant thereto, he may seek, in a
court of competent jurisdiction, an injunction temporarily or
permanently barring that person from making or taking part in or
continuing a takeover bid or from taking up or paying for shares
tendered by offerees pursuant to a takeover bid, and the court may grant
the relief applied for or so much thereof as it may deem proper.
Violations; penalties.
(a) Every person who willfully violates any provision of this article
shall be guilty of a class E felony; every person who willfully violates
any order, rule or regulation issued pursuant thereto, shall be guilty
of a class A misdemeanor.
(b) A violation of any provision of this article shall constitute a
fraudulent practice within the meaning of article twenty-three-A of the
general business law.
(c) Every person who violates any provision of this article shall be
subject to a civil penalty of one thousand dollars per violation if a
natural person or ten thousand dollars per violation if a corporation.
When the violation is the failure to file a registration statement as
required by subdivision (a) of section sixteen hundred two of this
article, the failure to file a solicitation or recommendation as
required by subdivision (c) of section sixteen hundred two of this
article, or the failure to amend such registration statement as required
by subdivision (b) of section sixteen hundred three of this article,
each business day of non-registration or failure to file a
recommendation or solicitation or failure to amend constitutes a
separate violation. The penalty imposed by this section shall be
cumulative and more than one penalty shall be recoverable in the same
action in any court of competent jurisdiction.
Administration.
(a) This article shall be administered by the attorney general and
employees designated by him within the department of law. The attorney
general is hereby empowered to promulgate, alter, amend or revoke rules
and regulations necessary to carry out the purposes of this article.
(b) The attorney general may establish fees for the filing of any
registration statement, not to exceed two thousand five hundred dollars,
to recover the costs of administering this article. Such fees may vary
according to the maximum consideration payable by the offeror for the
securities which are the subject of the takeover bid.
Prosecutions and immunity.
(a) The attorney general may prosecute every person charged with the
commission of a criminal offense arising from the violation of any
provision of this article. In all such proceedings, the attorney general
may appear in person or by his deputy before any court of record or any
grand jury and exercise all the powers and perform all the duties in
respect of such actions or proceedings which the district attorney would
otherwise be authorized or required to exercise or perform; or the
attorney general may in his discretion transmit evidence, proof and
information as to such offense to the district attorney of the county or
counties in which the alleged violation has occurred, and every district
attorney to whom such evidence, proof and information is so transmitted
shall forthwith proceed to prosecute any corporation, company,
association, or officer, manager or agent thereof, or any firm or person
charged with such violation. In any such proceeding, wherein the
attorney general has appeared either in person or by deputy, the
district attorney shall only exercise such powers and perform such
duties as are required of him by the attorney general or the deputy
attorney general so appearing.
(b) Upon any investigation before the attorney general or his deputy
or other officer designated by him, or in any criminal proceeding before
any court, magistrate or grand jury, pursuant to or for a violation of
any of the provisions of this article, the attorney general, his deputy
or other officer designated by him, or the court, magistrate or grand
jury, may confer immunity in accordance with the provisions of section
50.20 of the criminal procedure law.
Designation of secretary of state for service.
(a) Every nonresident offeror, whether or not such offeror has filed a
registration statement, except a foreign corporation which has appointed
and keeps a resident agent in this state, shall be deemed to have
appointed the secretary of state as his agent upon whom may be served
any lawful process, authorized by this article, with the same effect as
though served upon the offeror personally.
(b) Service of process pursuant to this section shall be accomplished
by leaving a copy of the process in the office of the secretary of
state, but it shall not be effective unless notice of the service and a
copy of the process is sent by certified or registered mail to the
nonresident offeror served, at his last known address.
Fraudulent, deceptive or manipulative practices.
(a) No person shall make any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements made, in the light of the circumstances under which they are
made, not misleading, or engage in any fraudulent, deceptive, or
manipulative acts or practices, in connection with any takeover bid or
any solicitation of offerees in opposition to or in favor of any such
takeover bid.
(b) It shall constitute a violation of this article for any person who
is in possession of material information relating to any takeover bid,
which information he knows or has reason to know is nonpublic, which he
acquired either before or after the commencement of the takeover bid,
and which he knows or has reason to know has been acquired directly or
indirectly from an offeror, a target company, or any officer, director,
partner or employee or any other person acting on behalf of the offeror
or target company, to purchase or sell or cause to be purchased or sold,
within or from this state, any securities sought or to be sought by such
takeover bid or any securities convertible into or exhangeable for any
such securities or any option or right to obtain or to dispose of any
such securities.
(c) Fraudulent, deceptive or manipulative acts or practices include
without limitation those acts and practices proscribed by rules and
regulations which the attorney general is hereby empowered to adopt,
promulgate, amend and rescind as is necessary to carry out the
provisions of this section.
Exclusions.
This article shall not apply when:
(a) The offeror or the target company is a public utility or a public
utility holding company as defined in section two of the "Public Utility
Holding Company Act of 1935," (49 Stat.803, 15 U.S.C. 79), as amended,
and the takeover bid is subject to approval by the appropriate federal
agency as provided in such act;
(b) The offeror or the target company is a bank or a bank holding
company as subject to the "Bank Holding Company Act of 1956," (70 Stat.
133, 12 U.S.C. 1841), and subsequent amendments thereto, and the
takeover bid is subject to approval by the appropriate federal agency as
provided in such act;
(c) The offeror or the target company is a savings and loan holding
company as defined in section two of the "Savings and Loan Holding
Company Amendments of 1967," (82 Stat. 5, 12 U.S.C. 1730A), as amended,
and the takeover bid is subject to approval by the appropriate federal
agency as provided in such act;
(d) The offeror and the target company are banks and the offer is part
of a merger transaction subject to approval by appropriate federal or
state supervisory authorities.
Validity; saving clause.
In the event any provision or application of this article shall be
held illegal or invalid for any reason, such holding shall not affect
the legality or validity of any other provision or application thereof.
Requirements for certain takeover bids.
If the takeover bid is not subject to the requirements of section
14(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(d), the
following additional requirements shall apply to the takeover bid:
(a) The takeover bid shall be made on the same terms to all offerees
holding the same class or series of securities.
(b) The period of time within which equity securities may be deposited
pursuant to a takeover bid shall not be less than thirty business days.
(c) Equity securities deposited pursuant to a takeover bid may be
withdrawn at any time until the expiration of thirty business days after
the commencement of the takeover bid and at any time after the
expiration of sixty-five days from the commencement of the takeover bid,
if the shares have not been purchased, and until the expiration of ten
business days following the date of commencement of another offeror's
takeover bid for the same equity securities if the shares have not been
purchased and if the bidder has received notice or otherwise has
knowledge of the commencement of such takeover bid.
(d) Where a takeover bid is made for less than all the outstanding
equity securities of a class and where a greater number of such
securities is deposited pursuant thereto than the offeror is bound or
willing to take up and pay for, the securities taken up and paid for by
the offeror shall be taken up and paid for as nearly as possible on a
pro rata basis, disregarding fractions, according to the number of
securities deposited by each shareholder.
(e) Where an offeror increases the consideration offered in a takeover
bid, the offeror shall pay the increased consideration for all equity
securities accepted, whether such securities have been accepted by the
offeror before or after the increase in consideration.
(f) (1) Within ten days of the filing of a registration statement as
required by section sixteen hundred two of this article the attorney
general may schedule a public hearing or hearings or conduct such
investigation as he deems necessary concerning any takeover bid for the
purpose of determining compliance with the requirements of this article;
(2) Any such hearing or investigation shall be declared by order of
the attorney general;
(3) Any initial hearing shall commence within twenty days of the
filing of a registration statement.
(g) In the event the attorney general shall schedule a public hearing
or otherwise conduct an investigation pursuant to subdivision (f) of
this section, the attorney general may also, in his discretion, issue an
order staying the offeror from purchasing or paying for any shares
tendered in response to its takeover bid at any time prior to such
purchasing or paying for shares tendered. Every person shall comply with
every such order.
(h) In the event the attorney general shall issue a stay payment order
pursuant to subdivision (g) of this section, the attorney general shall,
no later than thirty days from the issuance of such stay payment order,
issue an order containing his findings of fact and conclusions of law.
(i) Any stay payment order issued by the attorney general pursuant to
subdivision (g) of this section shall automatically expire within sixty
days from its issuance except where the attorney general has in his
order containing findings of fact and conclusions of law conditioned the
purchase and payment for shares tendered upon changes or modifications
in the registration statement, in which event any stay payment order
shall be vacated by the attorney general after he is satisfied that such
changes or modifications have been publicly disseminated to offerees.
(j) The attorney general may apply, on notice to the offeror and the
target company, to a court of competent jurisdiction, and such court may
grant an application, for good cause, to extend any of the time periods
set forth in this section if an extension is necessary for the
protection of offerees.
Private right of action.
Any offeree whose equity securities are the subject of a takeover bid
and who has been injured by any violation of this article may bring an
action in his or her own name to enjoin such unlawful act or practice
and to recover actual damages together with reasonable attorney fees in
the event the offeree is successful.
ARTICLE 17 Benefit Corporations
Application and effect of article.
(a) This article shall be applicable to all benefit corporations.
(b) The existence of a provision of this article shall not of itself
create any implication that a contrary or different rule of law is or
would be applicable to a business corporation that is not a benefit
corporation. This article shall not affect any statute or rule of law
that is or would be applicable to a business corporation that is not a
benefit corporation.
(c) Except as otherwise provided in this article, this chapter shall
be applicable to all benefit corporations. The specific provisions of
this article shall control over the general provisions of this chapter.
(d) A provision of the certificate of incorporation or bylaws of a
benefit corporation may not relax, be inconsistent with or supersede any
provision of this article.
Definitions.
As used in this article, unless the context otherwise requires, the
term:
(a) "Benefit corporation" means a business corporation incorporated
under this article and whose status as a benefit corporation has not
been terminated as provided in this article.
(b) "General public benefit" means a material positive impact on
society and the environment, taken as a whole, assessed against a
third-party standard, from the business and operations of a benefit
corporation.
(c) "Independent" means that a person has no material relationship
with a benefit corporation or any of its subsidiaries. A material
relationship between a person and a benefit corporation or any of its
subsidiaries will be conclusively presumed to exist if:
(1) the person is, or has been within the last three years, an
employee of the benefit corporation or any of its subsidiaries;
(2) an immediate family member of the person is, or has been within
the last three years, an executive officer of the benefit corporation or
any of its subsidiaries; or
(3) the person, or an entity of which the person is a director,
officer or other manager or in which the person owns beneficially or of
record five percent or more of the equity interests, owns beneficially
or of record five percent or more of the shares of the benefit
corporation. A percentage of ownership in an entity shall be calculated
as if all outstanding rights to acquire equity interests in the entity
had been exercised.
(d) "Minimum status vote" means that, in addition to any other
approval or vote required by this chapter, the certificate of
incorporation or a bylaw adopted by the shareholders:
(1) The holders of shares of every class or series that are entitled
to vote on the corporate action shall be entitled to vote as a class on
the corporate action; and
(2) The corporate action must be approved by vote of the shareholders
of each class or series entitled to cast at least three-quarters of the
votes that all shareholders of the class or series are entitled to cast
thereon.
(e) "Specific public benefit," includes:
(1) providing low-income or underserved individuals or communities
with beneficial products or services;
(2) promoting economic opportunity for individuals or communities
beyond the creation of jobs in the normal course of business;
(3) preserving the environment;
(4) improving human health;
(5) promoting the arts, sciences or advancement of knowledge;
(6) increasing the flow of capital to entities with a public benefit
purpose; and
(7) the accomplishment of any other particular benefit for society or
the environment.
(f) "Subsidiary" means an entity in which a person owns beneficially
or of record fifty percent or more of the equity interests. A percentage
of ownership in an entity shall be calculated as if all outstanding
rights to acquire equity interests in the entity had been exercised.
(g) "Third-party standard" means a recognized standard for defining,
reporting and assessing general public benefit that is:
(1) developed by a person that is independent of the benefit
corporation; and
(2) transparent because the following information about the standard
is publicly available:
(A) the factors considered when measuring the performance of a
business;
(B) the relative weightings of those factors; and
(C) the identity of the persons who developed and control changes to
the standard and the process by which those changes are made.
Formation of benefit corporations.
A benefit corporation shall be formed in accordance with this chapter
except that its certificate of incorporation shall also state that it is
a benefit corporation.
Election of an existing business corporation to become a benefit
corporation.
(a) A business corporation may become a benefit corporation under this
article by amending its certificate of incorporation so that it contains
a statement that the corporation is a benefit corporation. The amendment
shall not be effective unless it is adopted by at least the minimum
status vote.
(b) Any corporation that is not a benefit corporation that is a party
to a merger or consolidation in which the surviving or consolidated
corporation will be a benefit corporation must approve the plan of
merger or consolidation by at least the minimum status vote in addition
to any other vote required by this chapter, the certificate of
incorporation or the bylaws.
(c) Any corporation that is not a benefit corporation that is party to
a merger or consolidation in which shares of stock of such corporation
will be converted into a right to receive shares of stock of a benefit
corporation must approve the plan of merger or consolidation by at least
the minimum status vote in addition to any other vote required by this
chapter, the certificate of incorporation or the bylaws.
Termination of benefit corporation status.
(a) A benefit corporation may terminate its status as such and cease
to be subject to this article by amending its certificate of
incorporation to delete the statement that the corporation is a benefit
corporation. The amendment shall not be effective unless it is adopted
by at least the minimum status vote.
(b) If a benefit corporation is a party to a merger or consolidation
in which the surviving or new corporation will not be a benefit
corporation, the plan of merger or consolidation shall not be effective
unless it is adopted by at least the minimum status vote in addition to
any other vote required by this chapter, the certificate of
incorporation or the bylaws.
(c) Any benefit corporation that is party to a merger or consolidation
in which shares of stock of such benefit corporation will be converted
into a right to receive shares of stock of a corporation that is not a
benefit corporation must approve the plan of merger or consolidation by
at least the minimum status vote in addition to any other vote required
by this chapter, the certificate of incorporation or the bylaws.
(d) A sale, lease, conveyance, exchange, transfer, or other
disposition of all or substantially all of the assets of a benefit
corporation, unless the transaction is in the usual and regular course
of business of the benefit corporation, shall not be effective unless
the transaction is approved by at least the minimum status vote in
addition to any other vote required by this chapter, the certificate of
incorporation or the bylaws.
Corporate purposes.
(a) Every benefit corporation shall have a purpose of creating general
public benefit. This purpose is in addition to its purposes under
section two hundred one of this chapter and any specific purpose set
forth in its certificate of incorporation under paragraph (b) of this
section. The purpose to create general public benefit shall be a
limitation on the other purposes of the benefit corporation, and shall
control over any inconsistent purpose of the benefit corporation.
(b) The certificate of incorporation of a benefit corporation may
identify one or more specific public benefits that it is the purpose of
the benefit corporation to create in addition to its purposes under
section two hundred one of this chapter and paragraph (a) of this
section. The identification of a specific public benefit under this
paragraph does not limit the obligation of a benefit corporation to
create general public benefit.
(c) The creation of general and specific public benefits as provided
in paragraphs (a) and (b) of this section is in the best interests of
the benefit corporation.
(d) A benefit corporation may amend its certificate of incorporation
to add, amend or delete the identification of a specific public benefit
that it is the purpose of the benefit corporation to create. The
amendment shall not be effective unless it is adopted by at least the
minimum status vote.
Standard of conduct for directors and officers.
(a) In discharging the duties of their respective positions, the board
of directors, committees of the board and individual directors and
officers of a benefit corporation:
(1) shall consider the effects of any action upon:
(A) the ability for the benefit corporation to accomplish its general
and any specific public benefit purpose;
(B) the shareholders of the benefit corporation;
(C) the employees and workforce of the benefit corporation and its
subsidiaries and suppliers;
(D) the interests of customers as beneficiaries of the general or
specific public benefit purposes of the benefit corporation;
(E) community and societal considerations, including those of any
community in which offices or facilities of the benefit corporation or
its subsidiaries or suppliers are located;
(F) the local and global environment; and
(G) the short-term and long-term interests of the benefit corporation,
including benefits that may accrue to the benefit corporation from its
long-term plans and the possibility that these interests may be best
served by the continued independence of the benefit corporation;
(2) may consider:
(A) the resources, intent and conduct (past, stated and potential) of
any person seeking to acquire control of the corporation; and
(B) any other pertinent factors or the interests of any other group
that they deem appropriate; and
(3) shall not be required to give priority to the interests of any
particular person or group referred to in subparagraphs one and two of
this paragraph over the interests of any other person or group unless
the benefit corporation has stated its intention to give priority to
interests related to a specific public benefit purpose identified in its
certificate of incorporation.
(b) The consideration of interests and factors in the manner required
by paragraph (a) of this section:
(1) shall not constitute a violation of the provisions of sections
seven hundred fifteen or seven hundred seventeen of this chapter; and
(2) is in addition to the ability of directors to consider interests
and factors as provided in section seven hundred seventeen of this
chapter.
(c) A director does not have a fiduciary duty to a person that is a
beneficiary of the general or specific public benefit purposes of a
benefit corporation arising from the status of the person as a
beneficiary, unless otherwise stated in the certificate of incorporation
or the bylaws of the benefit corporation.
Annual benefit report.
(a) A benefit corporation must deliver to each shareholder an annual
benefit report including:
(1) a narrative description of:
(A) the process and rationale for selecting the third party standard
used to prepare the benefit report;
(B) the ways in which the benefit corporation pursued general public
benefit during the year and the extent to which general public benefit
was created;
(C) the ways in which the benefit corporation pursued any specific
public benefit that the certificate of incorporation states it is the
purpose of the benefit corporation to create and the extent to which
that specific public benefit was created; and
(D) any circumstances that have hindered the creation by the benefit
corporation of general or specific public benefit;
(2) an assessment of the performance of the benefit corporation,
relative to its general public benefit purpose assessed against a
third-party standard applied consistently with any application of that
standard in prior benefit reports or accompanied by an explanation of
the reasons for any inconsistent application and, if applicable,
assessment of the performance of the benefit corporation, relative to
its specific public benefit purpose or purposes;
(3) the compensation paid by the benefit corporation during the year
to each director in that capacity; and
(4) the name of each person that owns beneficially or of record five
percent or more of the outstanding shares of the benefit corporation.
(b) The benefit report must be sent annually to each shareholder
within one hundred twenty days following the end of the fiscal year of
the benefit corporation. Delivery of a benefit report to shareholders is
in addition to any other requirement to deliver an annual report to
shareholders.
(c) A benefit corporation must post its most recent benefit report on
the public portion of its website, if any, except that the compensation
paid to directors and any financial or proprietary information included
in the benefit report may be omitted from the benefit report as posted.
(d) Concurrently with the delivery of the benefit report to
shareholders pursuant to paragraph (b) of this section, the benefit
corporation must deliver a copy of the benefit report to the department
for filing, except that the compensation paid to directors and any
financial or proprietary information included in the benefit report may
be omitted from the benefit report as filed under this section.
(e) The annual benefit report shall be in addition to all other
reporting requirements under this chapter.
Conspicuous language on the face of certificates.
All certificates representing shares of a benefit corporation shall
contain, in addition to any other statements required by the business
corporation law, the following conspicuous language on the face of the
certificate:
"This entity is a benefit corporation organized under article
seventeen of the New York business corporation law."
ARTICLE 20 Effective Date
Effective date.
This act shall take effect September first, nineteen hundred
sixty-three.