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H.716

Introduced by   Representative Keenan of St. Albans City

Referred to Committee on

Date:

Subject:  Business corporations; shareholders’ rights

Statement of purpose:  This bill proposes to amend Vermont’s business corporate code to protect the rights of shareholders in publicly traded corporations and assess those corporations to pay a franchise fee.

AN ACT RELATING TO PROTECTING THE RIGHTS OF SHAREHOLDERS IN PUBLICLY TRADED CORPORATIONS AND PROVIDING FOR THE PUBLIC CORPORATION FRANCHISE FEE

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  Short title

This act shall be known and may be cited as the “Shareholder Rights Act of 2006.”

Sec. 2.  11A V.S.A. § 1.03 is added to read:

§ 1.03.  Liberal construction

The provisions of this title must be liberally construed to protect and enhance the rights of shareholders in domestic public corporations as defined in section 17.02 of this title.

Sec. 3.  11A V.S.A. § 1.20 is amended to read:

§ 1.20.  Filing requirements; reference to extrinsic facts

* * *

(j)(1)  Any of the terms of a plan or filed document may be made dependent on facts ascertainable outside the plan or filed document as follows:

(A)  The manner in which the facts operate on the terms of the plan or filed document must be clearly and expressly set forth in the plan or filed document.

(B)  The facts may include without limitation actions or events within the control of, or determinations made by, a party to the plan or filing the filed document or a representative of a party to the plan or filing the filed document.

(2)  As used in this subsection:

(A)  “Filed document” means a document filed with the secretary of state under any provision of this title except chapter 15 or section 16.22 of this title.

(B)  “Plan” means a plan of merger or share exchange.

Sec. 4.  11A V.S.A. § 1.40(25), (26), (27), and (28) are added to read:

(25)  “Affiliate” means a person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with another person or is a senior executive thereof.

(26)  “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(27)  “Sign” means, with present intent to authenticate or adopt a record:

(A)  to execute or adopt a tangible symbol; or

(B)  to attach to or logically associate with the record an electronic sound, symbol, or process.

(28)  “Writing” or “written” includes a record.

Sec. 5.  11A V.S.A. § 7.01(a) and (c) are amended to read:

(a)  A Unless directors are elected by consent in lieu of an annual meeting as provided in this subsection, a corporation shall hold a meeting of shareholders annually at a time on the date stated in or fixed in accordance with the bylaws for the election of directors and the conduct of such other business as may be properly brought before the meeting by the board of directors or shareholders.  The shareholders may act by consent to elect directors, but if the consent is less than unanimous, it will be in lieu of the annual meeting only if:

(1)  the shareholders are not entitled to vote cumulatively for the election of directors;

(2)  the election by consent takes effect within the 120‑day period before the anniversary of the most recent annual meeting; and

(3)  all of the directorships to which directors would be elected at the next annual meeting if it were held at the effective time of the election by consent are filled by that action.

(c)  The failure to hold an annual meeting at the time on the date stated in or fixed in accordance with a corporation’s bylaws does not affect the validity of any corporate action, and shall not result not in a forfeiture or dissolution of the corporation.

Sec. 6.  11A V.S.A. § 7.04(c) is amended to read:

(c)  If not otherwise fixed under section 7.03 or 7.07 of this title, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent under subsection (a) or (b) of this section.

Sec. 7.  11A V.S.A. § 7.08 is added to read:

§ 7.08.  Conduct AND BUSINESS of shareholders meeting

(a)  There must be a presiding officer at every meeting of the shareholders.  The presiding officer must be appointed in the manner provided in the bylaws or, in the absence of such a provision, by the board of directors before the meeting or by the shareholders at the meeting.  If the bylaws are silent on the appointment of the presiding officer and the board and the shareholders fail to designate a presiding officer, the president is the presiding officer.

(b)  Except as otherwise provided in the bylaws, the presiding officer determines the order of business and has the authority to establish rules for the conduct of the meeting.

(c)  Any action by the presiding officer must be fair to all of the shareholders and may not favor or disadvantage the proponent of any action to be taken at the meeting.

(d)  The presiding officer may announce at the meeting when the polls close for each matter voted upon.  If no announcement is made, the polls close upon the final adjournment of the meeting.  After the polls close, ballots, proxies, and votes may not be accepted, and changes and revocations of ballots, proxies, or votes may not be made.

(e)  A shareholder may propose any matter for consideration or a vote by the shareholders unless the proposal:

(1)  would improperly interfere with the authority or discretion of the board of directors;

(2)  would violate this title or other law;

(3)  relates to the redress of a personal claim or grievance against the corporation or any other person, or is designed to result in a benefit to the shareholder or to further a personal interest of the shareholder that is not shared generally by the shareholders; or

(4)  does not relate in a significant way to the business or affairs of the corporation.

Sec. 8.  11A V.S.A. § 8.03(a) is amended and (d) and (e) are added to read:

(a)  A board of directors of a corporation which is not a close corporation dispensing with a board of directors pursuant to section 20.13 of this title must consist of three or more individuals, with the number specified in or fixed in accordance with the articles of incorporation or bylaws.  The size of the board of directors may not be changed at a time when the board knows or has reason to know that there will be a contested election of directors at the next annual or special meeting of the shareholders.  If the number of shareholders in any corporation is less than three, the number of directors may be as few as the number of shareholders.

* * *

(d)  A shareholder who is entitled to vote in the election of directors by a voting group is entitled to nominate candidates for election by that group.

(e)  A meeting of the shareholders at which directors are to be elected may not be recessed or adjourned after a quorum is established until the election has been completed.

Sec. 9.  11A V.S.A. § 8.08(e) is added to read:

(e)  If a director is removed by action of the shareholders, a successor may be elected by the shareholders at the same meeting or by the same consent without a meeting.

Sec. 10.  11A V.S.A. § 8.60(3) is amended to read:

(3)  “Related person” of a director means includes:

(A)  the spouse (or a parent or sibling thereof) of the director, or a child, grandchild, sibling, parent (or spouse of any thereof) of the director, or an individual having the same home as the director, or a trust or estate of which an individual specified in this subdivision (A) is a substantial beneficiary; or

(B)  a trust, estate, incompetent, conservatee, or minor of which the director is a fiduciary.

Sec. 11.  11A V.S.A. § 8.61 is amended to read:

§ 8.61.  JUDICIAL ACTION VALIDATION OF TRANSACTIONS

(a)  A transaction effected or proposed to be effected by a corporation (or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest) that is not a director’s conflicting interest transaction may not be enjoined, set aside, or give rise to an award of damages or other sanctions, in a proceeding by a shareholder or by or in the right of the corporation, because a director of the corporation, or any person with whom or which he or she has a personal, economic, or other association, has an interest in the transaction.  [Repealed.]

(b)  A director’s conflicting interest transaction may not be enjoined, set aside, or give rise to an award of damages or other sanctions, in a proceeding by a shareholder or by or in the right of the corporation, because the director, or any person with whom or which he or she has a personal, economic, or other association, has an interest in the transaction, if:

(1)  directors’ action respecting the transaction was at any time taken in compliance with section 8.62 of this subchapter, and the qualified directors voting on the transaction could reasonably have concluded that the transaction was fair to the corporation at the time of commitment;

(2)  shareholders’ action respecting the transaction was at any time taken in compliance with section 8.63 of this subchapter; or

(3)  the transaction, judged according to the circumstances at the time of commitment, is established to have been fair to the corporation.

Sec. 12.  11A V.S.A. § 8.62(d) is amended to read:

(d)  For purposes of this section, “qualified director” means, with respect to a director’s conflicting interest transaction, any director who does not have either:  (1) a conflicting interest respecting the transaction, or (2) a familial, financial, professional, or employment, or other relationship with a second director who does have a conflicting interest respecting the transaction, which relationship would, in the circumstances, reasonably be expected to exert an influence on the first that would reasonably be expected to impair the director’s judgment when voting on the transaction.

Sec. 13.  11A V.S.A. § 12.02(h) and (i) are added to read:

(h)  The property of a direct or indirect subsidiary controlled by a parent corporation constitutes property of the parent corporation for the purposes of this section.

(i)  This section does not apply to and shareholder approval is not required for a sale, lease, exchange, or other disposition of property if the corporation or any direct or indirect subsidiary controlled by the corporation retains a business activity that represented at the end of its most recently completed fiscal year, on a consolidated basis, at least:

(1)  50 percent of total assets; and

(2)  50 percent of either:

(A)  income from continuing operations before taxes; or

(B)  revenues from continuing operations.

Sec. 14.  11A V.S.A. § 13.01(3) is amended to read:

(3)  “Fair value,” with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable determined:

(A)  immediately before the effectuation of the corporate action to which the dissenter objects;

(B)  using customary and current valuation concepts and techniques generally employed for similar businesses in the context of the type of corporate action involved; and

(C)  without discounting for lack of marketability or minority status.

Sec. 15.  11A V.S.A. § 13.02(a)(5) is amended and (c) is added to read:

(5)  Market exception Optional dissenter’s rights.  Any corporate action taken pursuant to a shareholder vote to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares.

* * *

(c)  Notwithstanding subsection (a) of this section, the availability of dissenters’ rights under subdivisions (a)(1), (2), (3), and (4) of this section shall be limited in accordance with the following provisions:

(1)  Dissenters’ rights shall not be available for the holders of shares of any class or series of shares that is:

(A)  traded on the New York Stock Exchange, American Stock Exchange, or NASDAQ; or

(B)  not so traded, but has at least 2,000 shareholders, and the outstanding shares of the class or series have a market value of at least $20 million (exclusive of the value of those shares held by its subsidiaries, senior executives, directors, and beneficial shareholders owning more than 10 percent of those shares).

(2)  The applicability of subdivision (1) of this subsection shall be determined as of:

(A)  the record date fixed to determine the shareholders entitled to receive notice of and to vote at the meeting of shareholders that will act upon the corporate action giving rise to dissenters’ rights; or

(B)  the day before the effective date of the corporate action if there is no meeting of shareholders.

(3)  Subdivision (1) of this subsection shall not be applicable to and dissenters’ rights shall be available pursuant to subsection (a) of this section for the holders of any class or series of shares:

(A)  if the holders of that class or series are not entitled to vote as a voting group on the corporate action; or

(B)  that are required to accept under the terms of the corporate action in exchange for their shares anything except shares in a corporation that satisfy the test in subdivision (1)(A) or (B) of this subsection or cash in lieu of fractional shares.

Sec. 16.  11A V.S.A. chapter 17 is added to read:

Chapter 17.  Public Corporations

Subchapter 1.  Preliminary Provisions

§ 17.01.  Application and effect of chapter

§ 17.02.  Definitions

Subchapter 2.  Shareholder Meetings and Voting

§ 17.20.  Annual meeting

§ 17.21.  Call of special meetings

§ 17.22.  Shareholder proposals

§ 17.23.  Action without a meeting

§ 17.24.  Supermajority provisions prohibited

§ 17.25.  Equal voting rights required

Subchapter 3.  Directors

§ 17.30.  Terms of directors

§ 17.31.  Nomination of directors

§ 17.32.  ACCESS TO CORPORATION’S PROXY STATEMENT

§ 17.33.  ELECTION OF directors

§ 17.34.  Removal of directors

§ 17.35.  Reimbursement of proxy expenses

Subchapter 4.  Poison Pills

§ 17.40.  Duration of POISON PILLS limited

§ 17.41.  Power of current directors protected

§ 17.42.  Minimum share ownership triggering level

§ 17.43.  Optional prohibition on adoption of POISON PILLS

Subchapter 5.  Amendment of Articles of Incorporation

§ 17.50.  Proposal of amendments of the articles of

               incorporation

Subchapter 1.  Preliminary Provisions

§ 17.01.  Application and effect of chapter

(a)  This chapter applies to every domestic public corporation, except a domestic corporation that was a domestic public corporation on July 1, 2006 and whose articles of incorporation do not provide that it is subject to this chapter.

(b)  The provisions of this chapter control over any inconsistent provision of this title.

(c)  The existence of a provision of this chapter does not of itself create any implication that a contrary or different rule of law is or would be applicable to a corporation that is not a domestic public corporation.  This chapter does not affect any statute or rule of law that is or would be applicable to a corporation that is not a domestic public corporation.

(d)  The articles of incorporation or bylaws of a domestic public corporation may not reduce the rights of shareholders provided in this chapter.  Whenever this chapter refers to a minimum or maximum amount or percentage of shares, that amount or percentage may not be increased or decreased by the articles of incorporation or bylaws.

§ 17.02.  Definitions

In this chapter:

(1)  “Domestic public corporation” or “corporation” means a domestic corporation that has a class of voting shares registered under section 12 of the Exchange Act.

(2)  “Exchange Act” means the Securities Exchange Act of 1934, as amended (15 U.S.C. § 78a et seq.).

(3)  “Poison pill” means a security created or issued by a domestic public corporation that precludes or limits a shareholder from exercising, converting, transferring, or receiving the security on the same terms as other shareholders or that is intended to have the effect of diluting the interest of the shareholder in the corporation or otherwise discouraging the shareholder from acquiring shares of the corporation.  For the purposes of this subdivision:

(A)  A security may constitute a poison pill whether or not it trades separately or together with other securities of the corporation and whether or not it is evidenced by a separate certificate or by a certificate for other securities of the corporation.

(B)  The term “poison pill” includes any form of security created or issued by a corporation, or any agreement or arrangement entered into by a corporation, regardless of the name by which it is known, that is designed or intended to operate as or that has the effect of what is commonly referred to as a “poison pill” or “shareholder rights plan.”

(C)  A security is not a poison pill if it would otherwise be a poison pill solely because it contains restrictions on ownership or acquisition of shares of the corporation that are necessary:

(i)  to maintain the tax status of the corporation; or

(ii)  for the corporation to comply with regulatory law.

(D)  “Security “ includes an investment contract, warrant, option right, conversion right, or any other form of right or obligation; or, in general, any interest or instrument commonly known as a “security.”

(4)  “Qualified shareholder” means a shareholder or group of shareholders acting together that satisfies the following requirements:

(A)  the shareholder or the group beneficially owns in the aggregate more than five percent of the outstanding shares of the domestic public corporation that are entitled to vote generally at the time for the election of directors; and

(B)  the shareholder or each member of the group has held the shares that are used for purposes of determining the ownership threshold in subdivision (A) of this subdivision (4) continuously for at least two years and holds the shares on the date of the annual or special meeting at which there is a vote on the director candidates or amendment of the articles of incorporation proposed by the qualified shareholder.

Subchapter 2.  Shareholder Meetings and Voting

§ 17.20.  Annual meeting

(a)  The bylaws of a domestic public corporation must state the latest date in each calendar year by which the annual meeting of shareholders must be held.  The date so fixed by the bylaws may not be later than 180 days after the end of the prior fiscal year of the corporation.

(b)  If the annual meeting of a domestic public corporation has not been held within 30 days after the latest date fixed by the bylaws for holding the annual meeting of shareholders, and the shareholders have not elected directors by consent in lieu of the annual meeting as provided in section 7.01(a) of this title by that date, any shareholder may call the meeting at any time thereafter by notice in a record to the secretary of the corporation.  If a shareholder calls a meeting as provided in this subsection, the secretary shall fix the date of the meeting, which must be not more than 60 days after the secretary receives the notice from the shareholder.

(c)  If the secretary of the corporation does not fix the date of an annual meeting called by a shareholder under subsection (b) of this section within ten days after receipt of the notice from the shareholder, the shareholder may apply for an order of court under section 7.03 of this title at any time thereafter.  The right of a shareholder under this subsection is in addition to any rights the shareholder may have under section 7.03.

(d)  An amendment of the bylaws of a domestic public corporation that changes the latest date by which the annual meeting of shareholders must be held may not take effect until after the annual meeting has been held for the year during which the amendment is adopted, unless the amendment has been approved by the shareholders.

§ 17.21.  Call of special meetings

(a)  A domestic public corporation shall hold a special meeting of shareholders upon the demand of its shareholders as provided in subdivision 7.02(a)(2) of this title except that the shareholders demanding the meeting must beneficially own at least 20 percent of the votes entitled to be cast on any issue proposed to be considered at the special meeting being called.

(b)  The articles of incorporation or bylaws of a domestic public corporation may not restrict:

(1)  the time at which shareholders may call a special meeting of shareholders; or

(2)  the business that may be conducted at a special meeting.

§ 17.22.  Shareholder proposals

(a)  If a domestic public corporation requires that a shareholder give the corporation advance notice of a matter to be proposed by the shareholder for consideration or a vote at an annual meeting, the date fixed for submission of the notice may not be earlier than:

(1)  in the case of a meeting held within five business days before or after the anniversary of the previous year’s annual meeting, 60 days before the anniversary date of the prior meeting; or

(2)  in the case of a meeting not held within five business days before or after the anniversary of the previous year’s annual meeting, the later of:

(A)  20 days after the corporation announces the date of the meeting in a public filing with the Securities and Exchange Commission under the Exchange Act; and

(B)  75 days before the date of the meeting.

(b)  The articles of incorporation or bylaws may not require that a notice of intention to propose a matter for consideration or a vote include more than:

(1)  the name of the shareholder;

(2)  the number of shares owned either beneficially or of record by the shareholder; and

(3)  the general nature of the business to be proposed.

(c)  The adoption or amendment of a bylaw requiring advance notice of business to be proposed by a shareholder may not take effect within 120 days before the next annual meeting of shareholders or during the period between a demand for a special meeting of shareholders and when the meeting is held, unless the bylaw as adopted or amended has been approved by the shareholders.

§ 17.23.  Action without a meeting

Action required or permitted by this title to be taken at a meeting of the shareholders of a domestic public corporation may be taken without a meeting if the action is taken by the holders of at least a majority of all of the shares entitled to vote on the action.  The action must be evidenced by one or more consents in a record describing the action taken, signed by the holders of at least a majority of all the shares entitled to vote on the action and delivered to the corporation for inclusion in the minutes or filed with the corporate records.  It is not necessary to give notice to those shareholders who do not consent to the action taken before the consents are delivered to the corporation.

§ 17.24.  Supermajority provisions prohibited

Neither the articles of incorporation nor the bylaws of a domestic public corporation may provide for a greater quorum or voting requirement for shareholders than a majority of the outstanding shares or, in the case of a voting group of shareholders, a majority of the outstanding shares of the voting group.

§ 17.25.  Equal voting rights required

An outstanding share of a domestic public corporation, regardless of its class or series, may not have voting rights greater than the per‑share voting rights of any outstanding class or series of common shares of the corporation.

Subchapter 3.  Directors

§ 17.30.  Terms of directors

The terms of directors of a domestic public corporation may not be staggered into groups whose terms end at different times.

§ 17.31.  Nomination of directors

(a)  If a domestic public corporation requires that a shareholder give the corporation advance notice that the shareholder intends to nominate candidates for election as directors at an annual meeting, the date fixed for submission of the notice may not be earlier than:

(1)  in the case of a meeting held within five business days before or after the anniversary of the previous year’s annual meeting, 60 days before the anniversary date of the prior meeting; or

(2)  in the case of a meeting not held within five business days before or after the anniversary of the previous year’s annual meeting, the later of:

(A)  20 days after the corporation announces the date of the meeting in a public filing with the Securities and Exchange Commission under the Exchange Act; and

(B)  75 days before the date of the meeting.

(b)  The corporation may not require that a notice of intention to nominate candidates include more than:

(1)  the name of the shareholder; and

(2)  the number of shares owned either beneficially or of record by the shareholder.

(c)  The adoption or amendment of a bylaw requiring advance notice of nominations may not take effect within 120 days before the next annual meeting of shareholders, unless the adoption or amendment of the bylaw has been approved by the shareholders.

§ 17.32.  ACCESS TO CORPORATION’S PROXY STATEMENT

(a)  If a qualified shareholder provides notice in a record of an intention to nominate one or more candidates for election to the board of directors, the domestic public corporation must include the name of each nominee and a statement not longer than 500 words supplied by the qualified shareholder in support of each nominee in the corporation’s proxy statement and must make provision for a shareholder to vote on each nominee on the form of proxy solicited on behalf of the corporation.

(b)  The notice from the qualified shareholder need not include more than:

(1)  the name of the shareholder or the names of the members of the group of shareholders;

(2)  a statement that the shareholder or group of shareholders satisfies the definition of a qualified shareholder in section 17.02 of this title;

(3)  a statement that, to the knowledge of the shareholder or group of shareholders, each nominee’s candidacy or, if elected, board membership would not violate controlling state or federal law or rules (other than rules regarding director independence) of a national securities exchange or national securities association applicable to the corporation;

(4)  the information regarding each nominee that is required to be included in the corporation’s proxy statement by the rules adopted by the Securities and Exchange Commission under the Exchange Act;

(5)  a statement from each nominee that the nominee consents to be named in the corporation’s proxy statement and form of proxy and, if elected, to serve on the board of directors of the corporation, for inclusion in the corporation’s proxy statement.

§ 17.33.  ELECTION OF directors

(a)  Except in the case of a domestic public corporation in which the shareholders have the right to cumulate their votes for directors:

(1)  Each share in a domestic public corporation entitled to vote in an election of directors shall be entitled to vote noncumulatively for or against a number of candidates not to exceed the number of directors to be elected in that election.

(2)  Directors are elected by a plurality of the votes cast, except that a nominee who receives more votes against the nominee’s election than are cast for the nominee’s election is not eligible to be elected.

(3)  A person who is not elected under subdivision (2) of this subsection may not be appointed by the board of directors to fill a vacancy on the board at any time thereafter.

(4)  If a director who is a nominee for reelection is not reelected under subdivision (2) of this subsection, the director may continue to serve under subsection 8.05(e) of this title for not longer than 60 days.

(5)  If no directors are elected under subdivision (2) of this subsection, the current directors continue to serve under subsection 8.05(e) of this title, and another meeting of the shareholders for the election of directors must be held within 59 days.

(b)  A domestic public corporation may not compensate an individual, directly or indirectly, because the individual is not elected or reelected as a director.

§ 17.34.  Removal of directors

The shareholders of a domestic public corporation may remove one or more directors with or without cause.

§ 17.35.  Reimbursement of proxy expenses

(a)  A shareholder of a domestic public corporation who solicits proxies for the election as directors of candidates not nominated by management or the board of directors must be reimbursed by the corporation for the actual costs of the solicitation in proportion to the number of candidates nominated by the shareholder who are elected.

(b)  As used in this section, “actual costs of the solicitation” means amounts reasonably paid to third parties relating to the solicitation, including without limitation lawyers, proxy solicitors, public relations firms, printers, and media outlets.

Subchapter 4.  Poison Pills

§ 17.40.  Duration of poison pills limited

(a)  If a domestic public corporation adopts, creates, or issues a poison pill without a vote of its shareholders authorizing that action while the corporation is a domestic public corporation, the poison pill must expire or be redeemed and will otherwise be of no further force or effect not later than the earlier of:

(1)  one year after the date of its adoption, creation, or issuance; or

(2)  90 days after the first public announcement that a number of shares have been tendered into an offer to purchase any and all shares of the corporation which represent at least a majority of the outstanding shares of each class or series of shares entitled to vote generally for the election of directors when added to those shares owned beneficially or of record by the person making the offer or by any affiliates of that person.

(b)  If authorized by a vote of its shareholders, a domestic public corporation may:

(1)  adopt, create, or issue a poison pill that will be in effect for a period not longer than the shorter of:

(A)  two years; and

(B)  the period set forth in subdivision (a)(2) of this section; or

(2)  extend the period during which a poison pill adopted, created, or issued pursuant to subsection (a) of this section will be in effect to not longer than the period set forth in subdivision (a)(1) of this section.

(c)  A domestic public corporation may not adopt, create, or issue a poison pill without the approval of its shareholders until after it has held an annual meeting of shareholders more than 60 days after its most recent prior poison pill has expired or been redeemed and otherwise ceased to be of any force or effect.

§ 17.41.  Power of current directors protected

A poison pill adopted, created, or issued by a domestic public corporation, with or without the approval of its shareholders, may not include a provision, including without limitation what is commonly referred to as a “dead hand,” “no hand,” or “slow hand” provision, that limits in any way the power of the board of directors to take any action at any time with respect to the poison pill.

§ 17.42.  Minimum share ownership triggering level

A poison pill adopted, created, or issued by a domestic public corporation, with or without the approval of its shareholders while the corporation is a domestic public corporation, may not provide that beneficial ownership or announcement of an intention to seek beneficial ownership by a person or group of persons of shares equal to less than 25 percent of the total number of outstanding shares of all classes and series of shares of the corporation will result, either immediately or after the passage of a period of time, in:

(1)  a distribution date for rights certificates or other securities (as defined in subdivision 17.02(3)(D) of this title);

(2)  the person or group or persons becoming what is commonly referred to as an “acquiring person” or “adverse person” or otherwise having the status of a person intended to be diluted by the poison pill;

(3)  what is commonly referred to as a “flip-in” or “flip-over” event or the poison pill otherwise being triggered or becoming operative; or

(4)  the poison pill otherwise having a dilutive, discriminatory, or other adverse effect on the person or group of persons.

§ 17.43.  Optional prohibition on adoption of poison pills

(a)  The articles of incorporation or bylaws of a domestic public corporation may restrict or prohibit the corporation from adopting, creating, or issuing a poison pill.

(b)  A provision of the bylaws adopted pursuant to subsection (a) of this section at a time when a domestic public corporation has a poison pill in effect must be adopted by the affirmative vote of a majority of the outstanding shares.  Otherwise, a provision of the bylaws adopted pursuant to subsection (a) of this section must be adopted by the affirmative vote of a majority of the votes cast.

Subchapter 5.  Amendment of Articles of Incorporation

§ 17.50.  Proposal of amendments of the articles of

               incorporation

(a)  An amendment of the articles of incorporation of a domestic public corporation may be proposed by a notice in a record by a qualified shareholder or by a shareholder or group of shareholders who beneficially own in the aggregate shares entitled to cast at least 20 percent of the votes that all shareholders are entitled to cast on the amendment.  The notice must be directed to the board of directors and filed with the secretary of the corporation.

(b)  An amendment of the articles of incorporation proposed pursuant to subsection (a) of this section must be submitted to a vote of the shareholders at either the next annual meeting of shareholders held not less than 75 days after the amendment is proposed or at a special meeting called for that purpose.

(c)  An amendment proposed pursuant to subsection (a) of this section and approved by the shareholders does not need to be approved by the board of directors to be adopted and become effective.

(d)  A notice proposing an amendment of the articles of incorporation need not include more than:

(1)  the name of the shareholder or the names of the members of the group of shareholders;

(2)  a statement either:

(A)  that the shareholder or group of shareholders satisfies the definition of a qualified shareholder in section 17.02 of this title; or

(B)  of the number of shares owned either beneficially or of record by the shareholder or group of shareholders; and

(3)  the text of the proposed amendment.

Sec. 17.  11A V.S.A. chapter 1, subchapter 5 is added to read:

Subchapter 5.  Public Corporation Franchise Fee

§ 1.50.  Name of FEE

The fee imposed by this subchapter shall be known as the Vermont public corporation franchise fee.

§ 1.51.  Annual fee

(a)  The secretary of state shall collect the Vermont public corporation franchise fee from every public corporation for each calendar year in an amount equal to $60.00 for each 10,000 shares of authorized capital stock of the corporation.  For the purposes of this subchapter, “public corporation” means any corporation that is a domestic public corporation as defined in section 17.02 of this title and is subject to the provisions of chapter 17 of this title.

(b)  In the case of a public corporation that has not been in existence during an entire 12-month calendar year, or that has not been subject to the provisions of chapter 17 of this title for an entire 12-month calendar year, the amount of Vermont public corporation franchise fee due, as provided in this section, shall be prorated on a monthly basis for the portion of the year during which the public corporation was in existence or was subject to chapter 17 of this title.  For this purpose, any portion of a month shall be regarded as a whole month.

(c)  In no case shall the Vermont public corporation franchise fee imposed by this section be more than $80,000.00 or less than $60.00.

(d)  In case a public corporation shall have changed during the calendar year the number of shares of its authorized capital stock, the total annual Vermont public corporation franchise fee payable as provided in this section shall be arrived at by adding together the franchise fees calculated as set forth in this section as prorated for the several periods of the year during which each distinct authorized amount of shares of capital stock was in effect.

(e)  For the purpose of computing the fee imposed by this section, the authorized capital stock of a public corporation shall be considered to be the total number of shares of all classes and series that the public corporation is authorized to issue, whether or not the number of shares that may be outstanding at any one time is a lesser number.

(f)  The Vermont public corporation franchise fee shall be in addition to any other fees imposed on the public corporation.

§ 1.52.  Filing of franchise FEE report and payment of

              FEE

Every public corporation required to pay the Vermont public corporation franchise fee for any calendar year shall file a public corporation franchise fee report on the anniversary of the date the entity became a public corporation.  The Vermont public corporation franchise fee determined to be due under section 1.51 of this title shall be paid on or before the date on which such franchise fee report is due.

Sec. 18.  Severability

The provisions of this act are severable.  If any provision of this act or its application to any person or circumstance is held invalid, the remainder of this act and the application of that provision to any other person or circumstance shall not be affected thereby.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us