Minnesota Session Laws - 1989, Regular Session

  

                         Laws of Minnesota 1989 

                        CHAPTER 172-H.F.No. 1574 
           An act relating to corporations; providing that the 
          control share acquisition and business combination 
          statutes apply to certain corporations unless they 
          elect not to be covered; clarifying application of the 
          statutes; reducing the period of time that business 
          combinations may be regulated from five years to four 
          years; eliminating procedures for the use of 
          committees to determine whether a corporation should 
          pursue certain legal remedies; providing that meeting 
          notices do not have to be sent to shareholders when 
          mail has been returned undeliverable; amending 
          Minnesota Statutes 1988, sections 302A.011, 
          subdivisions 41 and 49; 302A.111, subdivision 3; 
          302A.161, subdivision 17; 302A.241, subdivision 1; 
          302A.251, subdivision 2; 302A.435, subdivision 1; 
          302A.671, subdivision 1; and 302A.673, subdivisions 1 
          and 3; repealing Minnesota Statutes 1988, section 
          302A.243. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
     Section 1.  Minnesota Statutes 1988, section 302A.011, 
subdivision 41, is amended to read: 
    Subd. 41.  [BENEFICIAL OWNER; BENEFICIAL OWNERSHIP.] (a) 
"Beneficial owner," when used with respect to shares or other 
securities, includes, but is not limited to, any person who, 
directly or indirectly through any written or oral agreement, 
arrangement, relationship, understanding, or otherwise, has or 
shares the power to vote, or direct the voting of, the shares or 
securities or has or shares the power to dispose of, or direct 
the disposition of, the shares or securities, except that: 
    (1) a person shall not be deemed the beneficial owner of 
shares or securities tendered pursuant to a tender or exchange 
offer made by the person or any of the person's affiliates or 
associates until the tendered shares or securities are accepted 
for purchase or exchange,; and 
    (2) a person shall not be deemed the beneficial owner of 
shares or securities with respect to which the person has the 
power to vote or direct the voting arising solely from a 
revocable proxy given in response to a proxy solicitation 
required to be made and made in accordance with the applicable 
rules and regulations under the Securities Exchange Act of 1934 
and is not then reportable under that act on a Schedule 13D or 
comparable report, or, if the corporation is not subject to the 
rules and regulations under the Securities Exchange Act of 1934, 
would have been required to be made and would not have been 
reportable if the corporation had been subject to the rules and 
regulations.  
    (b) "Beneficial ownership" includes, but is not limited to, 
the right to acquire shares or securities through the exercise 
of options, warrants, or rights, or the conversion of 
convertible securities, or otherwise.  The shares or securities 
subject to the options, warrants, rights, or conversion 
privileges held by a person shall be deemed to be outstanding 
for the purpose of computing the percentage of outstanding 
shares or securities of the class or series owned by the person, 
but shall not be deemed to be outstanding for the purpose of 
computing the percentage of the class or series owned by any 
other person.  A person shall be deemed the beneficial owner of 
shares and securities beneficially owned by any relative or 
spouse of the person or any relative of the spouse, residing in 
the home of the person, any trust or estate in which the person 
owns ten percent or more of the total beneficial interest or 
serves as trustee or executor or in a similar fiduciary 
capacity, any corporation or entity in which the person owns ten 
percent or more of the equity, and any affiliate of the person. 
     (c) When two or more persons act or agree to act as a 
partnership, limited partnership, syndicate, or other group for 
the purposes of acquiring, owning, or voting shares or other 
securities of a corporation, all members of the partnership, 
syndicate, or other group are deemed to constitute a "person" 
and to have acquired beneficial ownership, as of the date they 
first so act or agree to act together, of all shares or 
securities of the corporation beneficially owned by the person. 
    Sec. 2.  Minnesota Statutes 1988, section 302A.011, 
subdivision 49, is amended to read: 
    Subd. 49.  [INTERESTED SHAREHOLDER.] "Interested 
shareholder," when used in reference to any issuing public 
corporation, means any person (other than the issuing public 
corporation or any subsidiary of the issuing public corporation) 
that is (1) the beneficial owner, directly or indirectly, of ten 
percent or more of the voting power of the outstanding shares 
entitled to vote of the issuing public corporation or (2) an 
affiliate or associate of the issuing public corporation and at 
any time within the five-year four-year period immediately 
before the date in question was the beneficial owner, directly 
or indirectly, of ten percent or more of the voting power of the 
then outstanding shares entitled to vote of the issuing public 
corporation.  Notwithstanding anything stated in this 
subdivision, if a person who has not been a beneficial owner of 
ten percent or more of the voting power of the outstanding 
shares entitled to vote of the issuing public corporation 
immediately prior to a repurchase of shares by, or 
recapitalization of, the issuing public corporation or similar 
action shall become a beneficial owner of ten percent or more of 
the voting power solely as a result of the share repurchase, 
recapitalization, or similar action, the person shall not be 
deemed to be the beneficial owner of ten percent or more of the 
voting power for purposes of clause (1) or (2) unless: 
    (i) the repurchase, recapitalization, conversion, or 
similar action was proposed by or on behalf of, or pursuant to 
any agreement, arrangement, relationship, understanding, or 
otherwise (whether or not in writing) with, the person or any 
affiliate or associate of the person; or 
    (ii) the person thereafter acquires beneficial ownership, 
directly or indirectly, of outstanding shares entitled to vote 
of the issuing public corporation and, immediately after the 
acquisition, is the beneficial owner, directly or indirectly, of 
ten percent or more of the voting power of the outstanding 
shares entitled to vote of the issuing public corporation.  
    Sec. 3.  Minnesota Statutes 1988, section 302A.111, 
subdivision 3, is amended to read: 
    Subd. 3.  [STATUTORY PROVISIONS THAT MAY BE MODIFIED EITHER 
IN ARTICLES OR IN BYLAWS.] The following provisions govern a 
corporation unless modified either in the articles or in the 
bylaws:  
    (a) Directors serve for an indefinite term that expires at 
the next regular meeting of shareholders (section 302A.207); 
    (b) The compensation of directors is fixed by the board 
(section 302A.211); 
    (c) A certain method must be used for removal of directors 
(section 302A.223); 
    (d) A certain method must be used for filling board 
vacancies (section 302A.225); 
    (e) If the board fails to select a place for a board 
meeting, it must be held at the principal executive office 
(section 302A.231, subdivision 1); 
    (f) A director may call a board meeting, and the notice of 
the meeting need not state the purpose of the meeting (section 
302A.231, subdivision 3); 
    (g) A majority of the board is a quorum for a board meeting 
(section 302A.235); 
    (h) A committee shall consist of one or more persons, who 
need not be directors, appointed by affirmative vote of a 
majority of the directors present (section 302A.241, subdivision 
2); 
    (i) The board may establish a special litigation committee 
of disinterested persons (section 302A.243 302A.241); 
    (j) The chief executive officer and chief financial officer 
have specified duties, until the board determines otherwise 
(section 302A.305); 
    (k) Officers may delegate some or all of their duties and 
powers, if not prohibited by the board from doing so (section 
302A.351); 
    (l) The board may establish uncertificated shares (section 
302A.417, subdivision 7); 
    (m) Regular meetings of shareholders need not be held, 
unless demanded by a shareholder under certain conditions 
(section 302A.431); 
    (n) In all instances where a specific minimum notice period 
has not otherwise been fixed by law, not less than ten-days 
notice is required for a meeting of shareholders (section 
302A.435, subdivision 2); 
    (o) The number of shares required for a quorum at a 
shareholders' meeting is a majority of the voting power of the 
shares entitled to vote at the meeting (section 302A.443); 
    (p) The board may fix a date up to 60 days before the date 
of a shareholders' meeting as the date for the determination of 
the holders of shares entitled to notice of and entitled to vote 
at the meeting (section 302A.445, subdivision 1); 
    (q) Indemnification of certain persons is required (section 
302A.521); and 
     (r) The board may authorize, and the corporation may make, 
distributions not prohibited, limited, or restricted by an 
agreement (section 302A.551, subdivision 1).  
    Sec. 4.  Minnesota Statutes 1988, section 302A.161, 
subdivision 17, is amended to read: 
    Subd. 17.  [COMMITTEES.] A corporation may establish 
committees of the board of directors, elect or appoint persons 
to the committees, and define their duties as provided in 
sections section 302A.241 and 302A.243 and fix their 
compensation.  
    Sec. 5.  Minnesota Statutes 1988, section 302A.241, 
subdivision 1, is amended to read: 
    Subdivision 1.  [GENERALLY.] A resolution approved by the 
affirmative vote of a majority of the board may establish 
committees having the authority of the board in the management 
of the business of the corporation only to the extent provided 
in the resolution.  Committees may include a special litigation 
committee consisting of one or more independent directors or 
other independent persons to consider legal rights or remedies 
of the corporation and whether those rights and remedies should 
be pursued.  Committees other than special litigation committees 
are subject at all times to the direction and control of the 
board, except as provided in section 302A.243. 
    Sec. 6.  Minnesota Statutes 1988, section 302A.251, 
subdivision 2, is amended to read: 
    Subd. 2.  [RELIANCE.] (a) A director is 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 
whom the director reasonably believes to be reliable and 
competent in the matters presented; 
    (2) Counsel, public accountants, or other persons as to 
matters that the director reasonably believes are within the 
person's professional or expert competence; or 
    (3) A committee of the board upon which the director does 
not serve, duly established in accordance with sections section 
302A.241 and 302A.243, as to matters within its designated 
authority, if the director reasonably believes the committee to 
merit confidence.  
    (b) Paragraph (a) does not apply to a director who has 
knowledge concerning the matter in question that makes the 
reliance otherwise permitted by paragraph (a) unwarranted.  
    Sec. 7.  Minnesota Statutes 1988, section 302A.435, 
subdivision 1, is amended to read: 
    Subdivision 1.  [TO WHOM GIVEN.] Except as otherwise 
provided in this chapter, notice of all meetings of shareholders 
shall be given to every holder of shares entitled to vote, 
except where unless: 
    (1) the meeting is an adjourned meeting and the date, time, 
and place of the meeting were announced at the time of 
adjournment; or 
    (2) the following have been mailed by first class mail to a 
shareholder at the address in the corporate records and returned 
undeliverable: 
    (i) two consecutive annual meeting notices; and 
    (ii) all meeting notices during the period between the two 
annual meetings; or all payments of dividends, provided there 
are at least two sent during a 12-month period. 
    An action or meeting that is taken or held without notice 
under clause (2) has the same force and effect as if notice was 
given.  If the shareholder delivers a written notice of the 
shareholder's current address to the corporation, the notice 
requirement is reinstated. 
    Sec. 8.  Minnesota Statutes 1988, section 302A.671, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AUTHORIZATION IN ARTICLES APPLICATION.] (a)
Unless otherwise expressly provided in the articles or in bylaws 
approved by the shareholders of an issuing public corporation, 
this section applies to a control share acquisition consummated, 
or a proposed control share acquisition with respect to which an 
information statement has been received by the issuing public 
corporation, on or before July 31, 1990. 
    Unless otherwise expressly provided in the articles or in 
bylaws approved by the shareholders of an issuing public 
corporation, this section does not apply to a control share 
acquisition consummated after July 31, 1990, with respect to 
which no information statement has been received by the issuing 
public corporation, on or before July 31, 1990. 
    (b) The shares of an issuing public corporation acquired by 
an acquiring person in a control share acquisition that exceed 
the threshold of voting power of any of the ranges specified in 
subdivision 2, paragraph (d), shall have only the voting rights 
as shall be accorded to them pursuant to subdivision 4a. 
    Sec. 9.  Minnesota Statutes 1988, section 302A.673, 
subdivision 1, is amended to read: 
    Subdivision 1.  [BUSINESS COMBINATION WITH INTERESTED 
SHAREHOLDER; APPROVAL BY DIRECTORS.] (a) Notwithstanding 
anything to the contrary contained in this chapter (except the 
provisions of subdivision 3), an issuing public corporation may 
not engage in any business combination, or vote, consent, or 
otherwise act to authorize a subsidiary of the issuing public 
corporation to engage in any business combination, with, with 
respect to, proposed by or on behalf of, or pursuant to any 
written or oral agreement, arrangement, relationship, 
understanding, or otherwise with, any interested shareholder of 
the issuing public corporation or any affiliate or associate of 
the interested shareholder for a period of five four years 
following the interested shareholder's share acquisition date 
unless the business combination or the acquisition of shares 
made by the interested shareholder on the interested 
shareholder's share acquisition date is approved by a committee 
of the board of the issuing public corporation before the 
interested shareholder's share acquisition date.  The by a 
committee shall be of the board of the issuing public 
corporation formed in accordance with paragraph (d). 
    (b) If a good faith definitive proposal regarding a 
business combination is made in writing to the board of the 
issuing public corporation, a committee of the board formed in 
accordance with paragraph (d) shall consider and take action on 
the proposal and respond in writing within 30 days after receipt 
of the proposal by the issuing public corporation, setting forth 
its decision regarding the proposal. 
     (c) If a good faith definitive proposal to acquire shares 
is made in writing to the board of the issuing public 
corporation, a committee of the board formed in accordance with 
paragraph (d), shall consider and take action on the proposal 
and respond in writing within 30 days after receipt of the 
proposal by the issuing public corporation, setting forth its 
decision regarding the proposal.  
     (d)(1) When a business combination or acquisition of shares 
is proposed pursuant to this subdivision, the board shall 
promptly form a committee composed of all of the board's 
disinterested directors.  The committee shall take action on the 
proposal by the affirmative vote of a majority of committee 
members.  No larger proportion or number of votes shall be 
required.  Notwithstanding the provisions of section 302A.241, 
subdivision 1, the committee shall not be subject to any 
direction or control by the board with respect to the 
committee's consideration of, or any action concerning, a 
business combination or acquisition of shares pursuant to this 
section. 
     (2) A committee formed pursuant to this subdivision shall 
be composed of one or more members.  Only disinterested 
directors may be members of a committee formed pursuant to this 
subdivision.  However, if the board has no disinterested 
directors, the board shall select three or more disinterested 
persons to be committee members.  Committee members are deemed 
to be directors for purposes of sections 302A.251, 302A.255, and 
302A.521. 
     (3) For purposes of this subdivision, a director or person 
is "disinterested" if the director or person is neither an 
officer nor an employee, nor has been an officer or employee 
within five years preceding the formation of the committee 
pursuant to this section, of the issuing public corporation, or 
of a related corporation. 
    Sec. 10.  Minnesota Statutes 1988, section 302A.673, 
subdivision 3, is amended to read: 
    Subd. 3.  [APPLICATION.] (a) Unless by express provision 
electing to be subject to this section contained in the articles 
or in bylaws approved by the shareholders of an issuing public 
corporation, this section does not apply to any business 
combination of an issuing public corporation, that is not, at 
any time during the period from June 1, 1987, until adoption of 
the article or bylaw provision, a publicly held corporation.  If 
the article or bylaw provision electing to be subject to this 
section expressly so provides, this section shall not apply to 
any business combination with an interested shareholder whose 
share acquisition date is before the effective date of the 
article or bylaw provision.  
     (b) Except as provided in paragraph (c), this section does 
not apply to any business combination of an issuing public 
corporation: 
     (1) if, prior to the time the issuing public corporation 
becomes a publicly held corporation or becomes subject to this 
section by virtue of an election under paragraph (a), including 
any time prior to the time that the corporation becomes an 
issuing public corporation, articles or bylaws of the 
corporation contain a provision expressly electing not to be 
subject to this section; 
     (2) if the board of the issuing public corporation adopts, 
prior to September 1, 1987, an amendment to the issuing public 
corporation's bylaws expressly electing not to be subject to 
this section; 
    (3) if an amendment to the articles or bylaws of the 
issuing public corporation is approved by the shareholders, 
other than interested shareholders and their affiliates and 
associates, holding a majority of the outstanding voting power 
of all shares entitled to vote, excluding the shares of 
interested shareholders and their affiliates and associates, 
expressly electing not to be subject to this section and the 
amendment provides that it is not to be effective until 18 
months after the vote of shareholders, or August 1, 1990, 
whichever date is earlier, and provides that, except as provided 
in paragraph (c), it does not apply to any business combination 
of the issuing public corporation with an interested shareholder 
whose share acquisition date is on or before the effective date 
of the amendment; or 
    (4) if the business combination was consummated before, or 
if a binding agreement for the business combination was entered 
into before, the day following June 1, 1987.  
    (c) This section does not apply to any business combination 
of an issuing public corporation with respect to, proposed by or 
on behalf of, or pursuant to any written or oral agreement, 
arrangement, relationship, understanding, or otherwise with any 
person that would have been an interested shareholder on June 1, 
1987, had this section been in effect on this date and had the 
issuing public corporation been an issuing public corporation on 
this date. 
    This section applies to any business combination of an 
issuing public corporation to which it previously did not apply 
because of provisions in articles or bylaws adopted or approved 
under paragraph (b), clause (1), (2), or (3), upon an amendment 
to the articles or bylaws approved by shareholders holding a 
majority of the outstanding voting power of all shares entitled 
to vote expressly electing to be subject to this section 
becoming effective.  This section does not apply to any business 
combination of the corporation with, with respect to, proposed 
by or on behalf of, or pursuant to any written or oral 
agreement, arrangement, relationship, understanding, or 
otherwise with any person that would have been an interested 
shareholder on the effective date of the amendment if this 
section had been applicable. 
    (d) Unless the articles or bylaws approved by the 
shareholders of the issuing public corporation otherwise 
provide, this section does not apply to any business combination 
of an issuing public corporation with, with respect to, proposed 
by or on behalf of, or pursuant to any agreement, arrangement, 
or understanding (whether or not in writing) with, any 
interested shareholder if the interested shareholder's share 
acquisition date is on or after August 1, 1990, or an affiliate 
or associate of that interested shareholder. 
    Sec. 11.  [REPEALER.] 
    Minnesota Statutes 1988, section 302A.243, is repealed. 
    Sec. 12.  [EFFECTIVE DATE.] 
    Section 11 is effective the day following final enactment 
and applies to proceedings pending under Minnesota Statutes, 
section 302A.243, or proceedings commenced on or after that 
date.  Notwithstanding any contrary provision of Minnesota 
Statutes, chapter 645, the repeal of Minnesota Statutes, section 
302A.243, does not imply that the legislature has accepted or 
rejected the substance of the repealed section but must be 
interpreted in the same manner as if section 302A.243 had not be 
enacted. 
    Presented to the governor May 16, 1989 
    Signed by the governor May 19, 1989, 4:30 p.m.