At midnight on December 31, 2016, the Business Corporation Act (the “Old Act”) will be repealed and replaced with the Nebraska Model Business Corporation Act (the “New Act”). As a current Nebraska corporation or foreign corporation registered to conduct business in Nebraska you will automatically be governed by the New Act—no election is required. Nonetheless, there are a number of differences between the Old Act and the New Act that you must be aware of to ensure that the corporation is acting in accordance with the New Act. In this post, I will discuss some of the main differences between the Old Act and the New Act pertaining to the shareholders and the officers and directors of the corporation.
Both the Old Act and the New Act permit shareholders to take action, without a meeting of the shareholders, if all the shareholders entitled to vote consent in a writing that sets forth the action to be taken. The New Act, however, gives the shareholders an easier alternative to take action without a shareholders’ meeting, so long as it is provided for in the articles of incorporation. If provided for, shareholders are permitted to take action if there is a writing signed by a number of shareholders that is equal to or greater than the minimum number of shareholder votes needed to authorize the action at a shareholders’ meeting.
The New Act also permits shareholders to participate in any shareholders’ meeting by remote communication. All shareholders who participate through remote communication are deemed present and are permitted to vote at such meeting provided that the corporation has implemented reasonable measures to verify the identity of each participant. In addition to the differences discussed, there are additional differences regarding: (i) voting agreements, (ii) conduct at shareholder meetings, (iii) notice requirements, and (iv) special meetings.
Directors & Officers
For directors, the New Act eliminates the requirement that each member of the board of directors must act with the care of an ordinarily prudent person in a like position would exercise under similar circumstances. Although the New Act eliminates the “ordinarily prudent” standard, directors must still act in good faith and in a manner the director reasonably believes to be in the best interest of the corporation, which was a requirement under the Old Act. Therefore, it is unclear at this point what impact the removal of the “ordinarily prudent” standard will have on directors.
For officers, the New Act adds specific duties that the officer must perform. The new duties require an officer to inform a superior officer, board of directors, or committee:
- About the affairs of the corporation known to the officer, within the scope of the officer’s function, and known to the officer to be material to the superior officer, board of directors, or committee; and
- Of any actual or probable material violation of law involving the corporation or material breach of duty to the corporation by an officer, employee, or agent that the officer believes occurred or likely occurred.
For your convenience, please find a copy of the officers’ duties HERE.
As previously stated, there are a number of differences between the Old Act and the New Act in addition to those briefly discussed here. Given the number of differences, I invite you to contact us regarding any additional questions you may have regarding the New Act, how it will impact your corporation, and whether there is a need to update your corporate documents.