Changes to Ohio House Bill 48 Affects Corporations, Non-Profit Corporations and Limited Liability Companies
Substitute Ohio House Bill 48 ("H.B. 48") adds and modifies a number of laws concerning Ohio corporations, Ohio non-profit corporations and Ohio limited liability companies. The new laws took effect on May 4, 2012 on a prospective basis. A summary of the substantive changes effectuated by H.B. 48 is provided below.
Ohio General Corporation Law
- Dissenting Shareholders:
- Provides that dissenting shareholders are not entitled to relief if (1) the shares of the subject corporation are listed on a national securities exchange, or (2) the consideration received in the applicable transaction are shares listed on a national securities exchange. The fair cash value of a share listed on a national securities exchange must be the closing sale price on the exchange as of the applicable date.
- Provides that control premiums and discounts for lack of marketability and lack of control must be disregarded in determining the fair cash value of a dissenting shareholder's shares.
- Provides that the notice to dissenting shareholders may now be provided before the vote on the proposal that is subject to dissenter's rights. If such notice is provided, a shareholder receiving the notice and electing to be a dissenting shareholder must deliver to the corporation before the vote a written demand for payment of the fair cash value of the shares as to which the shareholder seeks relief.
- Judicial Dissolution: Modifies the procedures for the judicial dissolution of an Ohio corporation. Among other changes, the new law changes the default voting standard in the event of a shareholder petition for judicial dissolution from a simple majority vote to a vote of two-thirds (2/3) of the voting power.
- Voluntary Dissolution:
- Modifies slightly the permissible contents of the corporate resolution required to effectuate the dissolution of an Ohio corporation. Such resolution may now include the date on which the certificate of dissolution is to be filed or the conditions or events that will result in the filing of the certificate, or authorization for the officers or directors to abandon the proposed dissolution before the filing of the certificate of dissolution.
- Requires that the certificate of dissolution contain the Internet address of each domain name held or maintained by or on behalf of the dissolving corporation, instead of the names and addresses of its directors, officers or incorporators, as the case may be.
- Modifies the evidence of tax payment information that must accompany the certificate of dissolution to provide that in lieu of a certificate from the Department of Taxation of full payment of certain taxes that an affidavit can be provided in cases where the corporation is not subject to a particular type of tax.
- Substantial language has been added regarding the notices that must be provided to known creditors and claimants, including for claims that are conditional, unmatured, or contingent upon the occurrence or nonoccurrence of future events. This section also sets forth specific language that must be included in each such notice. These revised notice requirements will eventually replace the public notice requirements on May 4, 2017, but until that date both notice and publication must be made. It also provides for the manner in which claims may be made by claimants, rejected by the corporation, and time-barred in certain instances.
- Where an Ohio corporation (i) is voluntarily dissolved, (ii) has its articles of incorporation canceled, or (iii) has had its period of existence expire, the new law provides that for purposes of winding up its affairs, the corporation must continue for a period of five years from dissolution, subject to extension by court.
- Expressly provides that the dissolution of an Ohio corporation does not impair or eliminate any remedy available to or against the corporation as a result of the dissolution, to the extent that an action seeking such a remedy is brought within the required period of time (the lesser of five years or the applicable statute of limitations in most cases).
- Authorizes certain individuals to enforce on behalf of an Ohio corporation any property right that is discovered after the winding up of the corporation.
- Specifies specific actions which must be taken by an Ohio corporation in connection with the winding up of its business.
- Specifies the circumstances in which, and the extent to which, a shareholder who has received a liquidating distribution may be liable to the creditors of the company.
Ohio General Corporation Law and Non-Profit Corporation Law
- Modifies existing law by providing that a right to indemnification or to advancement of expenses arising under a provision of the articles or the regulations cannot be eliminated or impaired after the occurrence of the act or omission for which indemnification or advancement of expenses is sought unless the provision in effect at the time of the act or omission explicitly authorizes retroactive elimination or impairment.
- Reduces the number of required directors to one director. Prior law required at least three directors, except in cases where a company had one or two shareholders (or members, in the case of non-profit corporations) in which case the number of required directors was equal to the number of shareholders/members. Also clarifies that directors must be natural persons who are at least 18 years old, and that directors serving on a committee of directors are serving in their director capacities.
- Note that H.B. 267, effective on May 22, 2012, expands the organizations in which non-profit corporations may merge or consolidate and updates Ohio's Unincorporated Association Law.
Recording of Corporate Mortgages
- Extends the application of existing laws on the recording of mortgages at the county recorders' offices for corporate property to include electric cooperatives. The property subject to such mortgages includes rolling stock, movable equipment, or machines.
Ohio Limited Liability Company Law
- States that a limited liability company is bound by the terms of the company's operating agreement, regardless of whether the company itself is a party to such agreement.
- Lists certain things that an operating agreement cannot accomplish, such as (i) varying the rights or duties set forth under a company's articles of organization; (ii) unreasonably restricting a member's access to the books and records of the company; (iii) eliminating the duty of loyalty or unreasonably reducing the duty of care; (iv) eliminating the obligation of good faith and fair dealing; and (v) eliminating certain duties of the manager.
- Specifies that without more, the assignment of a membership interest in a limited liability company entitles the assignee only to the right to receive, to the extent assigned, distributions from the company, and the allocation of profits and losses.
- Provides that a charging order remedy is the exclusive remedy for a judgment creditor seeking to satisfy a judgment against the membership interest of a member or a member's assignee. Also provides that a limited liability company or one or more of its members who are not subject to the charging order may pay the judgment creditor the full amount due under the judgment and by that payment succeed to the rights of that judgment creditor.
- Provides that a substitute assignee of a membership interest is bound by the terms of the company's operating agreement, whether or not the substitute member signs the agreement.
- States that the only duties owed by a member to an Ohio limited liability company are the duty of loyalty and the duty of care. The new law describes those duties in detail.
- States that upon the withdrawal of a member, the duty of loyalty and the duty of care owed by that member to the company shall cease, except with respect to matters arising and events occurring prior to the member's withdrawal.
- Provides that a manager of a limited liability company who was appointed in writing and has agreed in writing to serve as a manager and who is also a member or is serving as a representative of a member, owes to the company and the members, the duties of a manager. In all other instances, the new law provides that the only duty owed by a manager to the company is the duty to act in good faith in the manner in which the manager believes to be in or not opposed to the best interests of the company, and with the care that an ordinarily prudent person would use under similar circumstances.