The Model Business Corporation Act, potentially following suit with the rest of ever-changing 2016, has acquired proposed notable changes through provisional amendments by its Official Committee. Some of these changes model company-friendly Delaware’s legal structure, which can only help to attract companies to incorporate within states that choose to adopt such changes. Although Wisconsin has modeled its own state corporation statutes based on the Act under Chapter 180 of the state legislature, the addition of these new amendments could help attract local companies to incorporate within the state.
First, the Committee has proposed adoption of the addition of subchapter E to chapter one of the Act, mirroring the Delaware General Corporations Law’s 2014 amendments. The subchapter permits the ratification of defective corporate actions, including actions in connection with the issuance of shares. It also provides for retroactive validity of subsequent actions taken in reliance on the validity of the defective action upon its ratification. If Wisconsin adopts this subchapter, actions taken by local corporations won’t be hindered and found void based on, for example, a greater issuance of shares than allowed by the articles of incorporation. This malleability gives companies assurance that certain vote-based corporate actions have a safety net from being deemed void instantly, ensuring a remedy for defective corporate actions.
Next the Committee has proposed changes to sections 2.02 and 8.70 of the Act, allowing corporations to include a provision within its articles limiting or eliminating the duty of a director or officer to become involved with a corporate opportunity without informing the corporation, which typically falls under a director’s or officer’s duty of loyalty. These provisions would give the corporation control over the liability imposed upon its directors and/or officers upon involvement in corporate opportunities, shielding them from said liability. It would also allow directors and officers to engage in such opportunities against the wishes of the company. These provisions have their strengths and weaknesses, but the advantage surrounds the control given to the corporation.
Finally, and possibly most importantly for companies incorporated within Wisconsin, the Committee has proposed the addition of section 2.08, permitting a forum selection provision within the articles of incorporation or bylaws. This provision would allow corporations to control the forum of any or all internal corporate claims to within the state. This certainty for any future internal litigation is monumental for corporations that would otherwise be subject to litigation in foreign states. Further, due to Wisconsin’s the failure to adopt the Business Judgment Rule, adoption of this provision would at the least give corporations consistency to large chunk of potential litigation.
Whether or not Wisconsin will add provisions to Chapter 180 mirroring the proposed aforementioned changes to the Act upon their adoption, we will have to wait and see. The additional control and consistency the provisions would bring to those potential Wisconsin corporations is a huge selling point to incorporate here, though, I think many corporate attorneys in the state are still awaiting the adoption of the Business Judgment Rule. Hopefully, the state will continue to evolve and successfully adopt all of the above.