SENATE DEMOCRATIC WRAP-UP FOR THE WEEK OF
January 30, 2006

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The Senate this week unanimously approved Senate Bill 595, which would make changes to Title 15 (Corporations and Unincorporated Associations) concerning the removal of directors, “controlling persons” and for the appointment of minors to advisory committees for certain non-profit corporations.

Currently, a “controlling person or group” in a business corporation is defined as a person or group of persons acting in concert that have voting power over voting shares of the registered corporation that entitles the holders to cast 20 percent of the votes that all shareholders would be entitled to cast in an election of the corporation’s directors.

The bill would prohibit shares acquired directly from the corporation in a transaction exempt from the registrations requirements of the Securities Act of 1933 from being used in the calculation of the 20 percent threshold required to constitute a controlling person or group.  Further, the legislation outlaws the removal of directors without cause unless the articles of incorporation contain a specific and unambiguous statement that directors may be removed from office without cause.

In addition, a non-profit corporation organized primarily for recreational purposes, youth development or delinquency prevention programs would be permitted to appoint minors who are at least 16-years-old to an advisory committee if the corporation’s articles of incorporation allow it. However, the number of minors appointed to the advisory committee could not be more than half of the total number of persons on the board of directors required for a quorum to conduct official business.

The bill now goes to the Governor. 

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