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CHAPTER 156D BUSINESS CORPORATIONS



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CHAPTER 156D BUSINESS CORPORATIONS

Massachusetts General Laws

Chapter 156D

Business Corporations
Table of Contents

Elliott v. Great Nat=l Life Ins. Co. 12

Hoddeson v. Koos Bros. 15

Demian, Ltd. v. Charles A. Frank Assoc. 37

PART B. FILING DOCUMENTS 80

PART C. SUBSEQUENT ACQUISITION OF SHARES BY SHAREHOLDERS AND CORPORATION 105

PART D. DERIVATIVE PROCEEDINGS 120


Massachusetts General Laws

Chapter 156D

Business Corporations
ARTICLE 1
PART A. SHORT TITLE AND RESERVATION OF POWER
§ 1.01. Short Title.
This chapter shall be known and may be cited as the "Massachusetts Business Corporation Act".
§ 1.02. Reservation of Power to Amend or Repeal
The General Court of the commonwealth has power to amend or repeal all or part of this Act at any time and all domestic and foreign corporations subject to this Act are governed by the amendment or repeal.
PART B. FILING DOCUMENTS
§ 1.20. Filing Requirements
(a) To be entitled to filing with the secretary of state, a document shall satisfy the requirements of this section, any other section of this chapter that adds to or varies from these requirements, any applicable forms or regulations promulgated by the secretary of state hereunder, and any other relevant laws or regulations of the commonwealth.

(b) This chapter shall require or permit the filing of the document in the office of the secretary of state.

(c) The document shall contain the information required by this chapter. The document may contain other information as well that is relevant to the business or affairs of the corporation.

(d) The document shall be typewritten, printed or in such other form as the secretary of state shall prescribe.

(e) The document shall be in the English language. A corporate name need not be in English if written in English letters or Arabic or Roman numerals, and the certificate of existence required of foreign corporations need not be in English if accompanied by a reasonably authenticated English translation.

(f) The document shall be executed:

(1) by the chairman of the board of directors of a domestic or foreign corporation, by its president, or by another of its officers;

(2) if directors have not been selected or the corporation has not been formed, by the incorporator or incorporators; or

(3) if the corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that fiduciary.

(g) The person executing the document shall sign it and state beneath or opposite his signature his name and the capacity in which he signs. The document may but need not contain any of: (1) the corporate seal, (2) an attestation, and (3) an acknowledgment or verification.

(h) The document shall be delivered to the office of the secretary of state for filing and shall be accompanied by one exact or conformed copy, except that no copy is required for filings under sections 5.02, 15.03, 15.08, 15.09 and 16.22, the correct filing fee and any payment or penalty required by this chapter or other law. The secretary of state may waive the requirement that an exact or conformed copy accompany any document submitted for filing, including documents submitted electronically.

(i) Electronic documents or transmissions may be filed with the secretary of state if and to the extent permitted by the secretary. The secretary of state may promulgate regulations regarding the procedures for electronic filings which shall supersede any inconsistent provisions of this chapter with respect to such filings.


§ 1.21. Forms.
(a) The secretary of state may prescribe and furnish on request forms for any documents to be filed under this chapter. If the secretary of state so requires, use of these forms is mandatory.

(b) The secretary of state may accept for filing a document that contains the information required by this chapter but that does not conform to a prescribed form, whether or not use of the form is mandatory.


§ 1.22. Filing, Service and Copying Fees
The commissioner of administration shall issue regulations prescribing fees for the filing and copying of documents, the issuance of certificates and the handling of service of process under this chapter.

§ 1.23. Effective Time and Date of Document
(a) Except as provided in subsection (b) and in subsection (c) of section 1.24, a document that is filed by the secretary of state pursuant to section 1.25 is effective:

(1) at the time and on the date when it was approved for filing by the secretary of state; or

(2) in the case of articles of organization, amendment or merger, at the time and on the date when the articles were received for filing by the secretary of state if the articles are not rejected by the secretary within such time after their filing as is specified in regulations promulgated by the secretary.

(b) A filed document may specify a delayed effective time and date, and if it does so the document will become effective at the time and date specified. If a delayed effective date but no time is specified, the document is effective at the close of business on that date. A delayed effective date for a document may not be later than the ninetieth day after the date when it is received for filing by the secretary of state.


§ 1.24. Correcting Filed Document
(a) A domestic or foreign corporation may correct a document filed by the secretary of state if the document (1) contains a typographical error or an incorrect statement or (2) was defectively executed, attested, sealed, verified, or acknowledged.

(b) A document is corrected:

(1) by preparing articles of correction that (i) describe the document, including its filing date, or attach a copy of it to the articles; (ii) specify the typographical error, the incorrect statement and the reason it is incorrect or the manner in which the execution was defective; and (iii) correct the typographical error, incorrect statement or defective execution; and

(2) by delivering the articles of correction to the secretary of state for filing.

(c) Articles of correction are effective on the effective date of the document they correct except as to persons relying on the uncorrected document and adversely affected by the correction. As to those persons, articles of correction are effective when filed.

(d) Articles of correction cannot be used to change the effective date of a filed document; provided, however, that if a document has been filed with a delayed effective date, articles of correction may be filed prior to said date (1) to accelerate the effective date to a date not earlier than the date of the articles of correction, or (2) to abandon a merger or amendment to the articles of organization if authority to do so is granted by the merger agreement or the persons approving the amendment.

(e) If the secretary of state permits electronic filings, defects in the electronic recording or transmission of documents may be corrected under this section to the extent permitted by regulations promulgated by the secretary.
§ 1.25. Filing Duty of Secretary of State
(a) Upon receipt of a document for filing, except an annual report filed pursuant to section 16.22, the secretary of state shall record the date and time of receipt on or with the document and, if the person submitting the document or his representative so requests, furnish evidence of the date and time of receipt to the person or his representative in a form as the secretary of state shall determine.

(b) The secretary of state shall examine each document received by him for filing. If he finds that the relevant provisions of law have been satisfied, he shall evidence his approval on or with the document. Upon such approval and the payment of the fee authorized by section 1.22, the document shall be deemed to be filed with the secretary of state.

(c) If the secretary of state refuses to file a document, he shall notify the person or his representative in writing of the refusal and his reasons therefor within 90 days after receipt in the case of annual reports under section 16.22 or within 5 days after receipt in the case of other documents.

(d) The secretary of state shall keep a record of each document received, of the date and time of its receipt for filing, and of the date and, if requested, the time of his approval for filing, and shall keep the document and such records on file in his office in a manner convenient for public inspection.


§ 1.26. Appeal From Secretary of State's Refusal to File Document
If the secretary of state refuses to file a document delivered to his office for filing, the person attempting to file may appeal that refusal. Such an appeal must be commenced within 90 days after the return of the document to the superior court of the county where the corporation's principal office or, if none in the commonwealth, its registered office, is or will be located. Such an appeal is commenced by petitioning the court to compel the filing of the document and by attaching to the petition the document and the explanation of the secretary of state for his refusal to file.
§ 1.27. Evidentiary Effect of Copy of Filed Document
A certified copy of a document filed by the secretary of state is conclusive evidence that the original document is on file with the secretary of state.
§ 1.28. Certificates Regarding Corporations
(a) Anyone may apply to the secretary of state to furnish a certificate of legal existence for a domestic corporation. A certificate of legal existence shall set forth:

(1) the name of the corporation;

(2) the date the corporation was organized under the laws of the commonwealth; and

(3) that the corporation has legal existence so far as it appears in the records of the state secretary.

(b) Anyone may apply to the secretary of state to furnish a certificate of good standing. A certificate of good standing shall set forth:

(1) the name of the corporation;

(2) the date the corporation was organized under the laws of the commonwealth;

(3) that the corporation has filed all annual reports required by section 16.22 to be filed by it and paid all fees due with respect to such reports;

(4) that no proceedings are pending under section 14.21 for the dissolution of the corporation;

(5) that no articles of dissolution have been filed by the corporation; and

(6) that the corporation appears from the records of the state secretary to be in good standing.

(c) The secretary of state shall issue, upon request, such other certificates regarding facts of record in his office concerning corporations upon payment of the fees as may be specified in regulations promulgated by the commissioner of administration including, without limitation, certificates of merger, certificates of dissolution and certificates regarding the authority of a foreign corporation to do business in the commonwealth.

(d) The certificates may be relied upon as conclusive evidence of the facts stated therein.
§ 1.29. Penalty for Signing False Document
(a) A person commits an offense if he signs a document that he knows is false in any material respect with intent that the document be delivered to the secretary of state for filing.

(b) The secretary of state shall refer to the attorney general for action evidence of offenses under this section.

(c) An offense under this section is a civil misdemeanor punishable by a fine not to exceed $ 100,000.
PART C. SECRETARY OF STATE
§ 1.30. Powers
The secretary of state has the power reasonably necessary to perform the duties required of him by this chapter, including the power to promulgate regulations, prescribe forms and fees and adopt policies in order to implement this chapter.
PART D. DEFINITIONS

§ 1.40. Act Definitions

(a) As used in this chapter the following words shall have the following meanings, unless the context requires otherwise:

“Articles of organization”, the original and any amended and restated articles of organization and articles of merger, and special acts of incorporation, as amended from time to time by various articles and certificates provided for by this chapter.

“Authorized shares”, the shares of all classes a domestic or foreign corporation is authorized to issue.

“Conspicuous”, written so that a reasonable person against whom the writing is to operate should have noticed it.

“Corporation”, “domestic corporation” or “domestic business corporation”, a corporation for profit, which is not a foreign corporation, incorporated under or subject to this chapter.

“Deliver”, any method of delivery used in conventional commercial practice, including mailing, delivery by hand, messenger or delivery service and delivery by electronic transmission; however the secretary of state is not required to accept delivery of electronic documents or transmissions unless he adopts regulations authorizing this practice.

“Distribution”, a direct or indirect transfer of money or other property, except its own shares, or incurrence of indebtedness by a corporation to or for the benefit of its shareholders in respect of any of its shares. A distribution includes a declaration or payment of a dividend; a purchase, redemption, or other acquisition of shares; a distribution of indebtedness; and a distribution in voluntary or involuntary liquidation.

“Domestic other entity”, an other entity organized under the laws of the commonwealth.

“Effective date of notice”, as defined in section 1.41.

“Electronic document” or “electronic transmission”, any process of communication not directly involving the physical transfer of paper that is suitable for the retention, retrieval and reproduction of information by the recipient.

“Employee”, includes an officer but not a director. A director may accept duties that make him also an employee.

“Entity”, a corporation and a foreign corporation; a nonprofit corporation; a profit and a nonprofit unincorporated association; a limited liability company; a business trust; an estate; a partnership; a registered limited liability partnership; a trust, and two or more persons having a joint or common economic interest; and a state, the United States, and a foreign government.

“Filing entity”, an other entity that is of a type created by filing a public organic document.

“Foreign business corporation”, a corporation for profit incorporated under a law other than the law of the commonwealth.

“Foreign corporation”, a corporation for profit or a nonprofit corporation incorporated under a law other than the laws of the commonwealth.

“Foreign nonprofit corporation”, a corporation incorporated under a law other than the laws of the commonwealth, which if incorporated under the laws of the commonwealth would be a nonprofit corporation.

“Foreign other entity”, an other entity organized under a law other than the laws of the commonwealth.

“Governmental subdivision”, an authority, county, district or municipality.

“Individual”, includes the estate of an incompetent or deceased individual.

“Interest holder”, a person who holds of record:

(i) a right to receive distributions from an other entity either in the ordinary course of business or upon liquidation, other than as an assignee; or

(ii) a right to vote on issues involving its internal affairs, other than as an agent, assignee, proxy or person responsible for managing its business and affairs.

“Interests”, the interests in an other entity held by its interest holders.

“Membership”, the rights of a member in a nonprofit corporation.

“Nonfiling entity”, an other entity that is of a type that is not created by filing a filed organizational document.

“Nonprofit corporation” or “domestic nonprofit corporation”, a corporation incorporated under the laws of the commonwealth and subject to chapter 180.

“Notice”, as defined in section 1.41.

“Organic document”, a public organic document or a private organic document.

“Organic law”, the law governing the internal affairs of an entity.

“Other entity”, any association or entity other than a domestic or foreign business corporation, a domestic or foreign nonprofit corporation or a governmental or quasi-governmental organization. The term includes, without limitation, limited partnerships, general partnerships, limited liability partnerships, limited liability companies, joint ventures, joint stock companies, business trusts and profit and not-for-profit unincorporated associations.

“Owner liability”, personal liability for a debt, obligation or liability of an entity that is imposed on a person:

(i) solely by reason of the person's status as a shareholder or interest holder; or

(ii) by the articles of organization, bylaws or an organic document under a provision of the organic law of an entity authorizing the articles of organization, bylaws or an organic document to make one or more specified shareholders, members or interest holders liable in their capacity as shareholders, members or interest holders for all or specified debts, obligations or liabilities of the entity.

“Person”, includes individual and entity.

“Principal office”, the office, within or without the commonwealth, so designated in the annual report where the principal executive offices of a domestic or foreign corporation are located.

“Private organic document”, any document, other than the public organic document, if any, that determines the internal governance of an other entity.

“Proceeding”, includes civil suit and criminal, administrative, and investigatory action.

“Public corporation”, any corporation to which this chapter applies to, and which has a class of voting stock registered under the Securities Exchange Act of 1934, as amended; provided, that if a corporation is subject to paragraph (b) of section 8.06 at the time it ceases to have any class of voting stock so registered, such corporation shall nonetheless be deemed to be a public corporation for a period of twelve months following the date it ceased to have such stock registered.

“Public organic document”, the document, if any, that is filed of public record to create an other entity, including amendments and restatements thereof.

“Record date”, the date established under PART 6 or PART 7 hereof on which a corporation determines the identity of its shareholders for purposes of this chapter.

“Secretary”, the corporate officer to whom the board of directors has delegated responsibility under subsection (c) of section 8.40 for custody of the minutes of the meetings of the board of directors and of the shareholders and for authenticating records of the corporation, and includes a “clerk” appointed under chapter 156B unless the corporation has also appointed a “secretary” or the context otherwise requires.

“Secretary of state”, the state secretary.

“Shares”, the units into which the proprietary interests in a corporation are divided.

“Shareholder”, the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.

“Sign” or “signature”, includes any manual, facsimile, conformed or electronic signature.

“State”, when referring to a part of the United States, includes a state and commonwealth, and their agencies and governmental subdivisions, and a territory and insular possession, and their agencies and governmental subdivisions, of the United States.

“Subscriber”, a person who subscribes for shares in a corporation, whether before or after incorporation.

“United States”, includes a district, authority, bureau, commission, department, and any other agency of the United States.

“Voting group”, all shares of one or more classes or series that under the articles of organization or this chapter are entitled to vote and to be counted together collectively on a matter at a meeting of shareholders. All shares entitled by the articles of organization or this chapter to vote generally on the matter are for that purpose a single voting group.

(b) In this chapter, use of the masculine gender includes the feminine gender or, where the context permits, an entity.
§ 1.41. Notice
(a) Notice under this chapter shall be in writing unless oral notice is reasonable under the circumstances. Notice by electronic transmission is written notice.

(b) Notice may be communicated in person; by telephone, voice mail, telegraph, teletype, or other electronic means; by mail; by electronic transmission; or by messenger or delivery service. If these forms of personal notice are impracticable, notice may be communicated by a newspaper of general circulation in the area where published; or by radio, television, or other form of public broadcast communication.

(c) Written notice, other than notice by electronic transmission, by a domestic or foreign corporation to any of its shareholders, if in a comprehensible form, is effective upon deposit in the United States mail, if mailed postpaid and correctly addressed to the shareholder's address shown in the corporation's current record of shareholders.

(d) Written notice by electronic transmission by a domestic or foreign corporation to any of its shareholders, if in comprehensible form, is effective:

(1) if by facsimile telecommunication, when directed to a number furnished by the shareholder for the purpose;

(2) if by electronic mail, when directed to an electronic mail address furnished by the shareholder for the purpose;

(3) if by a posting on an electronic network together with separate notice to the shareholder of such specific posting, directed to an electronic mail address furnished by the shareholder for the purpose, upon the later of (i) such posting and (ii) the giving of such separate notice; and

(4) if by any other form of electronic transmission, when directed to the shareholder in such manner as the shareholder shall have specified to the corporation.

An affidavit of the secretary or an assistant secretary of the corporation, the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(e) Written notice, including notice by electronic transmission, to a domestic or foreign corporation, authorized to transact business in the commonwealth, may be addressed to its registered agent at its registered office or to the corporation at its principal office shown in its most recent annual report or, in the case of a foreign corporation that has not yet delivered an annual report, in its application for a certificate of qualification.

(f) Except as provided in subsection (c), written notice, other than notice by electronic transmission, if in a comprehensible form, is effective at the earliest of the following:

(1) when received;

(2) five days after its deposit in the United States mail, if mailed postpaid and correctly addressed;

(3) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested; or if sent by messenger or delivery service on the date shown on the return receipt signed by or on behalf of the addressee; or

(4) on the date of publication if notice by publication is permitted.

(g) Oral notice is effective when communicated if communicated in a comprehensible manner.

(h) If this chapter or any other General Law prescribes notice requirements for particular circumstances, those requirements shall govern. If articles of organization or bylaws prescribe notice requirements, which are not inconsistent with this chapter, those requirements shall govern.



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