Office of the Revisor of Statutes
Minnesota Session Laws - 2000, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 264-S.F.No. 2692
An act relating to business organizations; business
corporations and limited liability companies;
regulating the rights of shareholders and members;
clarifying notice of director and governor conflicts
of interest; regulating the issuing of and right to
purchase shares; regulating contribution allowance
agreements; amending Minnesota Statutes 1998, sections
302A.135, subdivision 2; 302A.181, subdivision 3;
302A.255, subdivision 1; 302A.405, subdivision 3;
302A.409, subdivision 3; 302A.471, subdivision 3;
302A.521, subdivision 6; 302A.613, subdivision 2; and
322B.699, subdivision 6; Minnesota Statutes 1999
Supplement, sections 302A.471, subdivision 1; 322B.43,
subdivision 1; 322B.666, subdivision 1; and 322B.72,
subdivision 2.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1998, section 302A.135,
subdivision 2, is amended to read:
Subd. 2. [SUBMISSION TO SHAREHOLDERS.] A resolution
approved by the affirmative vote of a majority of the directors
present, or proposed by a shareholder or shareholders holding
three percent or more of the voting power of the shares entitled
to vote, that sets forth the proposed amendment shall be
submitted to a vote at the next regular or special meeting of
the shareholders of which notice has not yet been given but
still can be timely given. Any number of amendments may be
submitted to the shareholders and voted upon at one meeting, but
the same or substantially the same amendment proposed by a
shareholder or shareholders need not be submitted to the
shareholders or be voted upon at more than one meeting during a
15-month period, except that if a corporation is registered or
reporting under the federal securities laws, the provisions of
this sentence do not apply to the extent that those provisions
are in conflict with the federal securities laws or rules
adopted under those laws. The resolution may amend the articles
in their entirety to restate and supersede the original articles
and all amendments to them. The provisions of this subdivision
regarding shareholder-proposed amendments do not apply to a
corporation registered or reporting under the federal securities
laws, to the extent that those provisions are in conflict with
the federal securities laws or rules promulgated thereunder, in
which case the federal securities laws or rules promulgated
thereunder shall govern.
Sec. 2. Minnesota Statutes 1998, section 302A.181,
subdivision 3, is amended to read:
Subd. 3. [POWER OF SHAREHOLDERS; PROCEDURE.] If a
shareholder or shareholders holding three percent or more of the
voting power of the shares entitled to vote propose a resolution
for action by the shareholders to adopt, amend, or repeal bylaws
adopted, amended, or repealed by the board and the resolution
sets forth the provision or provisions proposed for adoption,
amendment, or repeal, the limitations and procedures for
submitting, considering, and adopting the resolution are the
same as provided in section 302A.135, subdivisions 2 to 4, for
amendment of the articles. The provisions of this subdivision
regarding shareholder-proposed amendments shall not apply to a
corporation registered or reporting under the federal securities
laws, to the extent that those provisions are in conflict with
the federal securities laws or rules promulgated thereunder, in
which case the federal securities laws or rules promulgated
thereunder shall govern.
Sec. 3. Minnesota Statutes 1998, section 302A.255,
subdivision 1, is amended to read:
Subdivision 1. [CONFLICT; PROCEDURE WHEN CONFLICT ARISES.]
A contract or other transaction between a corporation and one or
more of its directors, or between a corporation and an
organization in or of which one or more of its directors are
directors, officers, or legal representatives or have a material
financial interest, is not void or voidable because the director
or directors or the other organizations are parties or because
the director or directors are present at the meeting of the
shareholders or the board or a committee at which the contract
or transaction is authorized, approved, or ratified, if:
(a) The contract or transaction was, and the person
asserting the validity of the contract or transaction sustains
the burden of establishing that the contract or transaction was,
fair and reasonable as to the corporation at the time it was
authorized, approved, or ratified;
(b) The material facts as to the contract or transaction
and as to the director's or directors' interest are fully
disclosed or known to the shareholders holders of all
outstanding shares, whether or not entitled to vote, and the
contract or transaction is approved in good faith by (1) the
holders of two-thirds of the voting power of the shares entitled
to vote which are owned by persons other than the interested
director or directors, or (2) the unanimous affirmative vote of
the holders of all outstanding shares, whether or not entitled
to vote;
(c) The material facts as to the contract or transaction
and as to the director's or directors' interest are fully
disclosed or known to the board or a committee, and the board or
committee authorizes, approves, or ratifies the contract or
transaction in good faith by a majority of the board or
committee, but the interested director or directors shall not be
counted in determining the presence of a quorum and shall not
vote; or
(d) The contract or transaction is a distribution described
in section 302A.551, subdivision 1, or a merger or exchange
described in section 302A.601, subdivision 1 or 2.
Sec. 4. Minnesota Statutes 1998, section 302A.405,
subdivision 3, is amended to read:
Subd. 3. [PAYMENT; LIABILITY; CONTRIBUTION; STATUTE OF
LIMITATIONS.] (a) A corporation shall issue only shares that are
nonassessable or that are assessable but are issued with the
unanimous consent of the shareholders. "Nonassessable" shares
are shares for which the agreed consideration has been fully
paid, delivered, or rendered to the corporation. Consideration
in the form of a promissory note, a check, or a written
agreement to transfer property or render services to a
corporation in the future is fully paid when the note, check, or
written agreement is delivered to the corporation, and
consideration in the form of services to be rendered to the
corporation is fully paid when the issuance of the shares is
authorized or approved pursuant to subdivision 1, paragraph (a).
(b) If shares are issued in violation of paragraph (a), the
following persons are jointly and severally liable to the
corporation for the difference between the agreed consideration
for the shares and the consideration actually received by the
corporation:
(1) A director or shareholder who was present and entitled
to vote but who failed to vote against the issuance of the
shares knowing of the violation;
(2) The person to whom the shares were issued; and
(3) A successor or transferee of the interest in the
corporation of a person described in clause (1) or (2),
including a purchaser of shares, a subsequent assignee,
successor, or transferee, a pledgee, a holder of any other
security interest in the assets of the corporation or shares
granted by the person described in clause (1) or (2), or a legal
representative of or for the person or estate of the person,
which successor, transferee, purchaser, assignee, pledgee,
holder, or representative acquired the interest knowing of the
violation.
(c)(1) A pledgee or holder of any other security interest
in all or any shares that have been issued in violation of
paragraph (a) is not liable under paragraph (b) if all those
shares are surrendered to the corporation. The surrender does
not impair any rights of the pledgee or holder of any other
security interest against the pledgor or person granting the
security interest.
(2) A pledgee, holder of any other security interest, or
legal representative is liable under paragraph (b) only in that
capacity. The liability of the person under paragraph (b) is
limited to the assets held in that capacity for the person or
estate of the person described in clause (1) or (2) of paragraph
(b).
(3) Each person liable under paragraph (b) has a full right
of contribution on an equitable basis from all other persons
liable under paragraph (b) for the same transaction.
(4) An action shall not be maintained against a person
under paragraph (b) unless commenced within two years from the
date on which shares are issued in violation of paragraph (a).
Sec. 5. Minnesota Statutes 1998, section 302A.409,
subdivision 3, is amended to read:
Subd. 3. [ISSUANCE PERMITTED.] A corporation may issue
rights to purchase after the terms, provisions, and conditions
of the rights to purchase to be issued, including the conversion
basis or the price at which securities may be purchased or
subscribed for, are fixed by the board, or by an officer
pursuant to board authorization, subject to any restrictions in
the articles. Notwithstanding any provision of this chapter, a
corporation may issue rights to purchase or amend the instrument
or agreement fixing the terms, provisions, and conditions of the
rights to purchase to include terms and conditions that prevent
the holder of a specified percentage of the outstanding shares
of the corporation, including subsequent transferees of the
holder, from exercising those rights to purchase.
Sec. 6. Minnesota Statutes 1999 Supplement, section
302A.471, subdivision 1, is amended to read:
Subdivision 1. [ACTIONS CREATING RIGHTS.] A shareholder of
a corporation may dissent from, and obtain payment for the fair
value of the shareholder's shares in the event of, any of the
following corporate actions:
(a) An amendment of the articles that materially and
adversely affects the rights or preferences of the shares of the
dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a
sinking fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of
the shares to acquire shares, securities other than shares, or
rights to purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote
on a matter, or to cumulate votes, except as the right may be
excluded or limited through the authorization or issuance of
securities of an existing or new class or series with similar or
different voting rights; except that an amendment to the
articles of an issuing public corporation that provides that
section 302A.671 does not apply to a control share acquisition
does not give rise to the right to obtain payment under this
section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation,
but not including a transaction permitted without shareholder
approval in section 302A.661, subdivision 1, or a disposition in
dissolution described in section 302A.725, subdivision 2, or a
disposition pursuant to an order of a court, or a disposition
for cash on terms requiring that all or substantially all of the
net proceeds of disposition be distributed to the shareholders
in accordance with their respective interests within one year
after the date of disposition;
(c) A plan of merger, whether under this chapter or under
chapter 322B, to which the corporation is a constituent
organization, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under
chapter 322B, to which the corporation is a party as the
corporation whose shares will be acquired by the acquiring
corporation, if the shares of the shareholder are entitled to be
voted on the plan except as provided in subdivision 3; or
(e) Any other corporate action taken pursuant to a
shareholder vote with respect to which the articles, the bylaws,
or a resolution approved by the board directs that dissenting
shareholders may obtain payment for their shares.
Sec. 7. Minnesota Statutes 1998, section 302A.471,
subdivision 3, is amended to read:
Subd. 3. [RIGHTS NOT TO APPLY.] (a) Unless the articles,
the bylaws, or a resolution approved by the board otherwise
provide, the right to obtain payment under this section does not
apply to a shareholder of (1) the surviving corporation in a
merger, if the shares of the shareholder are not entitled to be
voted on the merger with respect to shares of the shareholder
that are not entitled to be voted on the merger and are not
canceled or exchanged in the merger or (2) the corporation whose
shares will be acquired by the acquiring corporation in a plan
of exchange with respect to shares of the shareholder that are
not entitled to be voted on the plan of exchange and are not
exchanged in the plan of exchange.
(b) If a date is fixed according to section 302A.445,
subdivision 1, for the determination of shareholders entitled to
receive notice of and to vote on an action described in
subdivision 1, only shareholders as of the date fixed, and
beneficial owners as of the date fixed who hold through
shareholders, as provided in subdivision 2, may exercise
dissenters' rights.
Sec. 8. Minnesota Statutes 1998, section 302A.521,
subdivision 6, is amended to read:
Subd. 6. [DETERMINATION OF ELIGIBILITY.] (a) All
determinations whether indemnification of a person is required
because the criteria set forth in subdivision 2 have been
satisfied and whether a person is entitled to payment or
reimbursement of expenses in advance of the final disposition of
a proceeding as provided in subdivision 3 shall be made:
(1) by the board by a majority of a quorum, if the
directors who are at the time parties to the proceeding are not
counted for determining either a majority or the presence of a
quorum;
(2) if a quorum under clause (1) cannot be obtained, by a
majority of a committee of the board, consisting solely of two
or more directors not at the time parties to the proceeding,
duly designated to act in the matter by a majority of the full
board including directors who are parties;
(3) if a determination is not made under clause (1) or (2),
by special legal counsel, selected either by a majority of the
board or a committee by vote pursuant to clause (1) or (2) or,
if the requisite quorum of the full board cannot be obtained and
the committee cannot be established, by a majority of the full
board including directors who are parties;
(4) if a determination is not made under clauses (1) to
(3), by the shareholders affirmative vote of the shareholders
required by section 302A.437, but the shares held by parties to
the proceeding must not be counted in determining the presence
of a quorum and are not considered to be present and entitled to
vote on the determination; or
(5) if an adverse determination is made under clauses (1)
to (4) or under paragraph (b), or if no determination is made
under clauses (1) to (4) or under paragraph (b) within 60 days
after (i) the later to occur of the termination of a proceeding
or a written request for indemnification to the corporation or
(ii) a written request for an advance of expenses, as the case
may be, by a court in this state, which may be the same court in
which the proceeding involving the person's liability took
place, upon application of the person and any notice the court
requires. The person seeking indemnification or payment or
reimbursement of expenses pursuant to this clause has the burden
of establishing that the person is entitled to indemnification
or payment or reimbursement of expenses.
(b) With respect to a person who is not, and was not at the
time of the acts or omissions complained of in the proceedings,
a director, officer, or person possessing, directly or
indirectly, the power to direct or cause the direction of the
management or policies of the corporation, the determination
whether indemnification of this person is required because the
criteria set forth in subdivision 2 have been satisfied and
whether this person is entitled to payment or reimbursement of
expenses in advance of the final disposition of a proceeding as
provided in subdivision 3 may be made by an annually appointed
committee of the board, having at least one member who is a
director. The committee shall report at least annually to the
board concerning its actions.
Sec. 9. Minnesota Statutes 1998, section 302A.613,
subdivision 2, is amended to read:
Subd. 2. [APPROVAL BY OWNERS.] (a) At the meeting a vote
of the owners shall be taken on the proposed plan. The plan of
merger or exchange is adopted when approved by the affirmative
vote of the holders of a majority of the voting power of all
shares entitled to vote and, if the merger or exchange is with a
domestic or foreign limited liability company, when approved in
the manner required by the laws of the state under which the
limited liability company is organized. Except as provided in
paragraph (b), a class or series of shares of the corporation is
entitled to vote as a class or series if any provision of the
plan would, if contained in a proposed amendment to the
articles, entitle the class or series of shares to vote as a
class or series and, in the case of an exchange, if the class or
series is included in the exchange.
(b) A class or series of shares of the corporation is not
entitled to vote as a class or series solely because the plan of
merger or exchange effects a cancellation or exchange of the
shares of the class or series if the plan of merger or exchange
effects a cancellation or exchange of all shares of the
corporation of all classes and series that are outstanding
immediately prior to the merger or exchange and shareholders of
shares of that class or series are entitled to obtain payment
for the fair value of their shares under section 302A.471 in the
event of the merger or exchange.
Sec. 10. Minnesota Statutes 1999 Supplement, section
322B.43, subdivision 1, is amended to read:
Subdivision 1. [AGREEMENTS PERMITTED.] Subject to any
restrictions in the articles of organization or a member control
agreement, a limited liability company may enter into
contribution allowance agreements under the terms, provisions,
and conditions fixed by the board of governors or by a manager
pursuant to board authorization.
Sec. 11. Minnesota Statutes 1999 Supplement, section
322B.666, subdivision 1, is amended to read:
Subdivision 1. [CONFLICT AND PROCEDURE WHEN CONFLICT
ARISES.] A contract or other transaction between a limited
liability company and one or more of its governors, or between a
limited liability company and an organization in or of which one
or more of its governors are governors, directors, managers,
officers, or legal representatives or have a material financial
interest, is not void or voidable because the governor or
governors or the other organizations are parties or because the
governor or governors are present at the meeting of the members
or the board of governors or a committee at which the contract
or transaction is authorized, approved, or ratified, if:
(1) the contract or transaction was, and the person
asserting the validity of the contract or transaction sustains
the burden of establishing that the contract or transaction was,
fair and reasonable as to the limited liability company at the
time it was authorized, approved, or ratified;
(2) the material facts as to the contract or transaction
and as to the governor's or governors' interest are fully
disclosed or known to the members, whether or not entitled to
vote, and the contract or transaction is approved in good faith
by (i) the owners of two-thirds of the voting power of the
membership interests entitled to vote that are owned by persons
other than the interested governor or governors, or (ii) the
unanimous affirmative vote of all members, whether or not
entitled to vote;
(3) the material facts as to the contract or transaction
and as to the governor's or governors' interest are fully
disclosed or known to the board of governors or a committee, and
the board of governors or committee authorizes, approves, or
ratifies the contract or transaction in good faith by a majority
of the board of governors or committee, but the interested
governor or governors are not counted in determining the
presence of a quorum and must not vote; or
(4) the contract or transaction is a distribution described
in section 322B.54, subdivision 1, or a merger or exchange
described in section 322B.70, subdivision 1 or 2.
Sec. 12. Minnesota Statutes 1998, section 322B.699,
subdivision 6, is amended to read:
Subd. 6. [DETERMINATION OF ELIGIBILITY.] (a) All
determinations whether indemnification of a person is required
because the criteria set forth in subdivision 2 have been
satisfied and whether a person is entitled to payment or
reimbursement of expenses in advance of the final disposition of
a proceeding as provided in subdivision 3 must be made:
(1) by the board of governors by a majority of a quorum.
If the governors who are, at the time, parties to the proceeding
are not counted for determining either a majority or the
presence of a quorum;
(2) if a quorum under clause (1) cannot be obtained, by a
majority of a committee of the board of governors, consisting
solely of two or more governors not at the time parties to the
proceeding, duly designated to act in the matter by a majority
of the full board of governors including governors who are
parties;
(3) if a determination is not made under clause (1) or (2),
by special legal counsel, selected either by a majority of the
board of governors or a committee by vote pursuant to clause (1)
or (2) or, if the requisite quorum of the full board of
governors cannot be obtained and the committee cannot be
established, by a majority of the full board of governors
including governors who are parties;
(4) if a determination is not made under clauses (1) to
(3), by the affirmative vote of the members required by section
322B.346, but the membership interests held by parties to the
proceeding must not be counted in determining the presence of a
quorum and are not considered to be present and entitled to vote
on the determination; or
(5) if an adverse determination is made under clauses (1)
to (4) or under paragraph (b), or if no determination is made
under clauses (1) to (4) or under paragraph (b) within 60 days
after (i) the later to occur of the termination of a proceeding
or a written request for indemnification to the limited
liability company or (ii) a written request for an advance of
expenses, as the case may be, by a court in this state, which
may be the same court in which the proceeding involving the
person's liability took place, upon application of the person
and any notice the court requires. The person seeking
indemnification or payment or reimbursement of expenses pursuant
to this clause has the burden of establishing that the person is
entitled to indemnification or payment or reimbursement or
expenses.
(b) With respect to a person who is not, and was not at the
time of the acts or omissions complained of in the proceedings,
a governor, manager, or person possessing, directly or
indirectly, the power to direct or cause the direction of the
management or policies of the limited liability company, the
determination whether indemnification of this person is required
because the criteria set forth in subdivision 2 have been
satisfied and whether this person is entitled to payment or
reimbursement of expenses in advance of the final disposition of
a proceeding as provided in subdivision 3 may be made by an
annually appointed committee of the board of governors, having
at least one member who is a governor. The committee shall
report at least annually to the board of governors concerning
its actions.
Sec. 13. Minnesota Statutes 1999 Supplement, section
322B.72, subdivision 2, is amended to read:
Subd. 2. [APPROVAL BY OWNERS.] (a) At the meeting a vote
of the owners must be taken on the proposed plan. The plan of
merger or exchange is adopted when approved by the affirmative
vote of the owners of a majority of the voting power of all
ownership interests entitled to vote. Except as provided in
paragraph (b) or a member control agreement, a class or series
of ownership interests of the organization is entitled to vote
as a class or series if any provision of the plan would, if
contained in a proposed amendment to the articles of
organization entitle the class or series of ownership interests
to vote as a class or series and, in the case of an exchange, if
the class or series is included in the exchange.
(b) A class or series of ownership interests of the
organization is not entitled to vote as a class or series solely
because the plan of merger or exchange effects a cancellation or
exchange of the ownership interests of the class or series if
the plan of merger or exchange effects a cancellation or
exchange of all ownership interests of the organization of all
classes and series that are existing immediately before the
merger or exchange and owners of ownership interests of that
class or series are entitled to obtain payment for the fair
value of their shares ownership interests under section 322B.383
in the event of the merger or exchange.
Presented to the governor March 16, 2000
Signed by the governor March 20, 2000, 4:05 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes