The New Jersey legislature is considering six bills that have the potential to impact your business by changing the rules governing corporations. While the proposed laws have the potential to bring new companies to New Jersey by creating a business-friendly statutory scheme, existing entities may need to revisit their certificates of incorporation and by-laws in light of recently updated and proposed legislation.
Like all corporate laws, some rules in the proposed legislation automatically apply, and other rules must be affirmatively adopted through amending the certificate of incorporation or the by-laws. The following is a brief summary of the six proposed bills:
- Proposal S-2234 would allow businesses to include a forum selection provision to require certain actions, including derivative lawsuits, to be litigated exclusively in New Jersey. Derivative lawsuits allow minority shareholders to bring an action against the corporation’s managers and directors for acts or omissions that allegedly caused harm to the company.
- Proposal S-2236 intends to change the default application of existing provisions regarding derivative proceedings. Currently, provisions exist to help corporations avoid the costs associated with unnecessary derivative suits; however, the provisions are only applicable if they are included in the certificate of incorporation. Rather than requiring corporations to opt-in to the business friendly provisions, Proposal S-2236 would make the existing provisions the default rule. Corporations would be allowed to modify the effect or application of the provisions in the certificate of application.
- Proposal S-2237 would allow a corporation to adopt a “force the vote” provision in a plan of merger or consolidation, whereby the shareholders can vote on a plan that the board of directors approved, even if the board later recommends that the shareholders vote against the plan. This provision protects the board when, for example, a superior bid is submitted after the board approved a different bid, but other reasons make the first bid attractive to shareholders. In addition, S-2237 allows a board of directors to make certain amendments to a plan of merger or consolidation at any time prior to the effectiveness of the plan.
- Proposal S-2235 would clarify that consent may be provided via electronic transmission. The recommended change corresponds to current practice.
- Proposal S-2238 would permit corporations to place reasonable conditions, like confidentiality, or limitations on a requesting shareholder’s access to corporate records.
- Proposal S-2239 provides a non-exclusive list of conditions or procedures that a corporation would be able to establish regarding the proxy solicitation materials included by shareholder-nominated individuals for an upcoming election of directors.
Please feel free to contact the Corporate Department at Parker McCay with any questions you have regarding the impact the potential changes could have on your business.