Senate Bill 359 takes effect January 1, 2020
What is Senate Bill 359?
SB 359 sets a process for correcting defective corporate actions for private and nonprofit corporations.
This process provides definitions as well as requires filing articles of validation with the Secretary of State for corrections of defective action. It also provides authority for the circuit court to determine validity of actions or corrections.
“Defective corporate action” means:
- An action that is within the corporation’s power to take and would have been within the corporation’s power to take at the time the corporation took the action, but was not authorized; and
- An overissue (the action of overissuing bonds, shares of stock, etc.).
What should be included in Articles of Validation?
- Description of corporate action.
- Number and class of shares and the date they were issued.
- Date of the defective corporation action.
- State that the corporation’s board of directors ratified the defective corporate action and if necessary, the shareholders approved the ratification.
- List the date(s) of ratification and approval.
- Name and date of the previously filed document that was related to the defective corporate action.
- Include a copy of the previously filed document.