TITLE 47
CORPORATIONS
Chapter
01 General Provisions
01A South Dakota Business Corporation Act
02 Business Corporations--Formation And General Powers [Repealed]
03 Business Corporations--Capitalization And Distributions [Repealed]
04 Business Corporations--Shareholders' Rights [Repealed]
05 Business Corporations--Directors, Officers And Agents
06 Business Corporations--Reorganization [Repealed]
07 Business Corporations--Dissolution [Repealed]
08 Foreign Business Corporations [Repealed]
09 Business Corporations--Supervision By Secretary Of State [Repealed]
09A Corporate Farming Restrictions
10 Business Development Credit Corporations
11 Medical Corporations
11A Chiropractic Corporations
11B Optometric Corporations
11C Podiatric Corporations
11D Physician's Assistants Corporations
11E Nursing Corporations
11F Health Care Corporations, Limited Liability Companies And Limited Liability Partnerships
11G Physical Therapy, Occupational Therapy, And Speech-Language Pathology Corporations
12 Dental Corporations
13 Veterinary Corporations
13A Professional Corporations For The Practice Of Law
13B Professional Corporations For The Practice Of Public Accounting
14 Business Trusts [Repealed]
14A South Dakota Business Trust Act
14B South Dakota Foreign Business Trust Act
15 Cooperatives--Formation And General Powers
16 Cooperatives--Membership, Stock And Distributions
17 Cooperatives--Directors, Officers And Employees
18 Cooperatives--Reorganization And Dissolution
19 Foreign Cooperatives
20 Cooperatives--Records, Accounts And Reports
21 Rural Electric Cooperatives
22 Nonprofit Corporations--Formation And General Powers
23 Nonprofit Corporations--Members, Directors, Officers And Agents
24 Nonprofit Corporations--Records, Fiscal Affairs And Reports
25 Nonprofit Corporations--Reorganization
25A Nonprofit Corporations--Domestication And Conversion
26 Nonprofit Corporations--Dissolution And Liquidation
27 Foreign Nonprofit Corporations
28 Nonprofit Corporations--Supervision By Secretary Of State
29 Cemetery Corporations
30 Corporate Frauds And Mismanagement
31 Securities Registration And Sales [Repealed]
31A Uniform Securities Act [Repealed]
31B Uniform Securities Act Of 2002
32 Corporate Take-Over Offers [Repealed]
33 South Dakota Domestic Public Corporation Takeover Act
34 Limited Liability Companies [Repealed]
34A Uniform Limited Liability Company Act
47-1-1, 47-1-2.
Repealed.
47-1-3
Repealed.
47-1-4
Terms to include blockchain technology.
47-1-4. Terms to include blockchain technology.
As used in title 47, the terms, electronic, electronic transmission, or electronically transmitted, include blockchain technology, as defined in § 53-12-1.
Source: SL 2019, ch 207, § 2.
CHAPTER 47-1A
SOUTH DAKOTA BUSINESS CORPORATION ACT
47-1A-101 Short title.
47-1A-120 Requirements for documents.
47-1A-120.1 Terms of plan or filed document dependent on extrinsic facts--Applicable provisions.
47-1A-120.2 Provision of filed document dependent on extrinsic fact but fact not ascertainable by reference or shareholders not noticed of fact--Article of amendment.
47-1A-120.3 Dependency on extrinsic facts prohibited for specified provisions of plan or filed document.
47-1A-121 Forms.
47-1A-122 Fees for filing and service.
47-1A-122.1 Copying and certification fees.
47-1A-123 Effective time and date of document--Exceptions.
47-1A-123.1 Delayed effective time and date of document.
47-1A-124 Correction filed document--Circumstances when allowed.
47-1A-124.1 Correction of filed document--Procedure.
47-1A-124.2 Articles of correction--Effective date.
47-1A-125 Filing duty of Office of Secretary of State.
47-1A-126 Appeal from Office of Secretary of State's refusal to file document.
47-1A-127 Evidentiary effect of copy of filed document.
47-1A-128 Certificate of existence.
47-1A-129 Penalty for signing false document.
47-1A-140 Chapter definitions.
47-1A-141 Type of notice--Written or oral.
47-1A-141.1 Method of notice.
47-1A-141.2 Effective date of written notice by domestic or foreign corporation to shareholder.
47-1A-141.3 Address of written notice.
47-1A-141.4 Effective date of written notice--Exception.
47-1A-141.5 Notice requirements governing particular circumstances.
47-1A-142 Number of shareholders.
47-1A-201 Incorporators.
47-1A-202 Articles of incorporation--Required provisions.
47-1A-202.1 Articles of incorporation--Optional provisions.
47-1A-202.2 Articles of incorporation--Corporate powers.
47-1A-202.3 Articles of incorporation--Extrinsic facts.
47-1A-203 Incorporation.
47-1A-204 Liability for pre-incorporation transactions.
47-1A-205 Organization of corporation.
47-1A-206 Bylaws.
47-1A-207 Emergency bylaws.
47-1A-301 Purposes.
47-1A-302 General powers.
47-1A-303 Emergency powers.
47-1A-304 Ultra vires.
47-1A-401 Corporate name--Use of particular words--Purpose.
47-1A-401.1 Corporate name--Distinguishable from specified names--Exceptions.
47-1A-401.2 Corporate name--Application to use name not distinguishable from specified names--Authorization.
47-1A-401.3 Corporate name--Use of name upon merger, reorganization, or acquisition of assets.
47-1A-402 Reserved name.
47-1A-403 Foreign corporation--Registration of corporate name.
47-1A-403.1 Foreign corporation--Renewal of registration of corporate name.
47-1A-403.2 Foreign corporation--Qualification under registered name--Use of name by another--Termination.
47-1A-501 47-1A-501 to 47-1A-504. Repealed by SL 2008, ch 275, § 32.
47-1A-601 Authorized shares in articles of incorporation--Class or series--Terms.
47-1A-601.1 Classes or series of shares articles of incorporation required to authorize.
47-1A-601.2 Classes or series of shares articles of incorporation may authorize.
47-1A-602 Classification or reclassification of unissued shares determined by board of directors.
47-1A-602.1 Terms of class or series determined by board of directors.
47-1A-603 Issuance of shares--Outstanding until reacquired, redeemed, converted, or cancelled.
47-1A-603.1 Outstanding shares--Shares with unlimited voting rights and entitled to receipt of net assets upon dissolution required.
47-1A-604 Fractional shares--Scrip.
47-1A-604.1 Scrip--Label on certificate--Information.
47-1A-604.2 Rights of holder of fractional share--Scrip.
47-1A-604.3 Issuance of script--Authorization by board of directors--Conditions.
47-1A-620 Subscription for shares before incorporation.
47-1A-621 Issuance of shares by board of directors--Powers reserved to shareholders.
47-1A-621.1 Issuance of shares requiring approval of shareholders.
47-1A-622 Liability of shareholders.
47-1A-623 Share dividends.
47-1A-624 Share options.
47-1A-625 Form and content of certificates generally.
47-1A-625.1 Certificate requirements when corporation authorized to issue different classes of shares or different series within a class.
47-1A-625.2 Signatures on certificate--Seal.
47-1A-626 Shares without certificates.
47-1A-627 Restriction on transfer of shares or registration of transfer of shares in articles, bylaws, or agreements--Effect on shares.
47-1A-627.1 Purposes for which restriction on transfer of shares and registration of transfer of shares authorized--Validity and enforceability of restriction.
47-1A-627.2 Terms of restriction on transfer or registration of transfer of shares.
47-1A-628 Expense of issue.
47-1A-630 Shareholders' preemptive rights.
47-1A-631 Corporation's acquisition of its own shares.
47-1A-640 Distributions to shareholders authorized--Distribution entitlement date.
47-1A-640.1 Distribution to shareholders prohibited if certain financial conditions result.
47-1A-640.2 Factors used to measure effect of distribution.
47-1A-640.3 Indebtedness to shareholder by reason of distribution at parity with indebtedness to general unsecured creditor.
47-1A-640.4 Indebtedness of corporation for purposes of determinations under § 47-1A-640.1.
47-1A-640.5 Application of provisions in §§ 47-1A-640 to 47-1A-640.4.
47-1A-701 Annual meeting.
47-1A-702 Special meeting.
47-1A-703 Court-ordered meeting.
47-1A-704 Action without meeting.
47-1A-704.1 Notice to nonvoting shareholders of action to be taken by unanimous consent of voting shareholders.
47-1A-705 Notice of meeting.
47-1A-706 Waiver of notice.
47-1A-707 Record date.
47-1A-708 Conduct of the meeting.
47-1A-709 Shareholders' meeting--Remote communication--Requirements.
47-1A-720 Shareholders' list for meeting.
47-1A-721 Voting entitlement of shares.
47-1A-721.1 Limitation on voting entitlement of shares when owned by a second corporation--Shares held in fiduciary capacity.
47-1A-721.2 Voting entitlement of redeemable shares.
47-1A-722 Voting shares in person or by proxy--Appointment of proxy.
47-1A-722.1 Effective date and duration of appointment of proxy.
47-1A-722.2 Appointment of proxy revocable--Exception.
47-1A-722.3 Death or incapacity of shareholder appointing proxy.
47-1A-722.4 Transferee for value of shares subject to irrevocable appointment of proxy--Revocation.
47-1A-722.5 Acceptance of proxy's vote or other action--Limitations.
47-1A-723 Shares held by nominees.
47-1A-724 Corporation's acceptance of votes.
47-1A-724.1 Corporation's rejection of votes--Liability for acceptance or rejection--Validity of corporate action.
47-1A-725 Quorum and voting requirements for voting groups.
47-1A-726 Action by single and multiple voting groups.
47-1A-727 Greater quorum or voting requirements.
47-1A-728 Cumulative voting for directors.
47-1A-729 Inspectors of election.
47-1A-730 Voting trusts--Creation--Effective date and duration.
47-1A-730.1 Extension of voting trust for additional terms--Agreement.
47-1A-731 Voting agreements.
47-1A-732 Shareholder agreements--Effectiveness.
47-1A-732.1 Form, approval, amendment, and term of shareholder agreements.
47-1A-732.2 Existence of agreement to be noted on certificate--Right of rescission on purchase of shares without notice of agreement.
47-1A-732.3 Limitations on effectiveness of agreement--Amendment to articles of incorporation or bylaws.
47-1A-732.4 Liability of directors limited to extent discretion or powers limited by agreement.
47-1A-732.5 Agreement not grounds for imposition of personal liability on shareholder for acts or debts of corporation.
47-1A-732.6 Incorporators or subscribers for shares to act as shareholders with respect to agreement.
47-1A-740 Subpart definitions.
47-1A-741 Standing.
47-1A-742 Demand.
47-1A-743 Stay of proceedings.
47-1A-744 Dismissal upon determination that maintenance of proceeding not in best interests of corporation.
47-1A-744.1 Groups authorized to make determination that maintenance of proceeding not in best interest of corporation.
47-1A-744.2 Factors not pertinent to determining independence of directors.
47-1A-744.3 Proceeding commenced after rejection of shareholder demand--Complaint requirements.
47-1A-744.4 Burden of proof dependent on whether or not board consists of independent directors.
47-1A-744.5 Appointment of panel to make determination--Burden of proof.
47-1A-745 Discontinuance or settlement.
47-1A-746 Payment of expenses.
47-1A-747 Applicability to foreign corporations.
47-1A-801 Requirement for and duties of board of directors.
47-1A-802 Qualifications of directors.
47-1A-803 Number and election of directors.
47-1A-804 Election of directors by certain classes of shareholders.
47-1A-805 Terms of directors generally.
47-1A-806 Staggered terms for directors.
47-1A-807 Resignation of directors.
47-1A-808 Removal of directors by shareholders.
47-1A-809 Removal of directors by judicial proceeding.
47-1A-810 Vacancy on board.
47-1A-811 Compensation of directors.
47-1A-820 Meetings.
47-1A-821 Action without meeting.
47-1A-822 Notice of meeting.
47-1A-823 Waiver of notice.
47-1A-824 Quorum and voting.
47-1A-824.1 Director presence assent to action taken--Exceptions.
47-1A-825 Committees--Creation--Appointment of members.
47-1A-825.1 Powers of committees.
47-1A-825.2 Acts relating to committees not compliance by director with standards of conduct.
47-1A-825.3 Absent or disqualified committee member--Appointment of alternate member.
47-1A-830 Standards of conduct for directors.
47-1A-830.1 Director reliance on performance or information supplied by specified persons.
47-1A-831 Standards of liability for directors.
47-1A-831.1 Specific burdens when seeking specified money damages or payment.
47-1A-831.2 Limitations on the effect of §§ 47-1A-831 and 47-1A-831.1.
47-1A-832 47-1A-832. Reserved.
47-1A-833 Directors' liability for unlawful distributions.
47-1A-833.1 Contribution or recoupment--Limitation of action.
47-1A-840 Officers.
47-1A-841 Duties of officers.
47-1A-842 Standards of conduct for officers.
47-1A-842.1 Reliance on performance of or information supplied by specified persons authorized in discharge of duties.
47-1A-842.2 Liability of officer.
47-1A-843 Resignation and removal of officers.
47-1A-844 Contract rights of officers.
47-1A-850 Subpart definitions.
47-1A-851 Permissible indemnification.
47-1A-851.1 Prohibited indemnification--Exception.
47-1A-852 Mandatory indemnification.
47-1A-853 Advance for expenses.
47-1A-853.1 Authorizations under § 47-1A-853--Board of directors or shareholders.
47-1A-854 Court-ordered indemnification and advance for expenses.
47-1A-855 Determination and authorization of indemnification.
47-1A-856 Indemnification of officers.
47-1A-857 Insurance.
47-1A-858 Variation by corporate action--Application of subpart.
47-1A-859 Exclusivity of subpart.
47-1A-860 Subpart definitions.
47-1A-861 Judicial action--Transaction other than director's conflicting interest transaction.
47-1A-861.1 Judicial action--Director's conflicting interest transaction.
47-1A-862 Directors' action respecting transaction--Effectiveness.
47-1A-862.1 Sufficiency of director disclosure.
47-1A-862.2 Quorum of qualified directors.
47-1A-862.3 Qualified director defined.
47-1A-863 Shareholders' action respecting transaction--Effectiveness.
47-1A-863.1 Quorum of qualified shareholders.
47-1A-863.2 Notice by director of all shares beneficially owned or voting of which is controlled by director or relative.
47-1A-863.3 Court authority upon failure of shareholder vote to comply with § 47-1A-863.
47-1A-901 Excluded transactions.
47-1A-902 Required approvals.
47-1A-920 Domestication--Foreign business corporation to be domestic business corporation.
47-1A-920.1 Domestication--Domestic business corporation to be foreign business corporation.
47-1A-920.2 Plan of domestication--Content.
47-1A-920.3 Plan of domestication--Amendments.
47-1A-920.4 Terms of plan of domestication dependent on extrinsic facts.
47-1A-920.5 Evidence of indebtedness or contract with merger provision containing not reference to domestication--Provision application to domestication.
47-1A-921 Action on a plan of domestication.
47-1A-921.1 Articles of domestication--Content.
47-1A-921.2 Articles of domestication--Filing and effectiveness.
47-1A-921.3 Certificate of authority to transact business by foreign corporation cancelled upon domestication.
47-1A-922 Articles of domestication--Execution--Content.
47-1A-922.1 Articles of charter surrender--Filing and effectiveness.
47-1A-923 Surrender of charter upon domestication.
47-1A-924 Effect of domestication.
47-1A-924.1 Effect of domestication of domestic business corporation in foreign jurisdiction.
47-1A-924.2 Owner liability of shareholder in domesticated foreign corporation.
47-1A-924.3 Owner liability only for debts arising after effective time of articles of domestication.
47-1A-925 Abandonment of a domestication of domestic business corporation.
47-1A-925.1 Abandonment of domestication of foreign business corporation.
47-1A-950 Domestic business corporation to become domestic unincorporated entity.
47-1A-950.1 Domestic business corporation to become foreign unincorporated entity.
47-1A-950.2 Domestic unincorporated entity to become domestic business corporation.
47-1A-950.3 Foreign unincorporated entity to become domestic business corporation.
47-1A-950.4 Evidence of indebtedness or contract applying to merger containing no reference to entity conversion--Provision application to entity conversion.
47-1A-950.5 Definition of terms applying to §§ 47-1A-950 to 47-1A-956.
47-1A-951 Plan of entity conversion--Content.
47-1A-951.1 Plan of entity conversion--Amendments.
47-1A-951.2 Terms of plan of entity conversion dependent on extrinsic facts.
47-1A-952 Action on a plan of entity conversion.
47-1A-953 Domestic business corporation converted to domestic unincorporated entity--Articles of entity conversion--Content.
47-1A-953.1 Domestic unincorporated entity converted to domestic business corporation--Articles of entity conversion--Content.
47-1A-953.2 Foreign unincorporated entity converted to domestic business corporation--Articles of entity conversion--Content.
47-1A-953.3 Articles of entity conversion--Filing and effectiveness--Cancellation of certificate of authority.
47-1A-954 Surrender of charter upon conversion.
47-1A-955 Effect of entity conversion.
47-1A-955.1 Effect of conversion of domestic business to a foreign other entity.
47-1A-955.2 Owner liability only for debts arising after effective time of articles of entity conversion.
47-1A-955.3 Owner liability of an interest holder in an unincorporated entity converted to domestic business corporation.
47-1A-956 Abandonment of an entity conversion.
47-1A-957 Cooperative converted to business corporation.
47-1A-1001 Authority to amend.
47-1A-1002 Amendment before issuance of shares.
47-1A-1003 Amendment by board of directors and shareholders.
47-1A-1004 Voting on amendments by voting groups.
47-1A-1005 Amendment by board of directors.
47-1A-1006 Articles of amendment.
47-1A-1007 Restated articles of incorporation--Adoption.
47-1A-1007.1 Restated articles of incorporation--Delivery to Office of Secretary of State.
47-1A-1007.2 Restated articles of incorporation--Certification as articles currently in effect.
47-1A-1008 Amendment pursuant to reorganization.
47-1A-1009 Effect of amendment.
47-1A-1020 Amendment by board of directors or shareholders.
47-1A-1021 Bylaw increasing quorum or voting requirement for directors.
47-1A-1101 Definitions.
47-1A-1102 Merger allowed generally.
47-1A-1102.1 Foreign business corporation or foreign eligible entities allowed to parties to merger.
47-1A-1102.2 Procedures for approval of merger if not in organic law of entity.
47-1A-1102.3 Plan of merger--Required content.
47-1A-1102.4 Plan of merger--Amendment.
47-1A-1102.5 Property held in trust or for charitable purposes--Disposition by court order.
47-1A-1103 Share exchange generally.
47-1A-1103.1 Foreign corporation or eligible party allowed to be party to share exchange.
47-1A-1103.2 Procedures for approval of share exchange if not in organic law of entity.
47-1A-1103.3 Plan of share exchange--Required content.
47-1A-1103.4 Plan of share exchange--Amendments.
47-1A-1103.5 Acquisition of shares in transactions other than share exchange.
47-1A-1104 Action on a plan of merger or share exchange.
47-1A-1105 Merger between parent and subsidiary or between subsidiaries.
47-1A-1105.1 Parent corporation notice to subsidiary shareholders of merger effectiveness.
47-1A-1105.2 Provisions applicable to merger between parent and subsidiary.
47-1A-1106 Articles of merger or share exchange.
47-1A-1107 Effect of merger or share exchange.
47-1A-1107.1 Rights of shares of domestic corporation exchanged.
47-1A-1107.2 Owner liability only as in organic law and for debts arising after effective time of articles of merger or share exchange.
47-1A-1107.3 Effect of merger on surviving foreign corporation or foreign eligible entity.
47-1A-1107.4 Effect of merger or share exchange on owner liability of person who had owner liability for obligations of party to merger or share exchange.
47-1A-1108 Abandonment of a merger or share exchange.
47-1A-1201 Disposition of assets not requiring shareholder approval.
47-1A-1202 Shareholder approval of certain dispositions.
47-1A-1202.1 Resolution authorizing disposition--Recommendation and submission of resolution to shareholders--Conditions.
47-1A-1202.2 Meeting of shareholders to consider disposition--Notice.
47-1A-1202.3 Votes required for approval of disposition.
47-1A-1202.4 Abandonment of disposition.
47-1A-1202.5 Provisions not governing disposition of assets in course of dissolution.
47-1A-1202.6 Assets of direct or indirect consolidated subsidiary considered assets of parent corporation.
47-1A-1301 Definitions.
47-1A-1302 Right to appraisal.
47-1A-1302.1 Limitations on availability of appraisal rights.
47-1A-1302.2 Limits on or elimination of appraisal rights for preferred shares by articles of incorporation--Application.
47-1A-1302.3 Challenge of specified completed corporate actions--Limitation.
47-1A-1303 Assertion of appraisal rights by record shareholders for part of shares in name.
47-1A-1303.1 Assertion of appraisal rights of beneficial shareholder.
47-1A-1320 Notice of appraisal rights.
47-1A-1321 Notice of intent to demand payment.
47-1A-1322 Appraisal notice and form--Delivery to shareholders.
47-1A-1322.1 Appraisal notice and form--Time limits and content.
47-1A-1323 Perfection of rights--Right to withdraw.
47-1A-1323.1 Subsequent withdrawal from appraisal process.
47-1A-1323.2 Loss of payment upon failure to return form and deposit share certificates.
47-1A-1324 Payment for shares.
47-1A-1325 Withholding of payment for after-acquired shares.
47-1A-1325.1 Notice required upon withholding of payment for after-acquired shares.
47-1A-1325.2 Payment for shares upon shareholder acceptance of offer in notice.
47-1A-1325.3 Payment for shares of amount offered in notice to specified shareholders.
47-1A-1326 Procedure if shareholder dissatisfied with payment or offer.
47-1A-1330 Court action.
47-1A-1330.1 Venue.
47-1A-1330.2 Parties--Service.
47-1A-1330.3 Jurisdiction--Appraisers--Discovery--Jury trial.
47-1A-1330.4 Judgment amount.
47-1A-1331 Court costs.
47-1A-1331.1 Counsel and expert fees and expenses.
47-1A-1331.2 Counsel fees to be paid by benefited shareholders.
47-1A-1401 Dissolution by incorporators or initial directors.
47-1A-1402 Proposal to dissolve by board of directors--Requirements for adoption.
47-1A-1402.1 Conditions for submission of proposal for dissolution.
47-1A-1402.2 Meeting of shareholders to consider dissolving corporation--Notice.
47-1A-1402.3 Votes required for adoption of proposal to dissolve.
47-1A-1403 Articles of dissolution--Content--Filing--Effective date.
47-1A-1403.1 Dissolved corporation defined.
47-1A-1404 Revocation of dissolution.
47-1A-1405 Effect of dissolution.
47-1A-1405.1 Limitations on effect of dissolution.
47-1A-1406 Known claims against dissolved corporation.
47-1A-1406.1 Bar on known claims against dissolved corporation.
47-1A-1406.2 Claim exclusions.
47-1A-1407 Other claims against dissolved corporation--Publication of notice of dissolution.
47-1A-1407.1 Time for bringing action to enforce claim against dissolved corporation after notice publication.
47-1A-1407.2 Enforcement of claims against dissolved corporations.
47-1A-1408 Court proceedings for determination of amount and form of security for contingent, unknown, or future claims.
47-1A-1408.1 Court-ordered security satisfaction for contingent, unknown, or future claims.
47-1A-1409 Director duties.
47-1A-1420 Grounds for administrative dissolution.
47-1A-1421 Procedure for and effect of administrative dissolution.
47-1A-1422 Reinstatement following administrative dissolution.
47-1A-1423 Appeal from denial of reinstatement.
47-1A-1430 Grounds for judicial dissolution.
47-1A-1431 Venue.
47-1A-1431.1 Shareholders as parties.
47-1A-1431.2 Authority of court until full hearing held.
47-1A-1431.3 Shareholder right to avoid dissolution by purchase of petitioner shares--Notice.
47-1A-1432 Receivership or custodianship.
47-1A-1433 Decree of dissolution.
47-1A-1434 Election to purchase in lieu of dissolution.
47-1A-1434.1 Filing deadline for election to purchase--Notice of right to participate in election--Participation.
47-1A-1434.2 Agreement on fair value and terms of purchase of shares.
47-1A-1434.3 Court determination of fair value of shares when parties unable to reach agreement.
47-1A-1434.4 Order directing purchase of shares--Terms and conditions--Fees and expenses.
47-1A-1434.5 Dismissal of petition to dissolve corporation.
47-1A-1434.6 Time for purchase--Intent of corporation to adopt articles of dissolution--Dissolution--Fees and expenses--Claims.
47-1A-1434.7 Provisions applicable to payment by corporation pursuant to order to purchase shares.
47-1A-1440 Deposit with state treasurer.
47-1A-1501 Authority to transact business required.
47-1A-1502 Consequences of transacting business without authority.
47-1A-1502.1 Stay of proceeding until necessity for certificate of authority is determined and obtained.
47-1A-1502.2 Penalties for transacting business without certificate of authority--Collection.
47-1A-1503 Application for certificate of authority.
47-1A-1504 Amended certificate of authority.
47-1A-1505 Effect of certificate of authority.
47-1A-1506 Corporate name of foreign corporation--Use of particular words--Fictitious name.
47-1A-1506.1 Corporate name--Distinguishable from specified names.
47-1A-1506.2 Corporate name--Application to use name not distinguishable from specified names--Authorization.
47-1A-1506.3 Corporate name--Use of name upon merger, reorganization, or acquisition of assets.
47-1A-1506.4 Corporation prohibited from transacting business in state upon change to unauthorized name--Amended certificate of authority.
47-1A-1507 47-1A-1507 to 47-1A-1510. Repealed by SL 2008, ch 275, § 48.
47-1A-1520 Withdrawal of foreign corporation.
47-1A-1521 Automatic withdrawal upon certain conversions.
47-1A-1522 Withdrawal upon conversion to a nonfiling entity.
47-1A-1523 Transfer of authority.
47-1A-1530 Grounds for revocation.
47-1A-1531 Procedure for and effect of revocation.
47-1A-1531.1 Revocation appoints Office of Secretary of State agent for service of process for corporation--Registered agent.
47-1A-1532 Appeal from revocation.
47-1A-1601 Corporate records--Requirements.
47-1A-1601.1 Corporate records--Copies at principal office.
47-1A-1602 Shareholder right to inspect and copy records specified in § 47-1A-1601.1.
47-1A-1602.1 Shareholder right to inspect and copy specified records--Prerequisites in § 47-1A-1602.2.
47-1A-1602.2 Prerequisites to shareholder right to inspect and copy records specified in § 47-1A-1602.1.
47-1A-1602.3 Abolition or limitation of right of inspection prohibited--Application.
47-1A-1603 Scope of inspection right.
47-1A-1604 Court-ordered inspection of records specified in § 47-1A-1602.
47-1A-1604.1 Court-ordered inspection of other records.
47-1A-1604.2 Court-ordered inspection--Order to pays costs--Restrictions on use or distribution of records.
47-1A-1605 Inspection of records by directors.
47-1A-1605.1 Court-ordered inspection of records upon application of director.
47-1A-1605.2 Court-ordered inspection for director--Limitations--Costs.
47-1A-1606 Exception to notice requirement.
47-1A-1620 Financial statements for shareholders.
47-1A-1621 47-1A-1621 to 47-1A-1621.3. Repealed by SL 2008, ch 275, § 53.
47-1A-1701 Application to existing domestic corporations.
47-1A-1702 Application to qualified foreign corporations.
47-1A-1703 Saving provisions.
47-1A-1703.1 Penalty imposition for violation of repealed statute.
47-1A-101. Short title.
This chapter shall be known and may be cited as the South Dakota Business Corporation Act.
Source: SL 2005, ch 239, § 1.
47-1A-120. Requirements for documents.
Any document satisfying the following requirements, and the requirements of any other section that adds to or varies these requirements, is entitled to be filed by the Office of the Secretary of State:
(1) The document is required or permitted to be filed in the Office of the Secretary of State;
(2) The document contains the information required by this chapter;
(3) The document is typewritten or printed or, if electronically transmitted, is in a format that can be retrieved or reproduced in typewritten or printed form;
(4) The document is in the English language. A corporate name need not be in English if written in English letters or in English letters in combination with Arabic or Roman numerals. The certificate of existence required of foreign corporations need not be in English if accompanied by a reasonably authenticated English translation;
(5) The document is executed by one of the following persons:
(a) By the chair of the board of directors of a domestic or foreign corporation, by its president, or by another of its officers;
(b) If directors have not been selected or the corporation has not been formed, by an incorporator; or
(c) If the corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that receiver, trustee, or court-appointed fiduciary;
(6) The person executing the document has signed it and has stated beneath or opposite the signature the person's name and the capacity in which the person signs. The document may, but need not, contain a corporate seal, attestation, acknowledgment, or verification;
(7) If the Office of the Secretary of State has prescribed a mandatory form for the document under § 47-1A-121, the document is in or on the prescribed form;
(8) The document is delivered to the Office of the Secretary of State for filing. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document, except as provided in §§ 47-1A-503 and 47-1A-1510; and
(9) When the document is delivered to the Office of the Secretary of State for filing, the correct filing fee, and any license fee, or penalty required to be paid at that time by this chapter or other law is paid or provision for payment made in a manner permitted by the Office of the Secretary of State.
Source: SL 2005, ch 239, § 2.
47-1A-120.1. Terms of plan or filed document dependent on extrinsic facts--Applicable provisions.
If a provision of this chapter permits any of the terms of a plan or a filed document to be dependent on facts objectively ascertainable outside the plan or filed document, the following provisions apply:
(1) The manner in which the facts will operate upon the terms of the plan or filed document shall be set forth in the plan or filed document;
(2) The facts may include:
(a) Any of the following that are available in a nationally recognized news or information medium either in print or electronically: statistical or market indices, market prices of any security or group of securities, interest rates, currency exchange rates, or similar economic or financial data;
(b) A determination or action by any person, including the corporation or any other party to a plan or filed document; or
(c) The terms of, or actions taken under, an agreement to which the corporation is a party, or any other agreement or document.
For the purposes of this section, a filed document is a document filed with the Office of the Secretary of State under any provision of this chapter except §§ 47-1A-1502 to 47-1A-1601, inclusive, or §§ 47-1A-1621.1 to 47-1A-1701, inclusive, and a plan is a plan of domestication, nonprofit conversion, entity conversion, merger, or share exchange.
Source: SL 2005, ch 239, § 3.
47-1A-120.2. Provision of filed document dependent on extrinsic fact but fact not ascertainable by reference or shareholders not noticed of fact--Article of amendment.
If a provision of a filed document is made dependent on a fact ascertainable outside of the filed document, and that fact is not ascertainable by reference to a source described in subsection 47-1A-120.1(2)(a) or a document that is a matter of public record, or the affected shareholders have not received notice of the fact from the corporation, the corporation shall file with the Office of the Secretary of State articles of amendment setting forth the fact promptly after the time when the fact referred to is first ascertainable or thereafter changes. Articles of amendment under this section are deemed to be authorized by the authorization of the original filed document or plan to which they relate and may be filed by the corporation without further action by the board of directors or the shareholders.
Source: SL 2005, ch 239, § 4.
47-1A-120.3. Dependency on extrinsic facts prohibited for specified provisions of plan or filed document.
The following provisions of a plan or filed document may not be made dependent on facts outside the plan or filed document:
(1) The name and address of any person required in a filed document;
(2) The registered office of any entity required in a filed document;
(3) The registered agent of any entity required in a filed document;
(4) The number of authorized shares and designation of each class or series of shares;
(5) The effective date of a filed document;
(6) Any required statement in a filed document of the date on which the underlying transaction was approved or the manner in which that approval was given.
Source: SL 2005, ch 239, § 5.
47-1A-121. Forms.
The Office of the Secretary of State may prescribe and furnish, on request, forms for:
(1) An application for a certificate of existence;
(2) A foreign corporation's application for a certificate of authority to transact business in this state;
(3) A foreign corporation's application for a certificate of withdrawal; and
(4) The annual report.
The Office of the Secretary of State may require the use of the forms described in subdivisions (1) to (4), inclusive. The Office of the Secretary of State may prescribe and furnish, on request, forms for other documents required or permitted to be filed by this chapter but the use of such forms is not mandatory.
Source: SL 2005, ch 239, § 6.
47-1A-122. Fees for filing and service.
The Office of the Secretary of State shall collect the following fees when the documents described in this section are delivered for filing:
(1) Articles of incorporation, $150;
(2) Application for use of indistinguishable name, $25;
(3) Application for reserved name, $25;
(4) Notice of transfer of reserved name, $15;
(5) Application for registered name, $25;
(6) Application for renewal of registered name, $15. A renewal application may be filed between the first day of October and the thirty-first day of December in each year and shall extend the registration for the following year;
(7) to (9) Repealed by SL 2008, ch 275, § 27;
(10) Articles of domestication, $150;
(11) Articles of charter surrender, $150;
(12) Articles of domestication and conversion, $150;
(13) Articles of entity conversion, $150;
(14) Amendment of articles of incorporation, $60;
(15) Restatement of articles of incorporation, $60;
(16) Articles of merger or share exchange, $60;
(17) Articles of dissolution, $10;
(18) Articles of revocation of dissolution, $10;
(19) Certificate of administrative dissolution, no charge;
(20) Application for reinstatement following administrative dissolution, plus any delinquent annual report filing fees for the period before the reinstatement application, $300;
(21) Certificate of reinstatement, no charge;
(22) Certificate of judicial dissolution, no charge;
(23) Application for certificate of authority, $750;
(24) Application for amended certificate of authority, $250;
(25) Application for certificate of withdrawal, $10;
(26) Application for transfer of authority, $25;
(27) Certificate of revocation of authority to transact business, no charge;
(28) Annual report, $50. Each entity that does not file or refuses to file its annual report within the time prescribed is subject to a penalty of fifty dollars to be assessed by the secretary of state;
(29) Articles of correction, $25;
(30) Application for certificate of existence or authorization, $20;
(31) Amended annual report, $25;
(32) Any other document required or permitted to be filed by this chapter, $20.
The Office of the Secretary of State shall collect a fee of thirty dollars each time process is served on the Office of the Secretary of State under this chapter. The party to a proceeding causing service of process is entitled to recover this fee as costs if the party prevails in the proceeding.
Source: SL 2005, ch 239, § 7; SL 2008, ch 275, § 27; SL 2009, ch 4, § 12; SL 2015, ch 258, § 2, eff. Jan. 1, 2016; SL 2016, ch 2, § 5.
47-1A-122.1. Copying and certification fees.
The Office of the Secretary of State shall collect the following fees for copying and certifying the copy of any filed document relating to a domestic or foreign corporation:
(1) One dollar a page for copying;
(2) Twenty dollars for copying microfiche archived documents for a single corporation; and
(3) Ten dollars for the certificate.
Source: SL 2005, ch 239, § 8.
47-1A-123. Effective time and date of document--Exceptions.
Except as provided in §§ 47-1A-123.1 and 47-1A-124.2, a document accepted for filing is effective:
(1) At the date and time of filing, as evidenced by such means as the Office of the Secretary of State may use for the purpose of recording the date and time of filing; or
(2) At the time specified in the document as its effective time on the date it is filed.
Source: SL 2005, ch 239, § 9.
47-1A-123.1. Delayed effective time and date of document.
A document may specify a delayed effective time and date, and if it does so the document becomes effective at the time and date specified. If a delayed effective date is indicated, 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 it is filed.
Source: SL 2005, ch 239, § 10.
47-1A-124. Correction filed document--Circumstances when allowed.
A domestic or foreign corporation may correct a document filed by the Office of the Secretary of State if any of the following occur:
(1) The document contains an inaccuracy;
(2) The document was defectively executed, attested, sealed, verified, or acknowledged; or
(3) The electronic transmission was defective.
Source: SL 2005, ch 239, § 11.
47-1A-124.1. Correction of filed document--Procedure.
A document is corrected:
(1) By preparing articles of correction that:
(a) Describe the document, including its filing date, or attach a copy of it to the articles;
(b) Specify the inaccuracy or defect to be corrected; and
(c) Correct the inaccuracy or defect; and
(2) By delivering the articles to the Office of the Secretary of State for filing.
Source: SL 2005, ch 239, § 12.
47-1A-124.2. Articles of correction--Effective date.
Articles of correction are effective on the effective date of the document that 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.
Source: SL 2005, ch 239, § 13.
47-1A-125. Filing duty of Office of Secretary of State.
If a document delivered to the Office of the Secretary of State for filing satisfies the requirements of §§ 47-1A-120 to 47-1A-120.3, inclusive, the Office of the Secretary of State shall file it. The Office of the Secretary of State files a document by recording it as filed on the date and time of receipt. After filing a document, the Office of the Secretary of State shall deliver to the domestic or foreign corporation or its representative a receipt with an acknowledgment of the date and time of filing.
If the Office of the Secretary of State refuses to file a document, the Office of the Secretary of State shall return it to the domestic or foreign corporation or its representative within five days after the document was delivered, together with a brief, written explanation of the reason for the refusal.
The Office of the Secretary of State's duty to file documents under this section is ministerial. The Office of the Secretary of State's filing or refusing to file a document does not:
(1) Affect the validity or invalidity of the document in whole or part;
(2) Relate to the correctness or incorrectness of information contained in the document; or
(3) Create a presumption that the document is valid or invalid or that information contained in the document is correct or incorrect.
Source: SL 2005, ch 239, § 14; SL 2008, ch 275, § 28.
47-1A-126. Appeal from Office of Secretary of State's refusal to file document.
If the Office of the Secretary of State refuses to file a document delivered to the Office of the Secretary of State for filing, the domestic or foreign corporation may appeal the refusal within thirty days after the return of the document to the circuit court of the county where the corporation's principal office is located in this state or, if none in this state, to the circuit court of Hughes County. The appeal is commenced by petitioning the court to compel filing the document and by attaching to the petition the document and the Office of the Secretary of State's explanation of the refusal to file.
The court may summarily order the Office of the Secretary of State to file the document or take other action the court considers appropriate. The court's final decision may be appealed as in other civil proceedings.
Source: SL 2005, ch 239, § 15; SL 2008, ch 275, § 29.
47-1A-127. Evidentiary effect of copy of filed document.
Any certificate from the Office of the Secretary of State delivered with a copy of a document filed by the Office of the Secretary of State, is conclusive evidence that the original document is on file with the Office of the Secretary of State.
Source: SL 2005, ch 239, § 16.
47-1A-128. Certificate of existence.
Any person may apply to the Office of the Secretary of State to furnish a certificate of existence for a domestic corporation or a certificate of authorization for a foreign corporation. A certificate of existence or authorization shall set forth:
(1) The domestic corporation's corporate name or the foreign corporation's corporate name used in this state;
(2) That the domestic corporation is duly incorporated under the law of this state, the date of its incorporation, and the period of its duration if less than perpetual; or that the foreign corporation is authorized to transact business in this state;
(3) That all fees, taxes, and penalties owed to this state have been paid, if:
(a) Payment is reflected in the records of the Office of the Secretary of State; and
(b) Nonpayment affects the existence or authorization of the domestic or foreign corporation;
(4) That its most recent annual report required by § 47-1A-1621.1 has been delivered to the Office of the Secretary of State;
(5) That articles of dissolution have not been filed; and
(6) Other facts of record in the Office of the Secretary of State that may be requested by the applicant.
Subject to any qualification stated in the certificate, a certificate of existence or authorization issued by the Office of the Secretary of State may be relied upon as conclusive evidence that the domestic or foreign corporation is in existence or is authorized to transact business in this state.
Source: SL 2005, ch 239, § 17.
47-1A-129. Penalty for signing false document.
No person may sign a document, paper form or electronically, knowing it is false in any material respect with intent that the document be delivered to the Office of the Secretary of State for filing. An offense under this section is subject to a civil fine in any amount not exceeding five hundred dollars.
Source: SL 2005, ch 239, § 18; SL 2012, ch 222, § 1.
47-1A-140. Chapter definitions.
Terms used in this chapter mean:
(1) "Articles of incorporation," the original articles of incorporation, all amendments thereof, and any other documents permitted or required to be filed by a domestic business corporation with the Office of the Secretary of State under any provision of this chapter except §§ 47-1A-1621.1 to 47-1A-1701, inclusive. If an amendment of the articles or any other document filed under this chapter restates the articles in their entirety, from that time forward the articles do not include any prior documents;
(2) "Authorized shares," the shares of all classes a domestic or foreign corporation is authorized to issue;
(3) "Conspicuous," so written that a reasonable person against whom the writing is to operate should have noticed it. For example, printing in italics or boldface or contrasting color, or typing in capitals or underlined, is conspicuous;
(4) "Corporation," "domestic corporation," or "domestic business corporation," any corporation for profit, which is not a foreign corporation, incorporated under or subject to the provisions of this chapter;
(5) "Deliver," or "delivery," any method of delivery used in conventional commercial practice, including delivery by hand, mail, commercial delivery, and electronic transmission;
(6) "Distribution," any 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 may be in the form of a declaration or payment of a dividend; a purchase, redemption, or other acquisition of shares; a distribution of indebtedness; or otherwise;
(7) "Domestic unincorporated entity," an unincorporated entity whose internal affairs are governed by the laws of this state;
(8) "Electronic transmission," or "electronically transmitted," 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;
(9) "Eligible entity," any domestic or foreign unincorporated entity;
(10) "Eligible interest," an interest or membership as defined in this section;
(11) "Employee," includes any officer but not a director. However, a director may accept duties that make the director also an employee;
(12) "Entity," includes domestic and foreign business corporation; estate; trust; domestic and foreign unincorporated entity; and state government, the United States government, and any foreign government;
(13) "Facts objectively ascertainable," outside of a filed document or plan as defined in §§ 47-1A-120.1 to 47-1A-120.3, inclusive;
(14) "Filing entity," any unincorporated entity that is of a type that is created by filing a public organic document;
(15) "Foreign corporation," any corporation incorporated under a law other than the law of this state, which would be a business corporation if incorporated under the laws of this state;
(16) "Foreign nonprofit corporation," any corporation incorporated under a law other than the law of this state, which would be a nonprofit corporation if incorporated under the laws of this state;
(17) "Foreign unincorporated entity," any unincorporated entity whose internal affairs are governed by an organic law of a jurisdiction other than this state;
(18) "Governmental subdivision," includes authority, county, district, and municipality;
(19) "Individual," any natural person;
(20) "Interest," either or both of the following rights under the organic law of an unincorporated entity:
(a) The right to receive distributions from the entity either in the ordinary course or upon liquidation; or
(b) The right to receive notice or vote on issues involving its internal affairs, other than as an agent, assignee, proxy, or person responsible for managing its business and affairs;
(21) "Interest holder," any person who holds of record an interest;
(22) "Membership," the rights of a member in a domestic or foreign nonprofit corporation;
(23) "Nonfiling entity," any unincorporated entity that is of a type that is not created by filing a public organic document;
(24) "Nonprofit corporation," or "domestic nonprofit corporation," any corporation incorporated under the laws of this state and subject to the provisions of chapters 47-22 to 47-28, inclusive;
(25) "Organic document," any public organic document or a private organic document;
(26) "Organic law," the statute governing the internal affairs of a domestic or foreign business or nonprofit corporation or unincorporated entity;
(27) "Owner liability," personal liability for a debt, obligation, or liability of a domestic or foreign business or nonprofit corporation or unincorporated entity that is imposed on a person:
(a) Solely by reason of the person's status as a shareholder, member, or interest holder; or
(b) By the articles of incorporation, bylaws, or an organic document under a provision of the organic law of an entity authorizing the articles of incorporation, 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;
(28) "Person," includes an individual and an entity;
(29) "Principal office," the office, in or out of this state, so designated in the annual report where the principal executive offices of a domestic or foreign corporation are located;
(30) "Private organic document," any document, other than the public organic document, if any, that determines the internal governance of an unincorporated entity. If a private organic document has been amended or restated, the term means the private organic document as last amended or restated;
(31) "Public organic document," the document, if any, that is filed of public record to create an unincorporated entity. If a public organic document has been amended or restated, the term means the public organic document as last amended or restated;
(32) "Proceeding," includes civil suit and criminal, administrative, and investigatory action;
(33) "Record date," the date established under §§ 47-1A-601 to 47-1A-603, inclusive, or §§ 47-1A-701 to 47-1A-747, inclusive, on which a corporation determines the identity of its shareholders and their shareholdings for purposes of this chapter. The determinations shall be made as of the close of business on the record date unless another time for doing so is specified when the record date is fixed;
(34) "Secretary," the corporate officer to whom the board of directors has delegated responsibility under § 47-1A-840 for custody of the minutes of the meetings of the board of directors and of the shareholders and for authenticating records of the corporation;
(35) "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;
(36) "Shares," the units into which the proprietary interests in a corporation are divided;
(37) "Sign," or "signature," includes any manual, facsimile, conformed, or electronic signature;
(38) "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;
(39) "Subscriber," any person who subscribes for shares in a corporation, whether before or after incorporation;
(40) "Unincorporated entity," any organization or artificial legal person that either has a separate legal existence or has the power to acquire an estate in real property in its own name and that is not any of the following: a domestic or foreign business or nonprofit corporation, an estate, a trust, a state, the United States, or a foreign government. The term includes a general partnership, limited liability company, limited partnership, business trust, joint stock association, and incorporated nonprofit association;
(41) "United States," includes district, authority, bureau, commission, department, and any other agency of the United States;
(42) "Voting group," all shares of one or more classes or series that, under the articles of incorporation or this chapter, are entitled to vote and be counted together collectively on a matter at a meeting of shareholders. All shares entitled by the articles of incorporation or this chapter to vote generally on the matter are for that purpose a single voting group;
(43) "Voting power," the current power to vote in the election of directors.
Source: SL 2005, ch 239, § 19.
47-1A-141. Type of notice--Written or oral.
Notice under this chapter shall be in writing unless oral notice is reasonable under the circumstances. Notice by electronic transmission is written notice.
Source: SL 2005, ch 239, § 20.
47-1A-141.1. Method of notice.
Notice may be communicated in person; by mail or other method of delivery; or by telephone, voice mail, or other electronic means. 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.
Source: SL 2005, ch 239, § 21.
47-1A-141.2. Effective date of written notice by domestic or foreign corporation to shareholder.
Written notice by a domestic or foreign corporation to its shareholder, 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; or when electronically transmitted to the shareholder in a manner authorized by the shareholder.
Source: SL 2005, ch 239, § 22.
47-1A-141.3. Address of written notice.
Written notice to a domestic or foreign corporation authorized to transact business in this state may be addressed to its registered agent or to the corporation or its secretary 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 authority.
Source: SL 2005, ch 239, § 23; SL 2008, ch 275, § 30.
47-1A-141.4. Effective date of written notice--Exception.
Except as provided in § 47-1A-141.2, written notice, 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, and the receipt is signed by or on behalf of the addressee.
Oral notice is effective when communicated, if communicated in a comprehensible manner.
Source: SL 2005, ch 239, § 24.
47-1A-141.5. Notice requirements governing particular circumstances.
If this chapter prescribes notice requirements for particular circumstances, those requirements govern. If articles of incorporation or bylaws prescribe notice requirements, not inconsistent with §§ 47-1A-141 to 47-1A-141.4, inclusive, or other provisions of this chapter, those requirements govern.
Source: SL 2005, ch 239, § 25.
47-1A-142. Number of shareholders.
For purposes of this chapter, the following identified as a shareholder in a corporation's current record of shareholders constitutes one shareholder:
(1) Three or fewer co-owners;
(2) A corporation, partnership, trust, estate, or other entity;
(3) The trustees, guardians, custodians, or other fiduciaries of a single trust, estate, or account.
For purposes of this chapter, shareholdings registered in substantially similar names constitute one shareholder if it is reasonable to believe that the names represent the same person.
Source: SL 2005, ch 239, § 26.
47-1A-201. Incorporators.
One or more persons may act as the incorporator or incorporators of a corporation by delivering articles of incorporation to the Office of the Secretary of State for filing.
Source: SL 2005, ch 239, § 27.
47-1A-202. Articles of incorporation--Required provisions.
The articles of incorporation shall set forth:
(1) A corporate name for the corporation that satisfies the requirements of §§ 47-1A-401 to 47-1A-401.3, inclusive;
(2) The number of shares the corporation is authorized to issue;
(3) The street address of its principal office;
(4) The information required by § 59-11-6; and
(5) The name and address of each incorporator.
Source: SL 2005, ch 239, § 28; SL 2008, ch 275, § 31.
47-1A-202.1. Articles of incorporation--Optional provisions.
The articles of incorporation may set forth:
(1) The names and addresses of the individuals who are to serve as the initial directors;
(2) Provisions not inconsistent with law regarding:
(a) The purpose or purposes for which the corporation is organized;
(b) Managing the business and regulating the affairs of the corporation;
(c) Defining, limiting, and regulating the powers of the corporation, its board of directors, and shareholders;
(d) A par value for authorized shares or classes of shares; and
(e) The imposition of personal liability on shareholders for the debts of the corporation to a specified extent and upon specified conditions;
(3) Any provision that under this chapter is required or permitted to be set forth in the bylaws;
(4) A provision eliminating or limiting the liability of a director to the corporation or its shareholders for money damages for any action taken, or any failure to take any action, as a director, except liability for the amount of a financial benefit received by a director to which the director is not entitled; an intentional infliction of harm on the corporation or the shareholders; a violation of § 47-1A-833; or an intentional violation of criminal law;
(5) A provision permitting or making obligatory indemnification of a director for liability, as defined in subdivision 47-1A-850(5), to any person for any action taken, or any failure to take any action, as a director, except liability for receipt of a financial benefit to which the director is not entitled; an intentional infliction of harm on the corporation or its shareholders; a violation of § 47-1A-833.1; or an intentional violation of criminal law; and
(6) Any provision limiting or denying preemptive rights to acquire additional or treasury shares of the corporation.
Source: SL 2005, ch 239, § 29.
47-1A-202.2. Articles of incorporation--Corporate powers.
The articles of incorporation need not set forth any of the corporate powers enumerated in this chapter.
Source: SL 2005, ch 239, § 30.
47-1A-202.3. Articles of incorporation--Extrinsic facts.
Provisions of the articles of incorporation may be made dependent upon facts objectively ascertainable outside the articles of incorporation in accordance with §§ 47-1A-120.1 to 47-1A-120.3, inclusive.
Source: SL 2005, ch 239, § 31.
47-1A-203. Incorporation.
Unless a delayed effective date is specified, the corporate existence begins when the articles of incorporation are filed. The Office of the Secretary of State's filing of the articles of incorporation is conclusive proof that the incorporators satisfied all conditions precedent to incorporation except in a proceeding by the state to cancel or revoke the incorporation or involuntarily dissolve the corporation.
Source: SL 2005, ch 239, § 32.
47-1A-204. Liability for pre-incorporation transactions.
Any person purporting to act as or on behalf of a corporation, knowing there was no incorporation under this chapter, is jointly and severally liable for all liabilities created while so acting.
Source: SL 2005, ch 239, § 33.
47-1A-205. Organization of corporation.
After incorporation:
(1) If initial directors are named in the articles of incorporation, the initial directors shall hold an organizational meeting, at the call of a majority of the directors, to complete the organization of the corporation by appointing officers, adopting bylaws, and carrying on any other business brought before the meeting;
(2) If initial directors are not named in the articles, the incorporator or incorporators shall hold an organizational meeting at the call of a majority of the incorporators:
(a) To elect directors and complete the organization of the corporation; or
(b) To elect a board of directors who shall complete the organization of the corporation.
Action required or permitted by this chapter to be taken by incorporators at an organizational meeting may be taken without a meeting if the action taken is evidenced by one or more written consents describing the action taken and signed by each incorporator. An organizational meeting may be held in or out of this state.
Source: SL 2005, ch 239, § 34.
47-1A-206. Bylaws.
The incorporators or board of directors of a corporation shall adopt initial bylaws for the corporation. The bylaws of a corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation.
Source: SL 2005, ch 239, § 35.
47-1A-207. Emergency bylaws.
Unless the articles of incorporation provide otherwise, the board of directors of a corporation may adopt bylaws to be effective only in an emergency. The emergency bylaws, which are subject to amendment or repeal by the shareholders, may make all provisions necessary for managing the corporation during the emergency, including:
(1) Procedures for calling a meeting of the board of directors;
(2) Quorum requirements for the meeting; and
(3) Designation of additional or substitute directors.
All provisions of the regular bylaws consistent with the emergency bylaws remain effective during the emergency. The emergency bylaws are not effective after the emergency ends. Any corporate action taken in good faith in accordance with emergency bylaws binds the corporation and may not be used to impose liability on a corporate director, officer, employee, or agent.
An emergency exists for purposes of this section if a quorum of the corporation's directors cannot readily be assembled because of some catastrophic event.
Source: SL 2005, ch 239, § 36.
47-1A-301. Purposes.
Any corporation incorporated under this chapter has the purpose of engaging in any lawful business unless a more limited purpose is set forth in the articles of incorporation.
A corporation engaging in a business that is subject to regulation under another statute of this state may incorporate under this chapter only if permitted by, and subject to all limitations of, the other statute.
Source: SL 2005, ch 239, § 37.
47-1A-302. General powers.
Unless its articles of incorporation provide otherwise, a corporation has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including the power to:
(1) Sue and be sued, complain, and defend in its corporate name;
(2) Have a corporate seal, which may be altered at will, and to use it, or a facsimile of it, by impressing or affixing it or in any other manner reproducing it;
(3) Make and amend bylaws, not inconsistent with its articles of incorporation or with the laws of this state, for managing the business and regulating the affairs of the corporation;
(4) Purchase, receive, lease, or otherwise acquire, and own, hold, improve, use, and otherwise deal with, real or personal property, or any legal or equitable interest in property, wherever located;
(5) Sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property;
(6) Purchase, receive, subscribe for, or otherwise acquire; own, hold, vote, use, sell, mortgage, lend, pledge, or otherwise dispose of; and deal in and with shares or other interests in, or obligations of, any other entity;
(7) Make contracts and guarantees, incur liabilities, borrow money, issue its notes, bonds, and other obligations, which may be convertible into or include the option to purchase other securities of the corporation, and secure any of its obligations by mortgage or pledge of any of its property, franchises, or income;
(8) Lend money, invest and reinvest its funds, and receive and hold real and personal property as security for repayment;
(9) Be a promoter, partner, member, associate, or manager of any partnership, joint venture, trust, or other entity;
(10) Conduct its business, locate offices, and exercise the powers granted by this chapter within or without this state;
(11) Elect directors and appoint officers, employees, and agents of the corporation, define their duties, fix their compensation, and lend them money and credit;
(12) Pay pensions and establish pension plans, pension trusts, profit sharing plans, share bonus plans, share option plans, and benefit or incentive plans for any or all of its current or former directors, officers, employees, and agents;
(13) Make donations for the public welfare or for charitable, scientific, or educational purposes;
(14) Transact any lawful business that will aid governmental policy;
(15) Make payments or donations, or do any other act, not inconsistent with law, that furthers the business and affairs of the corporation.
Source: SL 2005, ch 239, § 38.
47-1A-303. Emergency powers.
In anticipation of or during an emergency, the board of directors of a corporation may modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent; and relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so.
During an emergency, unless emergency bylaws provide otherwise:
(1) Notice of a meeting of the board of directors need be given only to those directors whom it is practicable to reach and may be given in any practicable manner, including by publication and radio; and
(2) One or more officers of the corporation present at a meeting of the board of directors may be deemed to be directors for the meeting, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.
Corporate action taken in good faith during an emergency under this section to further the ordinary business affairs of the corporation binds the corporation and may not be used to impose liability on a corporate director, officer, employee, or agent.
An emergency exists for purposes of this section if a quorum of the corporation's directors cannot readily be assembled because of some catastrophic event.
Source: SL 2005, ch 239, § 39.
47-1A-304. Ultra vires.
The validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act. However, a corporation's power to act may be challenged in the following proceedings:
(1) In a proceeding by a shareholder against the corporation to enjoin the act;
(2) In a proceeding by the corporation, directly, derivatively, or through a receiver, trustee, or other legal representative, against an incumbent or former director, officer, employee, or agent of the corporation; or
(3) In a proceeding by the attorney general under § 47-1A-1431.
In a shareholder's proceeding under subdivision (1) to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss, other than anticipated profits, suffered by the corporation or another party because of enjoining the unauthorized act.
Source: SL 2005, ch 239, § 40.
47-1A-401. Corporate name--Use of particular words--Purpose.
A corporate name must contain the term, corporation, incorporated, company, or limited, or the abbreviation, corp., inc., co., or ltd., or terms or abbreviations of like import in another language. A corporate name may not contain language stating or implying that the corporation is organized for a purpose other than that permitted by § 47-1A-301 and its articles of incorporation.
Source: SL 2005, ch 239, § 41.
47-1A-401.1. Corporate name--Distinguishable from specified names--Exceptions.
Except as authorized by §§ 47-1A-401.2 and 47-1A-401.3, a corporate name shall be distinguishable upon the records of the Office of the Secretary of State from:
(1) The corporate name of a corporation incorporated or authorized to transact business in this state;
(2) A corporate name reserved or registered under § 47-1A-402 or 47-1A-403;
(3) The fictitious name adopted by a foreign corporation authorized to transact business in this state because its real name is unavailable;
(4) The corporate name of a not-for-profit corporation incorporated or authorized to transact business in this state; and
(5) The name of a limited liability company, limited liability partnership, limited partnership, or limited liability limited partnership organized or authorized to transact business in this state.
Source: SL 2005, ch 239, § 42.
47-1A-401.2. Corporate name--Application to use name not distinguishable from specified names--Authorization.
A corporation may apply to the Office of the Secretary of State for authorization to use a name that is not distinguishable upon the records of the Office of the Secretary of State from one or more of the names described in § 47-1A-401.1. The Office of the Secretary of State shall authorize use of the name applied for if:
(1) The other corporation or entity consents to the use in writing and submits an undertaking in form satisfactory to the Office of the Secretary of State to change its name to a name that is distinguishable upon the records of the Office of the Secretary of State from the name of the applying corporation; or
(2) The applicant delivers to the Office of the Secretary of State a certified copy of the final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this state.
Source: SL 2005, ch 239, § 43.
47-1A-401.3. Corporate name--Use of name upon merger, reorganization, or acquisition of assets.
A corporation may use the name, including the fictitious name, of another domestic or foreign corporation that is used in this state if the other corporation is incorporated or authorized to transact business in this state and the proposed user corporation:
(1) Has merged with the other corporation;
(2) Has been formed by reorganization of the other corporation; or
(3) Has acquired all or substantially all of the assets, including the corporate name, of the other corporation.
This chapter does not control the use of fictitious names.
Source: SL 2005, ch 239, § 44.
47-1A-402. Reserved name.
A person may reserve the exclusive use of a corporate name, including a fictitious name for a foreign corporation whose corporate name is not available, by delivering an application to the Office of the Secretary of State for filing. The application shall set forth the name and address of the applicant and the name proposed to be reserved. If the Office of the Secretary of State finds that the corporate name applied for is available, the Office of the Secretary of State shall reserve the name for the applicant's exclusive use for a nonrenewable one-hundred-twenty-day period.
The owner of a reserved corporate name may transfer the reservation to another person by delivering to the Office of the Secretary of State a signed notice of the transfer that states the name and address of the transferee.
Source: SL 2005, ch 239, § 45.
47-1A-403. Foreign corporation--Registration of corporate name.
A foreign corporation may register its corporate name, or its corporate name with any addition required by §§ 47-1A-1506.1 to 47-1A-1507, if the name is distinguishable upon the records of the Office of the Secretary of State from the corporate names that are not available under § 47-1A-401.1. A foreign corporation registers its corporate name, or its corporate name with any addition required by §§ 47-1A-1506.1 to 47-1A-1507, inclusive, by delivering to the Office of the Secretary of State for filing an application:
(1) Setting forth its corporate name, or its corporate name with any addition required by §§ 47-1A-1506.1 to 47-1A-1507, inclusive, the state or country and date of its incorporation, and a brief description of the nature of the business in which it is engaged; and
(2) Accompanied by a certificate of existence, or a document of similar import, from the state or country of incorporation.
The name is registered for the applicant's exclusive use upon the effective date of the application.
Source: SL 2005, ch 239, § 46.
47-1A-403.1. Foreign corporation--Renewal of registration of corporate name.
A foreign corporation whose registration is effective may renew it for successive years by delivering to the Office of the Secretary of State for filing a renewal application, which complies with the requirements of § 47-1A-403, between October first and December thirty-first of the preceding year. The renewal application when filed renews the registration for the following calendar year.
Source: SL 2005, ch 239, § 47.
47-1A-403.2. Foreign corporation--Qualification under registered name--Use of name by another--Termination.
A foreign corporation whose registration is effective may thereafter qualify as a foreign corporation under the registered name or consent in writing to the use of that name by a corporation thereafter incorporated under this chapter or by another foreign corporation thereafter authorized to transact business in this state. The registration terminates if the domestic corporation is incorporated or the foreign corporation qualifies or consents to the qualification of another foreign corporation under the registered name.
Source: SL 2005, ch 239, § 48.
47-1A-601. Authorized shares in articles of incorporation--Class or series--Terms.
The articles of incorporation shall set forth any classes of shares and series of shares within a class, and the number of shares of each class and series, that the corporation is authorized to issue. If more than one class or series of shares is authorized, the articles of incorporation shall prescribe a distinguishing designation for each class or series and shall describe, prior to the issuance of shares of a class or series, the terms, including the preferences, rights, and limitations, of that class or series. Except to the extent varied as permitted by this section, all shares of a class or series shall have terms, including preferences, rights, and limitations, that are identical with those of other shares of the same class or series. Terms of shares may be made dependent upon facts objectively ascertainable outside the articles of incorporation in accordance with §§ 47-1A-120.1 to 47-1A-120.3, inclusive. Any of the terms of shares may vary among holders of the same class or series so long as such variations are expressly set forth in the articles of incorporation.
Source: SL 2005, ch 239, § 53.
47-1A-601.1. Classes or series of shares articles of incorporation required to authorize.
The articles of incorporation shall authorize:
(1) One or more classes or series of shares that together have unlimited voting rights; and
(2) One or more classes or series of shares, which may be the same class or classes as those with voting rights, that together are entitled to receive the net assets of the corporation upon dissolution.
Source: SL 2005, ch 239, § 54.
47-1A-601.2. Classes or series of shares articles of incorporation may authorize.
The articles of incorporation may authorize one or more classes or series of shares that:
(1) Have special, conditional, or limited voting rights, or no right to vote, except to the extent otherwise provided by this chapter;
(2) Are redeemable or convertible as specified in the articles of incorporation:
(a) At the option of the corporation, the shareholder, or another person or upon the occurrence of a specified event;
(b) For cash, indebtedness, securities, or other property; and
(c) At prices and in amounts specified, or determined in accordance with a formula;
(3) Entitle the holders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative, or partially cumulative; or
(4) Have preference over any other class or series of shares with respect to distributions, including distributions upon the dissolution of the corporation.
The description of the preferences, rights, and limitations of classes or series of shares in this section is not exhaustive.
Source: SL 2005, ch 239, § 55.
47-1A-602. Classification or reclassification of unissued shares determined by board of directors.
If the articles of incorporation so provide, the board of directors, without shareholder approval, may:
(1) Classify any unissued shares into one or more classes or into one or more series within a class;
(2) Reclassify any unissued shares of any class into one or more classes or into one or more series within one or more classes; or
(3) Reclassify any unissued shares of any series of any class into one or more classes or into one or more series within a class.
Source: SL 2005, ch 239, § 56.
47-1A-602.1. Terms of class or series determined by board of directors.
If the board of directors acts pursuant to § 47-1A-602, the board shall determine the terms, including the preferences, rights, and limitations, to the same extent permitted under §§ 47-1A-601 to 47-1A-601.2, inclusive, of:
(1) Any class of shares before the issuance of any shares of that class; or
(2) Any series within a class before the issuance of any shares of that series.
Before issuing any shares of a class or series created under § 47-1A-602, the corporation shall deliver to the Office of the Secretary of State for filing articles of amendment setting forth the terms determined under this section.
Source: SL 2005, ch 239, § 57.
47-1A-603. Issuance of shares--Outstanding until reacquired, redeemed, converted, or cancelled.
A corporation may issue the number of shares of each class or series authorized by the articles of incorporation. Shares that are issued are outstanding shares until they are reacquired, redeemed, converted, or cancelled. The reacquisition, redemption, or conversion of outstanding shares is subject to the limitations of § 47-1A-603.1 and §§ 47-1A-640 to 47-1A-640.5, inclusive.
Source: SL 2005, ch 239, § 58.
47-1A-603.1. Outstanding shares--Shares with unlimited voting rights and entitled to receipt of net assets upon dissolution required.
At all times that shares of the corporation are outstanding, one or more shares that together have unlimited voting rights and one or more shares that together are entitled to receive the net assets of the corporation upon dissolution must be outstanding.
Source: SL 2005, ch 239, § 59.
47-1A-604. Fractional shares--Scrip.
A corporation may:
(1) Issue fractions of a share or pay in money the value of fractions of a share;
(2) Arrange for disposition of fractional shares by the shareholders;
(3) Issue scrip in registered or bearer form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share.
Source: SL 2005, ch 239, § 60.
47-1A-604.1. Scrip--Label on certificate--Information.
Each certificate representing scrip shall be conspicuously labeled scrip and shall contain the information required by § 47-1A-625.
Source: SL 2005, ch 239, § 61.
47-1A-604.2. Rights of holder of fractional share--Scrip.
The holder of a fractional share is entitled to exercise the rights of a shareholder, including the right to vote, to receive dividends, and to participate in the assets of the corporation upon liquidation. The holder of scrip is not entitled to any of these rights unless the scrip so provides.
Source: SL 2005, ch 239, § 62.
47-1A-604.3. Issuance of script--Authorization by board of directors--Conditions.
The board of directors may authorize the issuance of scrip subject to any condition considered desirable, including:
(1) That the scrip will become void if not exchanged for full shares before a specified date; and
(2) That the shares for which the scrip is exchangeable may be sold and the proceeds paid to the scripholders.
Source: SL 2005, ch 239, § 63.
47-1A-620. Subscription for shares before incorporation.
A subscription for shares entered into before incorporation is irrevocable for six months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation. The board of directors may determine the payment terms of subscription for shares that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors shall be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement specifies otherwise.
Shares issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement. If a subscriber defaults in payment of money or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may rescind the agreement and may sell the shares if the debt remains unpaid for more than twenty days after the corporation sends written demand for payment to the subscriber.
A subscription agreement entered into after incorporation is a contract between the subscriber and the corporation subject to §§ 47-1A-621 and 47-1A-621.1.
Source: SL 2005, ch 239, § 64.
47-1A-621. Issuance of shares by board of directors--Powers reserved to shareholders.
The powers granted in this section to the board of directors may be reserved to the shareholders by the articles of incorporation.
No corporation may issue stocks or bonds except for money, labor done, or money or property, tangible or intangible, actually received. Before the corporation may issue shares, the board of directors shall determine that the consideration received or to be received for shares to be issued is adequate. That determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid, and nonassessable. When the corporation receives the consideration for which the board of directors authorized the issuance of shares, the shares issued therefore are fully paid and nonassessable.
Source: SL 2005, ch 239, § 65.
47-1A-621.1. Issuance of shares requiring approval of shareholders.
An issuance of shares or other securities convertible into or rights exercisable for shares, in a transaction or a series of integrated transactions, requires approval of the shareholders, at a meeting at which a quorum consisting of at least a majority of the votes entitled to be cast on the matter exists, if:
(1) The shares, other securities, or rights are issued for consideration other than cash or cash equivalents; and
(2) The voting power of shares that are issued and issuable as a result of the transaction or series of integrated transactions will comprise more than twenty percent of the voting power of the shares of the corporation that were outstanding immediately before the transaction.
For purposes of determining the voting power of shares issued and issuable as a result of a transaction or series of integrated transactions, the voting power of shares shall be the greater of the voting power of the shares to be issued, or the voting power of the shares that would be outstanding after giving effect to the conversion of convertible shares and other securities and the exercise of rights to be issued. For the purposes of this section, a series of transactions is integrated if consummation of one transaction is made contingent on consummation of one or more of the other transactions.
Source: SL 2005, ch 239, § 66.
47-1A-622. Liability of shareholders.
A purchaser from a corporation of its own shares is not liable to the corporation or its creditors with respect to the shares except to pay the consideration for which the shares were authorized to be issued or specified in the subscription agreement.
Unless otherwise provided in the articles of incorporation, no shareholder of a corporation is personally liable for the acts or debts of the corporation except that a shareholder may become personally liable by reason of the shareholder's own acts or conduct.
Source: SL 2005, ch 239, § 67.
47-1A-623. Share dividends.
Unless the articles of incorporation provide otherwise, shares may be issued pro rata and without consideration to the corporation's shareholders or to the shareholders of one or more classes or series. An issuance of shares under this section is a share dividend.
Shares of one class or series may not be issued as a share dividend in respect of shares of another class or series unless:
(1) The articles of incorporation so authorize;
(2) A majority of the votes entitled to be cast by the class or series to be issued approve the issue; or
(3) There are no outstanding shares of the class or series to be issued.
If the board of directors does not fix the record date for determining shareholders entitled to a share dividend, it is the date the board of directors authorizes the share dividend.
Source: SL 2005, ch 239, § 68.
47-1A-624. Share options.
A corporation may issue rights, options, or warrants for the purchase of shares or other securities of the corporation. The board of directors shall determine the terms upon which the rights, options, or warrants are issued, and the terms, including the consideration, for which the shares or other securities are to be issued. The authorization by the board of directors for the corporation to issue such rights, options, or warrants constitutes authorization of the issuance of the shares or other securities for which the rights, options, or warrants are exercisable.
The terms and conditions of such rights, options, or warrants, including those outstanding on the effective date of this section, may include restrictions or conditions that:
(1) Preclude or limit the exercise, transfer, or receipt of such rights, options, or warrants by any person or persons owning or offering to acquire a specified number or percentage of the outstanding shares or other securities of the corporation or by any transferee or transferees of any such person or persons; or
(2) Invalidate or void such rights, options, or warrants held by any such person or persons or any such transferee or transferees.
Source: SL 2005, ch 239, § 69.
47-1A-625. Form and content of certificates generally.
Shares may but need not be represented by certificates. Unless this chapter or another statute expressly provides otherwise, the rights and obligations of shareholders are identical whether or not their shares are represented by certificates. At a minimum each share certificate shall state on its face:
(1) The name of the issuing corporation and that it is organized under the law of this state;
(2) The name of the person to whom issued; and
(3) The number and class of shares and the designation of the series, if any, the certificate represents.
Source: SL 2005, ch 239, § 70.
47-1A-625.1. Certificate requirements when corporation authorized to issue different classes of shares or different series within a class.
If the issuing corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series, and the authority of the board of directors to determine variations for future series, shall be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge.
Source: SL 2005, ch 239, § 71.
47-1A-625.2. Signatures on certificate--Seal.
Each share certificate shall be signed, either manually or in facsimile, by two officers designated in the bylaws or by the board of directors and may bear the corporate seal or its facsimile. If the person who signed a share certificate no longer holds office when the certificate is issued, the certificate is nevertheless valid.
Source: SL 2005, ch 239, § 72.
47-1A-626. Shares without certificates.
Unless the articles of incorporation or bylaws provide otherwise, the board of directors of a corporation may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. The authorization does not affect shares already represented by certificates until they are surrendered to the corporation.
Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall send the shareholder a written statement of the information required on certificates by §§ 47-1A-625 and 47-1A-625.1, and, if applicable, §§ 47-1A-627 to 47-1A-627.2, inclusive.
Source: SL 2005, ch 239, § 73.
47-1A-627. Restriction on transfer of shares or registration of transfer of shares in articles, bylaws, or agreements--Effect on shares.
The articles of incorporation, bylaws, an agreement among shareholders, or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation. A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction.
Source: SL 2005, ch 239, § 74.
47-1A-627.1. Purposes for which restriction on transfer of shares and registration of transfer of shares authorized--Validity and enforceability of restriction.
A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this section and its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by § 47-1A-626. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction. A restriction on the transfer or registration of transfer of shares is authorized:
(1) To maintain the corporation's status when it is dependent on the number or identity of its shareholders;
(2) To preserve exemptions under federal or state securities law;
(3) For any other reasonable purpose.
Source: SL 2005, ch 239, § 75.
47-1A-627.2. Terms of restriction on transfer or registration of transfer of shares.
A restriction on the transfer or registration of transfer of shares may:
(1) Obligate the shareholder first to offer the corporation or other persons, separately, consecutively, or simultaneously, an opportunity to acquire the restricted shares;
(2) Obligate the corporation or other persons, separately, consecutively, or simultaneously, to acquire the restricted shares;
(3) Require the corporation, the holders of any class of its shares, or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable;
(4) Prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable.
Source: SL 2005, ch 239, § 76.
47-1A-628. Expense of issue.
A corporation may pay the expenses of selling or underwriting its shares, and of organizing or reorganizing the corporation, from the consideration received for shares.
Source: SL 2005, ch 239, § 77.
47-1A-630. Shareholders' preemptive rights.
The shareholders of a corporation have the preemptive right to acquire unissued or treasury shares of a corporation, except, to the extent, if any, that such right is limited or denied in the articles of incorporation. Having preemptive rights means that the following provisions apply except to the extent the articles of incorporation expressly provide otherwise:
(1) The shareholders of the corporation have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the corporation's unissued shares upon the decision of the board of directors to issue them;
(2) A shareholder may waive any preemptive right. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration;
(3) There is no preemptive right with respect to:
(a) Shares issued as compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates;
(b) Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates;
(c) Shares authorized in articles of incorporation that are issued within six months from the effective date of incorporation;
(d) Shares sold otherwise than for money;
(4) Holders of shares of any class without general voting rights, but with preferential rights to distributions or assets, have no preemptive rights with respect to shares of any class;
(5) Holders of shares of any class with general voting rights, but without preferential rights to distributions or assets, have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights;
(6) Shares subject to preemptive rights that are not acquired by shareholders may be issued to any person for a period of one year after being offered to shareholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one year is subject to the shareholders' preemptive rights.
For purposes of this section, the term, shares, includes a security convertible into or carrying a right to subscribe for or acquire shares.
Source: SL 2005, ch 239, § 78.
47-1A-631. Corporation's acquisition of its own shares.
A corporation may acquire its own shares, and shares so acquired constitute authorized but unissued shares. If the articles of incorporation prohibit the reissue of the acquired shares, the number of authorized shares is reduced by the number of shares acquired.
Source: SL 2005, ch 239, § 79.
47-1A-640. Distributions to shareholders authorized--Distribution entitlement date.
A board of directors may authorize, and the corporation may make, distributions to its shareholders subject to restriction by the articles of incorporation and the limitation in § 47-1A-640.1. If the board of directors does not fix the record date for determining shareholders entitled to a distribution, other than one involving a purchase, redemption, or other acquisition of the corporation's shares, it is the date the board of directors authorizes the distribution.
Source: SL 2005, ch 239, § 80.
47-1A-640.1. Distribution to shareholders prohibited if certain financial conditions result.
No distribution may be made if, after giving it effect:
(1) The corporation would not be able to pay its debts as they become due in the usual course of business; or
(2) The corporation's total assets would be less than the sum of its total liabilities plus, unless the articles of incorporation permit otherwise, the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
The board of directors may base a determination that a distribution is not prohibited under this section either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable under the circumstances.
Source: SL 2005, ch 239, § 81.
47-1A-640.2. Factors used to measure effect of distribution.
Except as provided in § 47-1A-640.4, the effect of a distribution under § 47-1A-640.1 is measured:
(1) In the case of distribution by purchase, redemption, or other acquisition of the corporation's shares, as of the earlier of the date money or other property is transferred or debt incurred by the corporation, or the date the shareholder ceases to be a shareholder with respect to the acquired shares;
(2) In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
(3) In all other cases, as of the date the distribution is authorized if the payment occurs within one hundred twenty days after the date of authorization, or the date the payment is made if it occurs more than one hundred twenty days after the date of authorization.
Source: SL 2005, ch 239, § 82.
47-1A-640.3. Indebtedness to shareholder by reason of distribution at parity with indebtedness to general unsecured creditor.
A corporation's indebtedness to a shareholder incurred by reason of a distribution made in accordance with §§ 47-1A-640 to 47-1A-640.5, inclusive, is at parity with the corporation's indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.
Source: SL 2005, ch 239, § 83.
47-1A-640.4. Indebtedness of corporation for purposes of determinations under § 47-1A-640.1.
Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under § 47-1A-640.1 if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to shareholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is actually made.
Source: SL 2005, ch 239, § 84.
47-1A-640.5. Application of provisions in §§ 47-1A-640 to 47-1A-640.4.
The provisions of §§ 47-1A-640 to 47-1A-640.4, inclusive, do not apply to distributions in liquidation under §§ 47-1A-1402 to 47-1A-1501, inclusive.
Source: SL 2005, ch 239, § 85.
47-1A-701. Annual meeting.
A corporation shall hold a meeting of shareholders annually at a time stated in or fixed in accordance with the bylaws. Annual shareholders' meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings shall be held at the corporation' s principal office. The failure to hold an annual meeting at the time stated in or fixed in accordance with a corporation's bylaws does not affect the validity of any corporate action.
Source: SL 2005, ch 239, § 86.
47-1A-702. Special meeting.
A corporation shall hold a special meeting of shareholders:
(1) On call of its board of directors or any persons authorized to do so by the articles of incorporation or bylaws; or
(2) If the holders of at least ten percent of all the votes entitled to be cast on an issue proposed to be considered at the proposed special meeting sign, date, and deliver to the corporation one or more written demands for the meeting describing the purpose or purposes for which it is to be held. However, the articles of incorporation may fix a lower percentage or a higher percentage not exceeding twenty-five percent of all the votes entitled to be cast on any issue proposed to be considered. Unless otherwise provided in the articles of incorporation, a written demand for a special meeting may be revoked by a writing to that effect received by the corporation prior to the receipt by the corporation of demands sufficient in number to require the holding of a special meeting.
If not otherwise fixed under § 47-1A-703 or 47-1A-707, the record date for determining shareholders entitled to demand a special meeting is the date the first shareholder signs the demand. Special shareholders' meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated or fixed in accordance with the bylaws, special meetings shall be held at the corporation's principal office. Only business within the purposes described in the meeting notice required by § 47-1A-705 may be conducted at a special shareholders' meeting.
Source: SL 2005, ch 239, § 87.
47-1A-703. Court-ordered meeting.
The circuit court of the county where a corporation's principal office is located in this state, or, if none in this state, the circuit court of Hughes County, may summarily order a meeting to be held:
(1) On application of any shareholder of the corporation entitled to participate in an annual meeting if an annual meeting was not held within the earlier of six months after the end of the corporation's fiscal year or fifteen months after its last annual meeting; or
(2) On application of a shareholder who signed a demand for a special meeting valid under § 47-1A-702, if:
(a) Notice of the special meeting was not given within thirty days after the date the demand was delivered to the corporation's secretary; or
(b) The special meeting was not held in accordance with the notice.
The court may fix the time and place of the meeting, determine the shares entitled to participate in the meeting, specify a record date for determining shareholders entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting, or direct that the votes represented at the meeting constitute a quorum for action on those matters, and enter other orders necessary to accomplish the purposes of the meeting.
Source: SL 2005, ch 239, § 88; SL 2008, ch 275, § 33.
47-1A-704. Action without meeting.
Action required or permitted by this chapter to be taken at a shareholders' meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action shall be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action, and delivered to the corporation for inclusion in the minutes or filing with the corporate records. If not otherwise fixed under § 47-1A-703 or 47-1A-707, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent under this section. No written consent is effective to take the corporate action referred to therein unless written consents signed by all shareholders entitled to vote on the action are received by the corporation. A written consent may be revoked by a writing to that effect received by the corporation prior to receipt by the corporation of unrevoked written consents signed by all shareholders entitled to vote on the action. A consent signed under this section has the effect of a meeting vote and may be described as such in any document.
Source: SL 2005, ch 239, § 89.
47-1A-704.1. Notice to nonvoting shareholders of action to be taken by unanimous consent of voting shareholders.
If this chapter requires that notice of proposed action be given to nonvoting shareholders and the action is to be taken by unanimous consent of the voting shareholders, the corporation shall give its nonvoting shareholders written notice of the proposed action at least ten days before the action is taken. The notice shall contain or be accompanied by the same material that, under this chapter, would have been required to be sent to nonvoting shareholders in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.
Source: SL 2005, ch 239, § 90.
47-1A-705. Notice of meeting.
Except for the increase of stock and indebtedness when sixty days' notice is required by S.D. Const., Art. XVII, § 8, a corporation shall notify shareholders of the date, time, and place of each annual and special shareholders' meeting no fewer than ten nor more than sixty days before the meeting date. Unless this chapter or the articles of incorporation require otherwise, the corporation is required to give notice only to shareholders entitled to vote at the meeting. Unless this chapter or the articles of incorporation require otherwise, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called. However, notice of a special meeting shall include a description of the purpose or purposes for which the meeting is called. If not otherwise fixed under § 47-1A-703 or 47-1A-707, the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders' meeting is the day before the first notice is delivered to shareholders.
Unless the bylaws require otherwise, if an annual or special shareholders' meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed under § 47-1A-707, notice of the adjourned meeting shall be given under this section to persons who are shareholders as of the new record date.
Source: SL 2005, ch 239, § 91.
47-1A-706. Waiver of notice.
A shareholder may waive any notice required by this chapter, the articles of incorporation, or bylaws before or after the date and time stated in the notice. The waiver shall be in writing, shall be signed by the shareholder entitled to the notice, and shall be delivered to the corporation for inclusion in the minutes or filing with the corporate records.
A shareholder's attendance at a meeting:
(1) Waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting;
(2) Waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.
Source: SL 2005, ch 239, § 92.
47-1A-707. Record date.
The bylaws may fix or provide the manner of fixing the record date for one or more voting groups in order to determine the shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote, or to take any other action. If the bylaws do not fix or provide for fixing a record date, the board of directors of the corporation may fix a future date as the record date. A record date fixed under this section may not be more than seventy days before the meeting or action requiring a determination of shareholders. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than one hundred twenty days after the date fixed for the original meeting.
If a court orders a meeting adjourned to a date more than one hundred twenty days after the date fixed for the original meeting, it may provide that the original record date continues in effect or it may fix a new record date.
Source: SL 2005, ch 239, § 93.
47-1A-708. Conduct of the meeting.
At each meeting of shareholders, a chair shall preside. The chair shall be appointed as provided in the bylaws or, in the absence of such provision, by the board. The chair, unless the articles of incorporation or bylaws provide otherwise, shall determine the order of business and may establish rules for the conduct of the meeting. Any rules adopted for, and the conduct of, the meeting shall be fair to shareholders. The chair of the meeting shall announce at the meeting when the polls close for each matter voted upon. If no announcement is made, the polls are deemed to have closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies, or votes nor any revocations or changes thereto may be accepted.
Source: SL 2005, ch 239, § 94.
47-1A-709 . Shareholders' meeting--Remote communication--Requirements.
If authorized by the board of directors in its sole discretion and subject to any guidelines and procedures adopted by the board of directors, shareholders and proxies of shareholders not physically present at a meeting of shareholders may participate in the meeting by means of remote communication.
If shareholders and proxies of shareholders participate in a meeting of shareholders by means of remote communication, the participating shareholders and proxies of shareholders are deemed to be present in person and to vote at the meeting of shareholders, whether the meeting is held at a designated place or solely by means of remote communication or at a designated place and by remote communication, if:
(1) The corporation has implemented reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a shareholder or proxy of a shareholder; and
(2) The corporation has implemented reasonable measures to provide shareholders and proxies of shareholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to communicate and to read or hear the proceedings of the meeting concurrently with the proceedings.
Source: SL 2020, ch 198, § 1.
47-1A-720. Shareholders' list for meeting.
After fixing a record date for a meeting, a corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of a shareholders' meeting. The list shall be arranged by voting group, and within each voting group by class or series of shares, and show the address of and number of shares held by each shareholder. The shareholders' list shall be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder, a shareholder's agent, or an attorney is entitled on written demand to inspect and, subject to the requirements of § 47-1A-1602.3, to copy the list, during regular business hours and at the person's expense, during the period it is available for inspection. The corporation shall make the shareholders' list available at the meeting, and any shareholder, shareholder's agent, or attorney is entitled to inspect the list at any time during the meeting or any adjournment. If the corporation refuses to allow any shareholder, or the shareholder's agent or attorney to inspect the shareholders' list before or at the meeting, or copy the list as permitted by this section, the circuit court of the county where a corporation's principal office is located, or, if none in this state, the circuit court of Hughes County, on application of the shareholder, may summarily order the inspection or copying at the corporation's expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete. Refusal or failure to prepare or make available the shareholders' list does not affect the validity of action taken at the meeting.
Source: SL 2005, ch 239, § 95; SL 2008, ch 275, § 34.
47-1A-721. Voting entitlement of shares.
Except as provided in §§ 47-1A-721.1 and 47-1A-721.2 or unless the articles of incorporation provide otherwise, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a shareholders' meeting. Only shares are entitled to vote.
Source: SL 2005, ch 239, § 96.
47-1A-721.1. Limitation on voting entitlement of shares when owned by a second corporation--Shares held in fiduciary capacity.
Absent special circumstances, the shares of a corporation are not entitled to vote if they are owned, directly or indirectly, by a second corporation, domestic or foreign, and the first corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation. This section does not limit the power of a corporation to vote any shares, including its own shares, held by it in a fiduciary capacity.
Source: SL 2005, ch 239, § 97.
47-1A-721.2. Voting entitlement of redeemable shares.
Redeemable shares are not entitled to vote after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares.
Source: SL 2005, ch 239, § 98.
47-1A-722. Voting shares in person or by proxy--Appointment of proxy.
A shareholder may vote the shareholder's shares in person or by proxy. Any shareholder or the shareholder's agent or attorney-in-fact may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form, or by an electronic transmission. An electronic transmission shall contain or shall be accompanied by information from which one can determine that the shareholder or the shareholder's agent or attorney-in-fact authorized the transmission.
Source: SL 2005, ch 239, § 99.
47-1A-722.1. Effective date and duration of appointment of proxy.
An appointment of a proxy is effective when a signed appointment form or an electronic transmission of the appointment is received by the inspector of election or the officer or agent of the corporation authorized to tabulate votes. An appointment is valid for eleven months unless a longer period is expressly provided in the appointment form.
Source: SL 2005, ch 239, § 100.
47-1A-722.2. Appointment of proxy revocable--Exception.
An appointment of a proxy is revocable unless the appointment form or electronic transmission states that it is irrevocable and the appointment is coupled with an interest. Appointments coupled with an interest include the appointment of:
(1) A pledgee;
(2) A person who purchased or agreed to purchase the shares;
(3) A creditor of the corporation who extended it credit under terms requiring the appointment;
(4) An employee of the corporation whose employment contract requires the appointment; or
(5) A party to a voting agreement created under § 47-1A-731.
An appointment made irrevocable under this section is revoked when the interest with which it is coupled is extinguished.
Source: SL 2005, ch 239, § 101.
47-1A-722.3. Death or incapacity of shareholder appointing proxy.
The death or incapacity of the shareholder appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises authority under the appointment.
Source: SL 2005, ch 239, § 102.
47-1A-722.4. Transferee for value of shares subject to irrevocable appointment of proxy--Revocation.
A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if the transferee did not know of its existence when the transferee acquired the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares or on the information statement for shares without certificates.
Source: SL 2005, ch 239, § 103.
47-1A-722.5. Acceptance of proxy's vote or other action--Limitations.
Subject to §§ 47-1A-724 and 47-1A-724.1 and to any express limitation on the proxy's authority stated in the appointment form or electronic transmission, a corporation is entitled to accept the proxy's vote or other action as that of the shareholder making the appointment.
Source: SL 2005, ch 239, § 104.
47-1A-723. Shares held by nominees.
A corporation may establish a procedure by which the beneficial owner of shares that are registered in the name of a nominee is recognized by the corporation as the shareholder. The extent of this recognition may be determined in the procedure. The procedure may set forth:
(1) The types of nominees to which it applies;
(2) The rights or privileges that the corporation recognizes in a beneficial owner;
(3) The manner in which the procedure is selected by the nominee;
(4) The information that must be provided when the procedure is selected;
(5) The period for which selection of the procedure is effective; and
(6) Other aspects of the rights and duties created.
Source: SL 2005, ch 239, § 105.
47-1A-724. Corporation's acceptance of votes.
If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation if acting in good faith is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder. If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the name of its shareholder, the corporation if acting in good faith is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if:
(1) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;
(2) The name signed purports to be that of a personal representative, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
(3) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
(4) The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment;
(5) Two or more persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all the co-owners.
Source: SL 2005, ch 239, § 106.
47-1A-724.1. Corporation's rejection of votes--Liability for acceptance or rejection--Validity of corporate action.
The corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section or § 47-1A-722 are not liable in damages to the shareholder for the consequences of the acceptance or rejection. Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.
Source: SL 2005, ch 239, § 107.
47-1A-725. Quorum and voting requirements for voting groups.
Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the articles of incorporation or this chapter provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or this chapter require a greater number of affirmative votes. An amendment of articles of incorporation adding, changing, or deleting a quorum or voting requirement for a voting group greater than specified in this section is governed by § 47-1A-727.
Source: SL 2005, ch 239, § 108.
47-1A-726. Action by single and multiple voting groups.
If the articles of incorporation or this chapter provide for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group as provided in § 47-1A-725. If the articles of incorporation or this chapter provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately as provided in § 47-1A-725. Action may be taken by one voting group on a matter even though no action is taken by another voting group entitled to vote on the matter.
Source: SL 2005, ch 239, § 109.
47-1A-727. Greater quorum or voting requirements.
The articles of incorporation may provide for a greater quorum or voting requirement for shareholders, or voting groups of shareholders, than is provided for by this chapter. An amendment to the articles of incorporation that adds, changes, or deletes a greater quorum or voting requirement shall meet the same quorum requirement and shall be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.
Source: SL 2005, ch 239, § 110.
47-1A-728. Cumulative voting for directors.
Shareholders may cumulate their votes for directors. The right to cumulate votes for directors means that the shareholders are entitled to multiply the number of votes that they are entitled to cast by the number of directors for whom they are entitled to vote and cast the product for a single candidate or distribute the product among two or more candidates.
Source: SL 2005, ch 239, § 111; SL 2010, ch 218, § 16.
47-1A-729. Inspectors of election.
A corporation having any shares listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association shall, and any other corporation may, appoint one or more inspectors to act at a meeting of shareholders and make a written report of the inspectors' determinations. Each inspector shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of the inspector's ability. The inspectors shall:
(1) Ascertain the number of shares outstanding and the voting power of each;
(2) Determine the shares represented at a meeting;
(3) Determine the validity of proxies and ballots;
(4) Count all votes; and
(5) Determine the result.
An inspector may be an officer or employee of the corporation.
Source: SL 2005, ch 239, § 112.
47-1A-730. Voting trusts--Creation--Effective date and duration.
One or more shareholders may create a voting trust, conferring on a trustee the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust, which may include anything consistent with its purpose, and transferring their shares to the trustee. When a voting trust agreement is signed, the trustee shall prepare a list of the names and addresses of all voting trust beneficial owners, together with the number and class of shares each transferred to the trust, and deliver copies of the list and agreement to the corporation's principal office.
A voting trust becomes effective on the date the first shares subject to the trust are registered in the trustee's name. Any limit on the duration of a voting trust must be set forth in the voting trust. A voting trust that became effective between July 1, 2005, and June 30, 2015, remains governed by the ten-year limit then in effect, unless the voting trust is amended to provide otherwise by unanimous agreement of the parties to the voting trust.
Source: SL 2005, ch 239, § 113; SL 2015, ch 228, § 1.
47-1A-730.1. Extension of voting trust for additional terms--Agreement.
All or some of the parties to a voting trust may extend it for additional terms by signing written consent to the extension. An extension is valid for the duration stated in the extension agreement and is valid from the date the first shareholder signs the extension agreement. The voting trustee shall deliver copies of the extension agreement and list of all voting trust beneficial owners to the corporation's principal office. An extension agreement binds only those parties signing it.
Source: SL 2005, ch 239, § 114; SL 2015, ch 228, § 2.
47-1A-731. Voting agreements.
Two or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for this purpose. A voting agreement created under this section is not subject to the provisions of §§ 47-1A-730 and 47-1A-730.1. A voting agreement created under this section is specifically enforceable.
Source: SL 2005, ch 239, § 115.
47-1A-732. Shareholder agreements--Effectiveness.
An agreement among the shareholders of a corporation that complies with this section is effective among the shareholders and the corporation even though it is inconsistent with one or more other provisions of this chapter in that it:
(1) Eliminates the board of directors or restricts the discretion or powers of the board of directors;
(2) Governs the authorization or making of distributions whether or not in proportion to ownership of shares, subject to the limitations in §§ 47-1A-640 to 47-1A-640.5, inclusive;
(3) Establishes who shall be directors or officers of the corporation, or their terms of office or manner of selection or removal;
(4) Governs, in general or in regard to specific matters, the exercise or division of voting power by or between the shareholders and directors or by or among any of them, including use of weighted voting rights or director proxies;
(5) Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer, or employee of the corporation or among any of them;
(6) Transfers to one or more shareholders or other persons all or part of the authority to exercise the corporate powers or to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or shareholders;
(7) Requires dissolution of the corporation at the request of one or more of the shareholders or upon the occurrence of a specified event or contingency; or
(8) Otherwise governs the exercise of the corporate powers or the management of the business and affairs of the corporation or the relationship among the shareholders, the directors, and the corporation, or among any of them, and is not contrary to public policy.
Source: SL 2005, ch 239, § 116.
47-1A-732.1. Form, approval, amendment, and term of shareholder agreements.
Any agreement authorized by § 47-1A-732 shall be:
(1) Set forth in the articles of incorporation or bylaws and approved by all persons who are shareholders at the time of the agreement, or in a written agreement that is signed by all persons who are shareholders at the time of the agreement and is made known to the corporation;
(2) Subject to amendment only by all persons who are shareholders at the time of the amendment, unless the agreement provides otherwise; and
(3) Valid for ten years, unless the agreement provides otherwise.
Source: SL 2005, ch 239, § 117.
47-1A-732.2. Existence of agreement to be noted on certificate--Right of rescission on purchase of shares without notice of agreement.
The existence of an agreement authorized by § 47-1A-732 shall be noted conspicuously on the front or back of each certificate for outstanding shares or on the information statement required by § 47-1A-626. If, at the time of the agreement, the corporation has shares outstanding represented by certificates, the corporation shall recall the outstanding certificates and issue substitute certificates that comply with this section. The failure to note the existence of the agreement on the certificate or information statement does not affect the validity of the agreement or any action taken pursuant to it. Any purchaser of shares who, at the time of purchase, did not have knowledge of the existence of the agreement is entitled to rescission of the purchase. A purchaser is deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate or information statement for the shares in compliance with this section and, if the shares are not represented by a certificate, the information statement is delivered to the purchaser at or prior to the time of purchase of the shares. An action to enforce the right of rescission authorized by this section must be commenced within the earlier of ninety days after discovery of the existence of the agreement or two years after the time of purchase of the shares.
Source: SL 2005, ch 239, § 118.
47-1A-732.3. Limitations on effectiveness of agreement--Amendment to articles of incorporation or bylaws.
An agreement authorized by § 47-1A-732 shall cease to be effective when shares of the corporation are listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association. If the agreement ceases to be effective for any reason, the board of directors may, if the agreement is contained or referred to in the corporation's articles of incorporation or bylaws, adopt an amendment to the articles of incorporation or bylaws, without shareholder action, to delete the agreement and any references to it.
Source: SL 2005, ch 239, § 119.
47-1A-732.4. Liability of directors limited to extent discretion or powers limited by agreement.
An agreement authorized by § 47-1A-732 that limits the discretion or powers of the board of directors shall relieve the directors of, and impose upon the person or persons in whom such discretion or powers are vested, liability for acts or omissions imposed by law on directors to the extent that the discretion or powers of the directors are limited by the agreement.
Source: SL 2005, ch 239, § 120.
47-1A-732.5. Agreement not grounds for imposition of personal liability on shareholder for acts or debts of corporation.
The existence or performance of an agreement authorized by § 47-1A-732 is not a ground for imposing personal liability on any shareholder for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.
Source: SL 2005, ch 239, § 121.
47-1A-732.6. Incorporators or subscribers for shares to act as shareholders with respect to agreement.
Incorporators or subscribers for shares may act as shareholders with respect to an agreement authorized by § 47-1A-732 if no shares have been issued when the agreement is made.
Source: SL 2005, ch 239, § 122.
47-1A-740. Subpart definitions.
Terms used in §§ 47-1A-741 to 47-1A-747, inclusive, mean:
(1) "Derivative proceeding," a civil suit in the right of a domestic corporation or, to the extent provided in § 47-1A-747, in the right of a foreign corporation;
(2) "Shareholder," includes a beneficial owner whose shares are held in a voting trust or held by a nominee on the beneficial owner's behalf.
Source: SL 2005, ch 239, § 123.
47-1A-741. Standing.
No shareholder may commence or maintain a derivative proceeding unless the shareholder:
(1) Was a shareholder of the corporation at the time of the act or omission complained of or became a shareholder through transfer by operation of law from one who was a shareholder at that time; and
(2) Fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.
Source: SL 2005, ch 239, § 124.
47-1A-742. Demand.
No shareholder may commence a derivative proceeding until:
(1) A written demand has been made upon the corporation to take suitable action; and
(2) Ninety days have expired from the date the demand was made unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless irreparable injury to the corporation would result by waiting for the expiration of the ninety-day period.
Source: SL 2005, ch 239, § 125.
47-1A-743. Stay of proceedings.
If the corporation commences an inquiry into the allegations made in the demand or complaint, the court may stay any derivative proceeding for such period as the court deems appropriate.
Source: SL 2005, ch 239, § 126.
47-1A-744. Dismissal upon determination that maintenance of proceeding not in best interests of corporation.
A derivative proceeding shall be dismissed by the court on motion by the corporation if one of the groups specified in §§ 47-1A-744.1 or 47-1A-744.5 has determined in good faith after conducting a reasonable inquiry upon which its conclusions are based that the maintenance of the derivative proceeding is not in the best interests of the corporation.
Source: SL 2005, ch 239, § 127.
47-1A-744.1. Groups authorized to make determination that maintenance of proceeding not in best interest of corporation.
Unless a panel is appointed pursuant to § 47-1A-744.5, the determination in § 47-1A-744 shall be made by:
(1) A majority vote of independent directors present at a meeting of the board of directors if the independent directors constitute a quorum; or
(2) A majority vote of a committee consisting of two or more independent directors appointed by majority vote of independent directors present at a meeting of the board of directors, whether or not such independent directors constituted a quorum.
Source: SL 2005, ch 239, § 128.
47-1A-744.2. Factors not pertinent to determining independence of directors.
None of the following is, by itself, cause for a director to be considered not independent for purposes of §§ 47-1A-744 to 47-1A-744.5, inclusive:
(1) The nomination or election of the director by persons who are defendants in the derivative proceeding or against whom action is demanded;
(2) The naming of the director as a defendant in the derivative proceeding or as a person against whom action is demanded; or
(3) The approval by the director of the act being challenged in the derivative proceeding or demand if the act resulted in no personal benefit to the director.
Source: SL 2005, ch 239, § 129.
47-1A-744.3. Proceeding commenced after rejection of shareholder demand--Complaint requirements.
If a derivative proceeding is commenced after a determination has been made rejecting a demand by a shareholder, the complaint shall allege with particularity facts establishing either (1) that a majority of the board of directors did not consist of independent directors at the time the determination was made, or (2) that the requirements of § 47-1A-744 have not been met.
Source: SL 2005, ch 239, § 130.
47-1A-744.4. Burden of proof dependent on whether or not board consists of independent directors.
If a majority of the board of directors does not consist of independent directors at the time the determination is made, the corporation shall have the burden of proving that the requirements of § 47-1A-744 have been met. If a majority of the board of directors consists of independent directors at the time the determination is made, the plaintiff has the burden of proving that the requirements of § 47-1A-744 have not been met.
Source: SL 2005, ch 239, § 131.
47-1A-744.5. Appointment of panel to make determination--Burden of proof.
The court may appoint a panel of one or more independent persons upon motion by the corporation to make a determination whether the maintenance of the derivative proceeding is in the best interests of the corporation. In such case, the plaintiff has the burden of proving that the requirements of § 47-1A-744 have not been met.
Source: SL 2005, ch 239, § 132.
47-1A-745. Discontinuance or settlement.
A derivative proceeding may not be discontinued or settled without the court's approval. If the court determines that a proposed discontinuance or settlement will substantially affect the interests of the corporation's shareholders or a class of shareholders, the court shall direct that notice be given to the shareholders affected.
Source: SL 2005, ch 239, § 133.
47-1A-746. Payment of expenses.
On termination of the derivative proceeding the court may:
(1) Order the corporation to pay the plaintiff's reasonable expenses, including counsel fees, incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation;
(2) Order the plaintiff to pay any defendant's reasonable expenses. including counsel fees, incurred in defending the proceeding if it finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose; or
(3) Order a party to pay an opposing party's reasonable expenses, including counsel fees, incurred because of the filing of a pleading, motion or other paper, if it finds that the pleading, motion, or other paper was not well grounded in fact, after reasonable inquiry, or warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law and was interposed for an improper purpose, such as to harass or cause unnecessary delay or needless increase in the cost of litigation.
Source: SL 2005, ch 239, § 134.
47-1A-747. Applicability to foreign corporations.
In any derivative proceeding in the right of a foreign corporation, the matters covered by §§ 47-1A-740 to 47-1A-747, inclusive, shall be governed by the laws of the jurisdiction of incorporation of the foreign corporation except for §§ 47-1A-743, 47-1A-745, and 47-1A-746.
Source: SL 2005, ch 239, § 135.
47-1A-801. Requirement for and duties of board of directors.
Except as provided in §§ 47-1A-732 to 47-1A-732.6, inclusive, each corporation must have a board of directors. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed by or under the direction of, its board of directors, subject to any limitation set forth in the articles of incorporation or in an agreement authorized under § 47-1A-732.
Source: SL 2005, ch 239, § 136.
47-1A-802. Qualifications of directors.
The articles of incorporation or bylaws may prescribe qualifications for directors. A director need not be a resident of this state or a shareholder of the corporation unless the articles of incorporation or bylaws so prescribe.
Source: SL 2005, ch 239, § 137.
47-1A-803. Number and election of directors.
A board of directors must consist of one or more individuals, with the number specified in or fixed in accordance with the articles of incorporation or bylaws. The number of directors may be increased or decreased from time to time by amendment to, or in the manner provided in, the articles of incorporation or the bylaws. Directors are elected at the first annual shareholders' meeting and at each annual meeting thereafter unless their terms are staggered under § 47-1A-806.
Source: SL 2005, ch 239, § 138.
47-1A-804. Election of directors by certain classes of shareholders.
If the articles of incorporation authorize dividing the shares into classes, the articles may also authorize the election of all or a specified number of directors by the holders of one or more authorized classes of shares. A class of shares entitled to elect one or more directors is a separate voting group for purposes of the election of directors.
Source: SL 2005, ch 239, § 139.
47-1A-805. Terms of directors generally.
The terms of the initial directors of a corporation expire at the first shareholders' meeting at which directors are elected. The term of any other director expires at the next annual shareholders' meeting following the director's election unless the terms of the directors are staggered under § 47-1A-806. A decrease in the number of directors does not shorten an incumbent director's term. The term of a director elected to fill a vacancy expires at the next shareholders' meeting at which directors are elected. Despite the expiration of a director's term, a director continues to serve until a successor is elected and qualifies or until there is a decrease in the number of directors.
Source: SL 2005, ch 239, § 140.
47-1A-806. Staggered terms for directors.
The articles of incorporation may provide for staggering the terms of directors by dividing the total number of directors into two or three groups, with each group containing as close to one-half or one-third of the total as possible. In that event, the terms of directors in the first group expire at the first annual shareholders' meeting after their election, the terms of the second group expire at the second annual shareholders' meeting after their election, and the terms of the third group, if any, expire at the third annual shareholders' meeting after their election. At each annual shareholders' meeting held thereafter, directors shall be chosen for a term of two years or three years, as the case may be, to succeed those whose terms expire.
Source: SL 2005, ch 239, § 141.
47-1A-807. Resignation of directors.
A director may resign at any time by delivering written notice to the board of directors, or its chair, or to the corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date.
Source: SL 2005, ch 239, § 142.
47-1A-808. Removal of directors by shareholders.
The shareholders may remove one or more directors, with or without cause, unless the articles of incorporation provide that directors may be removed only for cause. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove that director.
If cumulative voting is authorized, a director may not be removed if the number of votes sufficient to elect that director under cumulative voting is voted against removal. If cumulative voting is not authorized, a director may be removed only if the number of votes cast to remove that director exceeds the number of votes cast not to remove that director.
A director may be removed by the shareholders only at a meeting called for the purpose of removing that director and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director.
Source: SL 2005, ch 239, § 143.
47-1A-809. Removal of directors by judicial proceeding.
The circuit court of the county where a corporation's principal office is located, or, if none in this state, the circuit court of Hughes County, may remove a director of the corporation from office in a proceeding commenced by or in the right of the corporation if the court finds that (1) the director engaged in fraudulent conduct with respect to the corporation or its shareholders, grossly abused the position of director, or intentionally inflicted harm on the corporation; and (2) considering the director's course of conduct and the inadequacy of other available remedies, removal would be in the best interest of the corporation.
A shareholder proceeding on behalf of the corporation under this section shall comply with all of the requirements of §§ 47-1A-740 to 47-1A-747, inclusive, except subdivision 47-1A-741(1).
The court, in addition to removing the director, may bar the director from reelection for a period prescribed by the court. Nothing in this section limits the equitable powers of the court to order other relief.
Source: SL 2005, ch 239, § 144; SL 2008, ch 275, § 35.
47-1A-810. Vacancy on board.
Unless the articles of incorporation provide otherwise, if a vacancy occurs on a board of directors, including a vacancy resulting from an increase in the number of directors:
(1) The shareholders may fill the vacancy;
(2) The board of directors may fill the vacancy; or
(3) If the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.
If the vacant office was held by a director elected by a voting group of shareholders, only the holders of shares of that voting group are entitled to vote to fill the vacancy if it is filled by the shareholders.
A vacancy that will occur at a specific later date, by reason of a resignation effective at a later date under § 47-1A-807 or otherwise, may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.
Source: SL 2005, ch 239, § 145.
47-1A-811. Compensation of directors.
Unless the articles of incorporation or bylaws provide otherwise, the board of directors may fix the compensation of directors.
Source: SL 2005, ch 239, § 146.
47-1A-820. Meetings.
The board of directors may hold regular or special meetings in or out of this state. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.
Source: SL 2005, ch 239, § 147.
47-1A-821. Action without meeting.
Except to the extent that the articles of incorporation or bylaws require that action by the board of directors be taken at a meeting, action required or permitted by this chapter to be taken by the board of directors may be taken without a meeting if each director signs a consent describing the action to be taken and delivers it to the corporation.
Action taken under this section is the act of the board of directors when one or more consents signed by all the directors are delivered to the corporation. The consent may specify the time at which the action taken thereunder is to be effective. A director's consent may be withdrawn by a revocation signed by the director and delivered to the corporation prior to delivery to the corporation of unrevoked written consents signed by all the directors.
A consent signed under this section has the effect of action taken at a meeting of the board of directors and may be described as such in any document.
Source: SL 2005, ch 239, § 148.
47-1A-822. Notice of meeting.
Unless the articles of incorporation or bylaws provide otherwise, regular meetings of the board of directors may be held without notice of the date, time, place, or purpose of the meeting.
Unless the articles of incorporation or bylaws provide for a longer or shorter period, special meetings of the board of directors must be preceded by at least two days' notice of the date, time, and place of the meeting. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or bylaws.
Source: SL 2005, ch 239, § 149.
47-1A-823. Waiver of notice.
A director may waive any notice required by this chapter, the articles of incorporation, or bylaws before or after the date and time stated in the notice. Except as provided by this section, the waiver must be in writing, signed by the director entitled to the notice, and filed with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting, or promptly upon arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.
Source: SL 2005, ch 239, § 150.
47-1A-824. Quorum and voting.
Unless the articles of incorporation or bylaws require a greater number or unless otherwise specifically provided in this chapter, a quorum of a board of directors consists of:
(1) A majority of the fixed number of directors if the corporation has a fixed board size; or
(2) A majority of the number of directors prescribed, or if no number is prescribed the number in office immediately before the meeting begins, if the corporation has a variable-range size board.
The articles of incorporation or bylaws may authorize a quorum of a board of directors to consist of no fewer than one-third of the fixed or prescribed number of directors determined under this section. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless the articles of incorporation or bylaws require the vote of a greater number of directors.
Source: SL 2005, ch 239, § 151.
47-1A-824.1. Director presence assent to action taken--Exceptions.
A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken is deemed to have assented to the action taken unless:
(1) The director objects at the beginning of the meeting, or promptly upon arrival, to holding it or transacting business at the meeting;
(2) The director's dissent or abstention from the action taken is entered in the minutes of the meeting; or
(3) The director delivers written notice of dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in favor of the action taken.
Source: SL 2005, ch 239, § 152.
47-1A-825. Committees--Creation--Appointment of members.
Unless this chapter, the articles of incorporation, or the bylaws provide otherwise, a board of directors may create one or more committees and appoint one or more members of the board of directors to serve on any such committee. Unless the provisions of this chapter otherwise provides, the creation of a committee and appointment of members to it must be approved by the greater of a majority of all the directors in office when the action is taken or the number of directors required by the articles of incorporation or bylaws to take action under § 47-1A-824.1.
Sections 47-1A-820 to 47-1A-824.1, inclusive, apply both to committees of the board and to their members.
Source: SL 2005, ch 239, § 153.
47-1A-825.1. Powers of committees.
To the extent specified by the board of directors or in the articles of incorporation or bylaws, each committee may exercise the powers of the board of directors under § 47-1A-801. However, a committee may not:
(1) Authorize or approve distributions, except according to a formula or method, or within limits, prescribed by the board of directors;
(2) Approve or propose to shareholders action that this chapter requires be approved by shareholders;
(3) Fill vacancies on the board of directors or, subject to § 47-1A-825.3, on any of its committees; or
(4) Adopt, amend, or repeal bylaws.
Source: SL 2005, ch 239, § 154.
47-1A-825.2. Acts relating to committees not compliance by director with standards of conduct.
The creation of, delegation of authority to, or action by, a committee does not alone constitute compliance by a director with the standards of conduct described in §§ 47-1A-830 and 47-1A-830.1.
Source: SL 2005, ch 239, § 155.
47-1A-825.3. Absent or disqualified committee member--Appointment of alternate member.
The board of directors may appoint one or more directors as alternate members of any committee to replace any absent or disqualified member during the member's absence or disqualification. Unless the articles of incorporation or the bylaws or the resolution creating the committee provide otherwise, in the event of the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, unanimously, may appoint another director to act in place of the absent or disqualified member.
Source: SL 2005, ch 239, § 156.
47-1A-830. Standards of conduct for directors.
Each member of the board of directors, when discharging the duties of a director, shall act in good faith and in a manner the director reasonably believes to be in the best interests of the corporation. The members of the board of directors or a committee of the board, when becoming informed in connection with their decision-making function or devoting attention to their oversight function, shall discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances.
Source: SL 2005, ch 239, § 157.
47-1A-830.1. Director reliance on performance or information supplied by specified persons.
In discharging board or committee duties, a director, who does not have knowledge that makes reliance unwarranted, is entitled to rely on the performance by any of the persons specified in subdivision (1) or subdivision (3) to whom the board may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board's functions that are delegable under applicable law.
In discharging board or committee duties, a director, who does not have knowledge that makes reliance unwarranted, is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by any of the following persons specified in subdivisions (1) to (3), inclusive.
A director is entitled to rely, in accordance with this section, on:
(1) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided;
(2) Legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the director reasonably believes are matters within the particular person's professional or expert competence or as to which the particular person merits confidence; or
(3) A committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.
Source: SL 2005, ch 239, § 158.
47-1A-831. Standards of liability for directors.
A director is not liable to the corporation or its shareholders for any decision to take or not to take action, or any failure to take any action, as a director, unless the party asserting liability in a proceeding establishes that:
(1) Any provision in the articles of incorporation authorized by subdivision 47-1A-202.1(4) or the protection afforded by §§ 47-1A-861 and 47-1A-861.1 for action taken in compliance with §§ 47-1A-862 to 47-1A-862.3, inclusive, or §§ 47-1A-863 to 47-1A-863.3, inclusive, if interposed as a bar to the proceeding by the director, does not preclude liability; and
(2) The challenged conduct consisted or was the result of:
(a) Action not in good faith; or
(b) A decision:
(i) Which the director did not reasonably believe to be in the best interests of the corporation; or
(ii) As to which the director was not informed to an extent the director reasonably believed appropriate in the circumstances; or
(c) A lack of objectivity due to the director's familial, financial, or business relationship with, or a lack of independence due to the director's domination or control by, another person having a material interest in the challenged conduct:
(i) Which relationship or which domination or control could reasonably be expected to have affected the director's judgment respecting the challenged conduct in a manner adverse to the corporation; and
(ii) After a reasonable expectation to such effect has been established, the director has not established that the challenged conduct was reasonably believed by the director to be in the best interests of the corporation; or
(d) A sustained failure of the director to devote attention to ongoing oversight of the business and affairs of the corporation, or a failure to devote timely attention, by making, or causing to be made, appropriate inquiry, when particular facts and circumstances of significant concern materialize that would alert a reasonably attentive director to the need therefor; or
(e) Receipt of a financial benefit to which the director was not entitled or any other breach of the director's duties to deal fairly with the corporation and its shareholders that is actionable under applicable law.
Source: SL 2005, ch 239, § 159.
47-1A-831.1. Specific burdens when seeking specified money damages or payment.
The party seeking to hold the director liable:
(1) For money damages, also has the burden of establishing that:
(a) Harm to the corporation or its shareholders has been suffered; and
(b) The harm suffered was proximately caused by the director's challenged conduct; or
(2) For other money payment under a legal remedy, such as compensation for the unauthorized use of corporate assets, also has whatever persuasion burden may be called for to establish that the payment sought is appropriate in the circumstances; or
(3) For other money payment under an equitable remedy, such as profit recovery by or disgorgement to the corporation, also has whatever persuasion burden may be called for to establish that the equitable remedy sought is appropriate in the circumstances.
Source: SL 2005, ch 239, § 160.
47-1A-831.2. Limitations on the effect of §§ 47-1A-831 and 47-1A-831.1.
Nothing contained in §§ 47-1A-831 and 47-1A-831.1:
(1) In any instance where fairness is at issue, such as consideration of the fairness of a transaction to the corporation under subdivision 47-1A-861.1(3), alters the burden of proving the fact or lack of fairness otherwise applicable;
(2) Alters the fact or lack of liability of a director under another section of this chapter, such as the provisions governing the consequences of an unlawful distribution under §§ 47-1A-833 and 47-1A-833.1, or a transactional interest under §§ 47-1A-861 and 47-1A-861.1; or
(3) Affects any rights to which the corporation or a shareholder may be entitled under another statute of this state or the United States.
Source: SL 2005, ch 239, § 161.
47-1A-833. Directors' liability for unlawful distributions.
A director who votes for or assents to a distribution in excess of what may be authorized and made pursuant to § 47-1A-640 or 47-1A-1409 is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating § 47-1A-640 or 47-1A-1409 if the party asserting liability establishes that when taking the action the director did not comply with §§ 47-1A-830 and 47-1A-830.1. A proceeding to enforce the liability of a director under this section is barred unless it is commenced within two years after the date:
(1) On which the effect of the distribution was measured under § 47-1A-640.2 or 47-1A-640.4;
(2) As of which the violation of § 47-1A-640 occurred as the consequence of disregard of a restriction in the articles of incorporation; or
(3) On which the distribution of assets to shareholders under § 47-1A-1409 was made.
Source: SL 2005, ch 239, § 162.
47-1A-833.1. Contribution or recoupment--Limitation of action.
A director held liable under § 47-1A-833 for an unlawful distribution is entitled to:
(1) Contribution from every other director who could be held liable under § 47-1A-833 for the unlawful distribution; and
(2) Recoupment from each shareholder of the pro-rata portion of the amount of the unlawful distribution the shareholder accepted, knowing the distribution was made in violation of § 47-1A-640 or 47-1A-1409.
A proceeding to enforce contribution or recoupment under this section is barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under § 47-1A-833.
Source: SL 2005, ch 239, § 163.
47-1A-840. Officers.
A corporation has the officers described in its bylaws or appointed by the board of directors in accordance with the bylaws. The board of directors may elect individuals to fill one or more offices of the corporation. An officer may appoint one or more officers if authorized by the bylaws or the board of directors. The bylaws or the board of directors shall assign to one of the officers responsibility for preparing the minutes of the directors' and shareholders' meetings and for maintaining and authenticating the records of the corporation required to be kept under §§ 47-1A-1601 and 47-1A-1601.1. The same individual may simultaneously hold more than one office in a corporation.
Source: SL 2005, ch 239, § 164.
47-1A-841. Duties of officers.
Each officer has the authority, and shall perform the duties, set forth in the bylaws or, to the extent consistent with the bylaws, the duties prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties of other officers.
Source: SL 2005, ch 239, § 165.
47-1A-842. Standards of conduct for officers.
An officer, when performing in such capacity, shall act:
(1) In good faith;
(2) With the care that a person in a like position would reasonably exercise under similar circumstances; and
(3) In a manner the officer reasonably believes to be in the best interests of the corporation.
Source: SL 2005, ch 239, § 166.
47-1A-842.1. Reliance on performance of or information supplied by specified persons authorized in discharge of duties.
In discharging those duties, an officer, who does not have knowledge that makes reliance unwarranted, is entitled to rely on:
(1) The performance of properly delegated responsibilities by one or more employees of the corporation whom the officer reasonably believes to be reliable and competent in performing the responsibilities delegated; or
(2) Information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by one or more employees of the corporation whom the officer reasonably believes to be reliable and competent in the matters presented or by legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the officer reasonably believes are matters within the particular person's professional or expert competence or as to which the particular person merits confidence.
Source: SL 2005, ch 239, § 167.
47-1A-842.2. Liability of officer.
An officer is not liable to the corporation or its shareholders for any decision to take or not to take action, or any failure to take any action, as an officer, if the duties of the office are performed in compliance with §§ 47-1A-842 and 47-1A-842.1. Whether an officer who does not comply with this section is liable depends in such instance on applicable law, including those principles of §§ 47-1A-831 to 47-1A-831.2, inclusive, that have relevance.
Source: SL 2005, ch 239, § 168.
47-1A-843. Resignation and removal of officers.
An officer may resign at any time by delivering notice to the corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective time. If a resignation is made effective at a later time and the board or the appointing officer accepts the future effective time, the board or the appointing officer may fill the pending vacancy before the effective time if the board or the appointing officer provides that the successor does not take office until the effective time.
An officer may be removed at any time with or without cause by the board of directors; the officer who appointed such officer, unless the bylaws or the board of directors provide otherwise; or any other officer if authorized by the bylaws or the board of directors.
In this section, the term, appointing officer, means the officer, including any successor to that officer, who appointed the officer resigning or being removed.
Source: SL 2005, ch 239, § 169.
47-1A-844. Contract rights of officers.
The appointment of an officer does not itself create contract rights. An officer's removal does not affect the officer's contract rights, if any, with the corporation. An officer's resignation does not affect the corporation's contract rights, if any, with the officer.
Source: SL 2005, ch 239, § 170.
47-1A-850. Subpart definitions.
Terms used in §§ 47-1A-850 to 47-1A-859, inclusive, mean:
(1) "Corporation," includes any domestic or foreign predecessor entity of a corporation in a merger;
(2) "Director" or "officer," an individual who is or was a director or officer, respectively, of a corporation or who, while a director or officer of the corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity. A director or officer is considered to be serving an employee benefit plan at the corporation's request if any duties to the corporation also impose duties on, or otherwise involve services by, the director or officer to the plan or to participants in or beneficiaries of the plan. The term, director or officer, includes, unless the context requires otherwise, the estate or personal representative of a director or officer;
(3) "Disinterested director," a director who, at the time of a vote referred to in § 47-1A-853.1 or a vote or selection referred to in § 47-1A-856, is not a party to the proceeding, or an individual having a familial, financial, professional or employment relationship with the director whose indemnification or advance for expenses is the subject of the decision being made, which relationship would, in the circumstances, reasonably be expected to exert an influence on the director's judgment when voting on the decision being made;
(4) "Expenses," includes counsel fees;
(5) "Liability," the obligation to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding;
(6) "Official capacity," when used with respect to a director, the office of director in a corporation; and when used with respect to an officer, as contemplated in § 47-1A-856, the office in a corporation held by the officer. Official capacity does not include service for any other domestic or foreign corporation or any partnership, joint venture, trust, employee benefit plan, or other entity;
(7) "Party," an individual who was, is, or is threatened to be made, a defendant or respondent in a proceeding;
(8) "Proceeding," any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative and whether formal or informal.
Source: SL 2005, ch 239, § 171.
47-1A-851. Permissible indemnification.
Except as otherwise provided in § 47-1A-851.1, a corporation may indemnify a director who is a party to a proceeding by reason of being a director, against liability incurred in the proceeding if the director:
(1) Acted in good faith; and
(2) Reasonably believed:
(a) In the case of conduct in an official capacity, that the conduct was in the best interests of the corporation; and
(b) In all other cases, that the conduct was at least not opposed to the best interests of the corporation; and
(3) In the case of any criminal proceeding, had no reasonable cause to believe the conduct was unlawful.
A corporation may also, except as provided in § 47-1A-851.1, indemnify a director who is a party to a proceeding against liability incurred in the proceeding if the director engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the articles of incorporation, as authorized by subdivision 47-1A-202.1(5).
A director's conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in, and the beneficiaries of, the plan is conduct that satisfies the requirement of subsection (2)(b).
The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director did not meet the relevant standard of conduct described in this section.
Source: SL 2005, ch 239, § 172.
47-1A-851.1. Prohibited indemnification--Exception.
Unless ordered by a court under subdivision 47-1A-854(3), a corporation may not indemnify a director:
(1) In connection with a proceeding by or in the right of the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct under § 47-1A-851; or
(2) In connection with any proceeding with respect to conduct for which the director was adjudged liable on the basis that the director received a financial benefit to which the director was not entitled, whether or not involving action in the director's official capacity.
Source: SL 2005, ch 239, § 173.
47-1A-852. Mandatory indemnification.
A corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party by reason of being a director of the corporation, against reasonable expenses incurred in connection with the proceeding.
Source: SL 2005, ch 239, § 174.
47-1A-853. Advance for expenses.
A corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding by reasons of being a director if the director delivers to the corporation:
(1) A written affirmation of the director's good faith belief that the director has met the relevant standard of conduct described in § 47-1A-851 or that the proceeding involves conduct for which liability has been eliminated under a provision of the articles of incorporation as authorized by subdivision 47-1A-202.1(4); and
(2) The director's written undertaking to repay any funds advanced if the director is not entitled to mandatory indemnification under § 47-1A-852 and it is ultimately determined under § 47-1A-854 or § 47-1A-855 that the director has not met the relevant standard of conduct described in § 47-1A-851.
The undertaking required by subdivision (2) must be an unlimited general obligation of the director but need not be secured and may be accepted without reference to the financial ability of the director to make repayment.
Source: SL 2005, ch 239, § 175.
47-1A-853.1. Authorizations under § 47-1A-853--Board of directors or shareholders.
Authorizations under § 47-1A-853 shall be made:
(1) By the board of directors:
(a) If there are two or more disinterested directors, by a majority vote of all the disinterested directors, a majority of whom shall for such purpose constitute a quorum, or by a majority of the members of a committee of two or more disinterested directors appointed by such a vote; or
(b) If there are fewer than two disinterested directors, by the vote necessary for action by the board in accordance with § 47-1A-824, in which authorization directors who do not qualify as disinterested directors may participate; or
(2) By the shareholders, but shares owned by or voted under the control of a director who at the time does not qualify as a disinterested director may not be voted, on the authorization.
Source: SL 2005, ch 239, § 176.
47-1A-854. Court-ordered indemnification and advance for expenses.
A director who is a party to a proceeding by reason of being a director may apply for indemnification or an advance for expenses to the court conducting the proceeding or to another court of competent jurisdiction. After receipt of an application and after giving any notice it considers necessary, the court shall:
(1) Order indemnification if the court determines that the director is entitled to mandatory indemnification under § 47-1A-852;
(2) Order indemnification or advance for expenses if the court determines that the director is entitled to indemnification or advance for expenses pursuant to a provision authorized by § 47-1A-858; or
(3) Order indemnification or advance for expenses if the court determines, in view of all the relevant circumstances, that it is fair and reasonable to:
(a) Indemnify the director, or
(b) Advance expenses to the director, even if the director has not met the relevant standard of conduct set forth in § 47-1A-851, failed to comply with §§ 47-1A-853 and 47-1A-853.1, or was adjudged liable in a proceeding referred to in subdivision 47-1A-851.1(1) or (2), but if the director was adjudged so liable the indemnification is limited to reasonable expenses incurred in connection with the proceeding.
If the court determines that the director is entitled to indemnification under subdivision (1) or to indemnification or advance for expenses under subdivision (2), the court shall also order the corporation to pay the director's reasonable expenses incurred in connection with obtaining court-ordered indemnification or advance for expenses. If the court determines that the director is entitled to indemnification or advance for expenses under subdivision (3), the court may also order the corporation to pay the director's reasonable expenses to obtain court-ordered indemnification or advance for expenses.
Source: SL 2005, ch 239, § 177.
47-1A-855. Determination and authorization of indemnification.
A corporation may not indemnify a director under §§ 47-1A-851 and 47-1A-851.1 unless authorized for a specific proceeding after a determination has been made that indemnification of the director is permissible because the director has met the relevant standard of conduct set forth in § 47-1A-851.
The determination shall be made:
(1) If there are two or more disinterested directors, by the board of directors by a majority vote of all the disinterested directors, a majority of whom shall for such purpose constitute a quorum, or by a majority of the members of a committee of two or more disinterested directors appointed by such a vote;
(2) By special legal counsel:
(a) Selected in the manner prescribed in subdivision (1); or
(b) If there are fewer than two disinterested directors, selected by the board of directors, in which selection directors who do not qualify as disinterested directors may participate; or
(3) By the shareholders, but shares owned by or voted under the control of a director who at the time does not qualify as a disinterested director may not be voted, on the determination.
Authorization of indemnification shall be made in the same manner as the determination that indemnification is permissible. However, if there are fewer than two disinterested directors or if the determination is made by special legal counsel, authorization of indemnification shall be made by those entitled under subsection (2)(b) to select special legal counsel.
Source: SL 2005, ch 239, § 178.
47-1A-856. Indemnification of officers.
A corporation may indemnify and advance expenses under §§ 47-1A-850 to 47-1A-859, inclusive, to an officer of the corporation who is a party to a proceeding by reason of being an officer of the corporation:
(1) To the same extent as a director; and
(2) If the officer is not also a director, to such further extent as may be provided by the articles of incorporation, the bylaws, a resolution of the board of directors, or contract except for:
(a) Liability in connection with a proceeding by or in the right of the corporation other than for reasonable expenses incurred in connection with the proceeding; or
(b) Liability arising out of conduct that constitutes:
(i) Receipt of a financial benefit to which the officer is not entitled;
(ii) An intentional infliction of harm on the corporation or the shareholders; or
(iii) An intentional violation of criminal law.
The provisions of subdivision (2) apply to an officer who is also a director if the basis on which the officer is made a party to the proceeding is an act or omission solely as an officer.
An officer of a corporation who is not also a director is entitled to mandatory indemnification under § 47-1A-852, and may apply to a court under § 47-1A-854 for indemnification or an advance for expenses, in each case to the same extent to which a director may be entitled to indemnification or advance for expenses under those provisions.
Source: SL 2005, ch 239, § 179.
47-1A-857. Insurance.
A corporation may purchase and maintain insurance on behalf of an individual who is a director or officer of the corporation, or who, while a director or officer of the corporation, serves at the corporation's request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity, against liability asserted against or incurred by the individual in that capacity or arising from the individual's status as a director or officer, whether or not the corporation would have power to indemnify or advance expenses to the director of officer against the same liability under §§ 47-1A-850 to 47-1A-859, inclusive.
Source: SL 2005, ch 239, § 180.
47-1A-858. Variation by corporate action--Application of subpart.
A corporation may, by a provision in its articles of incorporation or bylaws or in a resolution adopted or a contract approved by its board of directors or shareholders, obligate itself in advance of the act or omission giving rise to a proceeding to provide indemnification in accordance with §§ 47-1A-851 and 47-1A-851.1 or advance funds to pay for or reimburse expenses in accordance with §§ 47-1A-853 and 47-1A-853.1. Any such obligatory provision shall be deemed to satisfy the requirements for authorization referred to in §§ 47-1A-853.1 and 47-1A-855. Any such provision that obligates the corporation to provide indemnification to the fullest extent permitted by law shall be deemed to obligate the corporation to advance funds to pay for or reimburse expenses in accordance with §§ 47-1A-853 and 47-1A-853.1 to the fullest extent permitted by law, unless the provision specifically provides otherwise.
Any provision pursuant to this section does not obligate the corporation to indemnify or advance expenses to a director of a predecessor of the corporation, pertaining to conduct with respect to the predecessor, unless otherwise specifically provided. Any provision for indemnification or advance for expenses in the articles of incorporation, bylaws, or a resolution of the board of directors or shareholders of a predecessor of the corporation in a merger or in a contract to which the predecessor is a party, existing at the time the merger takes effect, is governed by subdivision 47-1A-1106(4).
A corporation may, by a provision in its articles of incorporation, limit any of the rights to indemnification or advance for expenses created by or pursuant to §§ 47-1A-850 to 47-1A-859, inclusive. The provisions of §§ 47-1A-850 to 47-1A-859, inclusive, do not limit a corporation's power to pay or reimburse expenses incurred by a director or an officer in connection with an appearance as a witness in a proceeding if the director or officer is not a party.
The provisions of §§ 47-1A-850 to 47-1A-859, inclusive, do not limit a corporation's power to indemnify, advance expenses to, or provide or maintain insurance on behalf of, an employee or agent.
Source: SL 2005, ch 239, § 181.
47-1A-859. Exclusivity of subpart.
A corporation may provide indemnification or advance expenses to a director or an officer only as permitted by §§ 47-1A-850 to 47-1A-859, inclusive.
Source: SL 2005, ch 239, § 182.
47-1A-860. Subpart definitions.
Terms used in §§ 47-1A-860 to 47-1A-863.3, inclusive, mean:
(1) "Conflicting interest," with respect to a corporation, the interest a director of the corporation has respecting a transaction effected or proposed to be effected by the corporation, or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest, if:
(a) Whether or not the transaction is brought before the board of directors of the corporation for action, the director knows at the time of commitment that the director or a related person is a party to the transaction or has a beneficial financial interest in or so closely linked to the transaction and of such financial significance to the director or a related person that the interest would reasonably be expected to exert an influence on the director's judgment if the director were called upon to vote on the transaction; or
(b) The transaction is brought, or is of such character and significance to the corporation that it would in the normal course be brought, before the board of directors of the corporation for action, and the director knows at the time of commitment that any of the following persons is either a party to the transaction or has a beneficial financial interest in or so closely linked to the transaction and of such financial significance to the person that the interest would reasonably be expected to exert an influence on the director's judgment if the director were called upon to vote on the transaction: (i) an entity, other than the corporation, of which the director is a director, general partner, agent, or employee; (ii) a person that controls one or more of the entities specified in (i) or an entity that is controlled by, or is under common control with, one or more of the entities specified in (i); or (iii) an individual who is a general partner, principal, or employer of the director;
(2) "Director's conflicting interest transaction," with respect to a corporation, a transaction effected or proposed to be effected by the corporation, or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest, respecting which a director of the corporation has a conflicting interest;
(3) "Related person," of a director: (i) the spouse, or a parent or sibling thereof, of the director, or a child, grandchild, sibling, parent, or spouse of any thereof, of the director, or an individual having the same home as the director, or a trust or estate of which an individual specified in this definition is a substantial beneficiary; or (ii) a trust, estate, incompetent, conservatee, or minor of which the director is a fiduciary;
(4) "Required disclosure," disclosure by the director who has a conflicting interest of (i) the existence and nature of the conflicting interest, and (ii) all facts known to the director respecting the subject matter of the transaction that an ordinarily prudent person would reasonably believe to be material to a judgment about whether or not to proceed with the transaction;
(5) "Time of commitment," respecting a transaction, the time when the transaction is consummated or, if made pursuant to contract, the time when the corporation, or its subsidiary or the entity in which it has a controlling interest, becomes contractually obligated so that its unilateral withdrawal from the transaction would entail significant loss, liability, or other damage.
Source: SL 2005, ch 239, § 183.
47-1A-861. Judicial action--Transaction other than director's conflicting interest transaction.
A transaction effected or proposed to be effected by a corporation, or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest, that is not a director's conflicting interest transaction, may not be enjoined, set aside, or give rise to an award of damages or other sanctions, in a proceeding by a shareholder or by or in the right of the corporation, because a director of the corporation, or any person with whom or which the director has a personal, economic, or other association, has an interest in the transaction.
Source: SL 2005, ch 239, § 184.
47-1A-861.1. Judicial action--Director's conflicting interest transaction.
A director's conflicting interest transaction may not be enjoined, set aside, or give rise to an award of damages or other sanctions, in a proceeding by a shareholder or by or in the right of the corporation, because the director, or any person with whom or which the director has a personal, economic, or other association, has an interest in the transaction, if:
(1) Directors' action respecting the transaction was at any time taken in compliance with §§ 47-1A-862 to 47-1A-862.3, inclusive;
(2) Shareholders' action respecting the transaction was at any time taken in compliance with §§ 47-1A-863 to 47-1A-863.3, inclusive; or
(3) The transaction, judged according to the circumstances at the time of commitment, is established to have been fair to the corporation.
Source: SL 2005, ch 239, § 185.
47-1A-862. Directors' action respecting transaction--Effectiveness.
Directors' action respecting a transaction is effective for purposes of subdivision 47-1A-861.1(1) if the transaction received the affirmative vote of a majority, but no fewer than one, of those qualified directors on the board of directors or on a duly empowered committee of the board who voted on the transaction after either required disclosure to them, to the extent the information was not known by them, or compliance with § 47-1A-861.1. However, action by a committee is effective only if:
(1) At least one of its members is a qualified director; and
(2) Its members are either all the qualified directors on the board or are appointed by the affirmative vote of a majority of the qualified directors on the board.
Source: SL 2005, ch 239, § 186; SL 2019, ch 196, § 1.
47-1A-862.1. Sufficiency of director disclosure.
If a director has a conflicting interest respecting a transaction, but neither the director nor a related person of the director specified in subsection 47-1A-860(3)(i) is a party to the transaction, and if the director has a duty under law or professional canon, or a duty of confidentiality to another person, respecting information relating to the transaction such that the director may not make the disclosure described in subsection 47-1A-860(4)(ii), then disclosure is sufficient for purposes of § 47-1A-862 if the director:
(1) Discloses to the directors voting on the transaction the existence and nature of the conflicting interest and informs them of the character and limitations imposed by that duty before their vote on the transaction; and
(2) Plays no part, directly or indirectly, in their deliberations or vote.
Source: SL 2005, ch 239, § 187.
47-1A-862.2. Quorum of qualified directors.
A majority, but no fewer than one, of all the qualified directors on the board of directors, or on the committee, constitutes a quorum for purposes of action that complies with §§ 47-1A-862 and 47-1A-862.1. Directors' action that otherwise complies with §§ 47-1A-862 and 47-1A-862.1 is not affected by the presence or vote of a director who is not a qualified director.
Source: SL 2005, ch 239, § 188; SL 2019, ch 196, § 2.
47-1A-862.3. Qualified director defined.
For purposes of §§ 47-1A-862 and 47-1A-862.1, the term, qualified director means, with respect to a director's conflicting interest transaction, any director who does not have either a conflicting interest respecting the transaction, or a familial, financial, professional, or employment relationship with a second director who does have a conflicting interest respecting the transaction, which relationship would, in the circumstances, reasonably be expected to exert an influence on the first director's judgment when voting on the transaction.
Source: SL 2005, ch 239, § 189.
47-1A-863. Shareholders' action respecting transaction--Effectiveness.
Shareholders' action respecting a transaction is effective for purposes of subdivision 47-1A-861.1(2) if a majority of the votes entitled to be cast by the holders of all qualified shares were cast in favor of the transaction after:
(1) Notice to shareholders describing the director's conflicting interest transaction;
(2) Provision of the information referred to in § 47-1A-863.2; and
(3) Required disclosure to the shareholders who voted on the transaction, to the extent the information was not known by them.
For purposes of this section, the term, qualified shares, means any shares entitled to vote with respect to the director's conflicting interest transaction except shares that, to the knowledge, before the vote, of the secretary, or other officer or agent of the corporation authorized to tabulate votes, are beneficially owned, or the voting of which is controlled, by a director who has a conflicting interest respecting the transaction or by a related person of the director, or both.
Source: SL 2005, ch 239, § 190.
47-1A-863.1. Quorum of qualified shareholders.
A majority of the votes entitled to be cast by the holders of all qualified shares constitutes a quorum for purposes of action that complies with § 47-1A-863. Subject to the provisions of §§ 47-1A-863.2 and 47-1A-863.3, shareholders' action that otherwise complies with § 47-1A-863 is not affected by the presence of holders, or the voting, of shares that are not qualified shares.
Source: SL 2005, ch 239, § 191.
47-1A-863.2. Notice by director of all shares beneficially owned or voting of which is controlled by director or relative.
For purposes of compliance with § 47-1A-863, a director who has a conflicting interest respecting the transaction shall, before the shareholders' vote, inform the secretary, or other office or agent of the corporation authorized to tabulate votes, of the number, and the identity of persons holding or controlling the vote, of all shares that the director knows are beneficially owned, or the voting of which is controlled, by the director or by a related person of the director, or both.
Source: SL 2005, ch 239, § 192.
47-1A-863.3. Court authority upon failure of shareholder vote to comply with § 47-1A-863.
If a shareholders' vote does not comply with § 47-1A-863 solely because of a failure of a director to comply with § 47-1A-863.2, and if the director establishes that the director's failure did not determine and was not intended by the director to influence the outcome of the vote, the court may, with or without further proceedings respecting subdivision 47-1A-861.1(3), take such action respecting the transaction and the director, and give such effect, if any, to the shareholders' vote, as it considers appropriate in the circumstances.
Source: SL 2005, ch 239, § 193.
47-1A-901. Excluded transactions.
The provisions of §§ 47-1A-901 to 47-1A-956, inclusive, may not be used to effect a transaction that converts an insurance company organized on the mutual principle to one organized on a stock-share basis.
Source: SL 2005, ch 239, § 194.
47-1A-902. Required approvals.
If a domestic or foreign business corporation or eligible entity is also governed by specific statutes such as insurance, banking, public utilities, and savings and loan provisions, the corporation or eligible entity cannot be a party to a transaction under §§ 47-1A-901 to 47-1A-956, inclusive, without also complying with the requirements of such specific statutes.
Property held in trust or for charitable purposes under the laws of this state by a domestic or foreign eligible entity may not, by any transaction under §§ 47-1A-901 to 47-1A-956, inclusive, be diverted from the objects for which it was donated, granted, or devised, unless and until the eligible entity obtains an order of the circuit court specifying the disposition of the property to the extent required by and pursuant to § 55-9-4.
Source: SL 2005, ch 239, § 195.
47-1A-920. Domestication--Foreign business corporation to be domestic business corporation.
A foreign business corporation may become a domestic business corporation only if the domestication is permitted by the organic law of the foreign corporation.
Source: SL 2005, ch 239, § 196.
47-1A-920.1. Domestication--Domestic business corporation to be foreign business corporation.
A domestic business corporation may become a foreign business corporation if the domestication is permitted by the laws of the foreign jurisdiction. Regardless of whether the laws of the foreign jurisdiction require the adoption of a plan of domestication, the domestication shall be approved by the adoption by the corporation of a plan of domestication in the manner provided in §§ 47-1A-920 to 47-1A-925.1, inclusive.
Source: SL 2005, ch 239, § 197.
47-1A-920.2. Plan of domestication--Content.
The plan of domestication shall include:
(1) A statement of the jurisdiction in which the corporation is to be domesticated;
(2) The terms and conditions of the domestication;
(3) The manner and basis of reclassifying the shares of the corporation following its domestication into shares or other securities, obligations, rights to acquire shares or other securities, cash, other property, or any combination of the foregoing; and
(4) Any desired amendments to the articles of incorporation of the corporation following its domestication.
Source: SL 2005, ch 239, § 198.
47-1A-920.3. Plan of domestication--Amendments.
The plan of domestication may also include a provision that the plan may be amended prior to filing the document required by the laws of this state or the other jurisdiction to consummate the domestication. However, subsequent to approval of the plan by the shareholders, the plan may not be amended to change:
(1) The amount or kind of shares or other securities, obligations, rights to acquire shares or other securities, cash, or other property to be received by the shareholders under the plan;
(2) The articles of incorporation as they will be in effect immediately following the domestication, except for changes permitted by § 47-1A-955 or by comparable provisions of the laws of the other jurisdiction; or
(3) Any of the other terms or conditions of the plan if the change would adversely affect any of the shareholders in any material respect.
Source: SL 2005, ch 239, § 199.
47-1A-920.4. Terms of plan of domestication dependent on extrinsic facts.
Terms of a plan of domestication may be made dependent upon facts objectively ascertainable outside the plan in accordance with §§ 47-1A-120.1 to 47-1A-120.3, inclusive.
Source: SL 2005, ch 239, § 200.
47-1A-920.5. Evidence of indebtedness or contract with merger provision containing not reference to domestication--Provision application to domestication.
If any debt security, note or similar evidence of indebtedness for money borrowed, whether secured or unsecured, or a contract of any kind, issued, incurred, or executed by a domestic business corporation before July 1, 2005, contains a provision applying to a merger of the corporation and the document does not refer to a domestication of the corporation, the provision is deemed to apply to a domestication of the corporation until such time as the provision is amended subsequent to that date.
Source: SL 2005, ch 239, § 201.
47-1A-921. Action on a plan of domestication.
In the case of a domestication of a domestic business corporation in a foreign jurisdiction:
(1) The plan of domestication must be adopted by the board of directors;
(2) After adopting the plan of domestication the board of directors shall submit the plan to the shareholders for their approval. The board of directors shall also transmit to the shareholders a recommendation that the shareholders approve the plan, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make such a recommendation, in which case the board of directors shall transmit to the shareholders the basis for that determination;
(3) The board of directors may condition its submission of the plan of domestication to the shareholders on any basis;
(4) If the approval of the shareholders is to be given at a meeting, the corporation shall notify each shareholder, whether or not entitled to vote, of the meeting of shareholders at which the plan of domestication is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the plan and must contain or be accompanied by a copy or summary of the plan. The notice shall include or be accompanied by a copy of the articles of incorporation as they will be in effect immediately after the domestication;
(5) Unless the articles of incorporation, or the board of directors acting pursuant to subdivision (3), requires a greater vote or a greater number of votes to be present, approval of the plan of domestication requires the approval of the shareholders at a meeting at which a quorum consisting of at least a majority of the votes entitled to be cast on the plan exists, and, if any class or series of shares is entitled to vote as a separate group on the plan, the approval of each such separate voting group at a meeting at which a quorum of the voting group consisting of at least a majority of the votes entitled to be cast on the domestication by that voting group exists;
(6) Separate voting by voting groups is required by each class or series of shares that:
(a) Are to be reclassified under the plan of domestication into other securities, obligations, rights to acquire shares or other securities, cash, other property, or any combination of the foregoing;
(b) Would be entitled to vote as a separate group on a provision of the plan that, if contained in a proposed amendment to articles of incorporation, would require action by separate voting groups under § 47-1A-1004; or
(c) Is entitled under the articles of incorporation to vote as a voting group to approve an amendment of the articles;
(7) If any provision of the articles of incorporation, bylaws, or an agreement to which any of the directors or shareholders are parties, adopted or entered into before July 1, 2005, applies to a merger of the corporation and that document does not refer to a domestication of the corporation, the provision is deemed to apply to a domestication of the corporation until such time as the provision is amended subsequent to that date.
Source: SL 2005, ch 239, § 202.
47-1A-921.1. Articles of domestication--Content.
The articles of domestication shall either contain all of the provisions that § 47-1A-202 requires to be set forth in articles of incorporation and any other desired provisions that § 47-1A-202.1 permits to be included in articles of incorporation, or shall have attached articles of incorporation. In either case, provisions that would not be required to be included in restated articles of incorporation may be omitted.
Source: SL 2005, ch 239, § 203.
47-1A-921.2. Articles of domestication--Filing and effectiveness.
The articles of domestication shall be delivered to the Office of the Secretary of State for filing, and shall take effect at the effective time provided in §§ 47-1A-123 and 47-1A-123.1.
Source: SL 2005, ch 239, § 204.
47-1A-921.3. Certificate of authority to transact business by foreign corporation cancelled upon domestication.
If the foreign corporation is authorized to transact business in this state under §§ 47-1A-1501 to 47-1A-1532, inclusive, its certificate of authority shall be cancelled automatically on the effective date of its domestication.
Source: SL 2005, ch 239, § 205.
47-1A-922. Articles of domestication--Execution--Content.
After the domestication of a foreign business corporation has been authorized as required by the laws of the foreign jurisdiction, articles of domestication shall be executed by any officer or other duly authorized representative. The articles shall set forth:
(1) The name of the corporation immediately before the filing of the articles of domestication and, if that name is unavailable for use in this state or the corporation desires to change its name in connection with the domestication, a name that satisfies the requirements of §§ 47-1A-401 to 47-1A-401.3, inclusive;
(2) The jurisdiction of incorporation of the corporation immediately before the filing of the articles of domestication and the date the corporation was incorporated in that jurisdiction; and
(3) A statement that the domestication of the corporation in this state was duly authorized as required by the laws of the jurisdiction in which the corporation was incorporated immediately before its domestication in this state.
Source: SL 2005, ch 239, § 207.
47-1A-922.1. Articles of charter surrender--Filing and effectiveness.
The articles of charter surrender shall be delivered by the corporation to the Office of the Secretary of State for filing. The articles of charter surrender shall take effect on the effective time provided in §§ 47-1A-123 and 47-1A-123.1.
Source: SL 2005, ch 239, § 208.
47-1A-923. Surrender of charter upon domestication.
Whenever a domestic business corporation has adopted and approved, in the manner required by §§ 47-1A-920 to 47-1A-925.1, inclusive, a plan of domestication providing for the corporation to be domesticated in a foreign jurisdiction, articles of charter surrender shall be executed on behalf of the corporation by any officer or other duly authorized representative. The articles of charter surrender shall set forth:
(1) The name of the corporation;
(2) A statement that the articles of charter surrender are being filed in connection with the domestication of the corporation in a foreign jurisdiction;
(3) A statement that the domestication was duly approved by the shareholders and, if voting by any separate voting group was required, by each such separate voting group, in the manner required by this chapter and the articles of incorporation; and
(4) The corporation's new jurisdiction of incorporation.
Source: SL 2005, ch 239, § 206.
47-1A-924. Effect of domestication.
When a domestication becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the corporation remains in the corporation without reversion or impairment;
(2) The liabilities of the corporation remain the liabilities of the corporation;
(3) An action or proceeding pending against the corporation continues against the corporation as if the domestication had not occurred;
(4) The articles of domestication, or the articles of incorporation attached to the articles of domestication, constitute the articles of incorporation of a foreign corporation domesticating in this state;
(5) The shares of the corporation are reclassified into shares, other securities, obligations, rights to acquire shares or other securities, or into cash or other property in accordance with the terms of the domestication, and the shareholders are entitled only to the rights provided by those terms and to any appraisal rights they may have under the organic law of the domesticating corporation; and
(6) The corporation is deemed to:
(a) Be incorporated under and subject to the organic law of the domesticated corporation for all purposes;
(b) Be the same corporation without interruption as the domesticating corporation; and
(c) Have been incorporated on the date the domesticating corporation was originally incorporated.
Source: SL 2005, ch 239, § 209.
47-1A-924.1. Effect of domestication of domestic business corporation in foreign jurisdiction.
When a domestication of a domestic business corporation in a foreign jurisdiction becomes effective, the foreign business corporation is deemed to:
(1) Appoint the Office of the Secretary of State as its agent for service of process in a proceeding to enforce the rights of shareholders who exercise appraisal rights in connection with the domestication; and
(2) Agree that it will promptly pay the amount, if any, to which such shareholders are entitled under §§ 47-1A-1301 to 47-1A-1331.2, inclusive.
Source: SL 2005, ch 239, § 210.
47-1A-924.2. Owner liability of shareholder in domesticated foreign corporation.
The owner liability of a shareholder in a foreign corporation that is domesticated in this state is as follows:
(1) The domestication does not discharge any owner liability under the laws of the foreign jurisdiction to the extent any such owner liability arose before the effective time of the articles of domestication;
(2) The shareholder does not have owner liability under the laws of the foreign jurisdiction for any debt, obligation, or liability of the corporation that arises after the effective time of the articles of domestication;
(3) The provisions of the laws of the foreign jurisdiction shall continue to apply to the collection or discharge of any owner liability preserved by subdivision (1), as if the domestication had not occurred; and
(4) The shareholder has whatever rights of contribution from other shareholders are provided by the laws of the foreign jurisdiction with respect to any owner liability preserved by subdivision (1), as if the domestication had not occurred.
Source: SL 2005, ch 239, § 211.
47-1A-924.3. Owner liability only for debts arising after effective time of articles of domestication.
A shareholder who becomes subject to owner liability for some or all of the debts, obligations, or liabilities of the corporation as a result of its domestication in this state has owner liability only for those debts, obligations, or liabilities of the corporation that arise after the effective time of the articles of domestication.
Source: SL 2005, ch 239, § 212.
47-1A-925. Abandonment of a domestication of domestic business corporation.
Unless otherwise provided in a plan of domestication of a domestic business corporation, after the plan has been adopted and approved as required by §§ 47-1A-920 to 47-1A-925, inclusive, and at any time before the domestication has become effective, it may be abandoned by the board of directors without action by the shareholders.
If a domestication is abandoned under this section after articles of charter surrender have been filed with the Office of the Secretary of State but before the domestication has become effective, a statement that the domestication has been abandoned in accordance with this section, executed by an officer or other duly authorized representative, shall be delivered to the Office of the Secretary of State for filing prior to the effective date of the domestication. The statement shall take effect upon filing and the domestication shall be deemed abandoned and does not become effective.
Source: SL 2005, ch 239, § 213.
47-1A-925.1. Abandonment of domestication of foreign business corporation.
If the domestication of a foreign business corporation in this state is abandoned in accordance with the laws of the foreign jurisdiction after articles of domestication have been filed with the Office of the Secretary of State, a statement that the domestication has been abandoned, executed by an officer or other duly authorized representative, shall be delivered to the Office of the Secretary of State for filing. The statement shall take effect upon filing and the domestication shall be deemed abandoned and does not become effective.
Source: SL 2005, ch 239, § 214.
47-1A-950. Domestic business corporation to become domestic unincorporated entity.
A domestic business corporation may become a domestic unincorporated entity pursuant to a plan of entity conversion.
Source: SL 2005, ch 239, § 215.
47-1A-950.1. Domestic business corporation to become foreign unincorporated entity.
A domestic business corporation may become a foreign unincorporated entity if the entity conversion is permitted by the laws of the foreign jurisdiction.
Source: SL 2005, ch 239, § 216.
47-1A-950.2. Domestic unincorporated entity to become domestic business corporation.
A domestic unincorporated entity may become a domestic business corporation. If the organic law of a domestic unincorporated entity does not provide procedures for the approval of an entity conversion, the conversion shall be adopted and approved, and the entity conversion effectuated, in the same manner as a merger of the unincorporated entity. If the organic law of a domestic unincorporated entity does not provide procedures for the approval of either an entity conversion or a merger, a plan of entity conversion shall be adopted and approved, the entity conversion effectuated, and appraisal rights exercised, in accordance with the procedures in §§ 47-1A-950 to 47-1A-956, inclusive, and §§ 47-1A-1301 to 47-1A-1331.2, inclusive. Without limiting the provisions of this section, a domestic unincorporated entity whose organic law does not provide procedures for the approval of an entity conversion is subject to §§ 47-1A-950.4 and 47-1A-952. For purposes of applying §§ 47-1A-950 to 47-1A-956, inclusive and §§ 47-1A-1301 to 47-1A-1331.2, inclusive:
(1) The unincorporated entity, its interest holders, interests and organic documents taken together, are deemed to be a domestic business corporation, shareholders, shares and articles of incorporation, respectively and vice versa, as the context may require; and
(2) If the business and affairs of the unincorporated entity are managed by a group of persons that is not identical to the interest holders, that group is deemed to be the board of directors.
Source: SL 2005, ch 239, § 217.
47-1A-950.3. Foreign unincorporated entity to become domestic business corporation.
A foreign unincorporated entity may become a domestic business corporation if the organic law of the foreign unincorporated entity authorizes it to become a corporation in another jurisdiction.
Source: SL 2005, ch 239, § 218.
47-1A-950.4. Evidence of indebtedness or contract applying to merger containing no reference to entity conversion--Provision application to entity conversion.
If any debt security, note, or similar evidence of indebtedness for money borrowed, whether secured or unsecured, or a contract of any kind, issued, incurred, or executed by a domestic business corporation before July 1, 2005, applies to a merger of the corporation and the document does not refer to an entity conversion of the corporation, the provision is deemed to apply to an entity conversion of the corporation until such time as the provision is amended subsequent to that date.
Source: SL 2005, ch 239, § 219.
47-1A-950.5. Definition of terms applying to §§ 47-1A-950 to 47-1A-956.
Terms used in §§ 47-1A-950 to 47-1A-956, inclusive, mean:
(1) "Converting entity," the domestic business corporation or domestic unincorporated entity that adopts a plan of entity conversion or the foreign unincorporated entity converting to a domestic business corporation;
(2) "Surviving entity," the corporation or unincorporated entity that is in existence immediately after consummation of an entity conversion pursuant to §§ 47-1A-950 to 47-1A-956, inclusive.
Source: SL 2005, ch 239, § 220.
47-1A-951. Plan of entity conversion--Content.
A plan of entity conversion must include:
(1) A statement of the type of other entity the surviving entity will be and, if it will be a foreign other entity, its jurisdiction of organization;
(2) The terms and conditions of the conversion;
(3) The manner and basis of converting the shares of the domestic business corporation following its conversion into interests or other securities, obligations, rights to acquire interests or other securities, cash, other property, or any combination of the foregoing; and
(4) The full text, as they will be in effect immediately after consummation of the conversion, of the organic documents of the surviving entity.
Source: SL 2005, ch 239, § 221.
47-1A-951.1. Plan of entity conversion--Amendments.
The plan of entity conversion may also include a provision that the plan may be amended prior to filing articles of entity conversion. However, subsequent to approval of the plan by the shareholders, the plan may not be amended to change:
(1) The amount or kind of shares or other securities, interests, obligations, rights to acquire shares, other securities or interests, cash, or other property to be received under the plan by the shareholders;
(2) The organic documents that will be in effect immediately following the conversion, except for changes permitted by a provision of the organic law of the surviving entity comparable to § 47-1A-1005; or
(3) Any of the other terms or conditions of the plan if the change would adversely affect any of the shareholders in any material respect.
Source: SL 2005, ch 239, § 222.
47-1A-951.2. Terms of plan of entity conversion dependent on extrinsic facts.
Terms of a plan of entity conversion may be made dependent upon facts objectively ascertainable outside the plan in accordance with §§ 47-1A-120.1 to 47-1A-120.3, inclusive.
Source: SL 2005, ch 239, § 223.
47-1A-952. Action on a plan of entity conversion.
In the case of an entity conversion of a domestic business corporation to a domestic or foreign unincorporated entity:
(1) The plan of entity conversion must be adopted by the board of directors;
(2) After adopting the plan of entity conversion, the board of directors shall submit the plan to the shareholders for their approval. The board of directors shall also transmit to the shareholders a recommendation that the shareholders approve the plan, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make such a recommendation, in which case the board of directors must transmit to the shareholders the basis for that determination;
(3) The board of directors may condition its submission of the plan of entity conversion to the shareholders on any basis;
(4) If the approval of the shareholders is to be given at a meeting, the corporation must notify each shareholder, whether or not entitled to vote, of the meeting of shareholders at which the plan of entity conversion is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the plan and must contain or be accompanied by a copy or summary of the plan. The notice shall include or be accompanied by a copy of the organic documents as they will be in effect immediately after the entity conversion;
(5) Unless the articles of incorporation, or the board of directors acting pursuant to subdivision (3), requires a greater vote or a greater number of votes to be present, approval of the plan of entity conversion requires the approval of each class or series of shares of the corporation voting as a separate voting group at a meeting at which a quorum of the voting group consisting of at least a majority of the votes entitled to be cast on the conversion by that voting group exists;
(6) If any provision of the articles of incorporation, bylaws, or an agreement to which any of the directors or shareholders are parties, adopted or entered into before July 1, 2005, applies to a merger of the corporation and the document does not refer to an entity conversion of the corporation, the provision is deemed to apply to an entity conversion of the corporation until such time as the provision is subsequently amended;
(7) If as a result of the conversion one or more shareholders of the corporation would become subject to owner liability for the debts, obligations, or liabilities of any other person or entity, approval of the plan of conversion shall require the execution, by each such shareholder, of a separate written consent to become subject to such owner liability.
Source: SL 2005, ch 239, § 224.
47-1A-953. Domestic business corporation converted to domestic unincorporated entity--Articles of entity conversion--Content.
After the conversion of a domestic business corporation to a domestic unincorporated entity has been adopted and approved as required by this chapter, articles of entity conversion shall be executed on behalf of the corporation by any officer or other duly authorized representative. The articles shall:
(1) Set forth the name of the corporation immediately before the filing of the articles of entity conversion and the name to which the name of the corporation is to be changed, which shall be a name that satisfies the organic law of the surviving entity;
(2) State the type of unincorporated entity that the surviving entity will be;
(3) Set forth a statement that the plan of entity conversion was duly approved by the shareholders in the manner required by this chapter and the articles of incorporation;
(4) If the surviving entity is a filing entity, either contain all of the provisions required to be set forth in its public organic document and any other desired provisions that are permitted, or have attached a public organic document. However, in either case, provisions that would not be required to be included in a restated public organic document may be omitted.
Source: SL 2005, ch 239, § 225.
47-1A-953.1. Domestic unincorporated entity converted to domestic business corporation--Articles of entity conversion--Content.
After the conversion of a domestic unincorporated entity to a domestic business corporation has been adopted and approved as required by the organic law of the unincorporated entity, articles of entity conversion shall be executed on behalf of the unincorporated entity by any officer or other duly authorized representative. The articles shall:
(1) Set forth the name of the unincorporated entity immediately before the filing of the articles of entity conversion and the name to which the name of the unincorporated entity is to be changed, which shall be a name that satisfies the requirements of §§ 47-1A-401 to 47-1A-401.3, inclusive;
(2) Set forth a statement that the plan of entity conversion was duly approved in accordance with the organic law of the unincorporated entity;
(3) Either contain all of the provisions that § 47-1A-202 requires to be set forth in articles of incorporation and any other desired provisions that § 47-1A-202.1 permits to be included in articles of incorporation, or have attached articles of incorporation. However, in either case, provisions that would not be required to be included in restated articles of incorporation of a domestic business corporation may be omitted.
Source: SL 2005, ch 239, § 226.
47-1A-953.2. Foreign unincorporated entity converted to domestic business corporation--Articles of entity conversion--Content.
After the conversion of a foreign unincorporated entity to a domestic business corporation has been authorized as required by the laws of the foreign jurisdiction, articles of entity conversion shall be executed on behalf of the foreign unincorporated entity by any officer or other duly authorized representative. The articles shall:
(1) Set forth the name of the unincorporated entity immediately before the filing of the articles of entity conversion and the name to which the name of the unincorporated entity is to be changed, which shall be a name that satisfies the requirements of §§ 47-1A-401 to 47-1A-401.3, inclusive;
(2) Set forth the jurisdiction under the laws of which the unincorporated entity was organized immediately before the filing of the articles of entity conversion and the date on which the unincorporated entity was organized in that jurisdiction;
(3) Set forth a statement that the conversion of the unincorporated entity was duly approved in the manner required by its organic law; and
(4) Either contain all of the provisions that § 47-1A-202 requires to be set forth in articles of incorporation and any other desired provisions that § 47-1A-202.1 permits to be included in articles of incorporation, or have attached articles of incorporation. However, in either case, provisions that would not be required to be included in restated articles of incorporation of a domestic business corporation may be omitted.
Source: SL 2005, ch 239, § 227.
47-1A-953.3. Articles of entity conversion--Filing and effectiveness--Cancellation of certificate of authority.
The articles of entity conversion shall be delivered to the Office of the Secretary of State for filing, and shall take effect at the effective time provided in §§ 47-1A-123 and 47-1A-123.1. Articles of entity conversion filed under § 47-1A-953 or 47-1A-953.1 may be combined with any required conversion filing under the organic law of the domestic unincorporated entity if the combined filing satisfies the requirements of §§ 47-1A-953 to 47-1A-953.3, inclusive, and the other organic law.
If the converting entity is a foreign unincorporated entity that is authorized to transact business in this state under a provision of law similar to §§ 47-1A-1501 to 47-1A-1532, inclusive, its certificate of authority or other type of foreign qualification shall be cancelled automatically on the effective date of its conversion.
Source: SL 2005, ch 239, § 228.
47-1A-954. Surrender of charter upon conversion.
Whenever a domestic business corporation has adopted and approved, in the manner required by §§ 47-1A-950 to 47-1A-956, inclusive, a plan of entity conversion providing for the corporation to be converted to a foreign unincorporated entity, articles of charter surrender shall be executed on behalf of the corporation by any officer or other duly authorized representative. The articles of charter surrender shall set forth:
(1) The name of the corporation;
(2) A statement that the articles of charter surrender are being filed in connection with the conversion of the corporation to a foreign unincorporated entity;
(3) A statement that the conversion was duly approved by the shareholders in the manner required by this chapter and the articles of incorporation;
(4) The jurisdiction under the laws of which the surviving entity will be organized;
(5) If the surviving entity will be a nonfiling entity, the address of its executive office immediately after the conversion.
The articles of charter surrender shall be delivered by the corporation to the Office of the Secretary of State for filing. The articles of charter surrender shall take effect on the effective time provided in §§ 47-1A-123 and 47-1A-123.1.
Source: SL 2005, ch 239, § 229.
47-1A-955. Effect of entity conversion.
When a conversion under §§ 47-1A-950 to 47-1A-956, inclusive, becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the converting entity remains in the surviving entity without reversion or impairment;
(2) The liabilities of the converting entity remain the liabilities of the surviving entity;
(3) An action or proceeding pending against the converting entity continues against the surviving entity as if the conversion had not occurred;
(4) In the case of a surviving entity that is a filing entity, its articles of incorporation or public organic document and its private organic document become effective;
(5) In the case of a surviving entity that is a nonfiling entity, its private organic document becomes effective;
(6) The shares or interests of the converting entity are reclassified into shares, interests, other securities, obligations, rights to acquire shares, interests or other securities, or into cash or other property in accordance with the plan of conversion; and the shareholders or interest holders of the converting entity are entitled only to the rights provided to them under the terms of the conversion and to any appraisal rights that they may have under the organic law of the converting entity; and
(7) The surviving entity is deemed to:
(a) Be incorporated or organized under and subject to the organic law of the converting entity for all purposes;
(b) Be the same corporation or unincorporated entity without interruption as the converting entity; and
(c) Have been incorporated or otherwise organized on the date that the converting entity was originally incorporated or organized.
Source: SL 2005, ch 239, § 230.
47-1A-955.1. Effect of conversion of domestic business to a foreign other entity.
When a conversion of a domestic business corporation to a foreign other entity becomes effective, the surviving entity is deemed to:
(1) Appoint the Office of the Secretary of State as its agent for service of process in a proceeding to enforce the rights of shareholders who exercise appraisal rights in connection with the conversion; and
(2) Agree that it will promptly pay the amount, if any, to which such shareholders are entitled under §§ 47-1A-1301 to 47-1A-1331.2, inclusive.
Source: SL 2005, ch 239, § 231.
47-1A-955.2. Owner liability only for debts arising after effective time of articles of entity conversion.
Any shareholder who becomes subject to owner liability for some or all of the debts, obligations, or liabilities of the surviving entity is personally liable only for those debts, obligations, or liabilities of the surviving entity that arise after the effective time of the articles of entity conversion.
Source: SL 2005, ch 239, § 232.
47-1A-955.3. Owner liability of an interest holder in an unincorporated entity converted to domestic business corporation.
The owner liability of an interest holder in an unincorporated entity that converts to a domestic business corporation is as follows:
(1) The conversion does not discharge any owner liability under the organic law of the unincorporated entity to the extent any such owner liability arose before the effective time of the articles of entity conversion;
(2) The interest holder does not have owner liability under the organic law of the unincorporated entity for any debt, obligation, or liability of the corporation that arises after the effective time of the articles of entity conversion;
(3) The provisions of the organic law of the unincorporated entity continue to apply to the collection or discharge of any owner liability preserved by subdivision (1), as if the conversion had not occurred;
(4) The interest holder has whatever rights of contribution from other interest holders are provided by the organic law of the unincorporated entity with respect to any owner liability preserved by subdivision (1), as if the conversion had not occurred.
Source: SL 2005, ch 239, § 233.
47-1A-956. Abandonment of an entity conversion.
Unless otherwise provided in a plan of entity conversion of a domestic business corporation, after the plan has been adopted and approved as required by §§ 47-1A-950 to 47-1A-956, inclusive, and at any time before the entity conversion has become effective, it may be abandoned by the board of directors without action by the shareholders.
If an entity conversion is abandoned after articles of entity conversion or articles of charter surrender have been filed with the Office of the Secretary of State, but before the entity conversion has become effective, a statement that the entity conversion has been abandoned in accordance with this section, executed by an officer or other duly authorized representative, shall be delivered to the Office of the Secretary of State for filing prior to the effective date of the entity conversion. Upon filing, the statement shall take effect, and the entity conversion shall be deemed abandoned and does not become effective.
Source: SL 2005, ch 239, § 234.
47-1A-957. Cooperative converted to business corporation.
Any cooperative may convert itself into a business corporation by adopting an amendment to its articles by which it elects to become subject to chapter 47-1A, together with changes in its articles required by the chapter and other desirable changes permitted by the chapter. Such amendment shall be adopted, filed, and recorded in the manner provided by the law then applicable to the cooperative. The conversion is effective upon the issuance of the certificate of amendment by the secretary of state.
Source: SL 2007, ch 258, § 1.
47-1A-1001. Authority to amend.
A corporation may amend its articles of incorporation at any time to add or change a provision that is required or permitted in the articles of incorporation as of the effective date of the amendment or to delete a provision that is not required to be contained in the articles of incorporation.
A shareholder of the corporation does not have a vested property right resulting from any provision in the articles of incorporation, including provisions relating to management, control, capital structure, dividend entitlement, or purpose or duration of the corporation.
Source: SL 2005, ch 239, § 235.
47-1A-1002. Amendment before issuance of shares.
If a corporation has not yet issued shares, its board of directors, or its incorporators, if it has no board of directors, may adopt one or more amendments to the corporation's articles of incorporation.
Source: SL 2005, ch 239, § 236.
47-1A-1003. Amendment by board of directors and shareholders.
If a corporation has issued shares, an amendment to the articles of incorporation shall be adopted in the following manner:
(1) The proposed amendment must be adopted by the board of directors;
(2) Except as provided in §§ 47-1A-1005, and 47-1A-1007 to 47-1A-1008, inclusive, after adopting the proposed amendment the board of directors must submit the amendment to the shareholders for their approval. The board of directors must also transmit to the shareholders a recommendation that the shareholders approve the amendment, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make such a recommendation, in which case the board of directors shall transmit to the shareholders the basis for that determination;
(3) The board of directors may condition its submission of the amendment to the shareholders on any basis;
(4) If the amendment is required to be approved by the shareholders, and the approval is to be given at a meeting, the corporation shall notify each shareholder, whether or not entitled to vote, of the meeting of shareholders at which the amendment is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the amendment and must contain or be accompanied by a copy of the amendment;
(5) Unless the articles of incorporation, or the board of directors acting pursuant to subdivision (3), requires a greater vote or a greater number of shares to be present, approval of the amendment requires the approval of the shareholders at a meeting at which a quorum consisting of at least a majority of the votes entitled to be cast on the amendment exists, and, if any class or series of shares is entitled to vote as a separate group on the amendment, except as provided in § 47-1A-1004, the approval of each such separate voting group at a meeting at which a quorum of the voting group consisting of at least a majority of the votes entitled to be cast on the amendment by that voting group exists.
Source: SL 2005, ch 239, § 237.
47-1A-1004. Voting on amendments by voting groups.
If a corporation has more than one class of shares outstanding, the holders of the outstanding shares of a class are entitled to vote as a separate voting group, if shareholder voting is otherwise required by this chapter, on a proposed amendment to the articles of incorporation if the amendment would:
(1) Effect an exchange or reclassification of all or part of the shares of the class into shares of another class;
(2) Effect an exchange or reclassification, or create the right of exchange, of all or part of the shares of another class into shares of the class;
(3) Change the rights, preferences, or limitations of all or part of the shares of the class;
(4) Change the shares of all or part of the class into a different number of shares of the same class;
(5) Create a new class of shares having rights or preferences with respect to distributions or to dissolution that are prior or superior to the shares of the class;
(6) Increase the rights, preferences, or number of authorized shares of any class that, after giving effect to the amendment, have rights or preferences with respect to distributions or to dissolution that are prior or superior to the shares of the class;
(7) Limit or deny an existing preemptive right of all or part of the shares of the class; or
(8) Cancel or otherwise affect rights to distributions that have accumulated, but not yet been authorized, on all or part of the shares of the class.
If a proposed amendment would affect a series of a class of shares in one or more of the ways described in this section, the holders of shares of that series are entitled to vote as a separate voting group on the proposed amendment.
If a proposed amendment that entitles the holders of two or more classes or series of shares to vote as separate voting groups under this section would affect those two or more classes or series in the same or a substantially similar way, the holders of shares of all the classes or series so affected shall vote together as a single voting group on the proposed amendment, unless otherwise provided in the articles of incorporation or required by the board of directors.
A class or series of shares is entitled to the voting rights granted by this section although the articles of incorporation provide that the shares are nonvoting shares.
Source: SL 2005, ch 239, § 238.
47-1A-1005. Amendment by board of directors.
Unless the articles of incorporation provide otherwise, a corporation's board of directors may adopt amendments to the corporation's articles of incorporation without shareholder approval:
(1) To extend the duration of the corporation if it was incorporated at a time when limited duration was required by law;
(2) To delete the names and addresses of the initial directors;
(3) To change the information required by § 59-11-6;
(4) If the corporation has only one class of shares outstanding:
(a) To change each issued and unissued authorized share of the class into a greater number of whole shares of that class; or
(b) To increase the number of authorized shares of the class to the extent necessary to permit the issuance of shares as a share dividend;
(5) To change the corporate name by substituting the term, corporation, incorporated, company, limited, or the abbreviation, corp., inc., co., or ltd., for a similar word or abbreviation in the name, or by adding, deleting, or changing a geographical attribution for the name;
(6) To reflect a reduction in authorized shares, as a result of the operation of § 47-1A-631, when the corporation has acquired its own shares and the articles of incorporation prohibit the reissue of the acquired shares;
(7) To delete a class of shares from the articles of incorporation, as a result of the operation of § 47-1A-631, when there are no remaining shares of the class because the corporation has acquired all shares of the class and the articles of incorporation prohibit the reissue of the acquired shares; or
(8) To make any change expressly permitted by §§ 47-1A-602 or 47-1A-602.1 to be made without shareholder approval.
Source: SL 2005, ch 239, § 239; SL 2008, ch 275, § 36.
47-1A-1006. Articles of amendment.
After an amendment to the articles of incorporation has been adopted and approved in the manner required by this chapter and by the articles of incorporation, the corporation shall deliver to the Office of the Secretary of State, for filing, articles of amendment, which shall set forth:
(1) The name of the corporation;
(2) The text of each amendment adopted, or the information required by § 47-1A-120.2;
(3) If an amendment provides for an exchange, reclassification, or cancellation of issued shares, provisions for implementing the amendment if not contained in the amendment itself, which may be made dependent upon facts objectively ascertainable outside the articles of amendment in accordance with § 47-1A-120.2;
(4) The date of each amendment's adoption; and
(5) If an amendment:
(a) Was adopted by the incorporators or board of directors without shareholder approval, a statement that the amendment was duly approved by the incorporators or by the board of directors, as the case may be, and that shareholder approval was not required;
(b) Required approval by the shareholders, a statement that the amendment was duly approved by the shareholders in the manner required by this chapter and by the articles of incorporation; or
(c) Is being filed pursuant to § 47-1A-120.2, a statement to that effect.
Source: SL 2005, ch 239, § 240.
47-1A-1007. Restated articles of incorporation--Adoption.
A corporation's board of directors may restate its articles of incorporation at any time, with or without shareholder approval, to consolidate all amendments into a single document. If the restated articles include one or more new amendments that require shareholder approval, the amendments shall be adopted and approved as provided in § 47-1A-1003. Duly adopted restated articles of incorporation supersede the original articles of incorporation and all amendments thereto.
Source: SL 2005, ch 239, § 241.
47-1A-1007.1. Restated articles of incorporation--Delivery to Office of Secretary of State.
A corporation that restates its articles of incorporation shall deliver to the Office of the Secretary of State for filing articles of restatement setting forth the name of the corporation and the text of the restated articles of incorporation together with a certificate which states that the restated articles consolidate all amendments into a single document and, if a new amendment is included in the restated articles, which also includes the statements required under § 47-1A-1006.
Source: SL 2005, ch 239, § 242.
47-1A-1007.2. Restated articles of incorporation--Certification as articles currently in effect.
The Office of the Secretary of State may certify restated articles of incorporation as the articles of incorporation currently in effect, without including the certificate information required by § 47-1A-1007.1.
Source: SL 2005, ch 239, § 243.
47-1A-1008. Amendment pursuant to reorganization.
A corporation's articles of incorporation may be amended without action by the board of directors or shareholders to carry out a plan of reorganization ordered or decreed by a court of competent jurisdiction under the authority of a law of the United States.
The individual or individuals designated by the court shall deliver to the Office of the Secretary of State for filing articles of amendment setting forth:
(1) The name of the corporation;
(2) The text of each amendment approved by the court;
(3) The date of the court's order or decree approving the articles of amendment;
(4) The title of the reorganization proceeding in which the order or decree was entered; and
(5) A statement that the court had jurisdiction of the proceeding under federal statute.
This section does not apply after entry of a final decree in the reorganization proceeding even though the court retains jurisdiction of the proceeding for limited purposes unrelated to consummation of the reorganization plan.
Source: SL 2005, ch 239, § 244.
47-1A-1009. Effect of amendment.
An amendment to the articles of incorporation does not affect a cause of action existing against or in favor of the corporation, a proceeding to which the corporation is a party, or the existing rights of persons other than shareholders of the corporation. An amendment changing a corporation's name does not abate a proceeding brought by or against the corporation in its former name.
Source: SL 2005, ch 239, § 245.
47-1A-1020. Amendment by board of directors or shareholders.
A corporation's shareholders may amend or repeal the corporation's bylaws.
A corporation's board of directors may amend or repeal the corporation's bylaws, unless:
(1) The articles of incorporation or § 47-1A-1021 reserve that power exclusively to the shareholders in whole or part; or
(2) The shareholders in amending, repealing, or adopting a bylaw expressly provide that the board of directors may not amend, repeal, or reinstate that bylaw.
Source: SL 2005, ch 239, § 246.
47-1A-1021. Bylaw increasing quorum or voting requirement for directors.
A bylaw that increases a quorum or voting requirement for the board of directors may be amended or repealed:
(1) If originally adopted by the shareholders, only by the shareholders, unless the bylaw otherwise provides;
(2) If adopted by the board of directors, either by the shareholders or by the board of directors.
A bylaw adopted or amended by the shareholders that increases a quorum or voting requirement for the board of directors may provide that it can be amended or repealed only by a specified vote of either the shareholders or the board of directors.
Action by the board of directors under this section to amend or repeal a bylaw that changes the quorum or voting requirement for the board of directors must meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.
Source: SL 2005, ch 239, § 247.
47-1A-1101. Definitions.
Terms used in §§ 47-1A-1101 to 47-1A-1108, inclusive, mean:
(1) "Merger," a business combination pursuant to §§ 47-1A-1102 to 47-1A-1102.5, inclusive;
(2) "Party to a merger" or "party to a share exchange," any domestic or foreign corporation or eligible entity that will:
(a) Merge under a plan of merger;
(b) Acquire shares or eligible interests of another corporation or an eligible entity in a share exchange; or
(c) Have all of its shares or eligible interests or all of one or more classes or series of its shares or eligible interests acquired in a share exchange;
(3) "Share exchange," a business combination pursuant to §§ 47-1A-1103 to 47-1A-1103.5, inclusive;
(4) "Survivor," in a merger means the corporation or eligible entity into which one or more other corporations or eligible entities are merged. A survivor of a merger may preexist the merger or be created by the merger.
Source: SL 2005, ch 239, § 248.
47-1A-1102. Merger allowed generally.
One or more domestic business corporations may merge with one or more domestic or foreign business corporations or eligible entities pursuant to a plan of merger, or two or more foreign business corporations or domestic or foreign eligible entities may merge into a new domestic business corporation to be created in the merger in the manner provided in §§ 47-1A-1101 to 47-1A-1108, inclusive.
Source: SL 2005, ch 239, § 249.
47-1A-1102.1. Foreign business corporation or foreign eligible entities allowed to parties to merger.
A foreign business corporation, or a foreign eligible entity, may be a party to a merger with a domestic business corporation, or may be created by the terms of the plan of merger, only if the merger is permitted by the foreign business corporation or eligible entity.
Source: SL 2005, ch 239, § 250.
47-1A-1102.2. Procedures for approval of merger if not in organic law of entity.
If the organic law of a domestic eligible entity does not provide procedures for the approval of a merger, a plan of merger may be adopted and approved, the merger effectuated, and appraisal rights exercised in accordance with the procedures in §§ 47-1A-1101 to 47-1A-1108, inclusive, and §§ 47-1A-1301 to 47-1A-1331.2, inclusive. For the purposes of applying §§ 47-1A-1101 to 47-1A-1108, inclusive, and §§ 47-1A-1301 to 47-1A-1331.2, inclusive:
(1) The eligible entity, its members or interest holders, eligible interests, and organic documents taken together shall be deemed to be a domestic business corporation, shareholders, shares, and articles of incorporation, respectively and vice versa as the context may require; and
(2) If the business and affairs of the eligible entity are managed by a group of persons that is not identical to the members or interest holders, that group shall be deemed to be the board of directors.
Source: SL 2005, ch 239, § 251.
47-1A-1102.3. Plan of merger--Required content.
The plan of merger must include:
(1) The name of each domestic or foreign business corporation or eligible entity that will merge and the name of the domestic or foreign business corporation or eligible entity that will be the survivor of the merger;
(2) The terms and conditions of the merger;
(3) The manner and basis of converting the shares of each merging domestic or foreign business corporation and eligible interests of each merging domestic or foreign eligible entity into shares or other securities, eligible interests, obligations, rights to acquire shares, other securities or eligible interests, cash, other property, or any combination of the foregoing;
(4) The articles of incorporation of any domestic or foreign business or nonprofit corporation, or the organic documents of any domestic or foreign unincorporated entity, to be created by the merger, or if a new domestic or foreign business or nonprofit corporation or unincorporated entity is not to be created by the merger, any amendments to the survivor's articles of incorporation or organic documents; and
(5) Any other provisions required by the laws under which any party to the merger is organized or by which it is governed, or by the articles of incorporation or organic document of any such party.
Terms of a plan of merger may be made dependent on facts objectively ascertainable outside the plan in accordance with §§ 47-1A-120.1 to 47-1A-120.3, inclusive.
Source: SL 2005, ch 239, § 252.
47-1A-1102.4. Plan of merger--Amendment.
The plan of merger may include a provision that the plan may be amended prior to filing articles of merger, but if the shareholders of a domestic corporation that is a party to the merger are required or permitted to vote on the plan, the plan must provide that subsequent to approval of the plan by such shareholders the plan may not be amended to change:
(1) The amount or kind of shares or other securities, eligible interests, obligations, rights to acquire shares, other securities or eligible interests, cash, or other property to be received under the plan by the shareholders of or owners of eligible interests in any party to the merger;
(2) The articles of incorporation of any corporation, or the organic documents of any unincorporated entity, that will survive or be created as a result of the merger, except for changes permitted by § 47-1A-1005 or by comparable provisions of the organic laws of any such foreign corporation or domestic or foreign unincorporated entity; or
(3) Any of the other terms or conditions of the plan if the change would adversely affect such shareholders in any material respect.
Source: SL 2005, ch 239, § 253.
47-1A-1102.5. Property held in trust or for charitable purposes--Disposition by court order.
Property held in trust or for charitable purposes under the laws of this state by a domestic or foreign eligible entity may not be diverted by a merger from the objects for which it was donated, granted, or devised, until the eligible entity obtains an order of circuit court specifying the disposition of the property to the extent required by and pursuant to § 55-9-4.
Source: SL 2005, ch 239, § 254.
47-1A-1103. Share exchange generally.
Through a share exchange:
(1) A domestic corporation may acquire all of the shares of one or more classes or series of shares of another domestic or foreign corporation, or all of the interests of one or more classes or series of interests of a domestic or foreign other entity, in exchange for shares or other securities, interests, obligations, rights to acquire shares or other securities, cash, other property, or any combination of the foregoing, pursuant to a plan of share exchange; or
(2) All of the shares of one or more classes or series of shares of a domestic corporation may be acquired by another domestic or foreign corporation or other entity, in exchange for shares or other securities, interests, obligations, rights to acquire shares or other securities, cash, other property, or any combination of the foregoing, pursuant to a plan of share exchange.
Source: SL 2005, ch 239, § 255.
47-1A-1103.1. Foreign corporation or eligible party allowed to be party to share exchange.
A foreign corporation or eligible entity may be a party to a share exchange only if the share exchange is permitted by the corporation or other entity is organized or by which it is governed.
Source: SL 2005, ch 239, § 256.
47-1A-1103.2. Procedures for approval of share exchange if not in organic law of entity.
If the organic law of a domestic other entity does not provide procedures for the approval of a share exchange, a plan of share exchange may be adopted and approved, and the share exchange effectuated, in accordance with the procedures, if any, for a merger. If the organic law of a domestic other entity does not provide procedures for the approval of either a share exchange or a merger, a plan of share exchange may be adopted and approved, the share exchange effectuated, and appraisal rights exercised, in accordance with the procedures in §§ 47-1A-1101 to 47-1A-1108, inclusive, and §§ 47-1A-1301 to 47-1A-1331.2, inclusive. For the purposes of applying §§ 47-1A-1101 to 47-1A-1108, inclusive, and §§ 47-1A-1301 to 47-1A-1331.2, inclusive:
(1) The other entity, its interest holders, interests, and organic documents taken together shall be deemed to be a domestic business corporation, shareholders, shares, and articles of incorporation, respectively and vice versa as the context may require; and
(2) If the business and affairs of the other entity are managed by a group of persons that is not identical to the interest holders, that group shall be deemed to be the board of directors.
Source: SL 2005, ch 239, § 257.
47-1A-1103.3. Plan of share exchange--Required content.
The plan of share exchange must include:
(1) The name of each corporation or other entity whose shares or interests will be acquired and the name of the corporation or other entity that will acquire those shares or interests;
(2) The terms and conditions of the share exchange;
(3) The manner and basis of exchanging shares of a corporation or interests in an other entity whose shares or interests will be acquired under the share exchange into shares or other securities, interests, obligations, rights to acquire shares, other securities, or interests, cash, other property, or any combination of the foregoing; and
(4) Any other provisions required by the laws under which any party to the share exchange is organized or by the articles of incorporation or organic document of any such party.
Terms of a plan of share exchange may be made dependent on facts objectively ascertainable outside the plan in accordance with §§ 47-1A-120.1 to 47-1A-120.3, inclusive.
Source: SL 2005, ch 239, § 258.
47-1A-1103.4. Plan of share exchange--Amendments.
The plan of share exchange may include a provision that the plan may be amended prior to filing articles of share exchange, but if the shareholders of a domestic corporation that is a party to the share exchange are required or permitted to vote on the plan, the plan must provide that subsequent to approval of the plan by such shareholders the plan may not be amended to change:
(1) The amount or kind of shares or other securities, interests, obligations, rights to acquire shares, other securities or interests, cash, or other property to be issued by the corporation or to be received under the plan by the shareholders of or owners of interests in any party to the share exchange; or
(2) Any of the other terms or conditions of the plan if the change would adversely affect such shareholders in any material respect.
Source: SL 2005, ch 239, § 259.
47-1A-1103.5. Acquisition of shares in transactions other than share exchange.
The provisions of §§ 47-1A-1103 to 47-1A-1103.1, inclusive, do not limit the power of a domestic corporation to acquire shares of another corporation or interests in another entity in a transaction other than a share exchange.
Source: SL 2005, ch 239, § 260.
47-1A-1104. Action on a plan of merger or share exchange.
In the case of a domestic corporation that is a party to a merger or share exchange:
(1) The plan of merger or share exchange must be adopted by the board of directors;
(2) Except as provided in subdivision (7) and in §§ 47-1A-1105 to 47-1A-1105.2, inclusive, after adopting the plan of merger or share exchange the board of directors shall submit the plan to the shareholders for their approval. The board of directors shall also transmit to the shareholders a recommendation that the shareholders approve the plan, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make such a recommendation, in which case the board of directors must transmit to the shareholders the basis for that determination;
(3) The board of directors may condition its submission of the plan of merger or share exchange to the shareholders on any basis;
(4) If the plan of merger or share exchange is required to be approved by the shareholders, and if the approval is to be given at a meeting, the corporation must notify each shareholder, whether or not entitled to vote, of the meeting of shareholders at which the plan is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the plan and must contain or be accompanied by a copy or summary of the plan. If the corporation is to be merged into an existing corporation or other entity, the notice shall also include or be accompanied by a copy or summary of the articles of incorporation or organizational documents of that corporation or other entity. If the corporation is to be merged into a corporation or other entity that is to be created pursuant to the merger, the notice shall include or be accompanied by a copy or a summary of the articles of incorporation or organizational documents of the new corporation or other entity;
(5) Unless the articles of incorporation, or the board of directors acting pursuant to subdivision (3), requires a greater vote or a greater number of votes to be present, approval of the plan of merger or share exchange requires the approval of the shareholders at a meeting at which a quorum consisting of at least a majority of the votes entitled to be cast on the plan exists, and, if any class or series of shares is entitled to vote as a separate group on the plan of merger or share exchange, the approval of each such separate voting group at a meeting at which a quorum of the voting group consisting of at least a majority of the votes entitled to be cast on the merger or share exchange by that voting group is present;
(6) Separate voting by voting groups is required:
(a) On a plan of merger, by each class or series of shares that:
(i) Are to be converted under the plan of merger into other securities, interests, obligations, rights to acquire shares, other securities or interests, cash, other property, or any combination of the foregoing; or
(ii) Would be entitled to vote as a separate group on a provision in the plan that, if contained in a proposed amendment to articles of incorporation, would require action by separate voting groups under § 47-1A-1004;
(b) On a plan of share exchange, by each class or series of shares included in the exchange, with each class or series constituting a separate voting group; and
(c) On a plan of merger or share exchange, if the voting group is entitled under the articles of incorporation to vote as a voting group to approve a plan of merger or share exchange;
(7) Unless the articles of incorporation otherwise provide, approval by the corporation's shareholders of a plan of merger or share exchange is not required if:
(a) The corporation will survive the merger or is the acquiring corporation in a share exchange;
(b) Except for amendments permitted by § 47-1A-1005, its articles of incorporation will not be changed;
(c) Each shareholder of the corporation whose shares were outstanding immediately before the effective date of the merger or share exchange will hold the same number of shares, with identical preferences, limitations, and relative rights, immediately after the effective date of change; and
(d) The issuance in the merger or share exchange of shares or other securities convertible into or rights exercisable for shares does not require a vote under § 47-1A-621.1;
(8) If as a result of a merger or share exchange one or more shareholders of a domestic corporation would become subject to owner liability for the debts, obligations, or liabilities of any other person or entity, approval of the plan of merger or share exchange shall require the execution, by each such shareholder, of a separate written consent to become subject to such owner liability.
Source: SL 2005, ch 239, § 261.
47-1A-1105. Merger between parent and subsidiary or between subsidiaries.
A domestic parent corporation that owns shares of a domestic or foreign subsidiary corporation that carry at least ninety percent of the voting power of each class and series of the outstanding shares of the subsidiary that have voting power may merge the subsidiary into itself or into another such subsidiary, or merge itself into the subsidiary, without the approval of the board of directors or shareholders of the subsidiary, unless the articles of incorporation of any of the corporations otherwise provide, and unless, in the case of a foreign subsidiary, approval by the subsidiary's board of directors or shareholders is required by the laws under which the subsidiary is organized.
Source: SL 2005, ch 239, § 262.
47-1A-1105.1. Parent corporation notice to subsidiary shareholders of merger effectiveness.
If under § 47-1A-1105 approval of a merger by the subsidiary's shareholders is not required, the parent corporation shall, within ten days after the effective date of the merger, notify each of the subsidiary's shareholders that the merger has become effective.
Source: SL 2005, ch 239, § 263.
47-1A-1105.2. Provisions applicable to merger between parent and subsidiary.
Except as provided in §§ 47-1A-1105 and 47-1A-1105.1, a merger between a parent and a subsidiary shall be governed by the provisions of §§ 47-1A-1101 to 47-1A-1108, inclusive, applicable to mergers generally.
Source: SL 2005, ch 239, § 264.
47-1A-1106. Articles of merger or share exchange.
After a plan of merger or share exchange has been adopted and approved as required by this chapter, articles of merger or share exchange shall be executed on behalf of each party to the merger or share exchange by any officer or other duly authorized representative. The articles shall set forth:
(1) The names of the parties to the merger or share exchange;
(2) If the articles of incorporation of the survivor of a merger are amended, or if a new corporation is created as a result of a merger, the amendments to the survivor's articles of incorporation or the articles of incorporation of the new corporation;
(3) If the plan of merger or share exchange required approval by the shareholders of a domestic corporation that was a party to the merger or share exchange, a statement that the plan was duly approved by the shareholders and, if voting by any separate voting group was required, by each such separate voting group, in the manner required by this chapter and the articles of incorporation;
(4) If the plan of merger or share exchange did not require approval by the shareholders of a domestic corporation that was a party to the merger or share exchange, a statement to that effect; and
(5) As to each foreign corporation or eligible entity that was a party to the merger or share exchange, a statement that the participation of the foreign corporation or eligible entity was duly authorized as required by the organic law of the corporation or eligible entity.
Articles of merger or share exchange shall be delivered to the Office of the Secretary of State for filing by the survivor of the merger or the acquiring corporation in a share exchange, and take effect at the effective time provided in §§ 47-1A-123 and 47-1A-123.1. Articles of merger or share exchange filed under this section may be combined with any filing required under the organic law of any domestic eligible entity involved in the transaction if the combined filing satisfies the requirements of both this section and the other organic law.
Source: SL 2005, ch 239, § 265.
47-1A-1107. Effect of merger or share exchange.
When a merger becomes effective:
(1) The corporation or eligible entity that is designated in the plan of merger as the survivor continues or comes into existence, as the case may be;
(2) The separate existence of every corporation or eligible entity that is merged into the survivor ceases;
(3) All property owned by, and every contract right possessed by, each corporation or eligible entity that merges into the survivor is vested in the survivor without reversion or impairment;
(4) All liabilities of each corporation or eligible entity that is merged into the survivor are vested in the survivor;
(5) The name of the survivor may, but need not, be substituted in any pending proceeding for the name of any party to the merger whose separate existence ceased in the merger;
(6) The articles of incorporation or organic documents of the survivor are amended to the extent provided in the plan of merger;
(7) The articles of incorporation or organic documents of a survivor that is created by the merger become effective; and
(8) The shares of each corporation that is a party to the merger, and the interests in an eligible entity that is a party to a merger, that are to be converted under the plan of merger into shares, eligible interests, obligations, rights to acquire securities, other securities, or eligible interests, cash, other property, or any combination of the foregoing, are converted, and the former holders of such shares or eligible interests are entitled only to the rights provided to them in the plan of merger or to any rights they may have under §§ 47-1A-1301 to 47-1A-1331.2, inclusive, or the organic law of the eligible entity.
Source: SL 2005, ch 239, § 266.
47-1A-1107.1. Rights of shares of domestic corporation exchanged.
When a share exchange becomes effective, the shares of each domestic corporation that are to be exchanged for shares or other securities, interests, obligations, rights to acquire shares or other securities, cash, other property, or any combination of the foregoing, are entitled only to the rights provided to them in the plan of share exchange or to any rights they may have under §§ 47-1A-1301 to 47-1A-1331.2, inclusive.
Source: SL 2005, ch 239, § 267.
47-1A-1107.2. Owner liability only as in organic law and for debts arising after effective time of articles of merger or share exchange.
Any person who becomes subject to owner liability for some or all of the debts, obligations, or liabilities of any entity as a result of a merger or share exchange has owner liability only to the extent provided in the organic law of the entity and only for those debts, obligations, and liabilities that arise after the effective time of the articles of merger or share exchange.
Source: SL 2005, ch 239, § 268.
47-1A-1107.3. Effect of merger on surviving foreign corporation or foreign eligible entity.
Upon a merger becoming effective, a foreign corporation, or a foreign eligible entity, that is the survivor of the merger is deemed to:
(1) Agree that service of process in a proceeding to enforce the rights of shareholders of each domestic corporation that is a party to the merger who exercise appraisal rights may be made in the manner provided in §§ 59-11-16 to 59-11-19, inclusive; and
(2) Agree that it will promptly pay the amount, if any, to which such shareholders are entitled under §§ 47-1A-1301 to 47-1A-1331.2, inclusive.
Source: SL 2005, ch 239, § 269; SL 2008, ch 275, § 37.
47-1A-1107.4. Effect of merger or share exchange on owner liability of person who had owner liability for obligations of party to merger or share exchange.
The effect of a merger or share exchange on the owner liability of a person who had owner liability for some or all of the debts, obligations, or liabilities of a party to the merger or share exchange shall be as follows:
(1) The merger or share exchange does not discharge any owner liability under the organic law of the entity in which the person was a shareholder or interest holder to the extent any such owner liability arose before the effective time of the articles of merger or share exchange;
(2) The person does not have owner liability under the organic law of the entity in which the person was a shareholder or interest holder prior to the merger or share exchange for any debt, obligation, or liability that arises after the effective time of the articles of merger or share exchange;
(3) The provisions of the organic law of any entity for which the person had owner liability before the merger or share exchange continue to apply to the collection or discharge of any owner liability preserved by subdivision (1), as if the merger or share exchange had not occurred;
(4) The person has whatever rights of contribution from other persons are provided by the organic law of the entity for which the person had owner liability with respect to any owner liability preserved by subdivision (1), as if the merger or share exchange had not occurred.
Source: SL 2005, ch 239, § 270.
47-1A-1108. Abandonment of a merger or share exchange.
Unless otherwise provided in a plan of merger or share exchange or in the laws under which a foreign business corporation or a domestic or foreign eligible entity that is a party to a merger or a share exchange is organized or by which it is governed, after the plan has been adopted and approved as required by this chapter, and at any time before the merger or share exchange has become effective, it may be abandoned by a domestic business corporation that is a party thereto without action by its shareholders in accordance with any procedures set forth in the plan of merger or share exchange or, if no such procedures are set forth in the plan, in the manner determined by the board of directors, subject to any contractual rights of other parties to the merger or share exchange.
If a merger or share exchange is abandoned under this section after articles of merger or share exchange have been filed with the Office of the Secretary of State but before the merger or share exchange has become effective, a statement that the merger or share exchange has been abandoned in accordance with this section, executed on behalf of a party to the merger or share exchange by an officer or other duly authorized representative, shall be delivered to the Office of the Secretary of State for filing prior to the effective date of the merger or share exchange. Upon filing, the statement shall take effect and the merger or share exchange shall be deemed abandoned and does not become effective.
Source: SL 2005, ch 239, § 271.
47-1A-1201. Disposition of assets not requiring shareholder approval.
No approval of the shareholders of a corporation is required, unless the articles of incorporation otherwise provide:
(1) To sell, lease, exchange, or otherwise dispose of any or all of the corporation's assets in the usual and regular course of business;
(2) To mortgage, pledge, dedicate to the repayment of indebtedness (whether with or without recourse), or otherwise encumber any or all of the corporation's assets, whether or not in the usual and regular course of business;
(3) To transfer any or all of the corporation's assets to one or more corporations or other entities all of the shares or interests of which are owned by the corporation; or
(4) To distribute assets pro rata to the holders of one or more classes or series of the corporation's shares.
Source: SL 2005, ch 239, § 272.
47-1A-1202. Shareholder approval of certain dispositions.
A sale, lease, exchange, or other disposition of assets, other than a disposition described in § 47-1A-1201, requires approval of the corporation's shareholders if the disposition would leave the corporation without a significant continuing business activity. If a corporation retains a business activity that represented at least twenty-five percent of total assets at the end of the most recently completed fiscal year, and twenty-five percent of either income from continuing operations before taxes or revenues from continuing operations for that fiscal year, in each case of the corporation and its subsidiaries on a consolidated basis, the corporation will conclusively be deemed to have retained a significant continuing business activity.
Source: SL 2005, ch 239, § 273.
47-1A-1202.1. Resolution authorizing disposition--Recommendation and submission of resolution to shareholders--Conditions.
A disposition that requires approval of the shareholders under § 47-1A-1202 shall be initiated by a resolution by the board of directors authorizing the disposition. After adoption of such a resolution, the board of directors shall submit the proposed disposition to the shareholders for their approval. The board of directors shall also transmit to the shareholders a recommendation that the shareholders approve the proposed disposition, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make such a recommendation, in which case the board of directors shall transmit to the shareholders the basis for that determination.
The board of directors may condition its submission of a disposition to the shareholders under this section on any basis.
Source: SL 2005, ch 239, § 274.
47-1A-1202.2. Meeting of shareholders to consider disposition--Notice.
If a disposition is required to be approved by the shareholders under § 47-1A-1202, and if the approval is to be given at a meeting, the corporation shall notify each shareholder, whether or not entitled to vote, of the meeting of shareholders at which the disposition is to be submitted for approval. The notice shall state that the purpose, or one of the purposes, of the meeting is to consider the disposition and shall contain a description of the disposition, including the terms and conditions thereof and the consideration to be received by the corporation.
Source: SL 2005, ch 239, § 275.
47-1A-1202.3. Votes required for approval of disposition.
Unless the articles of incorporation or the board of directors acting pursuant to § 47-1A-1202.1 requires a greater vote, or a greater number of votes to be present, the approval of a disposition by the shareholders shall require the approval of the shareholders at a meeting at which a quorum consisting of at least a majority of the votes entitled to be cast on the disposition exists.
Source: SL 2005, ch 239, § 276.
47-1A-1202.4. Abandonment of disposition.
After a disposition has been approved by the shareholders under § 47-1A-1202.1, and at any time before the disposition has been consummated, it may be abandoned by the corporation without action by the shareholders, subject to any contractual rights of other parties to the disposition.
Source: SL 2005, ch 239, § 277.
47-1A-1202.5. Provisions not governing disposition of assets in course of dissolution.
A disposition of assets in the course of dissolution under §§ 47-1A-1401 to 47-1A-1440, inclusive, is not governed by §§ 47-1A-1202 to 47-1A-1202.6, inclusive.
Source: SL 2005, ch 239, § 278.
47-1A-1202.6. Assets of direct or indirect consolidated subsidiary considered assets of parent corporation.
The assets of a direct or indirect consolidated subsidiary shall be deemed the assets of the parent corporation for the purposes of §§ 47-1A-1202 to 47-1A-1202.6, inclusive.
Source: SL 2005, ch 239, § 279.
47-1A-1301. Definitions.
Terms used in §§ 47-1A-1301 to 47-1A-1331.2, inclusive, mean:
(1) "Affiliate," any person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with another person or is a senior executive thereof. For purposes of subdivision 47-1A-1302.1(4), a person is deemed to be an affiliate of its senior executives;
(2) "Beneficial shareholder," any person who is the beneficial owner of shares held in a voting trust or by a nominee on the beneficial owner's behalf;
(3) "Corporation," the issuer of the shares held by a shareholder demanding appraisal and, for matters covered in §§ 47-1A-1321 to 47-1A-1331.2, inclusive, includes the surviving entity in a merger;
(4) "Fair value," the value of the corporation's shares determined:
(a) Immediately before the effectuation of the corporate action to which the shareholder objects;
(b) Using customary and current valuation concepts and techniques generally employed for similar businesses in the context of the transaction requiring appraisal; and
(c) Without discounting for lack of marketability or minority status except, if appropriate, for amendments to the articles pursuant to subdivision 47-1A-1302(5);
(5) "Interest," interest from the effective date of the corporate action until the date of payment, at the rate of interest on judgments in this state on the effective date of the corporate action;
(6) "Preferred shares," any class or series of shares whose holders have preference over any other class or series with respect to distributions;
(7) "Record shareholder," the person in whose name shares are registered in the records of the corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with the corporation;
(8) "Senior executive," the chief executive officer, chief operating officer, chief financial officer, and anyone in charge of a principal business unit or function;
(9) "Shareholder," both a record shareholder and a beneficial shareholder.
Source: SL 2005, ch 239, § 280.
47-1A-1302. Right to appraisal.
A shareholder is entitled to appraisal rights, and to obtain payment of the fair value of that shareholder's shares, in the event of any of the following corporate actions:
(1) Consummation of a merger to which the corporation is a party under either of the following circumstances:
(a) Shareholder approval is required for the merger by § 47-1A-1104 and the shareholder is entitled to vote on the merger, except that appraisal rights are not available to any shareholder of the corporation with respect to shares of any class or series that remain outstanding after consummation of the merger; or
(b) The corporation is a subsidiary and the merger is governed by §§ 47-1A-1105 to 47-1A-1105.2, inclusive;
(2) Consummation of a share exchange to which the corporation is a party as the corporation whose shares will be acquired if the shareholder is entitled to vote on the exchange, except that appraisal rights are not available to any shareholder of the corporation with respect to any class or series of shares of the corporation that is not exchanged;
(3) Consummation of a disposition of assets pursuant to §§ 47-1A-1202 to 47-1A-1202.6, inclusive, if the shareholder is entitled to vote on the disposition;
(4) An amendment of the articles of incorporation with respect to a class or series of shares that reduces the number of shares of a class or series owned by the shareholder to a fraction of a share if the corporation has the obligation or right to repurchase the fractional share so created;
(5) Any other amendment to the articles of incorporation, merger, share exchange, or disposition of assets to the extent provided by the articles of incorporation, bylaws, or a resolution of the board of directors;
(6) Consummation of a domestication if the shareholder does not receive shares in the foreign corporation resulting from the domestication that have terms as favorable to the shareholder in all material respects, and represent at least the same percentage interest of the total voting rights of the outstanding shares of the corporation, as the shares held by the shareholder before the domestication; or
(7) Consummation of a conversion of the corporation to an unincorporated entity pursuant to §§ 47-1A-950 to 47-1A-956, inclusive.
Source: SL 2005, ch 239, § 281.
47-1A-1302.1. Limitations on availability of appraisal rights.
Notwithstanding § 47-1A-1302, the availability of appraisal rights under subdivisions 47-1A-1302(1), (2), (3), (4), (6), and (8) are limited in accordance with the following provisions:
(1) Appraisal rights are not available for the holders of shares of any class or series of shares which is:
(a) Listed on the New York Stock Exchange or the American Stock Exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.; or
(b) Not listed or designated as provided in subsection (a), but has at least two thousand shareholders and the outstanding shares of such class or series has a market value of at least twenty million dollars, exclusive of the value of such shares held by its subsidiaries, senior executives, directors, and beneficial shareholders owning more than ten percent of such shares;
(2) The applicability of subdivision (1) shall be determined as of:
(a) The record date fixed to determine the shareholders entitled to receive notice of, and to vote at, the meeting of shareholders to act upon the corporate action requiring appraisal rights; or
(b) The day before the effective date of such corporate action if there is no meeting of shareholders;
(3) The provisions of subdivision (1) are not applicable and appraisal rights are available pursuant to § 47-1A-1302 for the holders of any class or series of shares who are required by the terms of the corporate action requiring appraisal rights to accept for such shares anything other than cash or shares of any class or any series of shares of any corporation, or any other proprietary interest of any other entity, that satisfies the standards set forth in subdivision (1) at the time the corporate action becomes effective;
(4) The provisions of subdivision (1) are not applicable and appraisal rights are available pursuant to § 47-1A-1302 for the holders of any class or series of shares in which:
(a) Any of the shares or assets of the corporation are being acquired or converted, whether by merger, share exchange, or otherwise, pursuant to the corporate action by a person, or by an affiliate of a person, who:
(i) Is, or at any time in the one-year period immediately preceding approval by the board of directors of the corporate action requiring appraisal rights was, the beneficial owner of twenty percent or more of the voting power of the corporation, excluding any shares acquired pursuant to an offer for all shares having voting power if such offer was made within one year prior to the corporate action requiring appraisal rights for consideration of the same kind and of a value equal to or less than that paid in connection with the corporate action; or
(ii) Directly or indirectly has, or at any time in the one-year period immediately preceding approval by the board of directors of the corporation of the corporate action requiring appraisal rights had, the power, contractually or otherwise, to cause the appointment or election of twenty-five percent or more of the directors to the board of directors of the corporation; or
(b) Any of the shares or assets of the corporation are being acquired or converted, whether by merger, share exchange, or otherwise, pursuant to such corporate action by a person, or by an affiliate of a person, who is, or at any time in the one-year period immediately preceding approval by the board of directors of the corporate action requiring appraisal rights was, a senior executive or director of the corporation or a senior executive of any affiliate thereof, and that senior executive or director will receive, as a result of the corporate action, a financial benefit not generally available to other shareholders as such, other than:
(i) Employment, consulting, retirement, or similar benefits established separately and not as part of or in contemplation of the corporate action; or
(ii) Employment, consulting, retirement, or similar benefits established in contemplation of, or as part of, the corporate action that are not more favorable than those existing before the corporate action or, if more favorable, that have been approved on behalf of the corporation in the same manner as is provided in §§ 47-1A-862 to 47-1A-862.3, inclusive; or
(iii) In the case of a director of the corporation who will, in the corporate action, become a director of the acquiring entity in the corporate action or one of its affiliates, rights and benefits as a director that are provided on the same basis as those afforded by the acquiring entity generally to other directors of such entity or such affiliate;
(5) For the purposes of subdivision (4), the term, beneficial owner, means any person who, directly or indirectly, through any contract, arrangement, or understanding, other than a revocable proxy, has or shares the power to vote, or to direct the voting of, shares. However, a member of a national securities exchange may not be deemed to be a beneficial owner of securities held directly or indirectly by it on behalf of another person solely because such member is the record holder of such securities if the member is precluded by the rules of such exchange from voting without instruction on contested matters or matters that may affect substantially the rights or privileges of the holders of the securities to be voted. When two or more persons agree to act together for the purpose of voting their shares of the corporation, each member of the group formed thereby shall be deemed to have acquired beneficial ownership, as of the date of such agreement, of all voting shares of the corporation beneficially owned by any member of the group.
Source: SL 2005, ch 239, § 282.
47-1A-1302.2. Limits on or elimination of appraisal rights for preferred shares by articles of incorporation--Application.
Notwithstanding any other provision of §§ 47-1A-1302 to 47-1A-1302.3, inclusive, the articles of incorporation as originally filed or any amendment thereto may limit or eliminate appraisal rights for any class or series of preferred shares, but any such limitation or elimination contained in an amendment to the articles of incorporation that limits or eliminates appraisal rights for any of such shares that are outstanding immediately prior to the effective date of such amendment or that the corporation is or may be required to issue or sell thereafter pursuant to any conversion, exchange, or other right existing immediately before the effective date of such amendment does not apply to any corporate action that becomes effective within one year of that date if such action would otherwise afford appraisal rights.
Source: SL 2005, ch 239, § 283.
47-1A-1302.3. Challenge of specified completed corporate actions--Limitation.
No shareholder may challenge a completed corporate action described in § 47-1A-1302, other than those subscribed in subdivisions 47-1A-1302.1(3) and (4), unless such corporate action:
(1) Was not effectuated in accordance with the applicable provisions of §§ 47-1A-901 to 47-1A-1202.6, inclusive, or the corporation's articles of incorporation, bylaws or board of directors' resolution authorizing the corporate action; or
(2) Was procured as a result of fraud or material misrepresentation.
Source: SL 2005, ch 239, § 284.
47-1A-1303. Assertion of appraisal rights by record shareholders for part of shares in name.
A record shareholder may assert appraisal rights as to fewer than all the shares registered in the record shareholder's name but owned by a beneficial shareholder only if the record shareholder objects with respect to all shares of the class or series owned by the beneficial shareholder and notifies the corporation in writing of the name and address of each beneficial shareholder on whose behalf appraisal rights are being asserted. The rights of a record shareholder who asserts appraisal rights for only part of the shares held of record in the record shareholder's name under this section shall be determined as if the shares as to which the record shareholder objects and the record shareholder's other shares were registered in the names of different record shareholders.
Source: SL 2005, ch 239, § 285.
47-1A-1303.1. Assertion of appraisal rights of beneficial shareholder.
A beneficial shareholder may assert appraisal rights as to shares of any class or series held on behalf of the shareholder only if such shareholder:
(1) Submits to the corporation the record shareholder's written consent to the assertion of such rights no later than the date referred to in subsection 47-1A-1322.1(2)(b); and
(2) Does so with respect to all shares of the class or series that are beneficially owned by the beneficial shareholder.
Source: SL 2005, ch 239, § 286.
47-1A-1320. Notice of appraisal rights.
If proposed corporate action described in § 47-1A-1302 is to be submitted to a vote at a shareholders' meeting, the meeting notice must state that the corporation has concluded that shareholders are, are not, or may be entitled to assert appraisal rights under this §§ 47-1A-1301 to 47-1A-1331.2, inclusive. If the corporation concludes that appraisal rights are or may be available, a copy of §§ 47-1A-1301 to 47-1A-1331.2, inclusive, must accompany the meeting notice sent to those record shareholders entitled to exercise appraisal rights.
In a merger pursuant to §§ 47-1A-1105 to 47-1A-1105.2, inclusive, the parent corporation shall notify in writing all record shareholders of the subsidiary who are entitled to assert appraisal rights that the corporate action became effective. Such notice shall be sent within ten days after the corporate action became effective and include the materials described in §§ 47-1A-1322 to 47-1A-1323, inclusive.
Source: SL 2005, ch 239, § 287.
47-1A-1321. Notice of intent to demand payment.
If proposed corporate action requiring appraisal rights under §§ 47-1A-1302 to 47-1A-1302.3, inclusive, is submitted to a vote at a shareholders' meeting, a shareholder who wishes to assert appraisal rights with respect to any class or series of shares:
(1) Must deliver to the corporation before the vote is taken written notice of the shareholder's intent to demand payment if the proposed action is effectuated; and
(2) Must not vote, or cause or permit to be voted, any shares of such class or series in favor of the proposed action.
A shareholder who does not satisfy the requirements of this section is not entitled to payment under §§ 47-1A-1301 to 47-1A-1331.2, inclusive.
Source: SL 2005, ch 239, § 288.
47-1A-1322. Appraisal notice and form--Delivery to shareholders.
If proposed corporate action requiring appraisal rights under § 47-1A-1302 becomes effective, the corporation must deliver a written appraisal notice and form required by subdivision 47-1A-1322.1(1) to all shareholders who satisfied the requirements of § 47-1A-1321. In the case of a merger under §§ 47-1A-1105 to 47-1A-1105.2, inclusive, the parent shall deliver a written appraisal notice and form to all record shareholders who may be entitled to assert appraisal rights.
Source: SL 2005, ch 239, § 289.
47-1A-1322.1. Appraisal notice and form--Time limits and content.
The appraisal notice shall be sent no earlier than the date the corporate action became effective and no later than ten days after such date and must:
(1) Supply a form that specifies the date of the first announcement to shareholders of the principal terms of the proposed corporate action and requires the shareholder asserting appraisal rights to certify (i) whether or not beneficial ownership of those shares for which appraisal rights are asserted was acquired before that date and (ii) that the shareholder did not vote for the transaction;
(2) State the following:
(a) Where the form must be sent and where certificates for certificated shares must be deposited and the date by which those certificates must be deposited, which date may not be earlier than the date for receiving the required form under subsection (2)(b);
(b) A date by which the corporation must receive the form, which date may not be fewer than forty nor more than sixty days after the date the § 47-1A-1322 appraisal notice and form are sent, and state that the shareholder waives the right to demand appraisal with respect to the shares unless the form is received by the corporation by such specified date;
(c) The corporation's estimate of the fair value of the shares;
(d) That, if requested in writing, the corporation will provide, to the shareholder so requesting, within ten days after the date specified in subsection (2)(b) the number of shareholders who return the forms by the specified date and the total number of shares owned by them; and
(e) The date by which the notice to withdraw under §§ 47-1A-1323 to 47-1A-1323.2, inclusive, must be received, which date must be within twenty days after the date specified in subsection (2)(b); and
(3) Be accompanied by a copy of §§ 47-1A-1301 to 47-1A-1331.2, inclusive.
Source: SL 2005, ch 239, § 290.
47-1A-1323. Perfection of rights--Right to withdraw.
A shareholder who receives notice pursuant to §§ 47-1A-1322 and 47-1A-1322.1 and who wishes to exercise appraisal rights must certify on the form sent by the corporation whether the beneficial owner of such shares acquired beneficial ownership of the shares before the date required to be set forth in the notice pursuant to subdivision 47-1A-1322.1(1). If a shareholder fails to make this certification, the corporation may elect to treat the shareholder's shares as after-acquired shares under §§ 47-1A-1325 to 47-1A-1325.3, inclusive. In addition, a shareholder who wishes to exercise appraisal rights must execute and return the form and, in the case of certificated shares, deposit the shareholder's certificates in accordance with the terms of the notice by the date referred to in the notice pursuant to subsection 47-1A-1322.1(2)(b). Once a shareholder deposits that shareholder's certificates or, in the case of uncertificated shares, returns the executed forms, that shareholder loses all rights as a shareholder, unless the shareholder withdraws pursuant to § 47-1A-1322.1.
Source: SL 2005, ch 239, § 291.
47-1A-1323.1. Subsequent withdrawal from appraisal process.
A shareholder who has complied with § 47-1A-1322 may nevertheless decline to exercise appraisal rights and withdraw from the appraisal process by so notifying the corporation in writing by the date set forth in the appraisal notice pursuant to subsection 47-1A-1322.1(2)(e). A shareholder who fails to so withdraw from the appraisal process may not thereafter withdraw without the corporation's written consent.
Source: SL 2005, ch 239, § 292.
47-1A-1323.2. Loss of payment upon failure to return form and deposit share certificates.
A shareholder who does not execute and return the form and, in the case of certificated shares, deposit that shareholder's share certificates where required, each by the date set forth in the notice described in § 47-1A-1322.1, is not entitled to payment under this chapter.
Source: SL 2005, ch 239, § 293.
47-1A-1324. Payment for shares.
Except as provided in §§ 47-1A-1325 to 47-1A-1325.3, inclusive, within thirty days after the form required by subsection 47-1A-1322.1(2)(b) is due, the corporation shall pay in cash to those shareholders who complied with § 47-1A-1323 the amount the corporation estimates to be the fair value of their shares, plus interest.
The payment to each shareholder pursuant to this section must be accompanied by:
(1) Financial statements of the corporation that issued the shares to be appraised, consisting of a balance sheet as of the end of a fiscal year ending not more than sixteen months before the date of payment, an income statement for that year, a statement of changes in shareholders' equity for that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the shares, which estimate must equal or exceed the corporation's estimate given pursuant to subsection 47-1A-1322.1(2)(c);
(3) A statement that shareholders described in this section have the right to demand further payment under § 47-1A-1326 and that if any such shareholder does not do so within the time period specified therein, such shareholder shall be deemed to have accepted such payment in full satisfaction of the corporation's obligations under this chapter.
Source: SL 2005, ch 239, § 294.
47-1A-1325. Withholding of payment for after-acquired shares.
A corporation may elect to withhold payment required by § 47-1A-1324 from any shareholder who did not certify that beneficial ownership of all of the shareholder's shares for which appraisal rights are asserted was acquired before the date set forth in the appraisal notice sent pursuant to subdivision 47-1A-1322.1(1).
Source: SL 2005, ch 239, § 295.
47-1A-1325.1. Notice required upon withholding of payment for after-acquired shares.
If the corporation elected to withhold payment under § 47-1A-1325, the corporation must, within thirty days after the form required by subsection 47-1A-1322.1(2)(b) is due, notify all shareholders who are described in § 47-1A-1325:
(1) Of the information required by subdivision 47-1A-1324(1);
(2) Of the corporation's estimate of fair value pursuant to subdivision 47-1A-1324(2);
(3) That they may accept the corporation's estimate of fair value, plus interest, in full satisfaction of their demands or demand appraisal under § 47-1A-1326;
(4) That those shareholders who wish to accept such offer must so notify the corporation of their acceptance of the corporation's offer within thirty days after receiving the offer; and
(5) That those shareholders who do not satisfy the requirements for demanding appraisal under § 47-1A-1326 shall be deemed to have accepted the corporation's offer.
Source: SL 2005, ch 239, § 296.
47-1A-1325.2. Payment for shares upon shareholder acceptance of offer in notice.
Within ten days after receiving the shareholder's acceptance pursuant to § 47-1A-1325.1, the corporation must pay in cash the amount it offered under subdivision 47-1A-1325.1(2) to each shareholder who agreed to accept the corporation's offer in full satisfaction of the shareholder's demand.
Source: SL 2005, ch 239, § 297.
47-1A-1325.3. Payment for shares of amount offered in notice to specified shareholders.
Within forty days after sending the notice described in § 47-1A-1325.1, the corporation must pay in cash the amount it offered to pay under subdivision 47-1A-1325.1(2) to each shareholder described in subdivision 47-1A-1325.1(5).
Source: SL 2005, ch 239, § 298.
47-1A-1326. Procedure if shareholder dissatisfied with payment or offer.
A shareholder paid pursuant to § 47-1A-1324 who is dissatisfied with the amount of the payment must notify the corporation in writing of that shareholder's estimate of the fair value of the shares and demand payment of that estimate plus interest, less any payment under § 47-1A-1324. A shareholder offered payment under §§ 47-1A-1325 to 47-1A-1325.3, inclusive, who is dissatisfied with that offer must reject the offer and demand payment of the shareholder's stated estimate of the fair value of the shares plus interest.
A shareholder who fails to notify the corporation in writing of that shareholder's demand to be paid the shareholder's stated estimate of the fair value plus interest under this section within thirty days after receiving the corporation's payment or offer of payment under § 47-1A-1324 or §§ 47-1A-1325 to 47-1A-1325.3, inclusive, respectively, waives the right to demand payment under this section and is entitled only to the payment made or offered pursuant to those respective sections.
Source: SL 2005, ch 239, § 299.
47-1A-1330. Court action.
If a shareholder makes demand for payment under § 47-1A-1326 which remains unsettled, the corporation shall commence a proceeding within sixty days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the sixty-day period, it shall pay in cash to each shareholder the amount the shareholder demanded pursuant to § 47-1A-1326 plus interest.
Source: SL 2005, ch 239, § 300.
47-1A-1330.1. Venue.
The corporation shall commence the proceeding in the appropriate court of the county where the corporation's principal office is located, or, if none in this state, in Hughes County. If the corporation is a foreign corporation, it shall commence the proceeding in the county in this state where the principal office of the domestic corporation merged with the foreign corporation was located or, if the domestic corporation did not have its principal office in this state at the time of the transaction, in Hughes County.
Source: SL 2005, ch 239, § 301; SL 2008, ch 275, § 38.
47-1A-1330.2. Parties--Service.
The corporation shall make all shareholders, whether or not residents of this state, whose demands remain unsettled parties to the proceeding as in an action against their shares, and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law.
Source: SL 2005, ch 239, § 302.
47-1A-1330.3. Jurisdiction--Appraisers--Discovery--Jury trial.
The jurisdiction of the court in which the proceeding is commenced under § 47-1A-1330.1 is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the powers described in the order appointing them, or in any amendment to it. The shareholders demanding appraisal rights are entitled to the same discovery rights as parties in other civil proceedings. There is no right to a jury trial.
Source: SL 2005, ch 239, § 303.
47-1A-1330.4. Judgment amount.
Each shareholder made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of the shareholder's shares, plus interest, exceeds the amount paid by the corporation to the shareholder for such shares or for the fair value, plus interest, of the shareholder's shares for which the corporation elected to withhold payment under §§ 47-1A-1325 to 47-1A-1325.3, inclusive.
Source: SL 2005, ch 239, § 304.
47-1A-1331. Court costs.
The court in an appraisal proceeding commenced under §§ 47-1A-1330 to 47-1A-1330.4, inclusive, shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess costs against all or some of the shareholders demanding appraisal, in amounts the court finds equitable, to the extent the court finds such shareholders acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by §§ 47-1A-1301 to 47-1A-1331.2, inclusive.
Source: SL 2005, ch 239, § 305.
47-1A-1331.1. Counsel and expert fees and expenses.
The court in an appraisal proceeding may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all shareholders demanding appraisal if the court finds the corporation did not substantially comply with the requirements of §§ 47-1A-1320, 47-1A-1322, 47-1A-1322.1, 47-1A-1324, or 47-1A-1325 to 47-1A-1325.3, inclusive; or
(2) Against either the corporation or a shareholder demanding appraisal, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this chapter.
Source: SL 2005, ch 239, § 306.
47-1A-1331.2. Counsel fees to be paid by benefited shareholders.
If the court in an appraisal proceeding finds that the services of counsel for any shareholder were of substantial benefit to other shareholders similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to such counsel reasonable fees to be paid out of the amounts awarded the shareholders who were benefited.
To the extent the corporation fails to make a required payment pursuant to § 47-1A-1324, §§ 47-1A-1325 to 47-1A-1325.3, inclusive, or § 47-1A-1326, the shareholder may sue directly for the amount owed and, to the extent successful, is entitled to recover from the corporation all costs and expenses of the suit, including counsel fees.
Source: SL 2005, ch 239, § 307.
47-1A-1401. Dissolution by incorporators or initial directors.
A majority of the incorporators or initial directors of a corporation that has not issued shares or has not commenced business may dissolve the corporation by delivering to the Office of the Secretary of State for filing articles of dissolution that set forth:
(1) The name of the corporation;
(2) The date of its incorporation;
(3) Either that none of the corporation's shares has been issued, or that the corporation has not commenced business;
(4) That no debt of the corporation remains unpaid;
(5) That the net assets of the corporation remaining after winding up have been distributed to the shareholders, if shares were issued; and
(6) That a majority of the incorporators or initial directors authorized the dissolution.
Source: SL 2005, ch 239, § 308.
47-1A-1402. Proposal to dissolve by board of directors--Requirements for adoption.
A corporation's board of directors may propose dissolution for submission to the shareholders. For a proposal to dissolve to be adopted:
(1) The board of directors must recommend dissolution to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders; and
(2) The shareholders entitled to vote must approve the proposal to dissolve as provided in § 47-1A-1402.3.
Source: SL 2005, ch 239, § 309.
47-1A-1402.1. Conditions for submission of proposal for dissolution.
The board of directors may condition its submission of the proposal for dissolution on any basis.
Source: SL 2005, ch 239, § 310.
47-1A-1402.2. Meeting of shareholders to consider dissolving corporation--Notice.
The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider dissolving the corporation.
Source: SL 2005, ch 239, § 311.
47-1A-1402.3. Votes required for adoption of proposal to dissolve.
Unless the articles of incorporation or the board of directors acting pursuant to § 47-1A-1402.1 require a greater vote, a greater number of shares to be present, or a vote by voting groups, adoption of the proposal to dissolve shall require the approval of the shareholders at a meeting at which a quorum consisting of at least a majority of the votes entitled to be cast exists.
Source: SL 2005, ch 239, § 312.
47-1A-1403. Articles of dissolution--Content--Filing--Effective date.
At any time after dissolution is authorized, the corporation may dissolve by delivering to the Office of the Secretary of State for filing articles of dissolution setting forth:
(1) The name of the corporation;
(2) The date dissolution was authorized; and
(3) If dissolution was approved by the shareholders, a statement that the proposal to dissolve was duly approved by the shareholders in the manner required by this chapter and by the articles of incorporation.
A corporation is dissolved upon the effective date of its articles of dissolution.
Source: SL 2005, ch 239, § 313.
47-1A-1403.1. Dissolved corporation defined.
For purposes of §§ 47-1A-1401 to 47-1A-1409, inclusive, the term, dissolved corporation, means a corporation whose articles of dissolution have become effective and includes a successor entity to which the remaining assets of the corporation are transferred subject to its liabilities for purposes of liquidation.
Source: SL 2005, ch 239, § 314.
47-1A-1404. Revocation of dissolution.
A corporation may revoke its dissolution within one hundred twenty days of its effective date. Revocation of dissolution must be authorized in the same manner as the dissolution was authorized unless that authorization permitted revocation by action of the board of directors alone, in which event the board of directors may revoke the dissolution without shareholder action. After the revocation of dissolution is authorized, the corporation may revoke the dissolution by delivering to the secretary of state for filing articles of revocation of dissolution, together with a copy of its articles of dissolution, that set forth:
(1) The name of the corporation;
(2) The effective date of the dissolution that was revoked;
(3) The date that the revocation of dissolution was authorized;
(4) If the corporation's board of directors, or incorporators, revoked the dissolution, a statement to that effect;
(5) If the corporation's board of directors revoked a dissolution authorized by the shareholders, a statement that revocation was permitted by action by the board of directors alone pursuant to that authorization; and
(6) If shareholder action was required to revoke the dissolution, the information required by subdivision 47-1A-1403(3).
Revocation of dissolution is effective upon the effective date of the articles of revocation of dissolution. When the revocation of dissolution is effective, it relates back to and takes effect as of the effective date of the dissolution and the corporation resumes carrying on its business as if dissolution had never occurred.
Source: SL 2005, ch 239, § 315.
47-1A-1405. Effect of dissolution.
A dissolved corporation continues its corporate existence but may not carry on any business except that appropriate to wind up and liquidate its business and affairs, including:
(1) Collecting its assets;
(2) Disposing of its properties that will not be distributed in kind to its shareholders;
(3) Discharging or making provision for discharging its liabilities;
(4) Distributing its remaining property among its shareholders according to their interests; and
(5) Doing every other act necessary to wind up and liquidate its business and affairs.
Source: SL 2005, ch 239, § 316.
47-1A-1405.1. Limitations on effect of dissolution.
Dissolution of a corporation does not:
(1) Transfer title to the corporation's property;
(2) Prevent transfer of its shares or securities, although the authorization to dissolve may provide for closing the corporation's share transfer records;
(3) Subject its directors or officers to standards of conduct different from those prescribed in §§ 47-1A-801 to 47-1A-863.3, inclusive;
(4) Change quorum or voting requirements for its board of directors or shareholders; change provisions for selection, resignation, or removal of its directors or officers or both; or change provisions for amending its bylaws;
(5) Prevent commencement of a proceeding by or against the corporation in its corporate name;
(6) Abate or suspend a proceeding pending by or against the corporation on the effective date of dissolution; or
(7) Terminate the authority of the registered agent of the corporation.
Source: SL 2005, ch 239, § 317.
47-1A-1406. Known claims against dissolved corporation.
A dissolved corporation may dispose of the known claims against it by notifying its known claimants in writing of the dissolution at any time after its effective date. The written notice must:
(1) Describe information that must be included in a claim;
(2) Provide a mailing address where a claim may be sent;
(3) State the deadline, which may not be fewer than one hundred twenty days from the effective date of the written notice, by which the dissolved corporation must receive the claim; and
(4) State that the claim will be barred if not received by the deadline.
Source: SL 2005, ch 239, § 318.
47-1A-1406.1. Bar on known claims against dissolved corporation.
A claim against the dissolved corporation is barred:
(1) If a claimant who was given written notice under § 47-1A-1406 does not deliver the claim to the dissolved corporation by the deadline; or
(2) If a claimant whose claim was rejected by the dissolved corporation does not commence a proceeding to enforce the claim within ninety days from the effective date of the rejection notice.
Source: SL 2005, ch 239, § 319.
47-1A-1406.2. Claim exclusions.
For purposes of §§ 47-1A-1406 and 47-1A-1406.1, the term, claim, does not include a contingent liability or a claim based on an event occurring after the effective date of dissolution.
Source: SL 2005, ch 239, § 320.
47-1A-1407. Other claims against dissolved corporation--Publication of notice of dissolution.
A dissolved corporation may also publish notice of its dissolution and request that persons with claims against the dissolved corporation present them in accordance with the notice. The notice must:
(1) Be published one time in a newspaper of general circulation in the county where the dissolved corporation's principal office is or was located, or, if none in this state, in Hughes County;
(2) Describe the information that must be included in a claim and provide a mailing address where the claim may be sent; and
(3) State that a claim against the dissolved corporation will be barred unless a proceeding to enforce the claim is commenced within three years after the publication of the notice.
Source: SL 2005, ch 239, § 321; SL 2008, ch 275, § 39.
47-1A-1407.1. Time for bringing action to enforce claim against dissolved corporation after notice publication.
If the dissolved corporation publishes a newspaper notice in accordance with § 47-1A-1407, the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved corporation within three years after the publication date of the newspaper notice:
(1) A claimant who was not given written notice under §§ 47-1A-1406 to 47-1A-1406.2, inclusive;
(2) A claimant whose claim was timely sent to the dissolved corporation but not acted on;
(3) A claimant whose claim is contingent or based on an event occurring after the effective date of dissolution.
Source: SL 2005, ch 239, § 322.
47-1A-1407.2. Enforcement of claims against dissolved corporations.
A claim that is not barred by § 47-1A-1406 or 47-1A-1407.1 may be enforced:
(1) Against the dissolved corporation, to the extent of its undistributed assets; or
(2) Except as provided in § 47-1A-1408.1, if the assets have been distributed in liquidation, against a shareholder of the dissolved corporation to the extent of the shareholder's pro rata share of the claim or the corporate assets distributed to the shareholder in liquidation, whichever is less, but a shareholder's total liability for all claims under this section may not exceed the total amount of assets distributed to the shareholder.
Source: SL 2005, ch 239, § 323.
47-1A-1408. Court proceedings for determination of amount and form of security for contingent, unknown, or future claims.
A dissolved corporation that has published a notice under §§ 47-1A-1407 to 47-1A-1407.2, inclusive, may file an application with the circuit court of the county where the dissolved corporation's principal office is located, or, if none in this state, with the circuit court of Hughes County, for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the dissolved corporation or that are based on an event occurring after the effective date of dissolution but that, based on the facts known to the dissolved corporation, are reasonably estimated to arise after the effective date of dissolution. Provision need not be made for any claim that is or is reasonably anticipated to be barred under § 47-1A-1407.1.
Within ten days after the filing of the application, notice of the proceeding shall be given by the dissolved corporation to each claimant holding a contingent claim whose contingent claim is shown on the records of the dissolved corporation.
The court may appoint a guardian ad litem to represent all claimants whose identities are unknown in any proceeding brought under this section. The reasonable fees and expenses of such guardian, including all reasonable expert witness fees, shall be paid by the dissolved corporation.
Source: SL 2005, ch 239, § 324; SL 2008, ch 275, § 40.
47-1A-1408.1. Court-ordered security satisfaction for contingent, unknown, or future claims.
Provision by the dissolved corporation for security in the amount and the form ordered by the court under § 47-1A-1408 shall satisfy the dissolved corporation's obligations with respect to claims that are contingent, have not been made known to the dissolved corporation, or are based on an event occurring after the effective date of dissolution, and such claims may not be enforced against a shareholder who received assets in liquidation.
Source: SL 2005, ch 239, § 325.
47-1A-1409. Director duties.
Directors shall cause the dissolved corporation to discharge or make reasonable provision for the payment of claims and make distributions of assets to shareholders after payment or provision for claims.
Directors of a dissolved corporation which has disposed of claims under §§ 47-1A-1406 to 47-1A-1406.2, inclusive, 47-1A-1407 to 47-1A-1407.2, inclusive, or 47-1A-1408 and 47-1A-1408.1, are not liable for breach of this section with respect to claims against the dissolved corporation that are barred or satisfied under §§ 47-1A-1406 to 47-1A-1406.2, inclusive, 47-1A-1407 to 47-1A-1407.2, inclusive, or 47-1A-1408 and 47-1A-1408.1.
Source: SL 2005, ch 239, § 326.
47-1A-1420. Grounds for administrative dissolution.
The Office of the Secretary of State may commence a proceeding under § 47-1A-1421 to administratively dissolve a corporation if:
(1) The corporation does not pay within sixty days after they are due any filing fees or penalties imposed by this chapter or other law;
(2) The corporation does not deliver its annual report to the Office of the Secretary of State within sixty days after it is due;
(3) The corporation is without a registered agent in this state for sixty days or more;
(4) The corporation does not notify the Office of the Secretary of State within sixty days that its registered agent has been changed or that its registered agent has resigned; or
(5) The corporation's period of duration stated in its articles of incorporation expires.
Source: SL 2005, ch 239, § 327; SL 2008, ch 275, § 41.
47-1A-1421. Procedure for and effect of administrative dissolution.
If the Office of the Secretary of State determines that one or more grounds exist under § 47-1A-1420 for dissolving a corporation, the Office of the Secretary of State shall serve the corporation with written notice of that determination. If the corporation does not correct each ground for dissolution or demonstrate to the reasonable satisfaction of the Office of the Secretary of State that each ground determined by the Office of the Secretary of State does not exist within sixty days after service of the notice is perfected, the Office of the Secretary of State shall administratively dissolve the corporation by signing a certificate of dissolution that recites the ground or grounds for dissolution and its effective date. The Office of the Secretary of State shall file the original of the certificate and serve a copy on the corporation.
A corporation administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business and affairs under §§ 47-1A-1405 and 47-1A-1405.1 and notify claimants under §§ 47-1A-1406 to 47-1A-1406.2, inclusive, and 47-1A-1407 to 47-1A-1407.2, inclusive.
The administrative dissolution of a corporation does not terminate the authority of its registered agent.
Source: SL 2005, ch 239, § 328; SL 2008, ch 275, § 42.
47-1A-1422. Reinstatement following administrative dissolution.
A corporation administratively dissolved under § 47-1A-1421 may apply to the Office of the Secretary of State for reinstatement any time after the effective date of dissolution. The application must:
(1) Recite the name of the corporation and the effective date of its administrative dissolution;
(2) State that the ground or grounds for dissolution either did not exist or have been eliminated;
(3) State that the corporation's name satisfies the requirements of §§ 47-1A-401 to 47-1A-401.3, inclusive; and
(4) Contain a certificate from the Department of Revenue in this state reciting that all taxes and fees administered and collected by the department which are owed by the corporation have been paid.
If the Office of the Secretary of State determines that the application contains the information required by this section and that the information is correct, the Office of the Secretary of State shall cancel the certificate of dissolution and prepare a certificate of reinstatement that recites that determination and the effective date of reinstatement, file the original of the certificate, and serve a copy on the corporation.
When the reinstatement is effective, it relates back to and takes effect as of the effective date of the administrative dissolution and the corporation resumes carrying on its business as if the administrative dissolution had never occurred.
Source: SL 2005, ch 239, § 329; SL 2008, ch 275, § 43; SL 2011, ch 1 (Ex. Ord. 11-1), § 161, eff. Apr. 12, 2011.
47-1A-1423. Appeal from denial of reinstatement.
If the Office of the Secretary of State denies a corporation's application for reinstatement following administrative dissolution, the Office of the Secretary of State shall serve the corporation with a written notice that explains the reason or reasons for denial.
The corporation may appeal the denial of reinstatement to the circuit court within thirty days after service of the notice of denial is perfected. The corporation appeals by petitioning the court to set aside the dissolution and attaching to the petition copies of the Office of the Secretary of State's certificate of dissolution, the corporation's application for reinstatement, and the Office of the Secretary of State's notice of denial.
The court may summarily order the Office of the Secretary of State to reinstate the dissolved corporation or may take other action the court considers appropriate. The court's final decision may be appealed as in other civil proceedings.
Source: SL 2005, ch 239, § 330; SL 2008, ch 275, § 44.
47-1A-1430. Grounds for judicial dissolution.
The circuit court may dissolve a corporation:
(1) In a proceeding by the attorney general if it is established that:
(a) The corporation obtained its articles of incorporation through fraud; or
(b) The corporation has continued to exceed or abuse the authority conferred upon it by law;
(2) In a proceeding by a shareholder if it is established that:
(a) The directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered, or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally, because of the deadlock;
(b) The directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent;
(c) The shareholders are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired; or
(d) The corporate assets are being misapplied or wasted;
(3) In a proceeding by a creditor if it is established that:
(a) The creditor's claim has been reduced to judgment, the execution on the judgment returned unsatisfied, and the corporation is insolvent; or
(b) The corporation has admitted in writing that the creditor's claim is due and owing and the corporation is insolvent; or
(4) In a proceeding by the corporation to have its voluntary dissolution continued under court supervision.
Source: SL 2005, ch 239, § 331.
47-1A-1431. Venue.
Venue for a proceeding by the attorney general to dissolve a corporation lies in Hughes County. Venue for a proceeding brought by any other party named in § 47-1A-1430 lies in the county where a corporation's principal office is or was last located, or, if none in this state, in Hughes County.
Source: SL 2005, ch 239, § 332; SL 2008, ch 275, § 45.
47-1A-1431.1. Shareholders as parties.
It is not necessary to make shareholders parties to a proceeding to dissolve a corporation unless relief is sought against them individually.
Source: SL 2005, ch 239, § 333.
47-1A-1431.2. Authority of court until full hearing held.
A court in a proceeding brought to dissolve a corporation may issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs, take other action required to preserve the corporate assets wherever located, and carry on the business of the corporation until a full hearing can be held.
Source: SL 2005, ch 239, § 334.
47-1A-1431.3. Shareholder right to avoid dissolution by purchase of petitioner shares--Notice.
Within ten days of the commencement of a proceeding under subdivision 47-1A-1430(2) to dissolve a corporation that has no shares listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association, the corporation shall send to all shareholders, other than the petitioner, a notice stating that the shareholders are entitled to avoid the dissolution of the corporation by electing to purchase the petitioner's shares under §§ 47-1A-1434 to 47-1A-1434.7, inclusive and accompanied by a copy of §§ 47-1A-1434 to 47-1A-1434.7, inclusive.
Source: SL 2005, ch 239, § 335.
47-1A-1432. Receivership or custodianship.
A court in a judicial proceeding brought to dissolve a corporation may appoint one or more receivers to wind up and liquidate, or one or more custodians to manage, the business and affairs of the corporation. The court shall hold a hearing, after notifying all parties to the proceeding and any interested persons designated by the court, before appointing a receiver or custodian. The court appointing a receiver or custodian has exclusive jurisdiction over the corporation and all of its property wherever located.
The court may appoint an individual or a domestic or foreign corporation, authorized to transact business in this state, as a receiver or custodian. The court may require the receiver or custodian to post bond, with or without sureties, in an amount the court directs.
The court shall describe the powers and duties of the receiver or custodian in its appointing order, which may be amended from time to time. Among other powers:
(1) The receiver may dispose of all or any part of the assets of the corporation wherever located, at a public or private sale, if authorized by the court; and may sue and defend in such person's own name as receiver of the corporation in all courts of this state;
(2) The custodian may exercise all of the powers of the corporation, through or in place of its board of directors, to the extent necessary to manage the affairs of the corporation in the best interests of its shareholders and creditors.
The court during a receivership may redesignate the receiver a custodian, and during a custodianship may redesignate the custodian a receiver, if doing so is in the best interests of the corporation, its shareholders, and creditors.
The court from time to time during the receivership or custodianship may order compensation paid and expense disbursements or reimbursements made to the receiver or custodian and such person's counsel from the assets of the corporation or proceeds from the sale of the assets.
Source: SL 2005, ch 239, § 336.
47-1A-1433. Decree of dissolution.
If after a hearing the court determines that one or more grounds for judicial dissolution described in § 47-1A-1430 exist, the court may enter a decree dissolving the corporation and specifying the effective date of the dissolution, and the clerk of the court shall deliver a certified copy of the decree to the Office of the Secretary of State, who shall file it.
After entering the decree of dissolution, the court shall direct the winding-up and liquidation of the corporation's business and affairs in accordance with §§ 47-1A-1405 and 47-1A-1405.1 and the notification of claimants in accordance with §§ 47-1A-1406 to 47-1A-1406.2, inclusive, and 47-1A-1407 to 47-1A-1407.2, inclusive.
Source: SL 2005, ch 239, § 337.
47-1A-1434. Election to purchase in lieu of dissolution.
In a proceeding under subdivision 47-1A-1430(2) to dissolve a corporation that has no shares listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association, the corporation may elect or, if it fails to elect, one or more shareholders may elect to purchase all shares owned by the petitioning shareholder at the fair value of the shares. An election pursuant to this section is irrevocable unless the court determines that it is equitable to set aside or modify the election.
Source: SL 2005, ch 239, § 338.
47-1A-1434.1. Filing deadline for election to purchase--Notice of right to participate in election--Participation.
An election to purchase pursuant to §§ 47-1A-1434 to 47-1A-1434.7, inclusive, may be filed with the court at any time within ninety days after the filing of the petition under subdivision 47-1A-1430(2) or at such later time as the court in its discretion may allow. If the election to purchase is filed by one or more shareholders, the corporation shall, within ten days thereafter, give written notice to all shareholders, other than the petitioner. The notice must state the name and number of shares owned by the petitioner and the name and number of shares owned by each electing shareholder and must advise the recipients of their right to join in the election to purchase shares in accordance with this section. Shareholders who wish to participate must file notice of their intention to join in the purchase no later than thirty days after the effective date of the notice to them. All shareholders who have filed an election or notice of their intention to participate in the election to purchase thereby become parties to the proceeding and shall participate in the purchase in proportion to their ownership of shares as of the date the first election was filed, unless they otherwise agree or the court otherwise directs. After an election has been filed by the corporation or one or more shareholders, the proceeding under subdivision 47-1A-1430(2) may not be discontinued or settled, nor may the petitioning shareholder sell or otherwise dispose of the petitioner's shares, unless the court determines that it would be equitable to the corporation and the shareholders, other than the petitioner, to permit such discontinuance, settlement, sale, or other disposition.
Source: SL 2005, ch 239, § 339.
47-1A-1434.2. Agreement on fair value and terms of purchase of shares.
If, within sixty days of the filing of the first election, the parties reach agreement as to the fair value and terms of purchase of the petitioner's shares, the court shall enter an order directing the purchase of petitioner's shares upon the terms and conditions agreed to by the parties.
Source: SL 2005, ch 239, § 340.
47-1A-1434.3. Court determination of fair value of shares when parties unable to reach agreement.
If the parties are unable to reach an agreement as provided for in § 47-1A-1434.2, the court, upon application of any party, shall stay the proceedings under subdivision 47-1A-1430(2) and determine the fair value of the petitioner's shares as of the day before the date on which the petition under subdivision 47-1A-1430(2) was filed or as of such other date as the court deems appropriate under the circumstances.
Source: SL 2005, ch 239, § 341.
47-1A-1434.4. Order directing purchase of shares--Terms and conditions--Fees and expenses.
Upon determining the fair value of the shares, the court shall enter an order directing the purchase upon such terms and conditions as the court deems appropriate, which may include payment of the purchase price in installments, if necessary in the interests of equity, provision for security to assure payment of the purchase price and any additional costs, fees, and expenses as may have been awarded, and, if the shares are to be purchased by shareholders, the allocation of shares among them. In allocating petitioner's shares among holders of different classes of shares, the court should attempt to preserve the existing distribution of voting rights among holders of different classes insofar as practicable and may direct that holders of a specific class or classes may not participate in the purchase. Interest may be allowed at the rate and from the date determined by the court to be equitable, but if the court finds that the refusal of the petitioning shareholder to accept an offer of payment was arbitrary or otherwise not in good faith, no interest may be allowed. If the court finds that the petitioning shareholder had probable grounds for relief under subsections 47-1A-1430(2)(b) or (2)(d), it may award to the petitioning shareholder reasonable fees and expenses of counsel and of any experts employed by the petitioner.
Source: SL 2005, ch 239, § 342.
47-1A-1434.5. Dismissal of petition to dissolve corporation.
Upon entry of an order under § 47-1A-1434.2 or 47-1A-1434.4, the court shall dismiss the petition to dissolve the corporation under § 47-1A-1430, and the petitioning shareholder no longer has any rights or status as a shareholder of the corporation, except the right to receive the amounts awarded by the order of the court which shall be enforceable in the same manner as any other judgment.
Source: SL 2005, ch 239, § 343.
47-1A-1434.6. Time for purchase--Intent of corporation to adopt articles of dissolution--Dissolution--Fees and expenses--Claims.
The purchase ordered pursuant to § 47-1A-1434.4 shall be made within ten days after the date the order becomes final unless before that time the corporation files with the court a notice of its intention to adopt articles of dissolution pursuant to §§ 47-1A-1402 to 47-1A-1403.1, inclusive, which articles must then be adopted and filed within fifty days thereafter. Upon filing of such articles of dissolution, the corporation shall be dissolved in accordance with the provisions of §§ 47-1A-1405 to 47-1A-1407.2, inclusive, and the order entered pursuant to § 47-1A-1434.4 is no longer of any force or effect, except that the court may award the petitioning shareholder reasonable fees and expenses in accordance with the provisions of the last sentence of § 47-1A-1434.4 and the petitioner may continue to pursue any claims previously asserted on behalf of the corporation.
Source: SL 2005, ch 239, § 344.
47-1A-1434.7. Provisions applicable to payment by corporation pursuant to order to purchase shares.
Any payment by the corporation pursuant to an order under § 47-1A-1434.2 or 47-1A-1434.4, other than an award of fees and expenses pursuant to § 47-1A-1434.4, is subject to the provisions of §§ 47-1A-640 to 47-1A-640.5, inclusive.
Source: SL 2005, ch 239, § 345.
47-1A-1440. Deposit with state treasurer.
Assets of a dissolved corporation that should be transferred to a creditor, claimant, or shareholder of the corporation who cannot be found or who is not competent to receive them shall be reduced to cash and deposited with the state treasurer for safekeeping. When the creditor, claimant, or shareholder furnishes satisfactory proof of entitlement to the amount deposited, the state treasurer shall pay that amount.
Source: SL 2005, ch 239, § 346.
47-1A-1501. Authority to transact business required.
A foreign corporation may not transact business in this state until it obtains a certificate of authority from the Office of the Secretary of State. The following activities, among others, do not constitute transacting business within the meaning of this section:
(1) Maintaining, defending, or settling any proceeding;
(2) Holding meetings of the board of directors or shareholders or carrying on other activities concerning internal corporate affairs;
(3) Maintaining bank accounts;
(4) Maintaining offices or agencies for the transfer, exchange, and registration of the corporation's own securities or maintaining trustees or depositories with respect to those securities;
(5) Selling through independent contractors;
(6) Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts;
(7) Creating or acquiring indebtedness, mortgages, and security interests in real or personal property;
(8) Securing or collecting debts or enforcing mortgages and security interests in property securing the debts;
(9) Owning, without more, real or personal property;
(10) Conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like nature; and
(11) Transacting business in interstate commerce.
Source: SL 2005, ch 239, § 347.
47-1A-1502. Consequences of transacting business without authority.
A foreign corporation transacting business in this state without a certificate of authority may not maintain a proceeding in any court in this state until it obtains a certificate of authority. The successor to a foreign corporation that transacted business in this state without a certificate of authority and the assignee of a cause of action arising out of that business may not maintain a proceeding based on that cause of action in any court in this state until the foreign corporation or its successor obtains a certificate of authority.
Source: SL 2005, ch 239, § 348.
47-1A-1502.1. Stay of proceeding until necessity for certificate of authority is determined and obtained.
A court may stay a proceeding commenced by a foreign corporation, its successor, or assignee until it determines whether the foreign corporation or its successor requires a certificate of authority. If it so determines, the court may further stay the proceeding until the foreign corporation or its successor obtains the certificate.
Source: SL 2005, ch 239, § 349.
47-1A-1502.2. Penalties for transacting business without certificate of authority--Collection.
A foreign corporation is liable for a civil penalty of one hundred dollars for each day, but not to exceed a total of one thousand dollars for each year, it transacts business in this state without a certificate of authority. The attorney general may collect all penalties due under this section.
Notwithstanding § 47-1A-1502, the failure of a foreign corporation to obtain a certificate of authority does not impair the validity of its corporate acts or prevent it from defending any proceeding in this state.
Source: SL 2005, ch 239, § 350.
47-1A-1503. Application for certificate of authority.
A foreign corporation may apply for a certificate of authority to transact business in this state by delivering an application to the Office of the Secretary of State for filing. The application must set forth:
(1) The name of the foreign corporation or, if its name is unavailable for use in this state, a corporate name that satisfies the requirements of §§ 47-1A-1506 to 47-1A-1506.4, inclusive;
(2) The name of the state or country under whose law it is incorporated;
(3) Its date of incorporation and period of duration;
(4) The street address of its principal office;
(5) The information required by § 59-11-6; and
(6) The names and usual business addresses of its current directors and officers.
The foreign corporation shall deliver with the completed application a certificate of existence, or a document of similar import, duly authenticated by the secretary of state or other official having custody of corporate records in the state or country under whose law it is incorporated.
Source: SL 2005, ch 239, § 351; SL 2008, ch 275, § 46.
47-1A-1504. Amended certificate of authority.
A foreign corporation authorized to transact business in this state must obtain an amended certificate of authority from the Office of the Secretary of State if it changes:
(1) Its corporate name;
(2) The period of its duration;
(3) The state or country of its incorporation; or
(4) Any of the information required by § 59-11-6.
The requirements of § 47-1A-1503 for obtaining an original certificate of authority apply to obtaining an amended certificate under this section.
Source: SL 2005, ch 239, § 352; SL 2008, ch 275, § 47.
47-1A-1505. Effect of certificate of authority.
A certificate of authority authorizes the foreign corporation to which it is issued to transact business in this state subject, however, to the right of the state to revoke the certificate as provided in this chapter.
A foreign corporation with a valid certificate of authority has the same but no greater rights and has the same but no greater privileges as, and, except as otherwise provided by this chapter, is subject to the same duties, restrictions, penalties, and liabilities now or later imposed on, a domestic corporation of like character.
This chapter does not authorize this state to regulate the organization or internal affairs of a foreign corporation authorized to transact business in this state.
Source: SL 2005, ch 239, § 353.
47-1A-1506. Corporate name of foreign corporation--Use of particular words--Fictitious name.
If the corporate name of a foreign corporation does not satisfy the requirements of §§ 47-1A-401 to 47-1A-401.3, inclusive, the foreign corporation to obtain or maintain a certificate of authority to transact business in this state:
(1) May add the word, corporation, incorporated, company, or limited, or the abbreviation corp., inc., co., or ltd., to its corporate name for use in this state; or
(2) May use a fictitious name to transact business in this state if its real name is unavailable and it delivers to the secretary of state for filing a copy of the resolution of its board of directors, certified by its secretary, adopting the fictitious name.
Source: SL 2005, ch 239, § 354.
47-1A-1506.1. Corporate name--Distinguishable from specified names.
Except as authorized by §§ 47-1A-1506.2 and 47-1A-1506.3, the corporate name, including a fictitious name, of a foreign corporation must be distinguishable upon the records of the secretary of state from:
(1) The corporate name of a corporation incorporated or authorized to transact business in this state;
(2) A corporate name reserved or registered under § 47-1A-402 or 47-1A-403 to 47-1A-403.2, inclusive;
(3) The fictitious name of another foreign corporation authorized to transact business in this state;
(4) The corporate name of a not-for-profit corporation incorporated or authorized to transact business in this state; and
(5) The name of a limited liability company, limited partnership, limited liability partnership, or limited liability limited partnership organized or authorized to transact business in this state.
Source: SL 2005, ch 239, § 355.
47-1A-1506.2. Corporate name--Application to use name not distinguishable from specified names--Authorization.
A foreign corporation may apply to the Office of the Secretary of State for authorization to use in this state the name of another corporation, incorporated or authorized to transact business in this state, that is not distinguishable upon the records of the Office of the Secretary of State from the name applied for. The Office of the Secretary of State shall authorize use of the name applied for if:
(1) The other corporation or entity consents to the use in writing and submits an undertaking in form satisfactory to the Office of the Secretary of State to change its name to a name that is distinguishable upon the records of the Office of the Secretary of State from the name of the applying corporation; or
(2) The applicant delivers to the secretary of state a certified copy of a final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this state.
Source: SL 2005, ch 239, § 356.
47-1A-1506.3. Corporate name--Use of name upon merger, reorganization, or acquisition of assets.
A foreign corporation may use in this state the name, including the fictitious name, of another domestic or foreign corporation that is used in this state if the other corporation is incorporated or authorized to transact business in this state and the foreign corporation:
(1) Has merged with the other corporation;
(2) Has been formed by reorganization of the other corporation; or
(3) Has acquired all or substantially all of the assets, including the corporate name, of the other corporation.
Source: SL 2005, ch 239, § 357.
47-1A-1506.4. Corporation prohibited from transacting business in state upon change to unauthorized name--Amended certificate of authority.
If a foreign corporation authorized to transact business in this state changes its corporate name to one that does not satisfy the requirements of §§ 47-1A-401 to 47-1A-401.3, inclusive, it may not transact business in this state under the changed name until it adopts a name satisfying the requirements of §§ 47-1A-401 to 47-1A-401.3, inclusive, and obtains an amended certificate of authority under § 47-1A-1504.
Source: SL 2005, ch 239, § 358.
47-1A-1520. Withdrawal of foreign corporation.
A foreign corporation authorized to transact business in this state may not withdraw from this state until it obtains a certificate of withdrawal from the Office of the Secretary of State. A foreign corporation authorized to transact business in this state may apply for a certificate of withdrawal by delivering an application to the secretary of state for filing. The application must set forth:
(1) The name of the foreign corporation and the name of the state or country under whose law it is incorporated;
(2) That it is not transacting business in this state and that it surrenders its authority to transact business in this state;
(3) That it revokes the authority of its registered agent to accept service on its behalf; and
(4) The address of the corporation's principal office.
After the withdrawal of the corporation is effective, service of process is perfected pursuant to § 47-1A-1510.
Source: SL 2005, ch 239, § 363.
47-1A-1521. Automatic withdrawal upon certain conversions.
A foreign business corporation authorized to transact business in this state that converts to any form of domestic filing entity shall be deemed to have withdrawn on the effective date of the conversion.
Source: SL 2005, ch 239, § 364.
47-1A-1522. Withdrawal upon conversion to a nonfiling entity.
A foreign business corporation authorized to transact business in this state that converts to a domestic or foreign nonfiling entity shall apply for a certificate of withdrawal by delivering an application to the secretary of state for filing. The application must set forth:
(1) The name of the foreign business corporation and the name of the state or country under whose law it was incorporated before the conversion;
(2) That it surrenders its authority to transact business in this state as a foreign business corporation;
(3) The type of unincorporated entity to which it has been converted and the jurisdiction whose laws govern its internal affairs;
(4) If it has been converted to a foreign unincorporated entity:
(a) That it revokes the authority of its registered agent to accept service on its behalf; and
(b) The address of the entity's principal office.
After the withdrawal under this section of a corporation that has converted to a foreign unincorporated entity is effective, service of process is perfected pursuant to § 47-1A-1510.
After the withdrawal under this section of a corporation that has converted to a domestic unincorporated entity is effective, service of process shall be made on the unincorporated entity in accordance with the regular procedures for service of process on the form of unincorporated entity to which the corporation was converted.
Source: SL 2005, ch 239, § 365.
47-1A-1523. Transfer of authority.
A foreign business corporation authorized to transact business in this state that converts to any form of foreign unincorporated entity that is required to obtain a certificate of authority or make a similar type of filing with the Office of the Secretary of State if it transacts business in this state shall file with the Office of the Secretary of State an application for transfer of authority executed by any officer or other duly authorized representative. The application shall set forth:
(1) The name of the corporation;
(2) The type of unincorporated entity to which it has been converted and the jurisdiction whose laws govern its internal affairs;
(3) Any other information that would be required in a filing under the laws of this state by an unincorporated entity of the type the corporation has become seeking authority to transact business in this state.
The application for transfer of authority shall be delivered to the Office of the Secretary of State for filing and shall take effect at the effective time provided in §§ 47-1A-123 and 47-1A-123.1.
Upon the effectiveness of the application for transfer of authority, the authority of the corporation under §§ 47-1A-1501 to 47-1A-1532, inclusive, to transact business in this state shall be transferred without interruption to the converted entity which shall thereafter hold such authority subject to the provisions of the laws of this state applicable to that type of unincorporated entity.
Source: SL 2005, ch 239, § 366.
47-1A-1530. Grounds for revocation.
The Office of the Secretary of State may commence a proceeding under §§ 47-1A-1531 and 47-1A-1531.1 to revoke the certificate of authority of a foreign corporation authorized to transact business in this state if:
(1) The foreign corporation does not deliver its annual report to the Office of the Secretary of State within sixty days after it is due;
(2) The foreign corporation does not pay within sixty days after they are due any franchise taxes or penalties imposed by this chapter or other law;
(3) The foreign corporation is without a registered agent in this state for sixty days or more;
(4) The foreign corporation does not inform the secretary of state by an appropriate filing that its registered agent has changed or that its registered agent has resigned within sixty days of the change or resignation;
(5) An incorporator, director, officer, or agent of the foreign corporation signed a document knowing it was false in any material respect with intent that the document be delivered to the Office of the Secretary of State for filing;
(6) The Office of the Secretary of State receives a duly authenticated certificate from the Office of the Secretary of State or other official having custody of corporate records in the state or country under whose law the foreign corporation is incorporated stating that it has been dissolved or disappeared as the result of a merger.
Source: SL 2005, ch 239, § 367; SL 2008, ch 275, § 49.
47-1A-1531. Procedure for and effect of revocation.
If the Office of the Secretary of State determines that one or more grounds exist under § 47-1A-1530 for revocation of a certificate of authority, the Office of the Secretary of State shall serve the foreign corporation with written notice of that determination under § 47-1A-1510. If the foreign corporation does not correct each ground for revocation or demonstrate to the reasonable satisfaction of the Office of the Secretary of State that each ground determined by the Office of the Secretary of State does not exist within sixty days after service of the notice is perfected under § 47-1A-1510, the Office of the Secretary of State may revoke the foreign corporation's certificate of authority by signing a certificate of revocation that recites the ground or grounds for revocation and its effective date. The Office of the Secretary of State shall file the original of the certificate and serve a copy on the foreign corporation under § 47-1A-1510.
The authority of a foreign corporation to transact business in this state ceases on the date shown on the certificate revoking its certificate of authority.
Source: SL 2005, ch 239, § 368.
47-1A-1531.1. Revocation appoints Office of Secretary of State agent for service of process for corporation--Registered agent.
The Office of the Secretary of State's revocation of a foreign corporation's certificate of authority appoints the Office of the Secretary of State the foreign corporation's agent for service of process in any proceeding based on a cause of action which arose during the time the foreign corporation was authorized to transact business in this state. Service of process on the Office of the Secretary of State under this section is service on the foreign corporation. Upon receipt of process, the Office of the Secretary of State shall mail a copy of the process to the secretary of the foreign corporation at its principal office shown in its most recent annual report or in any subsequent communication received from the corporation stating the current mailing address of its principal office, or, if none are on file, in its application for a certificate of authority.
Revocation of a foreign corporation's certificate of authority does not terminate the authority of the registered agent of the corporation.
Source: SL 2005, ch 239, § 369.
47-1A-1532. Appeal from revocation.
A foreign corporation may appeal the Office of the Secretary of State's revocation of its certificate of authority to the circuit court within thirty days after service of the certificate of revocation is perfected under § 47-1A-1510. The foreign corporation appeals by petitioning the court to set aside the revocation and attaching to the petition copies of its certificate of authority and the Office of the Secretary of State's certificate of revocation.
The court may summarily order the Office of the Secretary of State to reinstate the certificate of authority or may take any other action the court considers appropriate.
The court's final decision may be appealed as in other civil proceedings.
Source: SL 2005, ch 239, § 370.
47-1A-1601. Corporate records--Requirements.
A corporation shall keep as permanent records minutes of all meetings of its shareholders and board of directors, a record of all actions taken by the shareholders or board of directors without a meeting, and a record of all actions taken by a committee of the board of directors in place of the board of directors on behalf of the corporation.
A corporation shall maintain appropriate accounting records.
A corporation or its agent shall maintain a record of its shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each.
A corporation shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time.
Source: SL 2005, ch 239, § 371.
47-1A-1601.1. Corporate records--Copies at principal office.
A corporation shall keep a copy of the following records at its principal office:
(1) Its articles or restated articles of incorporation, all amendments to them currently in effect, and any notices to shareholders referred to in § 47-1A-120.2 regarding facts on which a filed document is dependent;
(2) Its bylaws or restated bylaws and all amendments to them currently in effect;
(3) Resolutions adopted by its board of directors creating one or more classes or series of shares, and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding;
(4) The minutes of all shareholders' meetings, and records of all action taken by shareholders without a meeting, for the past three years;
(5) All written communications to shareholders generally within the past three years, including the financial statements furnished for the past three years under § 47-1A-1620;
(6) A list of the names and business addresses of its current directors and officers; and
(7) Its most recent annual report delivered to the Office of the Secretary of State under §§ 47-1A-1621 to 47-1A-1621.3, inclusive.
Source: SL 2005, ch 239, § 372.
47-1A-1602. Shareholder right to inspect and copy records specified in § 47-1A-1601.1.
A shareholder of a corporation is entitled to inspect and copy, during regular business hours at the corporation's principal office, any of the records of the corporation described in § 47-1A-1601.1 if the shareholder gives the corporation written notice of that demand at least five business days before the date on which the shareholder wishes to inspect and copy.
Source: SL 2005, ch 239, § 373.
47-1A-1602.1. Shareholder right to inspect and copy specified records--Prerequisites in § 47-1A-1602.2.
A shareholder of a corporation is entitled to inspect and copy, during regular business hours at a reasonable location specified by the corporation, any of the following records of the corporation if the shareholder meets the requirements of § 47-1A-1602.2 and gives the corporation written notice of that demand at least five business days before the date on which the shareholder wishes to inspect and copy:
(1) Excerpts from minutes of any meeting of the board of directors, records of any action of a committee of the board of directors while acting in place of the board of directors on behalf of the corporation, minutes of any meeting of the shareholders, and records of action taken by the shareholders or board of directors without a meeting, to the extent not subject to inspection under § 47-1A-1602;
(2) Accounting records of the corporation; and
(3) The record of shareholders.
Source: SL 2005, ch 239, § 374.
47-1A-1602.2. Prerequisites to shareholder right to inspect and copy records specified in § 47-1A-1602.1.
A shareholder may inspect and copy the records described in § 47-1A-1602.1 only if:
(1) Demand is made in good faith and for a proper purpose;
(2) The shareholder describes with reasonable particularity the purpose and the records the shareholder desires to inspect; and
(3) The records are directly connected with the purpose.
Source: SL 2005, ch 239, § 375.
47-1A-1602.3. Abolition or limitation of right of inspection prohibited--Application.
The right of inspection granted by §§ 47-1A-1602 to 47-1A-1602.2, inclusive, may not be abolished or limited by a corporation's articles of incorporation or bylaws.
The provisions of this section do not affect:
(1) The right of a shareholder to inspect records under § 47-1A-720 or, if the shareholder is in litigation with the corporation, to the same extent as any other litigant;
(2) The power of a court, independently of this chapter, to compel the production of corporate records for examination.
For purposes of §§ 47-1A-1602 to 47-1A-1602.3, inclusive, the term, shareholder, includes a beneficial owner whose shares are held in a voting trust or by a nominee on his behalf.
Source: SL 2005, ch 239, § 376.
47-1A-1603. Scope of inspection right.
A shareholder's agent or attorney has the same inspection and copying rights as the shareholder represented.
The right to copy records under §§ 47-1A-1602 to 47-1A-1602.3, inclusive, includes, if reasonable, the right to receive copies by xerographic or other means, including copies through an electronic transmission if available and so requested by the shareholder.
The corporation may comply at its expense with a shareholder's demand to inspect the record of shareholders under subdivision 47-1A-1602.1(3) by providing the shareholder with a list of shareholders that was compiled no earlier than the date of the shareholder's demand.
The corporation may impose a reasonable charge, covering the costs of labor and material, for copies of any documents provided to the shareholder. The charge may not exceed the estimated cost of production, reproduction, or transmission of the records.
Source: SL 2005, ch 239, § 377.
47-1A-1604. Court-ordered inspection of records specified in § 47-1A-1602.
If a corporation does not allow a shareholder who complies with § 47-1A-1602 to inspect and copy any records required by that section to be available for inspection, the circuit court of the county where the corporation's principal office is located, or, if none in this state, the circuit court of Hughes County, may summarily order inspection and copying of the records demanded at the corporation's expense upon application of the shareholder.
Source: SL 2005, ch 239, § 378; SL 2008, ch 275, § 50.
47-1A-1604.1. Court-ordered inspection of other records.
If a corporation does not within a reasonable time allow a shareholder to inspect and copy any other record, the shareholder who complies with §§ 47-1A-1602.1 and 47-1A-1602.2 may apply to the circuit court in the county where the corporation's principal office is located, or, if none in this state, the circuit court of Hughes County, for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this section on an expedited basis.
Source: SL 2005, ch 239, § 379; SL 2008, ch 275, § 51.
47-1A-1604.2. Court-ordered inspection--Order to pays costs--Restrictions on use or distribution of records.
If the court orders inspection and copying of the records demanded, the court shall also order the corporation to pay the shareholder's costs, including reasonable counsel fees, incurred to obtain the order unless the corporation proves that it refused inspection in good faith because it had a reasonable basis for doubt about the right of the shareholder to inspect the records demanded.
If the court orders inspection and copying of the records demanded, the court may impose reasonable restrictions on the use or distribution of the records by the demanding shareholder.
Source: SL 2005, ch 239, § 380.
47-1A-1605. Inspection of records by directors.
A director of a corporation is entitled to inspect and copy the books, records, and documents of the corporation at any reasonable time to the extent reasonably related to the performance of the director's duties as a director, including duties as a member of a committee, but not for any other purpose or in any manner that would violate any duty to the corporation.
Source: SL 2005, ch 239, § 381.
47-1A-1605.1. Court-ordered inspection of records upon application of director.
The circuit court of the county where the corporation's principal office is located, or, if none in this state, the circuit court of Hughes County, may order inspection and copying of the books, records, and documents at the corporation's expense, upon application of a director who has been refused such inspection rights, unless the corporation establishes that the director is not entitled to such inspection rights. The court shall dispose of an application under this section on an expedited basis.
Source: SL 2005, ch 239, § 382; SL 2008, ch 275, § 52.
47-1A-1605.2. Court-ordered inspection for director--Limitations--Costs.
If an order is issued, the court may include provisions protecting the corporation from undue burden or expense, and prohibiting the director from using information obtained upon exercise of the inspection rights in a manner that would violate a duty to the corporation, and may also order the corporation to reimburse the director for the director's costs, including reasonable counsel fees, incurred in connection with the application.
Source: SL 2005, ch 239, § 383.
47-1A-1606. Exception to notice requirement.
Whenever notice is required to be given under any provision of this chapter to any shareholder, such notice may not be required to be given if:
(1) Notice of two consecutive annual meetings, and all notices of meetings during the period between such two consecutive annual meetings, have been sent to such shareholder at such shareholder's address as shown on the records of the corporation and have been returned undeliverable; or
(2) All, but not less than two, payments of dividends on securities during a twelve-month period, or two consecutive payments of dividends on securities during a period of more than twelve months, have been sent to such shareholder at such shareholder's address as shown on the records of the corporation and have been returned undeliverable.
If any such shareholder shall deliver to the corporation a written notice setting forth such shareholder's then-current address, the requirement that notice be given to such shareholder shall be reinstated.
Source: SL 2005, ch 239, § 384.
47-1A-1620. Financial statements for shareholders.
Upon the written request of any shareholder of a corporation, the corporation shall mail to such shareholder its most recent financial statement showing in reasonable detail its assets and liabilities and the results of its operations.
Source: SL 2005, ch 239, § 385.
47-1A-1701. Application to existing domestic corporations.
This chapter applies to all domestic corporations in existence on its effective date that were incorporated under any general statute of this state providing for incorporation of corporations for profit.
Source: SL 2005, ch 239, § 390.
47-1A-1702. Application to qualified foreign corporations.
A foreign corporation authorized to transact business in this state on the effective date of this chapter is subject to this chapter but is not required to obtain a new certificate of authority to transact business under this chapter.
Source: SL 2005, ch 239, § 391.
47-1A-1703. Saving provisions.
Except as provided in § 47-1A-1703.1, the repeal of a statute by this chapter does not affect:
(1) The operation of the statute or any action taken under it before its repeal;
(2) Any ratification, right, remedy, privilege, obligation, or liability acquired, accrued, or incurred under the statute before its repeal;
(3) Any violation of the statute, or any penalty, forfeiture, or punishment incurred because of the violation, before its repeal;
(4) Any proceeding, reorganization, or dissolution commenced under the statute before its repeal, and the proceeding, reorganization, or dissolution may be completed in accordance with the statute as if it had not been repealed.
Source: SL 2005, ch 239, § 392.
47-1A-1703.1. Penalty imposition for violation of repealed statute.
If a penalty or punishment imposed for violation of a statute repealed by this chapter is reduced by this chapter, the penalty or punishment, if not already imposed, shall be imposed in accordance with this chapter.
Source: SL 2005, ch 239, § 393.
47-2-1 to 47-2-70. Repealed.
47-3-1 to 47-3-83. Repealed.
47-4-1 to 47-4-29. Repealed.
47-5-1 to 47-5-23.
Repealed.
47-5-24
Repealed.
47-5-24.1 to 47-5-27.
Repealed.
47-6-1 to 47-6-23.3.
Repealed.
47-6-24 to 47-6-39.
Repealed.
47-6-40 to 47-6-50.
Repealed.
47-7-1 to 47-7-3.
Repealed.
47-7-4
Repealed.
47-7-4.1
Repealed.
47-7-5
Repealed.
47-7-5.1
Repealed.
47-7-6
Repealed.
47-7-6.1
Repealed.
47-7-7
Repealed.
47-7-7.1
Repealed.
47-7-8 to 47-7-13.
Repealed.
47-7-14
Repealed.
47-7-15
Repealed.
47-7-15.1
Repealed.
47-7-16 to 47-7-23.
Repealed.
47-7-24 to 47-7-28.
Repealed.
47-7-29
Repealed.
47-7-29.1
Repealed.
47-7-30
Repealed.
47-7-30.1 to 47-7-42.
Repealed.
47-7-43
Repealed.
47-7-44 to 47-7-51.
Repealed.
47-7-52 to 47-7-59.
Repealed.
47-8-1 to 47-8-33. Repealed.
47-9-1 to 47-9-20. Repealed.
CHAPTER 47-9A
CORPORATE FARMING RESTRICTIONS
47-9A-1 Agriculture prohibited as corporate or limited liability company purpose.
47-9A-1.1 Certain breeding stock, products, and facilities exempt.
47-9A-2 Definition of terms.
47-9A-3 Corporate farming and acquisition of interest in farm real estate prohibited.
47-9A-3.1 Certain greenhouse operations exempt.
47-9A-3.2 Facilities for feeding poultry or producing meat or eggs exempt.
47-9A-3.3 Dairy on agricultural lands exempt.
47-9A-4 Banks and trust companies exempt--Purchase of agricultural land through pooled investment fund excepted.
47-9A-5 Certain limited liability entities exempt from restrictions.
47-9A-6 Encumbrance taken for security exempt.
47-9A-7 Lands acquired in collection of debt or enforcement of claim exempt--Period allowed for disposition--Covenant runs with land.
47-9A-8 Agricultural land--Gift--Restrictions--Applicability.
47-9A-9 Farms, for scientific, medical, research, or experimental purposes exempt if sale of products incidental.
47-9A-10 Raising breeding stock for resale exempt--Nurseries and seed farms.
47-9A-11 Livestock feeding exempt.
47-9A-12 Land acquired for nonfarming uses exempt--Acreage allowed--Restrictions on farming pending development.
47-9A-12.1 Cement Plant Commission property used for nonfarming purposes.
47-9A-13 Family farm and authorized farm corporations exempt.
47-9A-13.1 47-9A-13.1. Repealed by SL 2016, ch 220, § 2.
47-9A-13.2 Pork production subject to same provisions as other operations.
47-9A-14 Family farm corporation defined.
47-9A-15 Qualifications of authorized small farm corporation.
47-9A-16 Report required of corporation engaged in farming--Contents.
47-9A-17 Additional information for qualification as family or authorized farm corporation.
47-9A-18 Farming prohibited without certification by secretary of state.
47-9A-19 47-9A-19. Repealed by SL 2017, ch 192, § 1.
47-9A-20 Corporation failing to file or filing false report--Civil fine.
47-9A-21 Attorney general to prosecute violations--Order of court declaring violation.
47-9A-22 Recording of order--Divestiture within prescribed period--Covenant running with land--Public sale of lands not divested.
47-9A-23 Citation of chapter.
47-9A-1. Agriculture prohibited as corporate or limited liability company purpose.
The Legislature of the State of South Dakota recognizes the importance of the family farm to the economic and moral stability of the state, and the Legislature recognizes that the existence of the family farm is threatened by conglomerates in farming. Therefore, it is hereby declared to be the public policy of this state, and shall be the provision of this chapter, that, notwithstanding the provisions of § 47-1A-301, no foreign or domestic corporation, except as provided herein, shall be formed or licensed under the South Dakota Business Corporation Act for the purpose of owning, leasing, holding or otherwise controlling agricultural land to be used in the business of agriculture.
It is further declared that no foreign or domestic limited liability company, except as provided herein, shall be formed or licensed under the South Dakota Limited Liability Company Act for the purpose of owning, leasing, holding or otherwise controlling agricultural land to be used in the business of agriculture.
Source: SL 1974, ch 294, § 2; SL 1991, ch 377, § 1; SL 1993, ch 344, § 39FF; SL 2005, ch 202, § 8.
47-9A-1.1. Certain breeding stock, products, and facilities exempt.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to agricultural land, animals, or facilities owned or operated primarily for the purpose of producing animal breeding stock or reproductive products from animals.
Source: SL 2006, ch 229, § 1.
47-9A-2. Definition of terms.
Terms used in this chapter, unless the context otherwise plainly requires, mean:
(1) "Agricultural land," land used for farming;
(2) "Corporation" or any derivation of "corporation," both corporations under the South Dakota Business Corporation Act and limited liability companies under the South Dakota Limited Liability Company Act;
(2A) "Family," all descendants born of common parents after the year 1900 as well as their spouses, step-children, and adopted children. Once a person is a family member subsequent events such as death or divorce, do not disqualify that person from being a family member under this chapter.
(3) "Family farm," an unincorporated farming unit owned by one or more persons residing on the farm or actively engaging in farming;
(4) "Farming," the cultivation of land for the production of agricultural crops; livestock or livestock products; poultry or poultry products; milk or dairy products; or fruit or other horticultural products. It shall not include the production of timber or forest products; nor shall it include a contract whereby a processor or distributor of farm products or supplies provides spraying, harvesting or other farm services;
(5) "Shareholders" or "stockholders," include the members of a limited liability company; and
(6) "Shares" or "stock," include membership interests in a limited liability company.
Source: SL 1974, ch 294, § 3 (1), (3), (4); SL 1993, ch 344, § 39GG; SL 2004, ch 276, § 1.
47-9A-3. Corporate farming and acquisition of interest in farm real estate prohibited.
Except as provided herein, no foreign or domestic corporation may engage in farming; nor may any foreign or domestic corporation, directly or indirectly, own, acquire, or otherwise obtain an interest, whether legal, beneficial or otherwise, in any title to real estate used for farming or capable of being used for farming in this state.
Source: SL 1974, ch 294, § 4; SL 1991, ch 377, § 2.
47-9A-3.1. Certain greenhouse operations exempt.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to the cultivation of edible fruits, vegetables or mushrooms if such cultivation occurs within a greenhouse or other enclosed or semi-enclosed structure.
Source: SL 1986, ch 386; SL 2004, ch 277, § 1.
47-9A-3.2. Facilities for feeding poultry or producing meat or eggs exempt.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to facilities acquired by a corporation for the purpose of feeding poultry for the production of meat or eggs.
Source: SL 1986, ch 385; SL 2004, ch 277, § 2.
47-9A-3.3. Dairy on agricultural lands exempt.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to agricultural lands acquired by a corporation solely for the purpose of operating a dairy.
Source: SL 2008, ch 237, § 1.
47-9A-4. Banks and trust companies exempt--Purchase of agricultural land through pooled investment fund excepted.
Any national or state chartered bank, or trust company, authorized to do business in this state shall be exempt from the provisions of this chapter; provided, however, that no national or state bank or trust company shall purchase agricultural lands in South Dakota through a pooled investment fund formed from assets from retirement, pension, profit sharing, stock bonds or other trusts.
Source: SL 1974, ch 294, § 9; SL 1977, ch 383.
47-9A-5. Certain limited liability entities exempt from restrictions.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to agricultural land and land capable of being used for farming which:
(1) Was owned by a corporation as of July 1, 1974, including the normal expansion of such ownership at a rate not to exceed twenty percent, measured in acres, in any five-year period; or
(2) Is leased by a corporation in an amount, measured in acres, not to exceed the acreage under lease to such corporation as of July 1, 1974, and the additional acreage required for normal expansion at a rate not to exceed twenty percent in any five-year period;
and the additional acreage necessary to meet the requirements of pollution control regulations.
Source: SL 1974, ch 294, § 4 (3), (6); SL 2004, ch 277, § 3.
47-9A-6. Encumbrance taken for security exempt.
The restrictions provided in §§ 47-9A-1 and 47-9A-3 do not apply to a bona fide encumbrance taken for purposes of security.
Source: SL 1974, ch 294, § 4 (1); SL 2004, ch 277, § 4.
47-9A-7. Lands acquired in collection of debt or enforcement of claim exempt--Period allowed for disposition--Covenant runs with land.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to agricultural lands acquired by a corporation by process of law in the collection of debts; or by any procedure for the enforcement of a lien or claim thereon, whether created by mortgage or otherwise. However, any land so acquired shall be disposed of within ten years after acquiring the title thereto. In addition, no land so acquired may be used for farming during the ten-year period except under a lease to a family farm unit, a family farm corporation or an authorized farm corporation. The aforementioned ten-year limitation period shall be deemed a covenant running with the title to the land against any corporate grantee or assignee or the successor of such corporation.
Source: SL 1974, ch 294, § 4 (9); SL 2004, ch 277, § 5.
47-9A-8. Agricultural land--Gift--Restrictions--Applicability.
The restrictions in §§ 47-9A-1 and 47-9A-3 do not apply to a gift of agricultural land, whether by grant or devise, to any nonprofit entity organized under the laws of this state and registered with the secretary of state.
Source: SL 1974, ch 294, § 4 (7); SL 2004, ch 277, § 6; SL 2021, ch 193, § 1.
47-9A-9. Farms, for scientific, medical, research, or experimental purposes exempt if sale of products incidental.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to any entity that engages in farming primarily for scientific, medical, research, or experimental purposes. However, any commercial sales from such farming shall be incidental to the scientific, medical, research, or experimental objectives of the entity.
Source: SL 1974, ch 294, § 4 (4); SL 2004, ch 277, § 7.
47-9A-10. Raising breeding stock for resale exempt--Nurseries and seed farms.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to agricultural land operated by a corporation for the purpose of raising breeding stock for resale to farmers or operated for the purpose of growing seed, nursery plants, or sod.
Source: SL 1974, ch 294, § 4 (5); SL 2004, ch 277, § 8.
47-9A-11. Livestock feeding exempt.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to agricultural lands acquired by a corporation solely for the purpose of feeding livestock.
Source: SL 1974, ch 294, § 4 (10); SL 2004, ch 277, § 9.
47-9A-12. Land acquired for nonfarming uses exempt--Acreage allowed--Restrictions on farming pending development.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to agricultural land acquired by a corporation other than a family farm corporation or authorized farm corporation for immediate or potential use in nonfarming purposes. A corporation may hold such agricultural land in such acreage or such form of ownership as may be necessary to its nonfarm business operation. However, pending the development of agricultural land for nonfarm purposes, such land may not be used for farming except under lease to a family farm unit, a family farm corporation or an authorized farm corporation, or except when controlled through ownership, options, leaseholds or other agreements by a corporation which has entered into an agreement with the United States of America pursuant to the New Community Act of 1968, (Title IV of the Housing and Urban Development Act of 1968, 42 U.S.C. 3901-3914), as amended, or a subsidiary or assign of such a corporation.
Source: SL 1974, ch 294, § 4 (8); SL 2004, ch 277, § 10.
47-9A-12.1. Cement Plant Commission property used for nonfarming purposes.
All real property owned or held by the State of South Dakota by and through the South Dakota State Cement Plant Commission as of December 28, 2000, is owned or held by it and its successors in title for immediate or potential use for nonfarming purposes and the real property is necessary for nonfarming business operations.
Source: SL 2000 (SS), ch 4, § 2.
47-9A-13. Family farm and authorized farm corporations exempt.
The restrictions of §§ 47-9A-1 and 47-9A-3 do not apply to a family farm corporation or an authorized farm corporation.
Source: SL 1974, ch 294, § 4 (2); SL 2004, ch 277, § 11.
47-9A-13.2. Pork production subject to same provisions as other operations.
The production of pork is subject to the same provisions which apply to livestock feeding, breeding stock, dairies, and poultry and egg operations under this chapter.
Source: SL 2016, ch 220, § 1.
47-9A-14. Family farm corporation defined.
As used in this chapter, the term, family farm corporation, means any corporation founded for the purpose of farming and the ownership of agricultural land in which the majority of the voting stock is held by members of a family, an estate of a family member, or a trust that benefits members of the family, and at least one of whose stockholders is a person who is residing on or actively operating the farm or who has resided on or has actively operated the farm, and none of whose stockholders are corporations. Transfers of shares to persons who are or have been family members are qualified as a family member under this chapter.
Source: SL 1974, ch 294, § 3 (5); SL 1984, ch 298; SL 1985, ch 369; SL 1988, ch 371, § 2; SL 2004, ch 276, § 2.
47-9A-15. Qualifications of authorized small farm corporation.
As used in this chapter, unless the context otherwise plainly requires, "authorized farm corporation" means a corporation whose shareholders do not exceed ten in number, whose shareholders are all natural persons or estates, whose shares are all of one class, and whose revenues from rent, royalties, dividends, interest, and annuities do not exceed twenty percent of its gross receipts.
Source: SL 1974, ch 294, § 3 (2).
47-9A-16. Report required of corporation engaged in farming--Contents.
Every corporation engaged in farming or proposing to commence farming in this state shall file with the secretary of state a report containing:
(1) The information required by § 59-11-6; and
(2) The acreage and location listed by section, township, and county of each lot or parcel of land in this state that is owned or leased by the corporation and used for the growing of crops or the keeping or feeding of poultry or livestock.
Source: SL 1974, ch 294, § 5; SL 2008, ch 275, § 54.
47-9A-17. Additional information for qualification as family or authorized farm corporation.
The report of a corporation seeking to qualify hereunder as a family farm corporation or an authorized farm corporation shall contain, in addition:
(1) The number of shares owned by persons residing on the farm or actively engaged in farming, or their relatives within the third degree of kindred;
(2) The name, address, and number of shares owned by each shareholder; and
(3) A statement as to percentage of gross receipts of the corporation derived from rent, royalties, dividends, interest, and annuities.
Source: SL 1974, ch 294, § 5.
47-9A-18. Farming prohibited without certification by secretary of state.
No corporation shall commence farming in this state until the secretary of state has inspected the report required by § 47-9A-16 and certified that its proposed operations comply with the provisions of §§ 47-9A-16 and 47-9A-17.
Source: SL 1974, ch 294, § 5.
47-9A-20. Corporation failing to file or filing false report--Civil fine.
Any corporation which fails to file any report required by this chapter or intentionally files false information on any report required by this chapter is subject to a civil fine of not more than one thousand dollars.
Source: SL 1974, ch 294, § 7; SL 1983, ch 15, § 31; SL 1983, ch 331, § 3.
47-9A-21. Attorney general to prosecute violations--Order of court declaring violation.
If the attorney general has reason to believe that a corporation is in violation of this chapter, he shall commence an action in the circuit court for the county in which any agricultural lands relative to such violation are situated, or if situated in two or more counties, in any county in which a substantial part of the lands are situated. If the court finds that the lands in question are being held in violation of this chapter, it shall enter an order so declaring.
Source: SL 1974, ch 294, § 8.
47-9A-22. Recording of order--Divestiture within prescribed period--Covenant running with land--Public sale of lands not divested.
The attorney general shall file any order under § 47-9A-21 for record with the register of deeds of each county in which any portion of said lands are located. Thereafter, the corporation owning such land shall have a period of five years from the date of such order to divest itself of such lands. The aforementioned five-year limitation period shall be deemed a covenant running with the title to the land against any corporate grantee or assignee or the successor of such corporation. Any lands not so divested within the time prescribed shall be sold at public sale in the manner prescribed by order of the court.
Source: SL 1974, ch 294, § 8.
47-9A-23. Citation of chapter.
This chapter shall be known and may be cited as the Family Farm Act of 1974.
Source: SL 1974, ch 294, § 1.
47-10-1
Purposes of corporations.
47-10-2
Powers of corporations.
47-10-3
Borrowing--Pledging security for borrowings.
47-10-4
Lending--Competition with lending institutions prohibited.
47-10-5
Terms and conditions of loans.
47-10-6
Purchase and sale of property.
47-10-7
Promotion of local development corporations.
47-10-8
Participation in federal programs.
47-10-9
Lending--Duty to give first opportunity to lending institution.
47-10-10
Incorporators.
47-10-11
Directors--Number and term of office.
47-10-12
Capitalization--Minimum capital before commencing business.
47-10-13
Accumulation of surplus--Use of surplus.
47-10-14
Persons authorized to hold common stock.
47-10-15
First annual meeting--Conditions--Subsequent annual meetings.
47-10-16
Classes of members--Stockholder members--Nonstockholder members.
47-10-17
Nonstockholder members--Establishment of line of credit.
47-10-18
Nonstockholder members--Duty to lend.
47-10-19
Nonstockholder members--Right to withdraw--Conditions.
47-10-20
Nonstockholder members--Liability for debts.
47-10-21
Nonstockholder members--Right to share in surplus.
47-10-22
Nonstockholder members--Payment before dissolution of corporation.
47-10-23
Legal investments.
47-10-24
Applicability of other laws.
47-10-1. Purposes of corporations.
Corporations may be organized under this chapter to promote, assist, encourage, and through the cooperative efforts of the institutions and corporations which are members thereof, develop and advance the business prosperity and economy of the state to encourage new industries and to rehabilitate existing industries in the state; to promote and stimulate the expansion of South Dakota business ventures which tend to increase the growth and thrift of the state; to cooperate and act in conjunction with other organizations, the objects of which are the promotion of industrial, agricultural, and recreational developments within the state and to lend to approved and deserving applicants money for the carrying on and development of all kinds of business undertakings in the state, thereby establishing a medium of credit not otherwise readily available therefor.
Source: SL 1957, ch 314, § 2; SDC Supp 1960, § 55.6002.
47-10-2. Powers of corporations.
In furtherance of the purposes set forth in § 47-10-1 and in addition to the powers conferred by the general laws relating to business corporations, any business development credit corporation shall, subject to the restrictions and limitations contained in this chapter, have the powers set forth in §§ 47-10-3 to 47-10-8, inclusive.
Source: SL 1957, ch 314, § 2; SDC Supp 1960, § 55.6002.
47-10-3. Borrowing--Pledging security for borrowings.
Subject to § 47-10-2, any business development credit corporation shall have the power to borrow money on secured or unsecured notes from any bank, savings and loan association, trust company, or insurance company which is a nonstockholder member of the corporation and from other nonmember persons, firms, or corporations; and to pledge bonds, notes, and other securities as collateral therefor.
Source: SL 1957, ch 314, § 2; SDC Supp 1960, § 55.6002 (1).
47-10-4. Lending--Competition with lending institutions prohibited.
Subject to § 47-10-2, any business development credit corporation shall have the power to make secured or unsecured loans; but it is not the intention hereof to take from the lending institutions within the state any loans or commitments desired by such institutions generally in the ordinary course of their business.
Source: SL 1957, ch 314, § 2; SDC Supp 1960, § 55.6002 (2).
47-10-5. Terms and conditions of loans.
Subject to § 47-10-2, any business development credit corporation shall have the power to establish and regulate the terms and conditions of any loans under § 47-10-4 and the charges for interest or service connected therewith.
Source: SL 1957, ch 314, § 2; SDC Supp 1960, § 55.6002 (3).
47-10-6. Purchase and sale of property.
Subject to § 47-10-2, any business development credit corporation shall have the power to purchase, hold, lease, and otherwise acquire and to convey such real and personal estate as it may acquire in the satisfaction of debts, or pursuant to the terms and conditions of loans, or which it acquires in the foreclosure of mortgages thereon, or upon judgments for debt or in settlements to secure debts.
Source: SL 1957, ch 314, § 2; SDC Supp 1960, § 55.6002 (4).
47-10-7. Promotion of local development corporations.
Subject to § 47-10-2, any business development credit corporation shall have the power to promote the establishment of local industrial development corporations in the various communities of the state, to enter into agreements with them, and to cooperate with, assist and otherwise encourage such local foundations.
Source: SL 1957, ch 314, § 2; SDC Supp 1960, § 55.6002 (5).
47-10-8. Participation in federal programs.
Subject to § 47-10-2, any business development credit corporation shall have the power to participate with any duly authorized federal lending agency in the making of loans.
Source: SL 1957, ch 314, § 2; SDC Supp 1960, § 55.6002 (6).
47-10-9. Lending--Duty to give first opportunity to lending institution.
The corporation shall lend money only when credit is not elsewhere readily available. Before granting any loan, the board of directors or a committee thereof shall endeavor, so far as is reasonably possible, to ascertain that the first opportunity to grant such loan has been given to lending institutions which may desire such loans generally in the course of their business.
Source: SL 1957, ch 314, § 7; SDC Supp 1960, § 55.6007.
47-10-10. Incorporators.
Five or more natural persons of the age of twenty-one years or more, may act as incorporators by signing, acknowledging, filing, and recording articles of incorporation for a business development credit corporation.
Source: SL 1957, ch 314, § 1; SDC Supp 1960, § 55.6001.
47-10-11. Directors--Number and term of office.
The corporate powers of any business development credit corporation shall be exercised by a board of directors. The number of directors and their term of office shall be determined in a manner prescribed in the bylaws. At no time shall there be less than five directors. The initial board of directors shall consist of the incorporators and they shall serve until the first annual meeting.
Source: SL 1957, ch 314, § 4; SDC Supp 1960, § 55.6004.
47-10-12. Capitalization--Minimum capital before commencing business.
At least twenty-five percent of the capital stock authorized in the articles of incorporation shall be paid into the treasury of the corporation in cash before the corporation shall be authorized to transact any business other than such as relates to its organization.
Source: SL 1957, ch 314, § 3; SDC Supp 1960, § 55.6003.
47-10-13. Accumulation of surplus--Use of surplus.
Any business development credit corporation shall set apart as a surplus not less than ten percent of its net earnings each year until such surplus, with any unimpaired surplus paid in, shall amount to one-half of the capital stock. The surplus shall be kept to secure against losses and contingencies, and whenever it becomes impaired it shall be reimbursed in the manner provided for its accumulation.
Source: SL 1957, ch 314, § 6; SDC Supp 1960, § 55.6006.
47-10-14. Persons authorized to hold common stock.
At least a majority of the common stock of a business development credit corporation shall at all times be held by residents of this state or by persons, firms, or corporations engaged in doing business therein. Common stock shall at all times be held by stockholder members who have their residences or principal places of business in not less than fifteen counties in this state.
Source: SL 1957, ch 314, § 3; SDC Supp 1960, § 55.6003.
47-10-15. First annual meeting--Conditions--Subsequent annual meetings.
The first annual meeting of a business development credit corporation shall occur at a date to be fixed by the board of directors as soon as reasonably possible after a minimum of twenty-five percent of the capital stock of the corporation is paid into its treasury and a minimum of ten stockholder members of the corporation have qualified as provided in § 47-10-16; and such annual meeting and subsequent annual meetings shall be called and the directors shall be elected in the manner provided in the bylaws.
Source: SL 1957, ch 314, § 4; SDC Supp 1960, § 55.6004.
47-10-16. Classes of members--Stockholder members--Nonstockholder members.
There shall be two classes of members in the corporation with voting rights specified in the articles of incorporation.
(1) Stockholder members include individuals, corporations, and organizations who qualify by the purchase of common stock.
(2) Nonstockholder members include banks, savings and loan associations, trust companies, and insurance companies who qualify by making application to lend funds to the corporation upon call.
Source: SL 1957, ch 314, § 5; SDC Supp 1960, § 55.6005.
47-10-17. Nonstockholder members--Establishment of line of credit.
Each nonstockholder member of a business development credit corporation shall establish a line of credit to the corporation as determined in the articles of incorporation.
Source: SL 1957, ch 314, § 5; SDC Supp 1960, § 55.6005 (2) (a).
47-10-18. Nonstockholder members--Duty to lend.
All calls of funds which nonstockholder members of a business development credit corporation are committed to lend to the corporation shall be prorated by the corporation among the nonstockholder members in the same proportion that the individual lines of credit bear to the aggregate line of credit.
Source: SL 1957, ch 314, § 5; SDC Supp 1960, § 55.6005 (2) (b).
47-10-19. Nonstockholder members--Right to withdraw--Conditions.
Upon written notice given sixty days in advance, a nonstockholder member of a business development credit corporation may withdraw from such membership at the expiration date of such notice and after said expiration date shall cease to exercise any of the powers and privileges incidental to such membership and shall be free of any obligations in connection therewith except those obligations which have accrued or for which commitments have been made before said expiration date.
Source: SL 1957, ch 314, § 5; SDC Supp 1960, § 55.6005 (2) (c).
47-10-20. Nonstockholder members--Liability for debts.
Nonstockholder members of a business development credit corporation do not assume any liability for the debts of the corporation.
Source: SL 1957, ch 314, § 5; SDC Supp 1960, § 55.6005 (2) (d).
47-10-21. Nonstockholder members--Right to share in surplus.
Nonstockholder members of a business development credit corporation shall not share in any surplus of the corporation in excess of the obligations due such nonstockholder members.
Source: SL 1957, ch 314, § 5; SDC Supp 1960, § 55.6005 (2) (e).
47-10-22. Nonstockholder members--Payment before dissolution of corporation.
Upon dissolution of a corporation organized under this chapter, obligations due the nonstockholder members are to be paid in full before any payments are made to the stockholder members.
Source: SL 1957, ch 314, § 5; SDC Supp 1960, § 55.6005 (2) (f).
47-10-23. Legal investments.
Notwithstanding any other statute, the notes or other interest-bearing obligations of any corporation organized under this chapter, issued in accordance with this law and the articles of incorporation and bylaws of the corporation shall be legal investments for the banks, savings and loan associations, trust companies, and insurance companies who become members of the corporation.
Source: SL 1957, ch 314, § 9; SDC Supp 1960, § 55.6009.
47-10-24. Applicability of other laws.
The provisions of §§ 47-1A-101 to 47-1A-863.3, inclusive, §§ 47-1A-1401 to 47-1A-1440, inclusive, and §§ 47-1A-1601 to 47-1A-1621.3, inclusive, shall apply to corporations incorporated under this chapter, insofar as they may be applicable and not inconsistent with this chapter.
Source: SL 1957, ch 314, § 8; SDC Supp 1960, § 55.6008; SL 2005, ch 202, § 3.
CHAPTER 47-11
MEDICAL CORPORATIONS
47-11-1 Medical corporations authorized--Formation and purposes--Number of stockholders, directors, and officers.
47-11-1.1 Definition of terms.
47-11-2 Corporate name.
47-11-3 Medical license required for all officers, directors, and shareholders.
47-11-3.1 Revocable trust as shareholder--Conditions.
47-11-4 Death of shareholder--Computation of book value.
47-11-5 Contracts for personal services with licensed persons.
47-11-6 Employees subject to Medical Practice Act.
47-11-7 Certificate of registration required--Application for certificate--Contents.
47-11-8 Action on application--Conditions to issuance of certificate--Duration of certificate.
47-11-9 Posting of certificate required.
47-11-10 Amending certificate upon change of location.
47-11-11 Certificate not assignable.
47-11-12 Annual renewal of certificate--Conditions.
47-11-13 Suspension or revocation of certificate--Grounds.
47-11-14 Notice and hearing required--Contents of notice.
47-11-15 Appeal from denial of certificate--Power of court on appeal.
47-11-16 Service of notice of appeal.
47-11-17 Physician-patient relationship unaffected.
47-11-18 Private corporations law as applicable.
47-11-19 Severability and saving clause.
47-11-20 Conflict with Medical Practice Act.
47-11-21 Citation of chapter.
47-11-1. Medical corporations authorized--Formation and purposes--Number of stockholders, directors, and officers.
One or more persons licensed pursuant to chapter 36-4, hereinafter referred to as the Medical Practice Act, may associate to form a corporation pursuant to the provisions of law pertaining to private corporations to own, operate, and maintain an establishment for the study, diagnosis, and treatment of human ailments and injuries, whether physical or mental, and to promote medical, surgical, and scientific research and knowledge; and for any other purpose incident or necessary thereto; provided medical or surgical treatment, consultation, or advice may be given by employees of the corporation only if they are licensed pursuant to the Medical Practice Act. In any corporation formed under this chapter one or more persons may act as the sole stockholders, directors, or officers of such corporation.
Persons licensed pursuant to the Medical Practice Act and corporations formed under chapter 47-11, or any combination thereof, may form a limited liability company to own, operate, and maintain an establishment for the study, diagnosis, and treatment of human ailments and injuries, whether physical or mental, and to promote medical, surgical, and scientific research and knowledge; and for any other purpose incident thereto; provided medical or surgical treatment, consultation, or advice may be given by employees of the limited liability company only if they are licensed pursuant to the Medical Practice Act.
Source: SL 1961, ch 29, § 2; SL 1971, ch 258; SL 1993, ch 344, § 39A; SL 1995, ch 255.
47-11-1.1. Definition of terms.
Terms used in this chapter mean:
(1) "Articles of incorporation," includes the articles of organization of a limited liability company;
(2) "Corporation," both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," includes any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," includes the members of a limited liability company;
(5) "Shareholders," includes the members of a limited liability company;
(6) "Shares" or "stock," includes membership interests in a limited liability company.
Source: SL 1993, ch 344, § 39B.
47-11-2. Corporate name.
A corporate name shall end with the word "chartered," or, the word "limited," or the abbreviation "Ltd.," or the words "professional association," or the abbreviation "P.C." or "PC". Corporations that were utilizing the designation "P.A." on July 1, 1974, but no others, may continue to use that designation. A limited liability company name shall include the word "professional limited liability company" or the abbreviation "Prof. L.L.C.", "Prof. LLC", "P.L.L.C.", or "PLLC".
Source: SL 1961, ch 29, § 4; SL 1963, ch 34, § 1; SL 1974, ch 295, § 1; SL 1993, ch 344, § 39C; SL 2020, ch 197, § 1.
47-11-3. Medical license required for all officers, directors, and shareholders.
All of the officers, directors, and shareholders of a corporation subject to this chapter shall at all times be persons licensed pursuant to the Medical Practice Act. No person who is not so licensed shall have any part in the ownership or control of such corporation, nor may any proxy to vote any shares of such corporation be given to a person who is not so licensed.
Source: SL 1961, ch 29, § 14; SL 1963, ch 34, § 2.
47-11-3.1. Revocable trust as shareholder--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation or limited liability company organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder of a corporation organized under this chapter. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter as if the shares were directly owned by the grantor of the trust.
Source: SL 2002, ch 205, § 1.
47-11-4. Death of shareholder--Computation of book value.
If the articles of incorporation or bylaws of a corporation subject to this chapter fail to state a price or method of determining a fixed price at which the corporation or its shareholders may purchase the shares of a deceased shareholder or a shareholder no longer qualified to own shares in the corporation, then the price for such shares shall be the book value as of the end of the month immediately preceding the death or disqualification of the shareholder. Book value shall be determined from the books and records of the corporation in accordance with the regular method of accounting used by the corporation.
Source: SL 1961, ch 29, § 17.
47-11-5. Contracts for personal services with licensed persons.
Notwithstanding any provision of statute to the contrary any medical corporation licensed under this chapter may enter into contracts for personal services with persons licensed pursuant to the Medical Practice Act for such duration as is agreed to between the parties.
Source: SL 1961, ch 29, § 14 as added by SL 1963, ch 34, § 2.
47-11-6. Employees subject to Medical Practice Act.
Each individual employee licensed pursuant to the Medical Practice Act who is employed by a corporation subject to this chapter shall remain subject to reprimand or discipline for his conduct under the provisions of the Medical Practice Act.
Source: SL 1961, ch 29, § 16.
47-11-7. Certificate of registration required--Application for certificate--Contents.
No corporation shall open, operate, or maintain an establishment for any of the purposes set forth in § 47-11-1 without a certificate of registration from the Board of Medical and Osteopathic Examiners, hereinafter referred to as the board. Application for such registration shall be made to said board in writing and shall contain the name and address of the corporation and such other information as may be required by the board.
Source: SL 1961, ch 29, § 5.
47-11-8. Action on application--Conditions to issuance of certificate--Duration of certificate.
Upon receipt of an application pursuant to § 47-11-7, the Board of Medical and Osteopathic Examiners shall make an investigation of the corporation. If the board finds that the incorporators, officers, directors, and shareholders are each licensed pursuant to the Medical Practice Act and if no disciplinary action is pending before the board against any of them, and if it appears that the corporation will be conducted in compliance with law and the regulations of the board, the board shall issue, upon payment of a registration fee of fifty dollars, a certificate of registration which shall remain effective until January first following the date of such registration.
Source: SL 1961, ch 29, § 5.
47-11-9. Posting of certificate required.
The certificate of registration issued pursuant to § 47-11-8 shall be conspicuously posted upon the premises to which it is applicable.
Source: SL 1961, ch 29, § 7.
47-11-10. Amending certificate upon change of location.
In the event of a change of location of the registered establishment, the Board of Medical and Osteopathic Examiners, in accordance with its regulations, shall amend the certificate of registration so that it shall apply to the new location.
Source: SL 1961, ch 29, § 8.
47-11-11. Certificate not assignable.
No certificate of registration issued under this chapter shall be assignable.
Source: SL 1961, ch 29, § 9.
47-11-12. Annual renewal of certificate--Conditions.
Upon written application of the holder, accompanied by a fee of one hundred dollars, the Board of Medical and Osteopathic Examiners shall annually renew the certificate of registration if the board finds that the corporation has complied with its regulations and the provisions of this chapter.
Source: SL 1961, ch 29, § 6; SL 1999, ch 190, § 4.
47-11-13. Suspension or revocation of certificate--Grounds.
The Board of Medical and Osteopathic Examiners may suspend or revoke any certificate of registration issued under this chapter for any of the following reasons:
(1) The revocation or suspension of the license to practice medicine of any officer, director, shareholder, or employee not promptly removed or discharged by the corporation;
(2) Unethical professional conduct on the part of any officer, director, shareholder, or employee not promptly removed or discharged by the corporation;
(3) The death of the last remaining shareholder; or
(4) Upon finding that the holder of a certificate has failed to comply with the provisions of this chapter or the regulations prescribed by the board.
Source: SL 1961, ch 29, § 10.
47-11-14. Notice and hearing required--Contents of notice.
Before any certificate of registration is suspended or revoked, the holder shall be given written notice of the proposed action and the reasons therefor, and shall be given a public hearing by the Board of Medical and Osteopathic Examiners with the right to produce testimony concerning the charges made. The notice shall also state the place and date of the hearing which shall be at least five days after service of said notice.
Source: SL 1961, ch 29, § 11.
47-11-15. Appeal from denial of certificate--Power of court on appeal.
Any corporation whose application for a certificate of registration has been denied or whose registration has been suspended or revoked may, within thirty days after notice of such action by the Board of Medical and Osteopathic Examiners, appeal to the circuit court for the county where such corporation has its principal place of business. The court shall inquire into the cause of the board's action and may affirm, or reverse such decision and order a further hearing by the board, or may order the board to grant appellant a certificate of registration.
Source: SL 1961, ch 29, § 12.
47-11-16. Service of notice of appeal.
Notice of appeal shall be served upon any member of the Board of Medical and Osteopathic Examiners by leaving with such member, or at his usual place of abode, an attested copy thereof within thirty days after the board has notified the appellant of its decision.
Source: SL 1961, ch 29, § 13.
47-11-17. Physician-patient relationship unaffected.
This chapter does not alter any law applicable to the relationship between a physician furnishing medical service and a person receiving such service, including liability arising out of such service.
Source: SL 1961, ch 29, § 15.
47-11-18. Private corporations law as applicable.
The provisions of the law governing private corporations shall be applicable to corporations formed under this chapter, including their organization, and they shall enjoy the powers and privileges and be subject to the duties, restrictions, and liabilities of other corporations, except so far as the same may be limited or enlarged by this chapter.
Source: SL 1961, ch 29, § 3.
47-11-19. Severability and saving clause.
If any provision of this chapter or the application thereof to any person or circumstances is invalid, such invalidity shall not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are declared to be severable.
Source: SL 1961, ch 29, § 18.
47-11-20. Conflict with Medical Practice Act.
If any provision of this chapter conflicts with the Medical Practice Act this chapter shall take precedence.
Source: SL 1961, ch 29, § 3.
47-11-21. Citation of chapter.
This chapter may be cited as "The Medical Corporation Act."
Source: SL 1961, ch 29, § 1.
CHAPTER 47-11A
CHIROPRACTIC CORPORATIONS
47-11A-1 Formation of corporation and limited liability company authorized.
47-11A-1.1 Definition of terms.
47-11A-2 Purpose of corporation.
47-11A-3 Powers and privileges restricted to corporate purpose.
47-11A-4 Words or abbreviations required in corporate name--Ethical standards.
47-11A-5 Shareholding restricted to licensed chiropractors--Active practice required.
47-11A-5.1 Revocable trust as shareholder--Conditions.
47-11A-6 Disposition of shares when shareholder no longer eligible.
47-11A-7 Qualifications of president, directors, and officers.
47-11A-8 47-11A-8 to 47-11A-12. Repealed by SL 2005, ch 240, § 4.
47-11A-12.1 Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
47-11A-12.2 Amendment of articles of incorporation to be consistent with law.
47-11A-12.3 Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
47-11A-13 Articles of incorporation filed with chiropractic examiners--List of shareholders and employees.
47-11A-14 Purchase at book value of shares of deceased or ineligible shareholder.
47-11A-15 Corporate practice of chiropractic restricted--Application of canons of ethics.
47-11A-16 Pension and insurance plans for employees--Restrictions on terms.
47-11A-17 Standards of professional conduct binding on corporation.
47-11A-18 Violation as ground for revocation of chiropractic license.
47-11A-19 Individual professional obligations unimpaired--Individual subject to discipline.
47-11A-20 Relationship with patient unchanged.
47-11A-21 Management of deceased or substantially disabled chiropractor's practice.
47-11A-1. Formation of corporation and limited liability company authorized.
One or more chiropractors may form professional service corporations for the practice of chiropractic under the South Dakota Business Corporation Act, as amended, providing that such corporations are organized and operated in accordance with the provisions of this chapter. The articles of incorporation of such corporations shall contain provisions complying with the requirements of §§ 47-11A-1 to 47-11A-12, inclusive.
Chiropractors may form professional limited liability companies under the South Dakota Limited Liability Company Act, as amended, providing that such limited liability companies are organized and operated in accordance with the provisions of this chapter. The articles of organization of such limited liability companies shall contain provisions complying with the requirements of §§ 47-11A-1 to 47-11A-12, inclusive.
Source: SL 1970, ch 258, § 1; SL 1993, ch 344, § 39D.
47-11A-1.1. Definition of terms.
Terms used in this chapter mean:
(1) "Articles of incorporation," includes the articles of organization of a limited liability company;
(2) "Corporation," both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," includes any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," includes the members of a limited liability company;
(5) "Shareholders," includes the members of a limited liability company;
(6) "Shares" or "stock," includes membership interests in a limited liability company.
Source: SL 1993, ch 344, § 39E.
47-11A-2. Purpose of corporation.
A corporation formed under § 47-11A-1 shall be organized solely for the purpose of conducting the practice of chiropractic only through persons qualified to practice chiropractic in the State of South Dakota.
Source: SL 1970, ch 258, § 1 (2).
47-11A-3. Powers and privileges restricted to corporate purpose.
A corporation formed under § 47-11A-1 may exercise the powers and privileges conferred upon corporations by the laws of the State of South Dakota only in furtherance of and subject to its corporate purpose.
Source: SL 1970, ch 258, § 1 (3).
47-11A-4. Words or abbreviations required in corporate name--Ethical standards.
The name of a corporation formed under § 47-11A-1 shall contain the words "professional company" or "professional corporation" or abbreviations thereof, such as "Prof. Co.," "Prof. Corp.", "P.C.", or "PC". The name of a limited liability company formed under § 47-11A-1 shall contain the words "professional limited liability company" or the abbreviation "Prof. L.L.C.", "Prof. LLC", "P.L.L.C.", or "PLLC". In addition, the name of the corporation or limited liability company shall always meet the ethical standards established for the names of chiropractic firms by the canons of professional ethics of the South Dakota Chiropractors Association as if all the stockholders of the corporation or members of the limited liability company were partners.
Source: SL 1970, ch 258, § 1 (1); SL 1993, ch 344, § 39F; SL 2020, ch 197, § 2.
47-11A-5. Shareholding restricted to licensed chiropractors--Active practice required.
All shareholders of a corporation formed under § 47-11A-1 shall be persons duly licensed by the Board of Chiropractic Examiners of the State of South Dakota to practice chiropractic in the State of South Dakota, and who at all times own their shares in their own right. They shall be individuals who, except for illness, accident, time spent in the armed services, on vacations, and on leaves of absence not to exceed one year, are actively engaged in the practice of chiropractic in the offices of the corporation.
Source: SL 1970, ch 258, § 1 (4).
47-11A-5.1. Revocable trust as shareholder--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation or limited liability company organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder of a corporation organized under this chapter. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter as if the shares were directly owned by the grantor of the trust.
Source: SL 2002, ch 205, § 2.
47-11A-6. Disposition of shares when shareholder no longer eligible.
Provisions shall be made requiring any shareholder of a corporation formed under § 47-11A-1 who ceases to be eligible to be a shareholder to dispose of all his shares forthwith either to the corporation or to any person having the qualifications prescribed in § 47-11A-5.
Source: SL 1970, ch 258, § 1 (5).
47-11A-7. Qualifications of president, directors, and officers.
The president of a corporation formed under § 47-11A-1 shall be a shareholder and a director, and to the extent possible all other directors and officers shall be persons having the qualifications prescribed in § 47-11A-5. Lay directors and officers shall not exercise any authority whatsoever over professional matters.
Source: SL 1970, ch 258, § 1 (6).
47-11A-12.1. Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
An obligation of a professional corporation or limited liability company formed pursuant to chapter 47-11A, 47-11B, 47-11C, 47-11D, 47-11E, 47-13A, or 47-13B, whether arising in contract, tort, or otherwise, is the obligation of the professional corporation or limited liability company and the individual whose act or omission gives rise to the obligation. No shareholder, director, or officer of a professional corporation or member or manager of a limited liability company is personally liable, directly or indirectly, by way of contribution or otherwise, for such obligation based solely on such person's capacity as a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company. This limitation of liability does not extend to amounts owed to the State of South Dakota or its political subdivisions for any taxes, or any penalty or interest on such taxes.
Source: SL 2005, ch 240, § 1.
47-11A-12.2. Amendment of articles of incorporation to be consistent with law.
Any professional corporation or limited liability company may amend its articles of incorporation to be consistent with SL 2005, ch 240.
Source: SL 2005, ch 240, § 2.
47-11A-12.3. Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
The repealed provisions contained in SL 2005, ch 240, that limited the liability of a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company by limiting or eliminating the joint and several liability of such person for any act, error, or omission of an employee of the professional corporation or limited liability company by maintaining professional liability insurance meeting certain standards, shall remain in effect for any act, error, or omission, whether arising in contract, tort, or otherwise, occurring before July 1, 2005.
Source: SL 2005, ch 240, § 11.
47-11A-13. Articles of incorporation filed with chiropractic examiners--List of shareholders and employees.
A copy certified by the secretary of state of the articles of incorporation of any corporation formed pursuant to this chapter shall be filed with the secretary-treasurer of the Board of Chiropractic Examiners of South Dakota, together with a certified copy of all amendments thereto. At the time of filing the original articles with said secretary-treasurer, the corporation shall file with him a written list of shareholders setting forth the names and addresses of each and a written list containing the names and addresses of all persons who are not shareholders who are employed by the corporation and who are authorized to practice chiropractic in South Dakota. Within ten days after any change in such shareholders or employees, a written list setting forth the information required by the preceding sentence shall be filed with the said secretary-treasurer.
Source: SL 1970, ch 258, § 2.
47-11A-14. Purchase at book value of shares of deceased or ineligible shareholder.
If the articles of incorporation or bylaws of a corporation subject to this chapter fail to state a price or method of determining a fixed price at which the corporation or its shareholders may purchase the shares of a deceased shareholder or a shareholder no longer qualified to own shares in the corporation, then the price for such shares shall be the book value as of the end of the month immediately preceding the death or disqualification of the shareholder. Book value shall be determined from the books and records of the corporation in accordance with the regular method of accounting used by the corporation.
Source: SL 1970, ch 258, § 4.
47-11A-15. Corporate practice of chiropractic restricted--Application of canons of ethics.
Except as provided in this chapter, corporations shall not engage in the practice of chiropractic. Professional service corporations organized and operated in accordance with the provisions of this chapter shall not be deemed lay agencies within the meaning of the canons of professional ethics.
Source: SL 1970, ch 258, § 5.
47-11A-16. Pension and insurance plans for employees--Restrictions on terms.
A professional service corporation may adopt a pension profit-sharing (whether cash or deferred), health and accident, insurance, or welfare plan for all or part of its employees including lay employees, providing that such plan does not require or result in the sharing of specific or identifiable fees with lay employees and any payments made to lay employees or into any such plan in behalf of lay employees are based upon their compensation or length of service, or both, rather than the amount of fees or income received.
Source: SL 1970, ch 258, § 3.
47-11A-17. Standards of professional conduct binding on corporation.
The corporation shall do nothing which if done by a chiropractor employed by it would violate the standards of professional conduct established for such chiropractor pursuant to law. The corporation shall at all times comply with the standards of professional conduct established by the South Dakota Chiropractors Association and the provisions of this chapter.
Source: SL 1970, ch 258, § 2.
47-11A-18. Violation as ground for revocation of chiropractic license.
Any violation of this chapter by the corporation shall be grounds for the Board of Chiropractic Examiners to revoke its, or any of its members, right to practice chiropractic.
Source: SL 1970, ch 258, § 2.
47-11A-19. Individual professional obligations unimpaired--Individual subject to discipline.
Nothing in this chapter shall be deemed to diminish or change the obligation of each chiropractor employed by the corporation to conduct his practice in accordance with the standards of professional conduct promulgated by the South Dakota State Chiropractors Association or by the Board of Chiropractic Examiners; any chiropractor who by act or omission causes the corporation to act or fail to act in a way which violates such standards of professional conduct, including any provision of this rule, shall be deemed personally responsible for such act or omission and shall be subject to discipline therefor.
Source: SL 1970, ch 258, § 2.
47-11A-20. Relationship with patient unchanged.
This chapter does not alter any law applicable to the relationship between a chiropractor furnishing chiropractic service and a person receiving such service, including liability arising out of such service.
Source: SL 1970, ch 258, § 2.
47-11A-21. Management of deceased or substantially disabled chiropractor's practice.
The estate or agent of a deceased or substantially disabled chiropractor may contract with or employ a chiropractor to manage the deceased or substantially disabled chiropractor's practice for a period, not to exceed twenty-four months, following the date of death or substantial disability of the chiropractor, until the entity can be sold or closed.
Source: SL 2017, ch 193, § 1.
CHAPTER 47-11B
OPTOMETRIC CORPORATIONS
47-11B-1 Optometric corporations and liability companies authorized.
47-11B-1.1 Definition of terms.
47-11B-2 Corporate name--Ethical standards.
47-11B-3 Optometric license required for officers, directors and shareholders.
47-11B-3.1 Revocable trust as shareholder--Conditions.
47-11B-4 Purchase at book value of shares of deceased or ineligible shareholder.
47-11B-5 Contracts for personal services with licensed optometrists.
47-11B-6 Professional services limited to licensed agents.
47-11B-7 Licensed employees subject to discipline under practice act.
47-11B-8 Certificate of registration required--Contents of application.
47-11B-9 Investigation on application--Conditions to issuance of certificate--Duration of certificate.
47-11B-10 Posting of certificate.
47-11B-11 Change of location of corporation--Certificate amended.
47-11B-12 Certificate not assignable.
47-11B-13 Annual renewal of certificate--Conditions.
47-11B-14 Suspension or revocation of certificate--Grounds.
47-11B-15 Suspension or revocation of certificate--Applicable procedure.
47-11B-16 Relationship with patient unchanged.
47-11B-17 47-11B-17 to 47-11B-21. Repealed by SL 2005, ch 240, § 5.
47-11B-21.1 Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
47-11B-21.2 Amendment of articles of incorporation to be consistent with law.
47-11B-21.3 Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
47-11B-22 Pension and insurance plans for employees--Restrictions on terms.
47-11B-23 Regulations issued by state board.
47-11B-1. Optometric corporations and liability companies authorized.
One or more optometrists may form professional service corporations for the practice of optometry under the South Dakota Business Corporation Act, as amended, providing that such corporations are organized and operated in accordance with the provisions of this chapter. Optometrists may form a limited liability company for the practice of optometry under the South Dakota Limited Liability Company Act, as amended, providing that such limited liability companies are organized and operated in accordance with the provisions of this chapter.
Source: SL 1972, ch 249, § 1; SL 1993, ch 344, § 39G.
47-11B-1.1. Definition of terms.
Terms used in this chapter mean:
(1) "Articles of incorporation," includes the articles of organization of a limited liability company;
(2) "Corporation," both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," includes any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," includes the members of a limited liability company;
(5) "Shareholders," includes the members of a limited liability company;
(6) "Shares" or "stock," includes membership interests in a limited liability company.
Source: SL 1993, ch 344, § 39H.
47-11B-2. Corporate name--Ethical standards.
The corporate name shall contain the words "professional company" or "professional corporation" or abbreviations thereof, such as "Prof. Co.", "Prof. Corp.", "P.C.", "PC", or "Prof. Ltd." The name of a professional limited liability company shall contain the words "professional limited liability company" or the abbreviation "Prof. L.L.C.", "Prof. LLC", "P.L.L.C.", or "PLLC". In addition, the name of the corporation or limited liability company shall always meet the ethical standards established by the State Board of Examiners in Optometry by duly adopted rules and regulations.
Source: SL 1972, ch 249, § 2; SL 1993, ch 344, § 39I; SL 2020, ch 197, § 3.
47-11B-3. Optometric license required for officers, directors and shareholders.
All of the officers, directors, and shareholders of a corporation created by this chapter shall at all times be persons registered pursuant to the provisions of chapter 36-7. No person who is not so licensed shall have any part in the ownership or control of such corporation, nor may any proxy to vote any shares of such corporation be given to a person who is not so registered.
Source: SL 1972, ch 249, § 3.
47-11B-3.1. Revocable trust as shareholder--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation or limited liability company organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder of a corporation organized under this chapter. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter as if the shares were directly owned by the grantor of the trust.
Source: SL 2002, ch 205, § 3.
47-11B-4. Purchase at book value of shares of deceased or ineligible shareholder.
If the articles of incorporation or bylaws of a corporation subject to this chapter fail to state a price or method of determining a fixed price at which the corporation or its shareholders may purchase the shares of a deceased shareholder or shareholder no longer qualified to own shares in the corporation, then the price for such shares shall be the book value as of the end of the month immediately preceding the death or disqualification of the shareholder. Book value shall be determined from the books and records of the corporation in accordance with the regular accounting method used by the corporation.
Source: SL 1972, ch 249, § 4.
47-11B-5. Contracts for personal services with licensed optometrists.
Notwithstanding any provision of statute to the contrary, any corporation formed pursuant to this chapter may enter into contracts for personal services with persons registered pursuant to chapter 36-7 for such duration as is agreed to between the parties and persons so registered may enter into contracts with corporations formed under this chapter.
Source: SL 1972, ch 249, § 5.
47-11B-6. Professional services limited to licensed agents.
A corporation formed pursuant to this chapter may render professional services only through its officers, employees, and agents who are duly registered to render such professional services under the provisions of chapter 36-7; provided, however, this section shall not be interpreted to include in the term "employee," as used herein, clerks, secretaries, bookkeepers, technicians, and other assistants who are not considered by law to be rendering professional services to the public.
Source: SL 1972, ch 249, § 6.
47-11B-7. Licensed employees subject to discipline under practice act.
Each individual employee registered pursuant to chapter 36-7 who is employed by a corporation subject to this chapter shall remain subject to reprimand or discipline for his conduct under the provisions of chapter 36-7.
Source: SL 1972, ch 249, § 7.
47-11B-8. Certificate of registration required--Contents of application.
No corporation shall open, operate, or maintain an establishment for the practice of optometry without a certificate of registration from the State Board of Examiners in Optometry, hereinafter referred to as the board. Application for such registration shall be made to the board in writing and shall contain the name and address of the corporation and such other information as may be required by the board.
Source: SL 1972, ch 249, § 8.
47-11B-9. Investigation on application--Conditions to issuance of certificate--Duration of certificate.
Upon receipt of an application made pursuant to § 47-11B-8, the Board of Examiners in Optometry shall make an investigation of the corporation. If the board finds that the incorporators, officers, directors, and shareholders are each registered pursuant to chapter 36-7 and if no disciplinary action is pending before the board against any of them, and if it appears that the corporation will be conducted in compliance with law and regulations of the board, the board shall issue, upon payment of a registration fee of fifty dollars, a certificate which shall remain effective until January first following the date of such registration.
Source: SL 1972, ch 249, § 9.
47-11B-10. Posting of certificate.
The certificate of registration issued pursuant to § 47-11B-8 shall be conspicuously posted upon the premises to which it is applicable.
Source: SL 1972, ch 249, § 10.
47-11B-11. Change of location of corporation--Certificate amended.
In the event of a change of location of the registered corporation, the Board of Examiners in Optometry, in accordance with its regulations, shall amend the certificate of registration so that it shall comply to the new location.
Source: SL 1972, ch 249, § 11.
47-11B-12. Certificate not assignable.
No certificate of registration issued under this chapter shall be assignable.
Source: SL 1972, ch 249, § 12.
47-11B-13. Annual renewal of certificate--Conditions.
Upon written application of the holder, accompanied by a fee of ten dollars, the Board of Examiners in Optometry shall annually renew the certificate of registration, if the board finds that the corporation has complied with its regulations and the provisions of this chapter.
Source: SL 1972, ch 249, § 13.
47-11B-14. Suspension or revocation of certificate--Grounds.
The Board of Examiners in Optometry may suspend or revoke any certificate of registration issued under this chapter for any of the following reasons:
(1) The revocation or suspension of the registration to practice optometry of any officer, director, shareholder, or employee not promptly removed or discharged by the corporation;
(2) Unethical professional conduct on the part of any officer, director, stockholder, or employee not promptly removed or discharged by the corporation;
(3) The death of the last remaining shareholder; or
(4) Upon finding that the holder of a certificate has failed to comply with the provisions of this chapter or the regulations prescribed by the board.
Source: SL 1972, ch 249, § 14.
47-11B-15. Suspension or revocation of certificate--Applicable procedure.
Any proceedings undertaken by the Board of Examiners in Optometry for the revocation or suspension of a certificate of registration shall be deemed a contested case under the provisions of chapter 1-26.
Source: SL 1972, ch 249, § 15.
47-11B-16. Relationship with patient unchanged.
This chapter does not alter any law applicable to the relationship between an optometrist furnishing professional services and a person receiving such service, including liability arising out of such service.
Source: SL 1972, ch 249, § 16.
47-11B-21.1. Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
An obligation of a professional corporation or limited liability company formed pursuant to chapter 47-11A, 47-11B, 47-11C, 47-11D, 47-11E, 47-13A, or 47-13B, whether arising in contract, tort, or otherwise, is the obligation of the professional corporation or limited liability company and the individual whose act or omission gives rise to the obligation. No shareholder, director, or officer of a professional corporation or member or manager of a limited liability company is personally liable, directly or indirectly, by way of contribution or otherwise, for such obligation based solely on such person's capacity as a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company. This limitation of liability does not extend to amounts owed to the State of South Dakota or its political subdivisions for any taxes, or any penalty or interest on such taxes.
Source: SL 2005, ch 240, § 1.
47-11B-21.2. Amendment of articles of incorporation to be consistent with law.
Any professional corporation or limited liability company may amend its articles of incorporation to be consistent with SL 2005, ch 240.
Source: SL 2005, ch 240, § 2.
47-11B-21.3. Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
The repealed provisions contained in SL 2005, ch 240, that limited the liability of a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company by limiting or eliminating the joint and several liability of such person for any act, error, or omission of an employee of the professional corporation or limited liability company by maintaining professional liability insurance meeting certain standards, shall remain in effect for any act, error, or omission, whether arising in contract, tort, or otherwise, occurring before July 1, 2005.
Source: SL 2005, ch 240, § 11.
47-11B-22. Pension and insurance plans for employees--Restrictions on terms.
A corporation formed pursuant to the provisions of this chapter, may adopt a pension, profit sharing (whether cash or deferred), health and accident, insurance, or welfare plan for all or part of its employees, including lay employees, providing that such plan does not require or result in the sharing of specific or identifiable fees with any lay employees and any payments made to lay employees or into any such plan in behalf of lay employees are based upon their compensation or length of service, or both, rather than the amount of fees or income received by the corporation or its shareholders.
Source: SL 1972, ch 249, § 22; SL 2013, ch 173, § 7.
47-11B-23. Regulations issued by state board.
The State Board of Examiners in Optometry shall have power to issue from time to time such regulations as they consider necessary to carry out the provisions of this chapter.
Source: SL 1972, ch 249, § 23.
CHAPTER 47-11C
PODIATRIC CORPORATIONS
47-11C-1 Podiatric corporations and limited liability companies authorized.
47-11C-1.1 Definition of terms.
47-11C-2 Corporate name--Ethical standards.
47-11C-3 Podiatric license required for officers, directors, and shareholders.
47-11C-3.1 Revocable trust as shareholder--Conditions.
47-11C-4 Purchase at book value of shares of deceased or ineligible shareholder.
47-11C-5 Contracts for personal services with licensed podiatrists.
47-11C-6 Professional services limited to licensed agents.
47-11C-7 Licensed employees subject to discipline under practice act.
47-11C-8 Certificate of registration required--Contents of application.
47-11C-9 Investigation on application--Conditions to issuance of certificate--Duration of certificate.
47-11C-10 Posting of certificate.
47-11C-11 Change of location of corporation--Certificate amended.
47-11C-12 Certificate not assignable.
47-11C-13 Annual renewal of certificate--Conditions.
47-11C-14 Suspension or revocation of certificate--Grounds.
47-11C-15 Suspension or revocation proceedings deemed contested case.
47-11C-16 Relationship with patient unchanged.
47-11C-17 47-11C-17 to 47-11C-21. Repealed by SL 2005, ch 240, § 6.
47-11C-21.1 Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
47-11C-21.2 Amendment of articles of incorporation to be consistent with law.
47-11C-21.3 Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
47-11C-22 Pension and insurance plans for employees--Restrictions on terms.
47-11C-23 Private corporations law applicable.
47-11C-1. Podiatric corporations and limited liability companies authorized.
One or more podiatrists may form professional corporations for the practice of podiatry under the South Dakota Business Corporation Act, as amended, providing that such corporations are organized and operated in accordance with the provisions of this chapter.
Podiatrists may form professional limited liability companies for the practice of podiatry under the South Dakota Limited Liability Company Act, as amended, providing that such limited liability companies are organized and operated in accordance with the provisions of this chapter.
Source: SL 1977, ch 384, § 1; SL 1993, ch 344, § 39K.
47-11C-1.1. Definition of terms.
Terms used in this chapter mean:
(1) "Articles of incorporation," includes the articles of organization of a limited liability company;
(2) "Corporation," both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," includes any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," includes the members of a limited liability company;
(5) "Shareholders," includes the members of a limited liability company;
(6) "Shares" or "stock," includes membership interests in a limited liability company.
Source: SL 1993, ch 344, § 39L.
47-11C-2. Corporate name--Ethical standards.
The corporate name shall contain the words "professional company" or "professional corporation" or abbreviations thereof, such as "Prof. Co.," "Prof. Corp.," "P.C.", "PC", or "Prof. Ltd." A limited liability company name shall contain the words "professional limited liability company" or the abbreviation "Prof. L.L.C.", "Prof. LLC", "P.L.L.C.", or "PLLC". In addition, the name of the corporation or limited liability company shall always meet the ethical standards established by the State Board of Podiatry Examiners by duly adopted rules and regulations.
Source: SL 1977, ch 384, § 2; SL 1993, ch 344, § 39M; SL 2020, ch 197, § 4.
47-11C-3. Podiatric license required for officers, directors, and shareholders.
All of the officers, directors, and shareholders of a corporation created by this chapter shall at times be persons registered pursuant to the provisions of chapter 36-8. No person who is not so licensed shall have any part in the ownership or control of such corporation, nor may any proxy to vote any shares of such corporation be given to a person who is not so registered.
Source: SL 1977, ch 384, § 3.
47-11C-3.1. Revocable trust as shareholder--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation or limited liability company organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder of a corporation organized under this chapter. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter as if the shares were directly owned by the grantor of the trust.
Source: SL 2002, ch 205, § 4.
47-11C-4. Purchase at book value of shares of deceased or ineligible shareholder.
If the articles of incorporation or bylaws of a corporation subject to this chapter fail to state a price or method of determining a fixed price at which the corporation or its shareholders may purchase the shares of a deceased shareholder or shareholder no longer qualified to own shares in the corporation, then the price for such shares shall be the book value as of the end of the month immediately preceding the death or disqualification of the shareholder. Book value shall be determined from the books and records of the corporation in accordance with the regular accounting method used by the corporation.
Source: SL 1977, ch 384, § 4.
47-11C-5. Contracts for personal services with licensed podiatrists.
Any corporation formed pursuant to this chapter may enter into contracts for personal services with persons registered pursuant to chapter 36-8 for such duration as may be agreed to between the parties and persons so registered may enter into contracts with corporations formed under this chapter.
Source: SL 1977, ch 384, § 5.
47-11C-6. Professional services limited to licensed agents.
A corporation formed pursuant to this chapter may render professional services only through its officers, employees, and agents who are duly registered to render such professional services under the provisions of chapter 36-8; provided, however, this section shall not be interpreted to include in the term "employee," as used herein, clerks, secretaries, bookkeepers, technicians, and other assistants who are not considered by law to be rendering professional services to the public.
Source: SL 1977, ch 384, § 6.
47-11C-7. Licensed employees subject to discipline under practice act.
Each individual employee registered pursuant to chapter 36-8 who is employed by a corporation subject to this chapter shall remain subject to reprimand or discipline for his conduct under the provisions of chapter 36-8.
Source: SL 1977, ch 384, § 7.
47-11C-8. Certificate of registration required--Contents of application.
No corporation shall open, operate, or maintain an establishment for the practice of podiatry without a certificate of registration from the State Board of Podiatry Examiners hereinafter referred to as the board. Application for such registration shall be made to the board in writing and shall contain the name and address of the corporation and such other information as may be required by the board.
Source: SL 1977, ch 384, § 8.
47-11C-9. Investigation on application--Conditions to issuance of certificate--Duration of certificate.
Upon receipt of an application made pursuant to § 47-11C-8, the Board of Podiatry Examiners shall make an investigation of the corporation. If the board finds that the incorporators, officers, directors, and shareholders are each registered pursuant to chapter 36-8 and if no disciplinary action is pending before the board against any of them, and if it appears that the corporation will be conducted in compliance with law and regulations of the board, the board shall issue, upon payment of a registration fee of fifty dollars, a certificate which shall remain effective until January first following the date of such registration.
Source: SL 1977, ch 384, § 9.
47-11C-10. Posting of certificate.
The certificate of registration issued pursuant to § 47-11C-8 shall be conspicuously posted upon the premises to which it is applicable.
Source: SL 1977, ch 384, § 10.
47-11C-11. Change of location of corporation--Certificate amended.
In the event of a change of location of the registered corporation, the Board of Podiatry Examiners, in accordance with its regulations, shall amend the certificate of registration so that it shall comply to the new location.
Source: SL 1977, ch 384, § 11.
47-11C-12. Certificate not assignable.
No certificate of registration issued under this chapter shall be assignable.
Source: SL 1977, ch 384, § 12.
47-11C-13. Annual renewal of certificate--Conditions.
Upon written application of the holder, accompanied by a fee of ten dollars, the Board of Podiatry Examiners shall annually renew the certificate of registration, if the board finds that the corporation has compiled with its regulations and the provisions of this chapter.
Source: SL 1977, ch 384, § 13.
47-11C-14. Suspension or revocation of certificate--Grounds.
The Board of Podiatry Examiners may suspend or revoke any certificate of registration issued under this chapter for any of the following reasons:
(1) The revocation or suspension of the registration to practice podiatry of any officer, director, shareholder, or employee not promptly removed or discharged by the corporation;
(2) Unethical professional conduct on the part of any officer, director, stockholder, or employee not promptly removed or discharged by the corporation;
(3) The death of the last remaining shareholder; or
(4) Upon finding that the holder of a certificate has failed to comply with the provisions of this chapter or the regulations prescribed by the board.
Source: SL 1977, ch 384, § 14.
47-11C-15. Suspension or revocation proceedings deemed contested case.
Any proceedings undertaken by the Board of Podiatry Examiners for the revocation or suspension of a certificate or registration shall be deemed a contested case under the provisions of chapter 1-26.
Source: SL 1977, ch 384, § 15.
47-11C-16. Relationship with patient unchanged.
This chapter does not alter any law applicable to the relationship between a podiatrist furnishing professional services and a person receiving such service, including liability arising out of such service.
Source: SL 1977, ch 384, § 16.
47-11C-21.1. Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
An obligation of a professional corporation or limited liability company formed pursuant to chapter 47-11A, 47-11B, 47-11C, 47-11D, 47-11E, 47-13A, or 47-13B, whether arising in contract, tort, or otherwise, is the obligation of the professional corporation or limited liability company and the individual whose act or omission gives rise to the obligation. No shareholder, director, or officer of a professional corporation or member or manager of a limited liability company is personally liable, directly or indirectly, by way of contribution or otherwise, for such obligation based solely on such person's capacity as a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company. This limitation of liability does not extend to amounts owed to the State of South Dakota or its political subdivisions for any taxes, or any penalty or interest on such taxes.
Source: SL 2005, ch 240, § 1.
47-11C-21.2. Amendment of articles of incorporation to be consistent with law.
Any professional corporation or limited liability company may amend its articles of incorporation to be consistent with SL 2005, ch 240.
Source: SL 2005, ch 240, § 2.
47-11C-21.3. Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
The repealed provisions contained in SL 2005, ch 240, that limited the liability of a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company by limiting or eliminating the joint and several liability of such person for any act, error, or omission of an employee of the professional corporation or limited liability company by maintaining professional liability insurance meeting certain standards, shall remain in effect for any act, error, or omission, whether arising in contract, tort, or otherwise, occurring before July 1, 2005.
Source: SL 2005, ch 240, § 11.
47-11C-22. Pension and insurance plans for employees--Restrictions on terms.
A corporation formed pursuant to the provisions of this chapter, may adopt a pension, profit-sharing, whether cash or deferred, health and accident insurance, or welfare plan for all or part of its employees, including lay employees, providing that such plan does not require or result in the sharing of specific or identifiable fees with any lay employees and any payments made to lay employees or into any such plan in behalf of lay employees are based upon their compensation or length of service or both, rather than the amount of fees or income received.
Source: SL 1977, ch 384, § 22.
47-11C-23. Private corporations law applicable.
The provisions of the law governing private corporations shall be applicable to corporations formed under this chapter, including their organization, and they shall enjoy the powers and privileges and be subject to the duties, restrictions, and liabilities of other corporations, except so far as the same may be limited or enlarged by this chapter.
Source: SL 1977, ch 384, § 23.
CHAPTER 47-11D
PHYSICIAN'S ASSISTANTS CORPORATIONS
47-11D-1 Formation of corporation or limited liability company authorized.
47-11D-1.1 Definition of terms.
47-11D-2 Corporate name.
47-11D-3 Certification of officers, directors and shareholders.
47-11D-3.1 Revocable trust as shareholder--Conditions.
47-11D-4 Death of shareholders--Computation of book value.
47-11D-5 Contracts for personal services with certified persons.
47-11D-6 Professional services limited to certified employees.
47-11D-7 Certified employees subject to discipline.
47-11D-8 Certificate of registration required--Application.
47-11D-9 Investigation upon application--Issuance of certificate--Duration of certificate.
47-11D-10 Posting of certificate.
47-11D-11 Change of location--Amending certificate.
47-11D-12 Certificate not assignable.
47-11D-13 Annual renewal of certificate.
47-11D-14 Suspension or revocation of certificate of registration--Grounds.
47-11D-15 Procedure for suspension or revocation of certificate.
47-11D-16 Relationship with patient unchanged.
47-11D-17 47-11D-17 to 47-11D-21. Repealed by SL 2005, ch 240, § 7.
47-11D-21.1 Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
47-11D-21.2 Amendment of articles of incorporation to be consistent with law.
47-11D-21.3 Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
47-11D-22 Pension, profit sharing, insurance, and welfare plans for employees--Restrictions.
47-11D-23 Application of private corporations law.
47-11D-1. Formation of corporation or limited liability company authorized.
One or more physician assistants may form a professional corporation for practicing as physician's assistants under the South Dakota Business Corporation Act, if such corporations are organized and operated in accordance with the provisions of this chapter.
Physician's assistants may form a professional limited liability company under the South Dakota Limited Liability Company Act if the limited liability company is organized and operated in accordance with the provisions of this chapter. The articles of organization of the limited liability company shall contain provisions complying with the requirements of this chapter.
Source: SL 1993, ch 337, § 1; SL 2000, ch 222, § 5.
47-11D-1.1. Definition of terms.
Terms used in this chapter shall also include the following terms:
(1) "Articles of incorporation," the articles of organization of a limited liability company;
(2) "Corporation," both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," the members of a limited liability company;
(5) "Shareholders," the members of a limited liability company;
(6) "Shares" or "stock," membership interests in a limited liability company.
Source: SL 2000, ch 222, § 6.
47-11D-2. Corporate name.
The name of a corporation shall contain the words, professional company, or professional corporation, or abbreviations thereof, such as Prof. Co., Prof. Corp., P.C., PC, or Prof. Ltd. The name of a limited liability company formed under § 47-11D-1 shall contain the words, professional limited liability company, or the abbreviation, Prof. L.L.C., Prof. LLC, P.L.L.C., or PLLC.
Source: SL 1993, ch 337, § 2; SL 2000, ch 222, § 7; SL 2020, ch 197, § 5.
47-11D-3. Certification of officers, directors and shareholders.
All of the officers, directors, and shareholders of a corporation created by this chapter shall at all times be persons certified pursuant to the provisions of chapter 36-4A. No person who is not so certified may have any part in the ownership or control of such corporation, nor may any proxy to vote any shares of such corporation be given to a person who is not so certified.
Source: SL 1993, ch 337, § 3.
47-11D-3.1. Revocable trust as shareholder--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation or limited liability company organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder of a corporation organized under this chapter. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter as if the shares were directly owned by the grantor of the trust.
Source: SL 2002, ch 205, § 5.
47-11D-4. Death of shareholders--Computation of book value.
If the articles of incorporation or bylaws of a corporation subject to this chapter fail to state a price or method of determining a fixed price at which the corporation or its shareholders may purchase the shares of a deceased shareholder or shareholder no longer qualified to own shares in the corporation, then the price for such shares shall be the book value as of the end of the month immediately preceding the death or disqualification of the shareholder. Book value shall be determined from the books and records of the corporation in accordance with the regular accounting method used by the corporation.
Source: SL 1993, ch 337, § 4.
47-11D-5. Contracts for personal services with certified persons.
Any corporation formed pursuant to this chapter may enter into contracts for personal services with persons certified pursuant to chapter 36-4A for such duration as may be agreed to between the parties, and persons so certified may enter into contracts with corporations formed under this chapter.
Source: SL 1993, ch 337, § 5.
47-11D-6. Professional services limited to certified employees.
A corporation formed pursuant to this chapter may render professional services only through its officers, employees, and agents who are duly certified to render such professional services under the provisions of chapter 36-4A. However, this section may not be interpreted to include in the term employee, as used herein, clerks, secretaries, bookkeepers, technicians, and other assistants who are not considered by law to be rendering professional services to the public.
Source: SL 1993, ch 337, § 6.
47-11D-7. Certified employees subject to discipline.
Each individual employee certified pursuant to chapter 36-4A who is employed by a corporation subject to this chapter remains subject to reprimand or discipline for his conduct under the provisions of chapter 36-4A.
Source: SL 1993, ch 337, § 7.
47-11D-8. Certificate of registration required--Application.
No corporation may open, operate, or maintain an establishment for practicing as physician's assistants without a certificate of registration from the State Board of Medical and Osteopathic Examiners hereinafter referred to as the board. Application for such registration shall be made to the board in writing and shall contain the name and address of the corporation and such other information as may be required by the board.
Source: SL 1993, ch 337, § 8.
47-11D-9. Investigation upon application--Issuance of certificate--Duration of certificate.
Upon receipt of an application made pursuant to § 47-11D-8, the board shall make an investigation of the corporation. If the board finds that the incorporators, officers, directors, and shareholders are each certified pursuant to chapter 36-4A and if no disciplinary action is pending before the board against any of them, and if it appears that the corporation will be conducted in compliance with law and rules of the board, the board shall issue, upon payment of a registration fee of fifty dollars, a certificate which shall remain effective until January first following the date of such registration.
Source: SL 1993, ch 337, § 9.
47-11D-10. Posting of certificate.
The certificate of registration issued pursuant to § 47-11D-9 shall be conspicuously posted upon the premises to which it is applicable.
Source: SL 1993, ch 337, § 10.
47-11D-11. Change of location--Amending certificate.
In the event of a change of location of the registered corporation, the board in accordance with its rules shall amend the certificate of registration so that it shall apply to the new location. The board may promulgate rules pursuant to chapter 1-26 for the amending of a certificate.
Source: SL 1993, ch 337, § 11.
47-11D-12. Certificate not assignable.
No certificate of registration issued under this chapter is assignable.
Source: SL 1993, ch 337, § 12.
47-11D-13. Annual renewal of certificate.
Upon written application of the holder, accompanied by a fee of one hundred dollars, the board shall annually renew the certificate of registration if the board finds that the corporation has compiled with its rules and the provisions of this chapter.
Source: SL 1993, ch 337, § 13; SL 1999, ch 190, § 5.
47-11D-14. Suspension or revocation of certificate of registration--Grounds.
The board may suspend or revoke any certificate of registration issued under this chapter for any of the following reasons:
(1) The revocation or suspension of the certificate practice as a physician's assistant of any officer, director, shareholder, or employee not promptly removed or discharged by the corporation;
(2) Unethical professional conduct on the part of any officer, director, stockholder, or employee not promptly removed or discharged by the corporation;
(3) The death of the last remaining shareholder; or
(4) Upon finding that the holder of a certificate of registration has failed to comply with the provisions of this chapter or the rules prescribed by the board.
Source: SL 1993, ch 337, § 14.
47-11D-15. Procedure for suspension or revocation of certificate.
Any proceedings undertaken by the board for the revocation or suspension of a certificate of registration shall be deemed a contested case under the provisions of chapter 1-26.
Source: SL 1993, ch 337, § 15.
47-11D-16. Relationship with patient unchanged.
This chapter does not alter any law applicable to the relationship between a physician's assistant furnishing professional services and a person receiving such service, including liability arising out of such service.
Source: SL 1993, ch 337, § 16.
47-11D-21.1. Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
An obligation of a professional corporation or limited liability company formed pursuant to chapter 47-11A, 47-11B, 47-11C, 47-11D, 47-11E, 47-13A, or 47-13B, whether arising in contract, tort, or otherwise, is the obligation of the professional corporation or limited liability company and the individual whose act or omission gives rise to the obligation. No shareholder, director, or officer of a professional corporation or member or manager of a limited liability company is personally liable, directly or indirectly, by way of contribution or otherwise, for such obligation based solely on such person's capacity as a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company. This limitation of liability does not extend to amounts owed to the State of South Dakota or its political subdivisions for any taxes, or any penalty or interest on such taxes.
Source: SL 2005, ch 240, § 1.
47-11D-21.2. Amendment of articles of incorporation to be consistent with law.
Any professional corporation or limited liability company may amend its articles of incorporation to be consistent with SL 2005, ch 240.
Source: SL 2005, ch 240, § 2.
47-11D-21.3. Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
The repealed provisions contained in SL 2005, ch 240, that limited the liability of a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company by limiting or eliminating the joint and several liability of such person for any act, error, or omission of an employee of the professional corporation or limited liability company by maintaining professional liability insurance meeting certain standards, shall remain in effect for any act, error, or omission, whether arising in contract, tort, or otherwise, occurring before July 1, 2005.
Source: SL 2005, ch 240, § 11.
47-11D-22. Pension, profit sharing, insurance, and welfare plans for employees--Restrictions.
A corporation formed pursuant to the provisions of this chapter, may adopt a pension, profit-sharing, whether cash or deferred, health and accident insurance, or welfare plan for all or part of its employees, including lay employees. However, any such plan may not require or result in the sharing of specific or identifiable fees with any lay employees and any payments made to lay employees or into any such plan in behalf of lay employees are based upon their compensation or length of service or both, rather than the amount of fees or income received.
Source: SL 1993, ch 337, § 22.
47-11D-23. Application of private corporations law.
The provisions of the law governing private corporations apply to corporations formed under this chapter, including their organization, and they enjoy the powers and privileges and are subject to the duties, restrictions, and liabilities of other corporations, except so far as limited or enlarged by this chapter.
Source: SL 1993, ch 337, § 23.
CHAPTER 47-11E
NURSING CORPORATIONS
47-11E-1 Professional service corporations and limited liability companies for the practice of nursing authorized.
47-11E-1.1 Definition of terms.
47-11E-2 Formation of corporation authorized.
47-11E-3 Powers and privileges.
47-11E-4 Name of corporation or limited liability company.
47-11E-5 Shareholders must be licensed and engaged in practice of nursing.
47-11E-5.1 Revocable trust as shareholder--Conditions.
47-11E-6 Ineligible shareholder to dispose of shares.
47-11E-7 Qualifications of president, directors and officers.
47-11E-8 47-11E-8 to 47-11E-12. Repealed by SL 2005, ch 240, § 8.
47-11E-12.1 Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
47-11E-12.2 Amendment of articles of incorporation to be consistent with law.
47-11E-12.3 Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
47-11E-13 Filing of articles of incorporation.
47-11E-14 Corporations not to engage in practice of nursing outside of chapter.
47-11E-15 Pension profit sharing, health and accident insurance or welfare plan for employees--Restrictions.
47-11E-16 Standards of professional conduct--Compliance.
47-11E-17 Suspension of corporation or members from practice of nursing.
47-11E-18 Standards of professional conduct--Discipline.
47-11E-19 Effect of act.
47-11E-20 Board of Nursing to promulgate rules.
47-11E-1. Professional service corporations and limited liability companies for the practice of nursing authorized.
One or more registered nurses, licensed practical nurses, certified registered nurse anesthetists, or clinical nurse specialists licensed pursuant to chapter 36-9 or certified nurse practitioners or certified nurse midwives licensed pursuant to chapter 36-9A may form a professional service corporation for the practice of nursing under the South Dakota Business Corporation Act. The articles of incorporation of the corporation shall contain provisions complying with the requirements of §§ 47-11E-1 to 47-11E-19, inclusive.
Registered nurses, licensed practical nurses, certified registered nurse anesthetists, or clinical nurse specialists licensed pursuant to chapter 36-9 or certified nurse practitioners or certified nurse midwives licensed pursuant to chapter 36-9A may form a professional limited liability company under the South Dakota Limited Liability Company Act if the limited liability company is organized and operated in accordance with the provisions of this chapter. The articles of organization of the limited liability company shall contain provisions complying with the requirements of §§ 47-11E-1 to 47-11E-19, inclusive.
Source: SL 1996, ch 228, § 1; SL 2000, ch 222, § 2; SL 2017, ch 171, § 50.
47-11E-1.1. Definition of terms.
Terms used in this chapter shall also include the following terms:
(1) "Articles of incorporation," the articles of organization of a limited liability company;
(2) "Corporation," both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," the members of a limited liability company;
(5) "Shareholders," the members of a limited liability company;
(6) "Shares" or "stock," membership interests in a limited liability company.
Source: SL 2000, ch 222, § 3.
47-11E-2. Formation of corporation authorized.
A corporation formed pursuant to § 47-11E-1 shall be organized solely for the purpose of conducting the practice of nursing only through persons qualified to practice nursing in the State of South Dakota.
Source: SL 1996, ch 228, § 2.
47-11E-3. Powers and privileges.
A corporation formed pursuant to § 47-11E-1 may exercise the powers and privileges conferred upon corporations by the laws of the State of South Dakota only in furtherance of and subject to its corporate purpose.
Source: SL 1996, ch 228, § 3.
47-11E-4. Name of corporation or limited liability company.
The name of a corporation formed pursuant to § 47-11E-1 shall contain the words, professional company or professional corporation or abbreviations thereof, such as Prof. Co., Prof. Corp., P.C., or PC. The name of a limited liability company formed under § 47-11E-1 shall contain the words, professional limited liability company, or the abbreviation, Prof. L.L.C., Prof. LLC, P.L.L.C., or PLLC. The name of the corporation or limited liability company shall always meet the ethical standards established for the names of nursing firms by the canons of professional ethics of the South Dakota Board of Nursing as if all the stockholders of the corporation were partners.
Source: SL 1996, ch 228, § 4; SL 2000, ch 222, § 4; SL 2020, ch 197, § 6.
47-11E-5. Shareholders must be licensed and engaged in practice of nursing.
All shareholders of a corporation formed pursuant to § 47-11E-1 shall be persons duly licensed by the South Dakota Board of Nursing to practice nursing in the State of South Dakota and who at all times own their shares in their own right. They shall be individuals who, except for illness, accident, time spent in the armed services, on vacations, and on leaves of absence not to exceed one year, are actively engaged in the practice of nursing in the offices of the corporation.
Source: SL 1996, ch 228, § 5.
47-11E-5.1. Revocable trust as shareholder--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation or limited liability company organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder of a corporation organized under this chapter. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter as if the shares were directly owned by the grantor of the trust.
Source: SL 2002, ch 205, § 6.
47-11E-6. Ineligible shareholder to dispose of shares.
Provisions shall be made requiring any shareholder who ceases to be eligible to be a shareholder to dispose of all shares forthwith either to the corporation or to any person having the qualifications prescribed in § 47-11E-5.
Source: SL 1996, ch 228, § 6.
47-11E-7. Qualifications of president, directors and officers.
The president of a corporation formed pursuant to § 47-11E-1 shall be a shareholder and director; and, to the extent possible, all other directors and officers shall be persons having the qualifications prescribed in § 47-11E-5. Lay directors and officers may not exercise any authority whatsoever over professional matters.
Source: SL 1996, ch 228, § 7.
47-11E-12.1. Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
An obligation of a professional corporation or limited liability company formed pursuant to chapter 47-11A, 47-11B, 47-11C, 47-11D, 47-11E, 47-13A, or 47-13B, whether arising in contract, tort, or otherwise, is the obligation of the professional corporation or limited liability company and the individual whose act or omission gives rise to the obligation. No shareholder, director, or officer of a professional corporation or member or manager of a limited liability company is personally liable, directly or indirectly, by way of contribution or otherwise, for such obligation based solely on such person's capacity as a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company. This limitation of liability does not extend to amounts owed to the State of South Dakota or its political subdivisions for any taxes, or any penalty or interest on such taxes.
Source: SL 2005, ch 240, § 1.
47-11E-12.2. Amendment of articles of incorporation to be consistent with law.
Any professional corporation or limited liability company may amend its articles of incorporation to be consistent with SL 2005, ch 240.
Source: SL 2005, ch 240, § 2.
47-11E-12.3. Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
The repealed provisions contained in SL 2005, ch 240, that limited the liability of a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company by limiting or eliminating the joint and several liability of such person for any act, error, or omission of an employee of the professional corporation or limited liability company by maintaining professional liability insurance meeting certain standards, shall remain in effect for any act, error, or omission, whether arising in contract, tort, or otherwise, occurring before July 1, 2005.
Source: SL 2005, ch 240, § 11.
47-11E-13. Filing of articles of incorporation.
A copy certified by the secretary of state of the articles of incorporation of any corporation formed pursuant to this chapter shall be filed with the South Dakota Board of Nursing, together with a certified copy of all amendments thereto. At the time of filing the original articles with the Board of Nursing, the corporation shall file a written list of shareholders setting forth the names and addresses of each and a written list containing the names and addresses of all persons who are not shareholders who are employed by the corporation and who are authorized to practice nursing in South Dakota. Within ten days after any change in such shareholders or employees, a written list setting forth the information required by the preceding sentence shall be filed with the Board of Nursing.
Source: SL 1996, ch 228, § 13.
47-11E-14. Corporations not to engage in practice of nursing outside of chapter.
Except as provided in this chapter, corporations may not engage in the practice of nursing. Professional service corporations organized and operated in accordance with the provisions of this chapter are not lay agencies within the meaning of the canons of professional ethics.
Source: SL 1996, ch 228, § 14.
47-11E-15. Pension profit sharing, health and accident insurance or welfare plan for employees--Restrictions.
A professional service corporation may adopt a pension profit-sharing (whether cash or deferred), health and accident, insurance, or welfare plan for all or part of its employees including lay employees, if such plan does not require or result in the sharing of specific or identifiable fees with lay employees and any payments made to lay employees or into any such plan in behalf of lay employees are based upon their compensation or length of service, or both, rather than the amount of fees or income received.
Source: SL 1996, ch 228, § 15.
47-11E-16. Standards of professional conduct--Compliance.
The corporation may not do anything which if done by a nurse employed by it would violate the standards of professional conduct established for such nurse pursuant to law. The corporation shall at all times comply with the standards of professional conduct established by the South Dakota Board of Nursing and the provisions of this chapter.
Source: SL 1996, ch 228, § 16.
47-11E-17. Suspension of corporation or members from practice of nursing.
The Board of Nursing may suspend or revoke the right of any corporation, or any of its members, to practice nursing, for any of the following reasons:
(1) The revocation or suspension of the license to practice nursing of any officer, director, shareholder, or employee not promptly removed or discharged by the corporation;
(2) Unethical professional conduct on the part of any officer, director, shareholder, or employee not promptly removed or discharged by the corporation;
(3) The death of the last remaining shareholder; or
(4) A violation of any of the provisions of this chapter or the rules promulgated pursuant to this chapter.
Source: SL 1996, ch 228, § 17.
47-11E-18. Standards of professional conduct--Discipline.
Nothing in this chapter diminishes or changes the obligation of each nurse employed by the corporation to conduct their practice in accordance with the standards of professional conduct promulgated by the South Dakota Board of Nursing. Any nurse who by act or omission causes the corporation to act or fail to act in a way which violates such standards of professional conduct, is personally responsible for such act or omission and is subject to discipline.
Source: SL 1996, ch 228, § 18.
47-11E-19. Effect of act.
This chapter does not alter any law applicable to the relationship between a nurse furnishing nursing service and a person receiving such service, including liability arising out of such service.
Source: SL 1996, ch 228, § 19.
47-11E-20. Board of Nursing to promulgate rules.
The Board of Nursing shall promulgate rules pursuant to chapter 1-26 pertaining to:
(1) Filing the original articles of incorporation under § 47-11E-13;
(2) Annual renewal;
(3) Fees; and
(4) Disciplinary proceedings.
Source: SL 1996, ch 228, § 20.
CHAPTER 47-11F
HEALTH CARE CORPORATIONS, LIMITED LIABILITY COMPANIES AND LIMITED LIABILITY PARTNERSHIPS
47-11F-1 Definition of terms.
47-11F-2 Professional corporation defined.
47-11F-3 Professional corporations rendering more than one professional service authorized.
47-11F-4 Certificates of registration required--Application.
47-11F-5 Action upon application--Duration of certificate.
47-11F-6 Posting of certificate required.
47-11F-7 Amending certificate upon change of location or ownership--Certificates not assignable.
47-11F-8 Suspension or revocation of certificate--Grounds.
47-11F-9 Notice and hearing required--Appeal--Certain situations where prior notice and hearing not required.
47-11F-10 Additional information required in forming, organizing, or registration documents.
47-11F-11 Corporate name.
47-11F-12 Ownership of property--Investment of funds.
47-11F-13 Professional practice or service without license not permitted.
47-11F-14 Exercise of powers accorded by governing law--Conditions.
47-11F-15 Corporate policies and actions to adhere to standards of professional conduct--Violations reported to licensing board--Board to have access to records.
47-11F-16 Relationship between health care provider and patient unaffected.
47-11F-17 Confidentiality of patient records.
47-11F-18 Licensing boards to promulgate rules to implement chapter.
47-11F-19 Insurance title unaffected.
47-11F-1. Definition of terms.
Terms used in this chapter mean:
(1) "Authorized licensee," a natural person licensed as a health care professional under Title 36 and entitled to form a professional corporation pursuant to chapters 47-11, 47-11A, 47-11B, 47-11C, 47-11D, and 47-11E;
(2) "Professional employee," an employee of a professional corporation who is an authorized licensee, but not a shareholder of the corporation.
Source: SL 2000, ch 219, § 1.
47-11F-2. Professional corporation defined.
For the purposes of this chapter, the term, professional corporation, includes a limited liability company organized under chapter 47-34A or a limited liability partnership organized under chapter 48-7. With respect to a limited liability company, references in this chapter to articles of incorporation, by-laws, directors, officers, shareholders, and shares of stock refer to articles of organization, operating agreement, governors, managers, members, and membership interest, respectively. With respect to a limited liability partnership, references in this chapter to articles of incorporation and by-laws refer to partnership agreement, references to directors, officers, and shareholders refer to partners, and references to shares of stock refer to partnership interests.
Source: SL 2000, ch 219, § 2.
47-11F-3. Professional corporations rendering more than one professional service authorized.
One or more authorized licensees may form a professional corporation for the purpose of rendering two or more kinds of professional services and services ancillary thereto. A professional corporation may not employ a person who is an authorized licensee unless at least one shareholder of the professional corporation is an authorized licensee of the same profession.
Source: SL 2000, ch 219, § 3.
47-11F-4. Certificates of registration required--Application.
No professional corporation may provide any professional service or ancillary service without a certificate of registration from the licensing board of each category of licensee who is a shareholder. An application for such registration shall be made to the applicable boards in writing and shall contain the name and address of the corporation, the information required in § 47-11F-10, and such other information as may be required by each licensing board.
Source: SL 2000, ch 219, § 4.
47-11F-5. Action upon application--Duration of certificate.
Upon receipt of an application made pursuant to § 47-11F-4, each licensing board shall investigate the proposed professional corporation. If the board finds that the shareholders and professional employees within its jurisdiction are properly licensed and have no disciplinary action pending before the board and if it appears that the corporation will be conducted in compliance with the law and rules of the board, the board shall issue an annually renewable certificate of registration upon payment of a registration fee in an amount to be established by rule pursuant to chapter 1-26. The application for renewal of a certificate of registration must report any change in status of the corporation or its shareholders. The corporation shall promptly report to any licensing board having jurisdiction the occurrence of any event mentioned in subdivisions 47-11F-8(1), (2), and (3).
Source: SL 2000, ch 219, § 5.
47-11F-6. Posting of certificate required.
The certificate of registration issued pursuant to § 47-11F-5 shall be conspicuously posted upon the premises to which it is applicable.
Source: SL 2000, ch 219, § 6.
47-11F-7. Amending certificate upon change of location or ownership--Certificates not assignable.
An application for an amended certificate of registration shall be filed with any boards having jurisdiction of the professional corporation any time the location or ownership of the professional corporation changes. The respective boards shall investigate the corporation to determine whether it continues to meet the requirements of this chapter. Certificates of registration are not assignable.
Source: SL 2000, ch 219, § 7.
47-11F-8. Suspension or revocation of certificate--Grounds.
Any licensing board having jurisdiction over a professional corporation may suspend or revoke the certificate of registration issued under this chapter for any of the following reasons:
(1) The revocation or suspension of the license to practice of any shareholder or professional employee not promptly removed or discharged by the corporation;
(2) Unprofessional conduct by any shareholder or professional employee not promptly removed or discharged by the corporation;
(3) The death of the last remaining shareholder; or
(4) Upon a finding that the certificate holder has failed to comply with the provisions of this chapter or rules prescribed by any licensing board having jurisdiction over the certificate holder.
Source: SL 2000, ch 219, § 8.
47-11F-9. Notice and hearing required--Appeal--Certain situations where prior notice and hearing not required.
Before any certificate of registration is suspended or revoked, the holder is entitled to a hearing pursuant to chapter 1-26 before the board or boards having jurisdiction. The hearing may be held jointly by the boards, but each board shall render its own decision. Any party to such a hearing is entitled to appeal pursuant to chapter 1-26. If any licensing board finds that the suspension or revocation is necessary to protect the public health, safety, or welfare or because willful acts are involved, it may dispense with the requirement of prior notice and hearing. However, the professional corporation shall have a seasonable hearing after any such suspension or revocation.
Source: SL 2000, ch 219, § 9.
47-11F-10. Additional information required in forming, organizing, or registration documents.
In addition to providing the information required by the South Dakota Business Corporation Act, the following information is also required in the forming documents of a professional corporation, the organizing documents of a limited liability company, or the registration documents of a limited liability partnership:
(1) The name of the corporation, limited liability company, or limited liability partnership;
(2) The purpose of the corporation, limited liability company, or limited liability partnership;
(3) A statement that the shareholders of the corporation, members of the limited liability company, or partners in a limited liability partnership may only be professional persons licensed to render the kind of professional service that fit the purpose of the corporation, limited liability company, or limited liability partnership; and
(4) A statement that the officers and directors of a corporation, the governors and managers of a limited liability company, and the partners of a limited liability partnership, must be professional persons licensed to render the kind of professional services that fit the purpose of the corporation, limited liability company, or limited liability partnership.
Source: SL 2000, ch 219, § 10.
47-11F-11. Corporate name.
The corporate name of a corporation formed pursuant to this chapter shall end with the words, Professional Corporation, or the abbreviation, P.C. or PC, or the word, Limited, or the abbreviation, Ltd. The name of any limited liability company shall end with the words, Professional Limited Liability Company, or the abbreviation, Prof. L.L.C., Prof. LLC, P.L.L.C., or PLLC, or the words, Limited Liability Company, or the abbreviation, L.L.C. or LLC. The name of any limited liability partnership shall end with the words, Professional Limited Liability Partnership, or the abbreviation, P.L.L.P. or PLLP, or the words, Limited Liability Partnership, or the abbreviation, L.L.P. or LLP.
Source: SL 2000, ch 219, § 11; SL 2020, ch 197, § 7.
47-11F-12. Ownership of property--Investment of funds.
A professional corporation may own real and personal property necessary or appropriate for rendering professional service and may invest its funds in real estate, mortgages, stocks, bonds, or any other type of investment.
Source: SL 2000, ch 219, § 12.
47-11F-13. Professional practice or service without license not permitted.
This chapter does not authorize an individual to practice any profession, or furnish any professional service, for which the individual is not licensed.
Source: SL 2000, ch 219, § 13.
47-11F-14. Exercise of powers accorded by governing law--Conditions.
A professional corporation may exercise any powers accorded it by its generally applicable governing law, so long as the professional corporation exercises those powers solely to provide the pertinent professional services or to accomplish tasks ancillary to providing those services.
Source: SL 2000, ch 219, § 14.
47-11F-15. Corporate policies and actions to adhere to standards of professional conduct--Violations reported to licensing board--Board to have access to records.
No professional corporation may adopt, implement, or follow a policy, procedure, or practice, which would give any licensing board having jurisdiction grounds for disciplinary action, cause a violation of professional ethics, or cause a violation of the professional duty to use due care, against a shareholder or professional employee who follows, agrees to, or acquiesces in the policy, procedure, or practice. Any licensing board having jurisdiction shall be notified of any practice or policy adopted by the professional corporation that violates any provision of this chapter. Any dissension or deadlock resulting in a corporate policy or action violating the terms of this chapter shall be reported to any licensing board having jurisdiction. Any licensing board having jurisdiction shall have access to any business records and any patient records relevant to the actions of its respective licensee.
Source: SL 2000, ch 219, § 15.
47-11F-16. Relationship between health care provider and patient unaffected.
This chapter does not alter any law applicable to the relationship between a professional licensee furnishing health care services and the person receiving those services, including liability arising out of those services. To the extent required by the licensing law governing any authorized licensee or professional employee, the corporation shall comply with the provisions of such law relevant to the maintenance of professional liability insurance for those affected health care professionals employed by the corporation.
Source: SL 2000, ch 219, § 16.
47-11F-17. Confidentiality of patient records.
Patient records shall be kept strictly confidential. No provision of this chapter, including interdisciplinary access to patient records by any stockholder, professional employee, or any employee of a professional corporation, constitutes a waiver of any privilege on confidential communications which otherwise exists under any provision of the law of this state.
Source: SL 2000, ch 219, § 17.
47-11F-18. Licensing boards to promulgate rules to implement chapter.
The licensing boards having jurisdiction over professional corporations authorized in chapters 47-11, 47-11A, 47-11B, 47-11C, 47-11D, and 47-11E are authorized to promulgate rules pursuant to chapter 1-26 to implement the provisions of this chapter, including the following provisions:
(1) Definition of terms;
(2) Applications for registration and renewed registration as provided by §§ 47-11F-4 and 47-11F-5;
(3) Procedure for investigations as provided by §§ 47-11F-5 and 47-11F-15;
(4) Standards for hearings and summary suspension or revocation as provided by § 47-11F-9; and
(5) Interboard consultation and hearings as provided by §§ 47-11F-4, 47-11F-5, 47-11F-7, 47-11F-9, and 47-11F-15.
Source: SL 2000, ch 219, § 18.
47-11F-19. Insurance title unaffected.
The provisions of this chapter do not affect or preempt any requirements contained in Title 58.
Source: SL 2000, ch 219, § 19.
CHAPTER 47-11G
PHYSICAL THERAPY, OCCUPATIONAL THERAPY, AND SPEECH-LANGUAGE PATHOLOGY CORPORATIONS
47-11G-1 Definition of terms.
47-11G-2 Professional service corporations and limited liability companies for physical, occupational, and speech-language pathologists.
47-11G-3 Formation of corporation—Powers and privileges.
47-11G-4 Name of corporation or limited liability company.
47-11G-5 Shareholders—Requirements.
47-11G-6 Directors and officers.
47-11G-7 Personal liability--Exception.
47-11G-8 Articles of incorporation—Shareholder and employee information.
47-11G-9 Pension profit sharing, health and accident insurance or welfare plan for employees--Restrictions.
47-11G-10 Standards of professional conduct--Compliance--Discipline.
47-11G-1. Definition of terms.
As used in this chapter:
(1) "Articles of incorporation," includes the articles of organization of a limited liability company;
(2) "Corporation," includes both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," includes any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," includes the organization of a limited liability company;
(5) "Shareholders," includes the members of a limited liability company; and
(6) "Shares," includes membership interests in a limited liability company.
Source: SL 2022, ch 167, § 1.
47-11G-2. Professional service corporations and limited liability companies for physical, occupational, and speech-language pathologists.
One or more physical therapists licensed pursuant to chapter 36-10, occupational therapists licensed pursuant to chapter 36-31, speech-language pathologists licensed pursuant to chapter 36-37, or any combination of such licensees, may form a corporation under the South Dakota Business Corporation Act. The articles of incorporation must contain provisions complying with the requirements of this chapter.
Source: SL 2022, ch 167, § 2.
47-11G-3. Formation of corporation—Powers and privileges.
A corporation formed pursuant to this chapter may:
(1) Be organized for the purpose of conducting the practice of physical therapy, occupational therapy, or speech-language pathology, or any combination of such practices; and
(2) Exercise the powers and privileges conferred upon corporations by the laws of this state.
Source: SL 2022, ch 167, § 3.
47-11G-4. Name of corporation or limited liability company.
The name of a corporation formed pursuant to this chapter must contain the words, professional company or professional corporation or abbreviations thereof, such as Prof. Co., Prof. Corp., P.C., or PC.
The name of a limited liability company formed under this chapter must contain the words, professional limited liability company, or the abbreviation, Prof. L.L.C., Prof. LLC, P.L.L.C., or PLLC.
Source: SL 2022, ch 167, § 4.
47-11G-5. Shareholders—Requirements.
All shareholders of a corporation formed pursuant to this chapter must be persons duly licensed by this state and actively engaged in the practice of physical therapy, occupational therapy, or speech-language pathology and must, at all times, own their shares in their own right.
A revocable trust may be a shareholder in a corporation organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter, as if the shares were directly owned by the grantor of the trust.
Any shareholder who ceases to be an eligible shareholder must dispose of all shares either to the corporation or to a person who is qualified to be a shareholder.
Source: SL 2022, ch 167, § 5.
47-11G-6. Directors and officers.
The president of a corporation formed pursuant to this chapter must be a shareholder and director. To the extent possible, all other directors and officers must be persons having the qualifications set forth in § 47-11G-2. Lay directors and officers may not exercise any authority over professional matters.
Source: SL 2022, ch 167, § 6.
47-11G-7. Personal liability--Exception.
An obligation of a corporation formed pursuant to this chapter, whether arising in contract, tort, or otherwise, is the obligation of the corporation and the individual whose act or omission gives rise to the obligation. No shareholder, director, officer, member, or manager is personally liable, directly or indirectly, by way of contribution or otherwise, for the obligation based solely on the person's capacity as a shareholder, director, officer, member, or manager.
The limitation of liability does not extend to amounts owed to this state or its political subdivisions for any taxes, or any penalty or interest on such taxes.
Source: SL 2022, ch 167, § 7.
47-11G-8. Articles of incorporation—Shareholder and employee information.
A copy of the articles of incorporation, certified by the secretary of state, must be filed with the licensing board of each shareholder, together with a certified copy of any amendments. The corporation shall also file the names and addresses of each shareholder and the names and addresses of all persons who are not shareholders but are employed by the corporation and licensed to practice physical therapy, occupational therapy, or speech-language pathology in this state.
The respective licensing board must be notified within ten days if any information required by this section changes.
Source: SL 2022, ch 167, § 8.
47-11G-9. Pension profit sharing, health and accident insurance or welfare plan for employees--Restrictions.
A corporation formed pursuant to this chapter may adopt a pension profit-sharing, a health and accident, an insurance, or a welfare plan for all or some of its employees, including lay employees, if the plan does not require or result in the sharing of specific or identifiable fees with lay employees, and if any payments made to lay employees or into any such plan on behalf of lay employees are based on their compensation, their length of service, or both, rather than the amount of fees or income received.
Source: SL 2022, ch 167, § 9.
47-11G-10. Standards of professional conduct--Compliance--Discipline.
The corporation may not do anything which, if done by a physical therapist, occupational therapist, or speech-language pathologist, would violate the standards of conduct established for those professions.
Nothing in this chapter diminishes or changes the obligation of each physical therapist, occupational therapist, or speech-language pathologist to conduct his or her practice in accordance with the professional standards established by the respective licensing boards.
Source: SL 2022, ch 167, § 10.
47-12-1
Dentists authorized to form business entities.
47-12-1.1, 47-12-2.
Repealed.
47-12-3
Only dentists or qualified entities to have ownership or control of entity.
47-12-3.1
Revocable trust as shareholder, member, or partner--Conditions.
47-12-4 to 47-12-6.
Repealed.
47-12-7
Certificate of registration required--Unprofessional or dishonorable conduct.
47-12-8
Contents of application for registration--Acceptance or denial--Certificate not
assignable--Posting--Change in location.
47-12-9 to 47-12-11.
Repealed.
47-12-12
Annual renewal of certificate--Conditions.
47-12-13
Condition, limitation, suspension, or revocation of certificate--Grounds--Opportunity
for hearing.
47-12-14
Hearings--Appeal.
47-12-15, 47-12-16.
Repealed.
47-12-17
Dentist-patient relationship unaffected.
47-12-18
Repealed.
47-12-19
Severability and saving clause.
47-12-20
Conflict with chapter 36-6A.
47-12-21
Citation of chapter.
47-12-1. Dentists authorized to form business entities.
One or more dentists licensed pursuant to chapter 36-6A may associate to form a corporation, limited liability company, limited partnership, limited liability partnership, or limited liability limited partnership, registered to do business in this state, to own, operate, and maintain an establishment for the study, diagnosis, and treatment of dental ailments and injuries, to promote dental and scientific research and knowledge, and for any other purpose incident or necessary thereto.
Source: SL 1963, ch 35, § 2; SL 1970, ch 255, § 1; SL 1993, ch 344, § 39N; SL 2017, ch 194, § 1.
47-12-3. Only dentists or qualified entities to have ownership or control of entity.
Each director, manager, member, partner, and shareholder of an entity subject to this chapter shall be a dentist licensed pursuant to chapter 36-6A or a qualified entity. No person other than a licensed dentist or a qualified entity may have any part in the ownership or control of an entity subject to this chapter, nor may any proxy to vote any shares of such entity be given to a person who is not so licensed.
For purposes of this chapter, the term, qualified entity, means any entity subject to this chapter that meets all of the following standards:
(1) Each director, manager, member, partner, and shareholder of the entity shall be a dentist licensed under chapter 36-6A;
(2) The entity is registered to do business in this state; and
(3) The entity has a certificate of registration under this chapter from the State Board of Dentistry.
Source: SL 1963, ch 35, § 14; SL 1970, ch 255, § 3; SL 2017, ch 194, § 4.
47-12-3.1. Revocable trust as shareholder, member, or partner--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation, a member in a limited liability company, or a partner in a limited partnership, a limited liability limited partnership, or a limited liability partnership subject to this chapter, for so long as the grantor of the revocable trust is living and is a licensed dentist pursuant to chapter 36-6A.
Source: SL 2002, ch 205, § 7; SL 2017, ch 194, § 5.
47-12-7. Certificate of registration required--Unprofessional or dishonorable conduct.
No entity subject to this chapter may open, operate, or maintain an establishment for any of the purposes set forth in § 47-12-1 without a certificate of registration from the State Board of Dentistry. It is unprofessional or dishonorable conduct under § 36-6A-59.1 to maintain or operate an entity subject to this chapter without a certificate of registration.
Source: SL 1963, ch 35, § 5; SL 2017, ch 194, § 9.
47-12-8. Contents of application for registration--Acceptance or denial--Certificate not assignable--Posting--Change in location.
An application for registration shall contain the name, address, state of organization, employer identification number of the entity, and such other information as may be required by the State Board of Dentistry. Upon receipt of an application for registration and a registration fee of one hundred dollars, the board shall issue a certificate of registration if the board finds that each director, manager, member, partner, and shareholder is licensed as a dentist pursuant to chapter 36-6A or is a qualified entity, if no disciplinary action is pending before the board, or any other state dental board, against any of them, and if it appears the entity has been compliant with law and the regulations of the board. The board may deny an application for registration for failure to meet the requirements of this chapter or any rule promulgated thereunder. If the board denies an application for a certificate of registration, the entity whose application has been denied shall be afforded an opportunity for hearing pursuant to chapter 1-26.
No certificate of registration is assignable. The certificate of registration shall be conspicuously posted at the premises to which it is applicable. Each certificate holder shall notify the board within ten days of a change in the location of the registered entity.
Source: SL 1963, ch 35, § 5; SL 1970, ch 255, § 4; SL 2017, ch 194, § 10.
47-12-12. Annual renewal of certificate--Conditions.
Each entity subject to this chapter shall annually submit, on or before July first, an application for renewal of its certificate of registration which shall contain the information required by the State Board of Dentistry. Upon application of the entity, accompanied by a renewal fee of twenty-five dollars, the board shall renew the certificate of registration if the board finds the entity has complied with the provisions of this chapter and the regulations prescribed by the board. If a certificate of registration is not renewed on or before July first, the entity's registration under this chapter is automatically suspended until the entity complies with the requirements of this section.
Source: SL 1963, ch 35, § 6; SL 1970, ch 255, § 5; SL 2017, ch 194, § 14.
47-12-13. Condition, limitation, suspension, or revocation of certificate--Grounds--Opportunity for hearing.
The State Board of Dentistry may place a condition, limit, suspend, or revoke any certificate of registration for any of the following reasons:
(1) The revocation or suspension of the license to practice dentistry of any officer, director, manager, member, partner, shareholder, or employee not promptly removed or discharged by the entity;
(2) Unethical professional conduct, professional incompetence, or unprofessional or dishonorable conduct under chapter 36-6A on the part of any officer, director, manager, member, partner, shareholder, or employee not promptly removed or discharged by the entity;
(3) The death of the last remaining licensed member, partner, or shareholder; or
(4) Upon finding that the certificate holder failed to comply with the provisions of this chapter or the regulations prescribed by the board.
If the board places on condition, limits, suspends, or revokes a certificate of registration, the affected entity shall be afforded an opportunity for hearing pursuant to chapter 1-26.
Source: SL 1963, ch 35, § 10; SL 2017, ch 194, § 15.
47-12-14. Hearings--Appeal.
Each hearing and other proceeding under this chapter shall be conducted in accordance with chapter 1-26. Any final decision of the State Board of Dentistry under § 47-12-8 or 47-12-13 may be appealed to circuit court in accordance with chapter 1-26 within thirty days. Prior to taking any appeal to circuit court, the entity shall first exhaust all available remedies under this chapter and chapter 1-26. Notice of appeal to circuit court shall be served upon the board by service upon the secretary of state, as registered agent for the board under this chapter, an attested copy thereof within thirty days after the board has notified the appellant of its decision.
Source: SL 1963, ch 35, § 11; SL 2017, ch 194, § 16.
47-12-17. Dentist-patient relationship unaffected.
This chapter does not alter any law applicable to the relationship between a dentist furnishing dental service and a person receiving such service, including liability arising out of such service.
Source: SL 1963, ch 35, § 15.
47-12-19. Severability and saving clause.
If any provision of this chapter or the application thereof to any person or circumstances is invalid, such invalidity shall not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are declared to be severable.
Source: SL 1963, ch 35, § 19.
47-12-20. Conflict with chapter 36-6A.
If any provision of this chapter conflicts with chapter 36-6A, the provisions of chapter 36-6A shall take precedence.
Source: SL 1963, ch 35, § 3; SL 1971, ch 213, § 41; SL 2017, ch 194, § 20.
47-12-21. Citation of chapter.
This chapter may be cited as "The Dental Corporation Act."
Source: SL 1963, ch 35, § 1.
CHAPTER 47-13
VETERINARY CORPORATIONS
47-13-1 Veterinary corporations authorized--Formation and purposes of corporation--Limited liability companies authorized.
47-13-1.1 Definition of terms.
47-13-2 Corporate name.
47-13-3 Veterinary license required for all officers, directors, and shareholders.
47-13-3.1 Revocable trust as shareholder--Conditions.
47-13-4 Death of shareholder--Computation of book value.
47-13-5 Contracts for personal services with licensed persons.
47-13-6 Employees subject to Veterinary Practice Act.
47-13-7 Certificate of registration required--Application for certificate--Contents.
47-13-8 Action on application--Conditions to issuance of certificate--Duration of certificate.
47-13-9 Posting of certificate required.
47-13-10 Amending certificate upon change of location.
47-13-11 Certificate not assignable.
47-13-12 Annual renewal of certificate--Conditions.
47-13-13 Suspension or revocation of certificate--Grounds.
47-13-14 Notice and hearing required--Contents of notice.
47-13-15 Appeal from denial of certificate--Power of court on appeal.
47-13-16 Service of notice of appeal.
47-13-17 Veterinary-customer relationship unaffected.
47-13-18 Private corporations law as applicable.
47-13-19 Severability and saving clause.
47-13-20 Conflict with Veterinary Practice Act.
47-13-21 Citation of chapter.
47-13-1. Veterinary corporations authorized--Formation and purposes of corporation--Limited liability companies authorized.
One or more persons licensed pursuant to chapter 36-12, hereinafter referred to as the Veterinary Practice Act, may associate to form a corporation, pursuant to the provisions of law pertaining to private corporations to own, operate, and maintain an establishment for the study, diagnosis, and treatment for the prevention, cure, or relief of a pain, deformity, wound, fracture, body injury, or physical condition or disability of animals and to promote scientific research and knowledge of the same; and for any other purpose incident or necessary thereto; provided such diagnosis and treatment may be given by employees of the corporation only if they are licensed pursuant to the Veterinary Practice Act.
Persons licensed pursuant to the Veterinary Practice Act may associate to form a limited liability company pursuant to the provisions of law pertaining to limited liability companies to own, operate, and maintain an establishment for the study, diagnosis, cure, or relief of a pain, deformity, wound, fracture, body injury, or physical conditions or disability of animals and to promote scientific research and knowledge of the same; and for any other purpose incident or necessary thereto; provided such diagnosis and treatment may be given by employees of the limited liability company only if they are licensed pursuant to the Veterinary Practice Act.
Source: SL 1964, ch 20, § 2; SL 1973, ch 282; SL 1993, ch 344, § 39R.
47-13-1.1. Definition of terms.
Terms used in this chapter mean:
(1) "Articles of incorporation," includes the articles of organization of a limited liability company;
(2) "Corporation," both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," includes any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," includes the members of a limited liability company;
(5) "Shareholders," includes the members of a limited liability company;
(6) "Shares" or "stock," includes membership interests in a limited liability company.
Source: SL 1993, ch 344, § 39S.
47-13-2. Corporate name.
The corporate name shall end with the word "chartered," or, the word "limited," or the abbreviation "Ltd.," or the words "professional association," or the abbreviation "P.C." or "PC". Corporations that were utilizing the designation "P.A." on July 1, 1974, but no others, may continue to use that designation. The name of a limited liability company shall contain the words "professional limited liability company" or the abbreviation "Prof. L.L.C.", "Prof. LLC", "P.L.L.C.", or "PLLC".
Source: SL 1964, ch 20, § 4; SL 1974, ch 295, § 1; SL 1993, ch 344, § 39T; SL 2020, ch 197, § 8.
47-13-3. Veterinary license required for all officers, directors, and shareholders.
All of the officers, directors, and shareholders of a corporation subject to this chapter shall at all times be persons licensed pursuant to the Veterinary Practice Act. No person who is not so licensed shall have any part in the ownership, or control of such corporation, nor may any proxy to vote any shares of such corporation be given to a person who is not so licensed.
Source: SL 1964, ch 20, § 14.
47-13-3.1. Revocable trust as shareholder--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation or limited liability company organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder of a corporation organized under this chapter. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter as if the shares were directly owned by the grantor of the trust.
Source: SL 2002, ch 205, § 8.
47-13-4. Death of shareholder--Computation of book value.
If the articles of incorporation or bylaws of a corporation subject to this chapter fail to state a price or method of determining a fixed price at which the corporation or its shareholders may purchase the shares of a deceased shareholder or a shareholder no longer qualified to own shares in the corporation, the price for such shares shall be the book value as of the end of the month immediately preceding the death or disqualification of the shareholder. Book value shall be determined from the books and records of the corporation in accordance with the regular method of accounting used by the corporation.
Source: SL 1964, ch 20, § 17.
47-13-5. Contracts for personal services with licensed persons.
Notwithstanding any provision of statute to the contrary any veterinary corporation licensed under this chapter may enter into contracts for personal services with persons licensed pursuant to the Veterinary Practice Act for such duration as is agreed to between the parties.
Source: SL 1964, ch 20, § 14.
47-13-6. Employees subject to Veterinary Practice Act.
Each individual employee licensed pursuant to the Veterinary Practice Act who is employed by a corporation subject to this chapter shall remain subject to reprimand or discipline for his conduct under the provisions of the Veterinary Practice Act.
Source: SL 1964, ch 20, § 16.
47-13-7. Certificate of registration required--Application for certificate--Contents.
No corporation shall open, operate, or maintain an establishment for any of the purposes set forth in § 47-13-1 without a certificate of registration from the Board of Veterinary Medical Examiners, hereinafter referred to as the board. Application for such registration shall be made to said board in writing and shall contain the name and address of the corporation and such other information as may be required by the board.
Source: SL 1964, ch 20, § 5.
47-13-8. Action on application--Conditions to issuance of certificate--Duration of certificate.
Upon receipt of an application under § 47-13-7, the Board of Veterinary Medical Examiners shall make an investigation of the corporation. If the board finds that the incorporators, officers, directors, and shareholders are each licensed pursuant to the Veterinary Practice Act and if no disciplinary action is pending before the board against any of them, and if it appears that the corporation will be conducted in compliance with law and the regulations of the board, the board shall issue, upon payment of a registration fee of fifty dollars, a certificate of registration which shall remain effective until January first following the date of such registration.
Source: SL 1964, ch 20, § 5.
47-13-9. Posting of certificate required.
The certificate of registration shall be conspicuously posted upon the premises to which it is applicable.
Source: SL 1964, ch 20, § 7.
47-13-10. Amending certificate upon change of location.
In the event of a change of location of the registered establishment, the Board of Veterinary Medical Examiners, in accordance with its regulations, shall amend the certificate of registration so that it shall apply to the new location.
Source: SL 1964, ch 20, § 8.
47-13-11. Certificate not assignable.
No certificate of registration shall be assignable.
Source: SL 1964, ch 20, § 9.
47-13-12. Annual renewal of certificate--Conditions.
Upon written application of the holder, accompanied by a fee of ten dollars, the Board of Veterinary Medical Examiners shall annually renew the certificate of registration if the board finds that the corporation has complied with its regulations and the provisions of this chapter.
Source: SL 1964, ch 20, § 6.
47-13-13. Suspension or revocation of certificate--Grounds.
The Board of Veterinary Medical Examiners may suspend or revoke any certificate of registration for any of the following reasons:
(1) The revocation or suspension of the license to practice veterinary medicine of any officer, director, shareholder, or employee not promptly removed or discharged by the corporation;
(2) Unethical professional conduct on the part of any officer, director, shareholder, or employee not promptly removed or discharged by the corporation;
(3) The death of the last remaining shareholder; or
(4) Upon finding that the holder of a certificate has failed to comply with the provisions of this chapter or the regulations prescribed by the board.
Source: SL 1964, ch 20, § 10.
47-13-14. Notice and hearing required--Contents of notice.
Before any certificate of registration is suspended or revoked, the holder shall be given written notice of the proposed action and the reasons therefor, and shall be given a public hearing by the Board of Veterinary Medical Examiners with the right to produce testimony concerning the charges made. The notice shall also state the place and date of the hearing which shall be at least five days after service of said notice.
Source: SL 1964, ch 20, § 11.
47-13-15. Appeal from denial of certificate--Power of court on appeal.
Any corporation whose application for a certificate of registration has been denied or whose registration has been suspended or revoked may, within thirty days after notice of such action by the Board of Veterinary Medical Examiners, appeal to the circuit court for the county where such corporation has its principal place of business. The court shall inquire into the cause of the board's action and may affirm, or reverse such decision and order a further hearing by the board, or may order the board to grant appellant a certificate of registration.
Source: SL 1964, ch 20, § 12.
47-13-16. Service of notice of appeal.
Notice of appeal shall be served upon any member of the Board of Veterinary Medical Examiners by leaving with such member, or at his usual place of abode, an attested copy thereof within thirty days after the board has notified such appellant of its decision.
Source: SL 1964, ch 20, § 13.
47-13-17. Veterinary-customer relationship unaffected.
This chapter does not alter any law applicable to the relationship between a veterinary and a person for whom services are rendered, including liability arising out of such service.
Source: SL 1964, ch 20, § 15.
47-13-18. Private corporations law as applicable.
The provisions of the law governing private corporations shall be applicable to corporations formed under this chapter, including their organization, and they shall enjoy the powers and privileges and be subject to the duties, restrictions, and liabilities of other corporations, except so far as the same may be limited or enlarged by this chapter.
Source: SL 1964, ch 20, § 3.
47-13-19. Severability and saving clause.
If any provision of this chapter or the application thereof to any person or circumstances is invalid, such invalidity shall not affect other provisions or application of this chapter which can be given effect without the invalid provisions or application, and to this end the provisions of this chapter are declared to be severable.
Source: SL 1964, ch 20, § 18.
47-13-20. Conflict with Veterinary Practice Act.
If any provision of this chapter conflicts with the Veterinary Practice Act this chapter shall take precedence.
Source: SL 1964, ch 20, § 3.
47-13-21. Citation of chapter.
This chapter may be cited as "The Veterinary Corporation Act."
Source: SL 1964, ch 20, § 1.
CHAPTER 47-13A
PROFESSIONAL CORPORATIONS FOR THE PRACTICE OF LAW
47-13A-1 Professional corporations for practice of law authorized--Limited liability company.
47-13A-1.1 Definition of terms.
47-13A-2 Contents of articles of incorporation.
47-13A-2.1 Revocable trust as shareholder--Conditions.
47-13A-2.2 Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
47-13A-2.3 Amendment of articles of incorporation to be consistent with law.
47-13A-2.4 Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
47-13A-3 Certified copy of articles and amendments filed with Supreme Court clerk.
47-13A-4 List of shareholders and employees filed with Supreme Court clerk.
47-13A-5 Corporation's violation of standards of professional conduct and rules of court prohibited--Compliance with standards and provisions of chapter.
47-13A-6 Violation as grounds for termination or suspension of right to practice law.
47-13A-7 Attorneys employed by corporation subject to standards of professional conduct--Personal liability.
47-13A-8 Attorney-client privilege unaffected.
47-13A-9 Adoption of pension, profit-sharing, and insurance plans authorized.
47-13A-10 Practice of law by corporations prohibited--Professional service corporations not deemed to be lay agencies.
47-13A-1. Professional corporations for practice of law authorized--Limited liability company.
One or more lawyers licensed pursuant to chapter 16-16 may form professional service corporations for the practice of law under §§ 47-1A-101 to 47-1A-863.3, inclusive, §§47-1A-1401 to 47-1A-1440, inclusive, and §§ 47-1A-1601 to 47-1A-1621.3, inclusive, or may form limited liability companies under the South Dakota Limited Liability Company Act, providing that such corporations and limited liability companies are organized and operated in accordance with the provisions of this chapter. In any corporation formed under this chapter one or more persons may act as the sole stockholders, directors or officers of such corporation. However, any limited liability company formed under this chapter shall comply with the South Dakota Limited Liability Act, as amended.
Source: SL 1968, ch 10, § 1; SL 1973, ch 283; SL 1993, ch 344, § 39U; SL 2005, ch 202, § 4.
47-13A-1.1. Definition of terms.
Terms used in this chapter mean:
(1) "Articles of incorporation," includes the articles of organization of a limited liability company;
(2) "Corporation," both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," includes any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," includes the members of a limited liability company;
(5) "Shareholders," includes the members of a limited liability company;
(6) "Shares" or "stock," includes membership interests in a limited liability company.
Source: SL 1993, ch 344, § 39V.
47-13A-2. Contents of articles of incorporation.
The articles of incorporation of such corporations shall contain provisions complying with the following requirements:
(1) The name of a corporation shall contain the words "professional company" or "professional corporation" or abbreviations thereof, such as "Prof. Co.," "Prof. Corp.", "P.C.", or "PC". The name of a limited liability company shall contain the words "professional limited liability company" or the abbreviation "Prof. L.L.C.", "Prof. LLC", "P.L.L.C.", "PLLC". In addition, the name of the corporation shall always meet the ethical standards established for the names of law firms by the Rules of Professional Conduct of the Supreme Court of South Dakota as if all the stockholders of the corporation were partners.
(2) The corporation shall be organized solely for the purpose of conducting the practice of law only through persons qualified to practice law in the State of South Dakota.
(3) The corporation may exercise the powers and privileges conferred upon corporations by the laws of the State of South Dakota only in furtherance of and subject to its corporate purpose.
(4) All shareholders of the corporation shall be persons duly licensed by the Supreme Court of the State of South Dakota to practice law in the State of South Dakota, and who at all times own their shares in their own right. They shall be individuals who, except for illness, accident, time spent in the armed services, on vacations, and on leaves of absence not to exceed one year, are actively engaged in the practice of law in the offices of the corporation.
(5) Provisions shall be made requiring any shareholder who ceases to be eligible to be a shareholder to dispose of all his shares forthwith either to the corporation or to any person having the qualifications prescribed in subdivision (4).
(6) The president shall be a shareholder and a director, and to the extent possible all other directors and officers shall be persons having the qualifications prescribed in subdivision (4). Lay directors and officers may not exercise any authority whatsoever over professional matters.
(7) Repealed by SL 2005, ch 240, § 9.
Source: SL 1968, ch 10, § 1; SL 1989, ch 30, § 76; SL 1993, ch 344, § 39W; SL 2005, ch 240, § 9; SL 2020, ch 197, § 9.
47-13A-2.1. Revocable trust as shareholder--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation or limited liability company organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder of a corporation organized under this chapter. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter as if the shares were directly owned by the grantor of the trust.
Source: SL 2002, ch 205, § 9.
47-13A-2.2. Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
An obligation of a professional corporation or limited liability company formed pursuant to chapter 47-11A, 47-11B, 47-11C, 47-11D, 47-11E, 47-13A, or 47-13B, whether arising in contract, tort, or otherwise, is the obligation of the professional corporation or limited liability company and the individual whose act or omission gives rise to the obligation. No shareholder, director, or officer of a professional corporation or member or manager of a limited liability company is personally liable, directly or indirectly, by way of contribution or otherwise, for such obligation based solely on such person's capacity as a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company. This limitation of liability does not extend to amounts owed to the State of South Dakota or its political subdivisions for any taxes, or any penalty or interest on such taxes.
Source: SL 2005, ch 240, § 1.
47-13A-2.3. Amendment of articles of incorporation to be consistent with law.
Any professional corporation or limited liability company may amend its articles of incorporation to be consistent with SL 2005, ch 240.
Source: SL 2005, ch 240, § 2.
47-13A-2.4. Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
The repealed provisions contained in SL 2005, ch 240, that limited the liability of a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company by limiting or eliminating the joint and several liability of such person for any act, error, or omission of an employee of the professional corporation or limited liability company by maintaining professional liability insurance meeting certain standards, shall remain in effect for any act, error, or omission, whether arising in contract, tort, or otherwise, occurring before July 1, 2005.
Source: SL 2005, ch 240, § 11.
47-13A-3. Certified copy of articles and amendments filed with Supreme Court clerk.
A copy certified by the secretary of state of the articles of incorporation of any corporation formed pursuant to this chapter shall be filed with the clerk of the Supreme Court of South Dakota, together with a certified copy of all amendments thereto.
Source: SL 1968, ch 10, § 2.
47-13A-4. List of shareholders and employees filed with Supreme Court clerk.
At the time of filing the original articles with the clerk of the Supreme Court, the corporation shall file with him a written list of shareholders setting forth the names and addresses of each and a written list containing the names and addresses of all persons who are not shareholders who are employed by the corporation and who are authorized to practice law in South Dakota. Within ten days after any change in such shareholders or employees, a written list setting forth the information required by the preceding sentence shall be filed with the said clerk.
Source: SL 1968, ch 10, § 2.
47-13A-5. Corporation's violation of standards of professional conduct and rules of court prohibited--Compliance with standards and provisions of chapter.
The corporation shall do nothing which if done by an attorney employed by it would violate the standards of professional conduct established for such attorney pursuant to law, including rules of court. The corporation shall at all times comply with the standards of professional conduct established by the Supreme Court of South Dakota and the provisions of this chapter.
Source: SL 1968, ch 10, § 2; SL 1969, ch 18.
47-13A-6. Violation as grounds for termination or suspension of right to practice law.
Any violation of this chapter by the corporation shall be grounds for the Supreme Court to terminate or suspend its, or any of its members' right to practice law.
Source: SL 1968, ch 10, § 2; SL 1969, ch 18.
47-13A-7. Attorneys employed by corporation subject to standards of professional conduct--Personal liability.
Nothing in this chapter shall be deemed to diminish or change the obligation of each attorney employed by the corporation to conduct his practice in accordance with the standards of professional conduct promulgated by the State Bar of South Dakota or by the Supreme Court of South Dakota; any attorney who by act or omission causes the corporation to act or fail to act in a way which violates such standards of professional conduct, including any provision of this rule, shall be deemed personally responsible for such act or omission and shall be subject to discipline therefor.
Source: SL 1968, ch 10, § 2.
47-13A-8. Attorney-client privilege unaffected.
Nothing in this chapter shall be deemed to modify the attorney-client privilege established by the Legislature and any comparable common law privilege.
Source: SL 1968, ch 10, § 2.
47-13A-9. Adoption of pension, profit-sharing, and insurance plans authorized.
A professional service corporation may adopt a pension, profit-sharing (whether cash or deferred), health and accident, insurance, or welfare plan for all or part of its employees including lay employees, providing that such plan does not require or result in the sharing of specific or identifiable fees with lay employees and any payments made to lay employees or into any such plan in behalf of lay employees are based upon their compensation or length of service, or both, rather than the amount of fees or income received.
Source: SL 1968, ch 10, § 3.
47-13A-10. Practice of law by corporations prohibited--Professional service corporations not deemed to be lay agencies.
Except as provided in this chapter, corporations may not engage in the practice of law. Professional service corporations organized and operated in accordance with the provisions of this chapter may not be deemed lay agencies within the meaning of the Rules of Professional Conduct.
Source: SL 1968, ch 10, § 4; SL 1989, ch 30, §§ 52, 76A.
CHAPTER 47-13B
PROFESSIONAL CORPORATIONS FOR THE PRACTICE OF PUBLIC ACCOUNTING
47-13B-1 Formation of corporations or limited liability companies authorized.
47-13B-1.1 Definition of terms.
47-13B-2 Purpose of corporation.
47-13B-3 Powers exercised only for authorized purpose--Incompatible services prohibited.
47-13B-4 Corporate name.
47-13B-5 47-13B-5. Repealed by SL 2002, ch 179, § 72
47-13B-5.1 Revocable trust as shareholder--Conditions.
47-13B-6 Disposition of shares held by person no longer qualified.
47-13B-7 Qualifications of directors and officers--Restrictions on powers of lay directors and officers.
47-13B-8 47-13B-8 to 47-13B-12. Repealed by SL 2005, ch 240, § 10.
47-13B-12.1 Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
47-13B-12.2 Amendment of articles of incorporation to be consistent with law.
47-13B-12.3 Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
47-13B-13 Articles of incorporation filed with board of accountancy--List of shareholders and professional employees--Notice of changes.
47-13B-14 Restrictions on corporate practice of accounting.
47-13B-15 Pension and insurance plans for employees.
47-13B-16 Corporation held to professional standards of conduct--Violation as ground for suspension or revocation of professional certificate.
47-13B-17 Professional obligations unchanged by incorporation--Personal responsibility for corporate acts in violation.
47-13B-18 Accountant-client privileges unchanged.
47-13B-1. Formation of corporations or limited liability companies authorized.
Public accountants may form professional service corporations or limited liability companies for the practice of public accounting under the South Dakota Business Corporation Act as amended, or the South Dakota Limited Liability Act as amended, respectively, providing that such corporations and limited liability companies are organized and operated in accordance with the provisions of this chapter.
Source: SL 1971, ch 260, § 1; SL 1993, ch 344, § 39Y.
47-13B-1.1. Definition of terms.
Terms used in this chapter mean:
(1) "Articles of incorporation," includes the articles of organization of a limited liability company;
(2) "Corporation," both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;
(3) "Director" or "officer," includes any manager of a limited liability company or the members of a limited liability company that does not have managers;
(4) "Incorporation," includes the members of a limited liability company;
(5) "Shareholders," includes the members of a limited liability company;
(6) "Shares" or "stock," includes membership interests in a limited liability company.
Source: SL 1993, ch 344, § 39Z.
47-13B-2. Purpose of corporation.
The corporation shall be organized solely for the purpose of conducting the practice of accountancy.
Source: SL 1971, ch 260, § 1 (2); SL 2002, ch 179, § 71.
47-13B-3. Powers exercised only for authorized purpose--Incompatible services prohibited.
The corporation may exercise the powers and privileges conferred upon corporations by the laws of the State of South Dakota only in furtherance of and subject to its corporate purpose, the practice of accountancy in the State of South Dakota, and shall not provide services that are incompatible with the practice of public accountancy.
Source: SL 1971, ch 260, § 1 (3).
47-13B-4. Corporate name.
The name of the corporation shall contain words "professional company," or "professional corporation" or abbreviations thereof, such as "Prof. Co.," "Prof. Corp.," "P.C.", "PC", "Incorporated," "Corporation," "Corp.," "Association," "Ltd.," "Chartered," or "Inc." The name of a limited liability company shall contain the words "professional limited liability company" or the abbreviation "Prof. L.L.C.", "Prof. LLC", "P.L.L.C.", or "PLLC". In addition, any name of a corporation or limited liability company shall always meet the ethical standards established for the names of professional accounting firms by the board of the State of South Dakota, and in accordance with the code of professional ethics of the American Institute of Certified Public Accountants.
Source: SL 1971, ch 260, § 1 (1); SL 1993, ch 344, § 39AA; SL 1994, ch 305, § 8; SL 2020, ch 197, § 10.
47-13B-5.1. Revocable trust as shareholder--Conditions.
Notwithstanding any other provisions of this chapter, a revocable trust may be a shareholder in a corporation or limited liability company organized under this chapter, for so long as the grantor of the revocable trust is living and is eligible to be a shareholder of a corporation organized under this chapter. After the death of the grantor, the shares owned by a revocable trust are subject to any divestiture and redemption provisions of this chapter as if the shares were directly owned by the grantor of the trust.
Source: SL 2002, ch 205, § 10.
47-13B-6. Disposition of shares held by person no longer qualified.
Provisions shall be made requiring any shareholder who ceases to be eligible to be a shareholder to dispose of all his shares forthwith, either to the corporation or to any person having the qualifications prescribed in § 47-13B-5.
Source: SL 1971, ch 260, § 1 (5).
47-13B-7. Qualifications of directors and officers--Restrictions on powers of lay directors and officers.
The principal executive officer shall be a shareholder and a director and, to the extent possible, all other directors and principal officers shall be shareholders, and lay directors and officers shall not exercise any authority whatsoever over professional matters.
Source: SL 1971, ch 260, § 1 (6).
47-13B-12.1. Personal liability of shareholders, directors, and officers of professional corporations or members or managers of limited liability companies limited for corporate or individual obligations--Exception.
An obligation of a professional corporation or limited liability company formed pursuant to chapter 47-11A, 47-11B, 47-11C, 47-11D, 47-11E, 47-13A, or 47-13B, whether arising in contract, tort, or otherwise, is the obligation of the professional corporation or limited liability company and the individual whose act or omission gives rise to the obligation. No shareholder, director, or officer of a professional corporation or member or manager of a limited liability company is personally liable, directly or indirectly, by way of contribution or otherwise, for such obligation based solely on such person's capacity as a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company. This limitation of liability does not extend to amounts owed to the State of South Dakota or its political subdivisions for any taxes, or any penalty or interest on such taxes.
Source: SL 2005, ch 240, § 1.
47-13B-12.2. Amendment of articles of incorporation to be consistent with law.
Any professional corporation or limited liability company may amend its articles of incorporation to be consistent with SL 2005, ch 240.
Source: SL 2005, ch 240, § 2.
47-13B-12.3. Application of repealed provisions to acts, errors, or omissions occurring before July 1, 2005.
The repealed provisions contained in SL 2005, ch 240, that limited the liability of a shareholder, director, or officer of a professional corporation or member or manager of a limited liability company by limiting or eliminating the joint and several liability of such person for any act, error, or omission of an employee of the professional corporation or limited liability company by maintaining professional liability insurance meeting certain standards, shall remain in effect for any act, error, or omission, whether arising in contract, tort, or otherwise, occurring before July 1, 2005.
Source: SL 2005, ch 240, § 11.
47-13B-13. Articles of incorporation filed with board of accountancy--List of shareholders and professional employees--Notice of changes.
A copy certified by the secretary of state of the articles of incorporation of any corporation formed pursuant to this chapter shall be filed with the secretary of the South Dakota Board of Accountancy, together with a certified copy of all amendments thereto. At the time of filing the original articles with the secretary, the corporation shall file with him a written list of shareholders setting forth the names and addresses of each and a written list containing the names and addresses for all persons who are not shareholders who are employed by the corporation and who are authorized to practice accounting in South Dakota. Within thirty days after any change in such shareholders or employees a written list setting forth the information required by the preceding sentence shall be filed with the said secretary.
Source: SL 1971, ch 260, § 2.
47-13B-14. Restrictions on corporate practice of accounting.
Except as provided in this chapter, corporations shall not engage in the practice of accounting. Professional service corporations organized and operated in accordance with the provisions of this chapter shall not be deemed lay agencies within the meaning of the laws of this state and the rules and regulations of the South Dakota Board of Accountancy or the code of professional ethics of the American Institute of Certified Public Accountants.
Source: SL 1971, ch 260, § 4.
47-13B-15. Pension and insurance plans for employees.
A professional service corporation may adopt a pension, profit-sharing (whether cash or deferred), health and accident, insurance, or welfare plan for all or part of its employees including lay employees, providing that such plan does not require or result in the sharing of specific or identifiable fees with any lay employees and any payments made to lay employees or into any such plan in behalf of lay employees are based upon their compensation or length of service, or both, rather than the amount of fees or income received.
Source: SL 1971, ch 260, § 3.
47-13B-16. Corporation held to professional standards of conduct--Violation as ground for suspension or revocation of professional certificate.
The corporation shall do nothing which if done by an accountant employed by it would violate the standards of professional conduct established for such accountant pursuant to law, including rules of the South Dakota State Board of Accountancy. The corporation shall at all times comply with the standards of professional conduct established by the South Dakota State Board of Accountancy and the provisions of this chapter and the American Institute of Certified Public Accountants. Any violation of this chapter by the corporation shall be grounds for the South Dakota State Board of Accountancy to suspend or revoke or refuse to renew the license or certificate of any of its members' right to practice accountancy.
Source: SL 1971, ch 260, § 2.
47-13B-17. Professional obligations unchanged by incorporation--Personal responsibility for corporate acts in violation.
Nothing in this chapter shall be deemed to diminish or change the obligation of each accountant employed by the corporation to conduct his practice in accordance with the rules and regulations of the South Dakota State Board of Accountancy or by the code of professional ethics of the American Institute of Certified Public Accountants; any accountant who by act or omission causes the corporation to act or fail to act in a way which violates such standards of professional conduct, including any provision of this chapter, shall be deemed personally responsible for such act or omission and shall be subject to discipline therefor.
Source: SL 1971, ch 260, § 2.
47-13B-18. Accountant-client privileges unchanged.
Nothing in this chapter shall be deemed to modify the accountant-client privilege established by the Legislature and any comparable common privilege.
Source: SL 1971, ch 260, § 2.
47-14-1 to 47-14-13. Repealed.
47-14A-1
Definitions.
47-14A-2
Beneficial owner's contribution to business trust--Contribution not required.
47-14A-3
Obligation of beneficial owner--Cash value of contribution as option in addition to
other remedies.
47-14A-4
Penalties or consequences for failure to make contribution.
47-14A-5
Liability of beneficial owners.
47-14A-6
Liability of trustees.
47-14A-7
Liability of officers, employees, and others managing business of trust.
47-14A-8
Usury not a defense against beneficial owner's obligation.
47-14A-9
Power to sue and be sued--Liabilities--Property subject to attachment--Exception for
separately designed series.
47-14A-10
Trustee may be served with process.
47-14A-11
Service of process--Fee if service made on secretary of state.
47-14A-12
Time for responsive pleading.
47-14A-13
Trustee or beneficial owner may consent to jurisdiction.
47-14A-14
Service of process not limited.
47-14A-15
Circuit court jurisdiction over business trusts.
47-14A-16
Doing business in state by reason of being trustee.
47-14A-17
Beneficial owner to have undivided interest in trust property--Proportionate share in
profits and losses.
47-14A-18
Creditors of beneficial owners have no rights in business trust property.
47-14A-19
Beneficial owner's interest in business trust as personal property.
47-14A-20
Beneficial owner's interest transferable.
47-14A-21
Beneficial owner entitled to distribution becomes creditor of business trust.
47-14A-22
Title to property of business trust may be held by trustee.
47-14A-23
Creditors of trustee have no rights in business trust property.
47-14A-24
Trustees to manage affairs of business trust--Persons entitled to direct trustees--Power to direct trustees does not cause person to be trustee nor to create duties or
liabilities.
47-14A-25
Provisions of governing instrument.
47-14A-26
Trustee acting in reliance on governing instrument not liable to trust or beneficial
owner--Duties determined by governing instrument.
47-14A-27
Officer or employer acting in reliance on governing instrument not liable--Duties
determined by governing instrument.
47-14A-28
Action by beneficial owners--Notice and meeting not necessary if consent exists--Proxy.
47-14A-29
Action by trustees--Notice and meeting not necessary if consent exists--Proxy.
47-14A-30
One trustee required to have residence or principal place of business in state.
47-14A-31
Exception to § 47-14A-30 for registered investment companies.
47-14A-32
Change of registered agent or location of office--Amendment to certificate of trust.
47-14A-33
Service of process on registered agent valid.
47-14A-34
Change of name or address of trustee or registered agent--Fee--Certificate.
47-14A-35
Business trust to have perpetual existence--Termination determined by governing
instrument.
47-14A-36
Death or incapacity of beneficial owner need not terminate business trust.
47-14A-37
Dissolution of trust determined by governing instrument.
47-14A-38
Powers of trust managers upon dissolution of trust.
47-14A-1. Definitions.
Terms used in this chapter mean:
(1) "Business trust," an unincorporated association which:
(a) Is created by a governing instrument under which property is or will be held, managed, administered, controlled, invested, reinvested, or operated, or business or professional activities for profit are carried on or will be carried on, by a trustee or trustees for the benefit of such person or persons as are or may become entitled to a beneficial interest in the trust property, including a trust of the type known at common law as a business trust, or Massachusetts trust, or a trust qualifying as a real estate investment trust under § 856 et seq., of the United States Internal Revenue Code of 1986 (26 U.S.C. § 856 et seq.), as amended, or under any successor provision, or a trust qualifying as a real estate mortgage investment conduit under § 860D of the United States Internal Revenue Code of 1986 (26 U.S.C. § 860D), as amended, or under any successor provision; and
(b) Files a certificate of trust pursuant to § 47-14A-10.
Any such association heretofore or hereafter organized shall be a business trust and a separate legal entity. A business trust may be organized to carry on any lawful business or activity, whether or not conducted for profit, or for any of the purposes referred to in subsection (a) of this subdivision (including, without limitation, for the purpose of holding or otherwise taking title to property, whether in an active or custodial capacity);
(2) "Beneficial owner," any owner of a beneficial interest in a business trust, the fact of ownership to be determined and evidenced (whether by means of registration, the issuance of certificates or otherwise) in conformity to the applicable provisions of the governing instrument of the business trust;
(3) "Trustee," any person appointed as a trustee in accordance with the governing instrument of a business trust, and may include the beneficial owners or any of them;
(4) "Person," any natural person, partnership, limited partnership, trust, estate, association, corporation, custodian, nominee, or any other individual or entity in its own or any representative capacity;
(5) "Other business entity," any corporation, partnership (whether general or limited), limited liability company, common- law trust, foreign business trust, or any other unincorporated business, excluding a business trust;
(6) "Governing instrument," any instrument which creates a business trust provides for the governance of the affairs of the business trust and the conduct of its business. A governing instrument:
(a) May provide that a person shall become a beneficial owner and shall become bound by the governing instrument if such person (or a representative authorized by such person orally, in writing or by other action such as payment for a beneficial interest) complies with the conditions for becoming a beneficial owner set forth in the governing instrument or any other writing and acquires a beneficial interest;
(b) May consist of one or more agreements, instruments, or other writings and may include or incorporate bylaws containing provisions relating to the business of the business trust, the conduct of its affairs and its rights or powers or the rights or powers of its trustees, beneficial owners, agents, or employees; and
(c) May contain any provision that is not inconsistent with law or with the information contained in the certificate of trust;
(7) "Foreign business trust," any business trust formed under the laws of any state or under the laws of any foreign country or other foreign jurisdiction and denominated as such under the laws of such state or foreign country or other foreign jurisdiction;
(8) "Independent trustee," solely with respect to a business trust that is registered as an investment company under the Investment Company Act of 1940, as amended (15 U.S.C. § 80a-1 et seq.), or any successor statute thereto (the 1940 Act), any trustee who is not an interested person of the business trust. However, the receipt of compensation for service as an independent trustee of the business trust and also for service as an independent trustee of one or more other investment companies managed by a single investment adviser (or an affiliated person of such investment adviser) does not affect the status of a trustee as an independent trustee under this chapter. An independent trustee shall be deemed to be independent and disinterested for all purposes. For purposes of this definition, the terms, affiliated person and interested person, have the meanings set forth in the 1940 Act or any rule adopted thereunder.
Source: SL 2001, ch 245, § 1.
47-14A-2. Beneficial owner's contribution to business trust--Contribution not required.
A contribution of a beneficial owner to the business trust may be in cash, property, or services rendered, or a promissory note or other obligation to contribute cash or property or to perform services. However, a person may become a beneficial owner of a business trust and may receive a beneficial interest in a business trust without making a contribution or being obligated to make a contribution to the business trust.
Source: SL 2001, ch 245, § 2.
47-14A-3. Obligation of beneficial owner--Cash value of contribution as option in addition to other remedies.
Except as provided in the governing instrument, a beneficial owner is obligated to the business trust to perform any promise to contribute cash, property, or to perform services, even if the beneficial owner is unable to perform because of death, disability, or any other reason. If a beneficial owner does not make the required contribution of property or services, the beneficial owner is obligated at the option of the business trust to contribute cash equal to that portion of the agreed value, as stated in the records of the business trust, of the contribution that has not been made. The foregoing option shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the business trust may have against such beneficial owner under the governing instrument of applicable law.
Source: SL 2001, ch 245, § 3.
47-14A-4. Penalties or consequences for failure to make contribution.
A governing instrument may provide that the interest of any beneficial owner who fails to make any contribution that the beneficial owner is obligated to make shall be subject to specific penalties for, or specified consequences of, such failure. Such penalty or consequence may take the form of reducing or eliminating the defaulting beneficial owner's proportionate interest in the business trust, subordinating the beneficial interest to that of nondefaulting beneficial owners, a forced sale of the beneficial interest, forfeiture of the beneficial interest, the lending by other beneficial owners of the amount necessary to meet the beneficiary's commitment, a fixing of the value of the defaulting beneficial owner's beneficial interest by appraisal or by formula and redemption or sale of the beneficial interest at such value, or any other penalty or consequence.
Source: SL 2001, ch 245, § 4.
47-14A-5. Liability of beneficial owners.
Except to the extent otherwise provided in the governing instrument of the business trust, the beneficial owners are entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the general corporation law of the state.
Source: SL 2001, ch 245, § 5.
47-14A-6. Liability of trustees.
Except to the extent otherwise provided in the governing instrument of a business trust, a trustee, when acting in such capacity, is not personally liable to any person other than the business trust or a beneficial owner for any act, omission, or obligation of the business trust or any trustee thereof.
Source: SL 2001, ch 245, § 6.
47-14A-7. Liability of officers, employees, and others managing business of trust.
Except to the extent otherwise provided in the governing instrument of a business trust, an officer, employee, manager, or other person acting pursuant to subdivision 47-14A-25(7), when acting in such capacity, is not personally liable to any person other than the business trust or a beneficial owner for any act, omission, or obligation of the business trust or any trustee thereof.
Source: SL 2001, ch 245, § 7.
47-14A-8. Usury not a defense against beneficial owner's obligation.
No obligation of a beneficial owner or trustee of a business trust to the business trust arising under the governing instrument or a separate agreement in writing, and no note, instrument or other writing evidencing any such obligation of a beneficial owner or trustee, is subject to the defense of usury, and no beneficial owner or trustee may interpose the defense of usury with respect to any such obligation in any action.
Source: SL 2001, ch 245, § 8.
47-14A-9. Power to sue and be sued--Liabilities--Property subject to attachment--Exception for separately designed series.
A business trust may sue and be sued, and service of process upon one of the trustees is sufficient. A business trust may be sued for debts and other obligations or liabilities contracted or incurred by the trustees, or by the duly authorized agents of such trustees, in the performance of their respective duties under the governing instrument of the business trust, and for any damages to persons or property resulting from the negligence of such trustees or agents acting in the performance of such respective duties. The property of a business trust is subject to attachment and execution as if it were a corporation. Notwithstanding the foregoing provisions of this section, in the event that the governing instrument of a business trust, including a business trust which is a registered investment company under the Investment Company Act of 1940, as amended (15 U.S.C. § 80a-1 et seq.), creates one or more series as provided in subdivision 47-14A-25(2), and if separate and distinct records are maintained for any such series and the assets associated with any such series are held and accounted for separately from the other assets of the business trust, or any other series thereof, and if the governing instrument so provides, and notice of the limitation on liabilities of a series as referenced in this sentence is set forth in the certificate of trust of the business trust, then the debts, liabilities, obligations, and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and not against the assets of the business trust generally or any other series thereof, and, unless otherwise provided in the governing instrument, none of the debts, liabilities, obligations, and expenses incurred, contracted for or otherwise existing with respect to the business trust generally or any other series thereof shall be enforceable against the assets of such series.
Source: SL 2001, ch 245, § 9.
47-14A-10. Trustee may be served with process.
A trustee of a business trust may be served with process in the manner prescribed in § 47-14A-11 in all civil actions or proceedings brought in the state involving or relating to the activities of the business trust or a violation by a trustee of a duty to the business trust, or any beneficial owner, whether or not the trustee is a trustee at the time suit is commenced. Every resident or nonresident of the state who accepts election or appointment or serves as a trustee of a business trust shall, by such acceptance or service, be deemed thereby to have consented to the appointment of the South Dakota trustee or registered agent of such business trust required by § 47-14A-30 (or, if there is none, the secretary of state) as such person's agent upon whom service of process may be made as provided in this section. Such acceptance or service shall signify the consent of such trustee that any process if so served shall be of the same legal force and validity as if served upon such trustee within the state and such appointment of such South Dakota trustee or registered agent (or, if there is none, the secretary of state) shall be irrevocable.
Source: SL 2001, ch 245, § 10.
47-14A-11. Service of process--Fee if service made on secretary of state.
Service of process shall be effected by serving the South Dakota trustee or registered agent of such business trust required by § 47-14A-30 (or, if there is none, the secretary of state) with one copy of such process in the manner provided by law for service of writs of summons. In the event service is made upon the secretary of state, the plaintiff shall pay to the secretary of state the sum of fifty dollars for the use of the state, which sum shall be taxed as part of the costs of the proceeding if the plaintiff shall prevail therein.
Source: SL 2001, ch 245, § 11.
47-14A-12. Time for responsive pleading.
In any action in which any such trustee has been served with process as provided in this chapter, the time in which a defendant shall be required to appear and file a responsive pleading shall be computed as in other civil actions.
Source: SL 2001, ch 245, § 12.
47-14A-13. Trustee or beneficial owner may consent to jurisdiction.
In the governing instrument of the business trust or other writing, a trustee or beneficial owner may consent to be subject to the nonexclusive jurisdiction of the courts of, or arbitration in, a specified jurisdiction, or the exclusive jurisdiction of the courts of the state, or the exclusivity of arbitration in a specified jurisdiction or the state, and to be served with legal process in the manner prescribed in such governing instrument of the business trust or other writing.
Source: SL 2001, ch 245, § 13.
47-14A-14. Service of process not limited.
Nothing in this chapter limits or affects the right to serve process in any other manner now or hereafter provided by law. This section is an extension of and not a limitation upon the right otherwise existing of service of legal process upon nonresidents.
Source: SL 2001, ch 245, § 14.
47-14A-15. Circuit court jurisdiction over business trusts.
The circuit court has jurisdiction over business trusts to the same extent as it has jurisdiction over common law trusts formed under the laws of the state.
Source: SL 2001, ch 245, § 15.
47-14A-16. Doing business in state by reason of being trustee.
A partnership (whether general or limited), corporation, or other nonnatural person formed or organized under the laws of any foreign country or other foreign jurisdiction or the laws of any state other than the State of South Dakota may not be deemed to be doing business in the state solely by reason of its being a trustee of a business trust.
Source: SL 2001, ch 245, § 16.
47-14A-17. Beneficial owner to have undivided interest in trust property--Proportionate share in profits and losses.
Except to the extent otherwise provided in the governing instrument of the business trust, a beneficial owner shall have an undivided beneficial interest in the property of the business trust and shall share in the profits and losses of the business trust in the proportion (expressed as a percentage) of the entire undivided beneficial interest in the business trust owned by such beneficial owner. The governing instrument of a business trust may provide that the business trust or the trustees, acting for and on behalf of the business trust, shall be deemed to hold beneficial ownership of any income earned on securities of the business trust issued by any business entities formed, organized, or existing under the laws of any jurisdiction, including the laws of any foreign country.
Source: SL 2001, ch 245, § 17.
47-14A-18. Creditors of beneficial owners have no rights in business trust property.
No creditor of the beneficial owner shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the business trust.
Source: SL 2001, ch 245, § 18.
47-14A-19. Beneficial owner's interest in business trust as personal property.
A beneficial owner's beneficial interest in the business trust is personal property notwithstanding the nature of the property of the trust. Except to the extent otherwise provided in the governing instrument of a business trust, a beneficial owner has no interest in specific business trust property.
Source: SL 2001, ch 245, § 19.
47-14A-20. Beneficial owner's interest transferable.
A beneficial owner's beneficial interest in the business trust is freely transferable except to the extent otherwise provided in the governing instrument of the business trust.
Source: SL 2001, ch 245, § 20.
47-14A-21. Beneficial owner entitled to distribution becomes creditor of business trust.
Except to the extent otherwise provided in the governing instrument of a business trust, at the time a beneficial owner becomes entitled to receive a distribution, the beneficial owner has the status of, and is entitled to all remedies available to, a creditor of the business trust with respect to the distribution. A governing instrument may provide for the establishment of record dates with respect to allocations and distributions by a business trust.
Source: SL 2001, ch 245, § 21.
47-14A-22. Title to property of business trust may be held by trustee.
Except to the extent otherwise provided in the governing instrument of the business trust, legal title to the property of the business trust, or any part thereof, may be held in the name of any trustee of the business trust, in its capacity as such, with the same effect as if such property were held in the name of the business trust.
Source: SL 2001, ch 245, § 22.
47-14A-23. Creditors of trustee have no rights in business trust property.
No creditor of the trustee has any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the business trust with respect to any claim against, or obligation of, such trustee in its individual capacity and not related to the business trust.
Source: SL 2001, ch 245, § 23.
47-14A-24. Trustees to manage affairs of business trust--Persons entitled to direct trustees--Power to direct trustees does not cause person to be trustee nor to create duties or liabilities.
Except to the extent otherwise provided in the governing instrument of a business trust, the business and affairs of a business trust shall be managed by or under the direction of its trustees. To the extent provided in the governing instrument of a business trust, any person (including a beneficial owner) shall be entitled to direct the trustees or other persons in the management of the business trust. Except to the extent otherwise provided in the governing instrument of a business trust, neither the power to give direction to a trustee or other persons nor the exercise thereof by any person (including a beneficial owner) may cause such person to be a trustee. To the extent provided in the governing instrument of a business trust, neither the power to give direction to a trustee or other persons nor the exercise thereof by any person (including a beneficial owner) may cause such person to have duties (including fiduciary duties) or liabilities relating thereto to the business trust or to a beneficial owner thereof.
Source: SL 2001, ch 245, § 24.
47-14A-25. Provisions of governing instrument.
A governing instrument may contain any provision relating to the management of the business and affairs of the business trust, and the rights, duties, and obligations of the trustees, beneficial owners, and other persons, which is not contrary to any provision or requirement of this section and, without limitation:
(1) May provide for classes, groups, or series of trustees or beneficial owners, or classes, groups, or series of beneficial interests, having such relative rights, powers, and duties as the governing instrument may provide, and may make provision for the future creation in the manner provided in the governing instrument of additional classes, groups, or series of trustees, beneficial owners, or beneficial interests, having such relative rights, powers, and duties as may from time to time be established, including rights, powers, and duties senior or subordinate to existing classes, groups, or series of trustees, beneficial owners, or beneficial interests;
(2) May establish or provide for the establishment of designated series of trustees, beneficial owners, or beneficial interests having separate rights, powers, or duties with respect to specified property or obligations of the business trust or profits and losses associated with specified property or obligations, and, to the extent provided in the governing instrument, any such series may have a separate business purpose or investment objective;
(3) May provide for the taking of any action, including the amendment of the governing instrument, the accomplishment of a merger or consolidation, the appointment of one or more trustees, the sale, lease, exchange, transfer, pledge, or other disposition of all or any part of the assets of the business trust or the assets of any series, or the dissolution of the business trust, or may provide for the taking of any action to create under the provisions of the governing instrument a class, group, or series of beneficial interests that was not previously outstanding, in any such case without the vote or approval of any particular trustee or beneficial owner, or class, group, or series of trustees or beneficial owners;
(4) May grant to (or withhold from) all or certain trustees or beneficial owners, or a specified class, group, or series of trustees or beneficial owners, the right to vote, separately or with any or all other classes, groups, or series of the trustees or beneficial owners, on any matter, such voting being on a per capita, number, financial interest, class, group, series, or any other basis;
(5) May, if and to the extent that voting rights are granted under the governing instrument, set forth provisions relating to notice of the time, place, or purpose of any meeting at which any matter is to be voted on, waiver of any such notice, action by consent without a meeting, the establishment of record dates, quorum requirements, voting in person, by proxy or in any other manner, or any other matter with respect to the exercise of any such right to vote;
(6) May provide for the present or future creation of more than one business trust, including the creation of a future business trust to which all or any part of the assets, liabilities, profits, or losses of any existing business trust will be transferred, and for the conversion of beneficial interests in an existing business trust, or series thereof, into beneficial interests in the separate business trust, or series thereof; or
(7) May provide for the appointment, election, or engagement, either as agents or independent contractors of the business trust or as delegatees of the trustees, of officers, employees, managers, or other persons who may manage the business and affairs of the business trust and may have such titles and such relative rights, powers, and duties as the governing instrument shall provide. Except to the extent otherwise provided in the governing instrument of a business trust, the trustees shall choose and supervise such officers, managers, employees, and other persons.
Source: SL 2001, ch 245, § 25.
47-14A-26. Trustee acting in reliance on governing instrument not liable to trust or beneficial owner--Duties determined by governing instrument.
To the extent that, at law or in equity, a trustee has duties (including fiduciary duties) and liabilities relating thereto to a business trust or to a beneficial owner:
(1) Any such trustee acting under a governing instrument is not liable to the business trust or to any such beneficial owner for the trustee's good faith reliance on the provisions of such governing instrument; and
(2) The trustee's duties and liabilities may be expanded or restricted by provisions in a governing instrument.
Source: SL 2001, ch 245, § 26.
47-14A-27. Officer or employer acting in reliance on governing instrument not liable--Duties determined by governing instrument.
To the extent that, at law or in equity, an officer, employee, manager, or other person designated pursuant to subdivision 47-14A-25(7) has duties (including fiduciary duties) and liabilities relating thereto to a business trust, a beneficial owner, or a trustee:
(1) Any such officer, employee, manager, or other person acting under a governing instrument is not liable to the business trust, any beneficial owner, or any trustee for such person's good faith reliance on the provisions of such governing instrument; and
(2) The duties and liabilities of an officer, employee, manager, or other person acting pursuant to subdivision 47-14A-25(7) may be expanded or restricted by provisions in a governing instrument.
Source: SL 2001, ch 245, § 27.
47-14A-28. Action by beneficial owners--Notice and meeting not necessary if consent exists--Proxy.
Unless otherwise provided in the governing instrument of a business trust, on any matter that is to be voted on by the beneficial owners:
(1) The beneficial owners may take such action without a meeting, without a prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by the beneficial owners having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all interests in the business trust entitled to vote thereon were present and voted; and
(2) The beneficial owners may vote in person or by proxy.
Source: SL 2001, ch 245, § 28.
47-14A-29. Action by trustees--Notice and meeting not necessary if consent exists--Proxy.
Unless otherwise provided in the governing instrument of a business trust, on any matter that is to be voted on by the trustees:
(1) The trustees may take such action without a meeting, without a prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by the trustees having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all trustees entitled to vote thereon were present and voted; and
(2) The trustee may vote in person or by proxy.
Source: SL 2001, ch 245, § 29.
47-14A-30. One trustee required to have residence or principal place of business in state.
Every business trust shall at all times have at least one trustee which, in the case of a natural person, shall be a person who is a resident of this state or which, in all other cases, has its principal place of business in this state.
Source: SL 2001, ch 245, § 30.
47-14A-31. Exception to § 47-14A-30 for registered investment companies.
Notwithstanding the provisions of § 47-14A-30, if a business trust is, becomes, or will become prior to or within one hundred eighty days following the first issuance of beneficial interests, a registered investment company under the Investment Company Act of 1940, as amended (15 U.S.C. §§ 80a-1 et seq.), such business trust may not be required to have a trustee who is a resident of this state or who has a principal place of business in this state if notice that the business trust is or will become an investment company as referenced in this sentence is set forth in the certificate of trust of the business trust and if and for so long as such business trust shall have and maintain in this state:
(1) A registered office, which may, but need not be, a place of business in this state; and
(2) A registered agent for service of process on the business trust, which agent may be either an individual resident in this state whose business office is identical with such business trust's registered office, or a domestic corporation, or a foreign corporation authorized to transact business in this state, having a business office identical with such registered office.
Source: SL 2001, ch 245, § 31.
47-14A-32. Change of registered agent or location of office--Amendment to certificate of trust.
Any business trust maintaining a registered office and registered agent in this state under § 47-14A-30 may change the location of its registered office in this state to any other place in this state, or may change the registered agent to any other person or corporation, by filing an amendment to its certificate of trust in accordance with the applicable provisions of this section. If a business trust which is an investment company registered as aforesaid maintains a registered office and registered agent in this state, then the reference in § 47-14A-43 to the "name and the business address of at least one of the trustees meeting the requirements of § 47-14A-43" shall be deemed a reference to the name and the business address of the registered agent and registered office maintained under this section, and the certificate of trust filed under this chapter shall reflect such information in lieu of the information otherwise required by § 47-14A-43.
Source: SL 2001, ch 245, § 32.
47-14A-33. Service of process on registered agent valid.
Service of process upon a registered agent maintained by a business trust pursuant to § 47-14A-31 shall be as effective as if served upon one of the trustees of the business trust pursuant to this chapter.
Source: SL 2001, ch 245, § 33.
47-14A-34. Change of name or address of trustee or registered agent--Fee--Certificate.
A trustee or registered agent of a business trust whose address, as set forth in a certificate of trust pursuant to § 47-14A-43, has changed may change such address in the certificates of trust for all business trusts for which such trustee or registered agent is appointed, to another address in the State of South Dakota by paying a fee as set forth in § 47-14A-57 and filing with the secretary of state a certificate, executed by such trustee or registered agent, setting forth the names of all business trusts for which such trustee or registered agent is appointed, and the address of such trustee or registered agent before it was changed, and further certifying as to the new address of such trustee or registered agent for each of the business trusts recited in the certificate. Upon the filing of such certificate, the secretary of state shall furnish to the trustee or registered agent a certified copy of the same under his or her hand and seal of office, and thereafter, or until further change of address, as authorized by law, the address of such trustee or registered agent in the State of South Dakota of each of the business trusts recited in the certificate shall be located at the new address of the trustee or registered agent thereof as given in the certificate. A trustee or registered agent of a business trust whose name, as set forth in a certificate of trust pursuant to § 47-14A-43, has changed may change such name in the certificates of trust for all business trusts for which such trustee or registered agent is appointed, to its new name by paying a fee as set forth in § 47-14A-57 and filing with the secretary of state a certificate, executed by such trustee or registered agent, setting forth the names of all business trusts for which such trustee or registered agent is appointed, the name of such trustee or registered agent before it was changed, and further certifying as to the new name of such trustee or registered agent for each of the business trusts recited in the certificate. Upon the filing of such certificate and payment of such fee, the secretary of state shall furnish to the trustee or registered agent a certified copy of the certificate under his hand and seal of office. Filing a certificate under this section shall be deemed to be an amendment of the certificate of trust of each business trust affected thereby and no further action with respect thereto to amend its certificate of trust under § 47-14A-43 shall be required. Any trustee or registered agent filing a certificate under this section shall promptly, upon such filing, deliver a copy of any such certificate to each business trust affected thereby.
Source: SL 2001, ch 245, § 34.
47-14A-35. Business trust to have perpetual existence--Termination determined by governing instrument.
Except to the extent otherwise provided in the governing instrument of the business trust, a business trust shall have perpetual existence, and a business trust may not be terminated or revoked by a beneficial owner or other person except in accordance with the terms of its governing instrument.
Source: SL 2001, ch 245, § 35.
47-14A-36. Death or incapacity of beneficial owner need not terminate business trust.
Except to the extent otherwise provided in the governing instrument of a business trust, the death, incapacity, dissolution, termination, or bankruptcy of a beneficial owner may not result in the termination or dissolution of a business trust.
Source: SL 2001, ch 245, § 36.
47-14A-37. Dissolution of trust determined by governing instrument.
In the event that a business trust does not have perpetual existence, a business trust is dissolved and its affairs shall be wound up at the time or upon the happening of events specified in the governing instrument.
Source: SL 2001, ch 245, § 37.
47-14A-38. Powers of trust managers upon dissolution of trust.
Upon dissolution of a business trust and until the filing of a certificate of cancellation as provided in § 47-14A-43, the persons who, under the governing instrument of the business trust, are responsible for winding up the business trust's affairs may, in the name of and for and on behalf of the business trust, prosecute and defend suits, whether civil, criminal, or administrative, gradually settle and close the business trust business, dispose of and convey the business trust property, discharge or make reasonable provision for the business trust liabilities and distribute to the beneficial owners any remaining assets of the business trust.
Source: SL 2001, ch 245, § 38.
47-14A-39. Payment of claims and obligations of trust upon dissolution--Distribution of remaining assets--Liability of persons winding up business.
A business trust which has dissolved shall pay or make reasonable provision to pay all claims and obligations, including all contingent, conditional, or unmatured claims and obligations, known to the business trust and all claims and obligations which are known to the business trust but for which the identity of the claimant is unknown. If there are sufficient assets, such claims and obligations shall be paid in full and any such provision for payment shall be made in full. If there are insufficient assets, such claims and obligations shall be paid or provided for according to their priority and, among claims and obligations of equal priority, ratably to the extent of assets available therefor. Unless otherwise provided in the governing instrument of a business trust, any remaining assets shall be distributed to the beneficial owners. Any person, including any trustee, who under the governing instrument of the business trust is responsible for winding up a business trust's affairs who has complied with this section shall not be personally liable to the claimants of the dissolved business trust by reason of such person's actions in winding up the business trust.
Source: SL 2001, ch 245, § 39.
47-14A-40. Dissolution of series need not cause dissolution of trust--Series dissolution determined by governing instrument--Death or incapacity of beneficial owner need not terminate series.
Except to the extent otherwise provided in the governing instrument of the business trust, a series established in accordance with this chapter may be dissolved and its affairs wound up without causing the dissolution of the business trust or any other series thereof. Unless otherwise provided in the governing instrument of the business trust, the dissolution, winding up, liquidation or termination of the business trust or any series thereof shall not affect the limitation of liability with respect to a series established in accordance with this chapter. A series established in accordance with this chapter is dissolved and its affairs shall be wound up at the time or upon the happening of events specified in the governing instrument of the business trust. Except to the extent otherwise provided in the governing instrument of a business trust, the death, incapacity, dissolution, termination, or bankruptcy of a beneficial owner of such series shall not result in the termination or dissolution of such series and such series may not be terminated or revoked by a beneficial owner of such series or other person except in accordance with the terms of the governing instrument of the business trust.
Source: SL 2001, ch 245, § 40.
47-14A-41. Powers of trust series managers upon dissolution of series--Liability.
Upon dissolution of a series of a business trust, the persons who under the governing instrument of the business trust are responsible for winding up such series affairs may, in the name of the business trust and for and on behalf of the business trust and such series, take all actions with respect to the series as are permitted under § 47-14A-38 and shall provide for the claims and obligations of the series and distribute the assets of the series as provided under § 47-14A-39. Any person, including any trustee, who under the governing instrument is responsible for winding up such series affairs who has complied with § 47-14A-39 is not personally liable to the claimants of the dissolved series by reason of such person's actions in winding up the series.
Source: SL 2001, ch 245, § 41.
47-14A-42. Laws applicable to business trusts.
Except to the extent otherwise provided in the governing instrument of a business trust or in this section, the laws of this state pertaining to trusts are hereby made applicable to business trusts. However, for purposes of any tax imposed by this state or any instrumentality, agency or political subdivision of this state a business trust shall be classified as a corporation, an association, a partnership, a trust, or otherwise, as shall be determined under the United States Internal Revenue Code of 1986, as amended, or under any successor provision.
Source: SL 2001, ch 245, § 42.
47-14A-43. Certificate of trust to be filed with secretary--Contents--Trust formed upon filing.
Every business trust shall file a certificate of trust in the Office of the Secretary of State. The certificate of trust shall set forth:
(1) The name of the business trust;
(2) The name and the business address of at least one of the trustees meeting the requirements of this chapter;
(3) The future effective date or time (which shall be a date or time certain) of effectiveness of the certificate if it is not to be effective upon the filing of the certificate; and
(4) Any other information the trustees determine to include therein.
A business trust is formed at the time of the filing of the initial certificate of trust in the Office of the Secretary of State or at any later date or time specified in the certificate of trust if, in either case, there has been substantial compliance with the requirements of this section.
Source: SL 2001, ch 245, § 43.
47-14A-44. Certificate of amendment--Contents--Certificate of trust may be freely amended.
A certificate of trust may be amended by filing a certificate of amendment thereto in the Office of the Secretary of State. The certificate of amendment shall set forth:
(1) The name of the business trust;
(2) The amendment to the certificate; and
(3) The future effective date or time (which shall be a date or time certain) of effectiveness of the certificate if it is not to be effective upon the filing of the certificate.
Except to the extent otherwise provided in the certificate of trust or in the governing instrument of a business trust, a certificate of trust may be amended at any time for any purpose as the trustees may determine. A trustee who becomes aware that any statement in a certificate of trust was false when made or that any matter described has changed making the certificate false in any material respect shall promptly file a certificate of amendment.
Source: SL 2001, ch 245, § 44.
47-14A-45. Restated certificate of trust integrating all amendments--Contents.
A certificate of trust may be restated by integrating into a single instrument all of the provisions of the certificate of trust which are then in effect and operative as a result of there having been theretofore filed one or more certificates of amendment pursuant to § 47-14A-44, and the certificate of trust may be amended or further amended by the filing of a restated certificate of trust. The restated certificate of trust shall be specifically designated as such in its heading and shall set forth:
(1) The present name of the business trust, and if it has been changed, the name under which the business trust was originally formed;
(2) The date of filing of the original certificate of trust with the secretary of state;
(3) The information required to be included pursuant to subsection (a) of this section; and
(4) Any other information the trustees determine to include therein.
A certificate of trust may be restated at any time for any purpose as the trustees may determine. A trustee who becomes aware that any statement in a restated certificate of trust was false when made or that any matter described has changed making the restated certificate false in any material respect shall promptly file a certificate of amendment or a restated certificate of trust.
Source: SL 2001, ch 245, § 45.
47-14A-46. Certificate of cancellation to be filed upon termination of trust--Contents.
A certificate of trust shall be cancelled upon the completion of winding up of the business trust and its termination. A certificate of cancellation shall be filed in the Office of the Secretary of State and set forth:
(1) The name of the business trust;
(2) The date of filing of its certificate of trust;
(3) The future effective date or time (which shall be a date or time certain) of cancellation if it is not to be effective upon the filing of the certificate; and
(4) Any other information the trustee determines to include therein.
Source: SL 2001, ch 245, § 46.
47-14A-47. Certificate of correction or corrected certificate of trust to be filed to correct defective information--Contents--Effective date.
Whenever any certificate authorized to be filed with the Office of the Secretary of State under this section has been so filed and is an inaccurate record of the action therein referred to or was defectively or erroneously executed, such certificate may be corrected by filing with the Office of the Secretary of State a certificate of correction of such certificate. The certificate of correction shall specify the inaccuracy or defect to be corrected, shall set forth the portion of the certificate in corrected form and shall be executed and filed as required by this chapter. In lieu of filing a certificate of correction, the certificate may be corrected by filing with the Office of the Secretary of State a corrected certificate which shall be executed and filed in accordance with this section. The corrected certificate shall be specifically designated as such in its heading, shall specify the inaccuracy or defect to be corrected and shall set forth the entire certificate in corrected form. The corrected certificate shall be effective as of the date the original certificate was filed, except as to those persons who are substantially and adversely affected by the corrections, and as to those persons the corrected certificate shall be effective from the filing date.
Source: SL 2001, ch 245, § 47.
47-14A-48. Termination of certificate containing future effective date.
If any certificate filed in accordance with this chapter provides for a future effective date or time and if the transaction is terminated or amended to change the future effective date or time prior to the future effective date or time, the certificate shall be terminated or amended by the filing, prior to the future effective date or time set forth in such original certificate, of a certificate of termination or amendment of the original certificate, executed and filed in accordance with this section, which shall identify the original certificate which has been terminated or amended and shall state that the original certificate has been terminated or amended.
Source: SL 2001, ch 245, § 48.
47-14A-49. Execution of certificates.
Each certificate required by this section to be filed in the Office of the Secretary of State shall be executed in the following manner:
(1) A certificate of trust or a certificate of conversion must be signed by all of the trustees;
(2) A certificate of amendment, a certificate of correction, a certificate of termination or amendment, and a restated certificate of trust must be signed by at least one of the trustees;
(3) A certificate of cancellation must be signed by all of the trustees or as otherwise provided in the governing instrument of the business trust; and
(4) If a business trust is filing a certificate of merger or consolidation or certificate of termination or amendment of a merger or consolidation, the certificate of merger or consolidation or certificate of termination or amendment of a merger or consolidation must be signed by all of the trustees or as otherwise provided in the governing instrument of the business trust, or if the certificate of merger or consolidation or certificate of termination or amendment of a merger or consolidation is being filed by another business entity, the certificate of merger or consolidation or certificate of termination or amendment of a merger or consolidation must be signed by a person authorized to execute such instrument on behalf of such other business entity.
Source: SL 2001, ch 245, § 49.
47-14A-50. Execution by agent--Authorization of agent.
Unless otherwise provided in the governing instrument, any person may sign any certificate or amendment thereof or enter into a governing instrument or amendment thereof by any agent, including any attorney-in-fact. An authorization, including a power of attorney, to sign any certificate or amendment thereof or to enter into a governing instrument or amendment thereof need not be in writing, need not be sworn to, verified, or acknowledged and need not be filed in the Office of the Secretary of State, but if in writing, shall be retained by the business trust or a trustee or other person authorized to manage the business and affairs of the business trust.
Source: SL 2001, ch 245, § 50.
47-14A-51. Execution of certificate by trustee constitutes oath as to truth of contents.
The execution of a certificate by a trustee constitutes an oath or affirmation, under the penalties of perjury, that, to the best of the trustee's knowledge and belief, the facts stated therein are true.
Source: SL 2001, ch 245, § 51.
47-14A-52. Certificates to be delivered to secretary's office--Duties of secretary upon receipt of filing.
Any certificate authorized to be filed with the Office of the Secretary of State under this section (or any judicial decree of amendment or cancellation) shall be delivered to the Office of the Secretary of State for filing. A person who executes a certificate as an agent or fiduciary need not exhibit evidence of the person's authority as a prerequisite to filing. Unless the secretary of state finds that any certificate does not conform to law, upon receipt of all filing fees required by law the secretary of state shall:
(1) Certify that the certificate (or any judicial decree of amendment or cancellation) has been filed in the secretary of state's office by endorsing upon the filed certificate (or judicial decree) the word, filed, and the date and hour of the filing. This endorsement is conclusive of the date and time of its filing in the absence of actual fraud;
(2) File and index the endorsed certificate (or judicial decree); and
(3) Prepare and return to the person who filed it or the person's representative a copy of the filed certificate (or judicial decree), similarly endorsed, and shall certify such copy as a true copy of the filed certificate (or judicial decree).
Source: SL 2001, ch 245, § 52.
47-14A-53. Certificates effective upon filing or upon effective date contained in certificate.
Upon the filing of a certificate of trust in the Office of the Secretary of State, or upon the future effective date or time of a certificate of trust as provided for therein, the certificate of trust shall be effective. Upon the filing of a certificate of amendment (or judicial decree of amendment), certificate of correction, corrected certificate, or restated certificate in the Office of the Secretary of State, or upon the future effective date or time of a certificate of amendment (or judicial decree of amendment) or restated certificate as provided for therein, the certificate of trust shall be amended or restated as set forth therein. Upon the filing of a certificate of cancellation (or a judicial decree thereof) or a certificate of merger or consolidation which acts as a certificate of cancellation in the Office of the Secretary of State, or upon the future effective date or time of a certificate of cancellation (or a judicial decree thereof) or a certificate of merger or consolidation which acts as a certificate of cancellation, as provided for therein, the certificate of trust shall be canceled. Upon the filing of a certificate of termination or amendment, the original certificate identified in the certificate of termination or amendment shall be terminated or amended, as the case may be.
Source: SL 2001, ch 245, § 53.
47-14A-54. Fees paid at request of secretary or upon filing of certificate.
Any fee set forth in § 47-14A-57 shall be paid at the request of the secretary of state or at the time of the filing of a certificate of trust, a certificate of amendment, a certificate of correction, a corrected certificate, a certificate of termination or amendment, a certificate of cancellation, a certificate of merger or consolidation, or a restated certificate.
Source: SL 2001, ch 245, § 54.
47-14A-55. Signature may be facsimile or electronically transmitted--Certificate may be electronically transmitted.
Any signature on any certificate authorized to be filed with the secretary of state under any provision of this section may be a facsimile, a conformed signature or an electronically transmitted signature. Any such certificate may be filed by telecopy, fax, or similar electronic transmission. However, the secretary of state need not accept such filing if such certificate is illegible or otherwise unsuitable for processing.
Source: SL 2001, ch 245, § 55.
47-14A-56. Certificate of trust on file with secretary is notice of business trust.
The fact that a certificate of trust is on file in the Office of the Secretary of State is notice that the entity formed in connection with the filing of the certificate of trust is a business trust formed under the laws of the state and is notice of all other facts set forth therein which are required to be set forth in a certificate of trust by § 47-14A-43 and is notice of the limitation on liability of a series of a business trust which is permitted to be set forth in a certificate of trust.
Source: SL 2001, ch 245, § 56.
47-14A-57. Fees-Documents not effective until fee paid.
No document required to be filed under this section is effective until the applicable fee required by this section is paid. The following fees shall be paid to and collected by the secretary of state for the use of the state:
(1) Application for reservation of name, $50;
(2) Application for renewal of reservation, $50;
(3) Notice of transfer or cancellation of reservation, $50;
(4) Certificate of trust, $125;
(5) Certificate of amendment, $125;
(6) Certificate of cancellation, $125;
(7) Certificate of merger or consolidation, $125;
(8) Certificate of correction, $125;
(9) Certificate of termination or amendment or a restated certificate, $125; and
(10) All other certificates filed under this chapter, $50.
Source: SL 2001, ch 245, § 57; SL 2009, ch 4, § 13.
47-14A-58. Name of business trust to be distinguishable from other businesses--Exception.
The name of each business trust as set forth in its certificate of trust shall be such as to distinguish it upon the records of the Office of the Secretary of State from the name of any corporation, limited partnership, business trust, or limited liability company reserved, registered, formed, or organized under the laws of this state or qualified to do business or registered as a foreign corporation, foreign limited partnership, foreign business trust, or foreign limited liability company in this state. However, a business trust may register under any name which is not such as to distinguish it upon the records of the Office of the Secretary of State from the name of any domestic or foreign corporation, limited partnership, business trust, or limited liability company reserved, registered, formed, or organized under the laws of this state with the written consent of the other corporation, limited partnership, business trust, or limited liability company, which written consent shall be filed with the secretary of state.
Source: SL 2001, ch 245, § 58.
47-14A-59. Name of person in name of business trust.
The name of each business trust as set forth in its certificate of trust may contain the name of a beneficial owner, a trustee or any other person.
Source: SL 2001, ch 245, § 59.
47-14A-60. Terms contained in name of business trust.
The name of each business trust, as set forth in its certificate of trust, may contain the following words: company, association, club, foundation, fund, institute, society, union, syndicate, limited or trust (or abbreviations of like import).
Source: SL 2001, ch 245, § 60.
47-14A-61. Reservation of name.
The exclusive right to the use of a name may be reserved by any person intending to form a business trust and to adopt that name or any business trust registered in this state which proposes to change its name.
Source: SL 2001, ch 245, § 61.
47-14A-62. Reservation of name--Application--Duration--Transfer--Cancellation.
The reservation of a specified name shall be made by filing with the secretary of state an application, executed by the applicant, together with a duplicate copy, which may either be a signed or conformed copy, specifying the name to be reserved and the name and address of the applicant. If the secretary of state finds that the name is available for use by a business trust, the secretary shall reserve the name for the exclusive use of the applicant for a period of one hundred twenty days. Once having so reserved a name, the same applicant may again reserve the same name for successive one hundred twenty-day periods. The right to the exclusive use of a reserved name may be transferred to any other person by filing in the Office of the Secretary of State a notice of the transfer, executed by the applicant for whom the name was reserved, together with a duplicate copy, which may be either a signed or conformed copy, specifying the name to be transferred and the name and address of the transferee. The reservation of a specified name may be cancelled by filing with the secretary of state a notice of cancellation, executed by the applicant or transferee, together with a duplicate copy, which may be either a signed or conformed copy, specifying the name reservation to be cancelled and the name and address of the applicant or transferee. Any duplicate copy filed with the secretary of state, as required by this section, shall be returned by the secretary of state to the person who filed it or that person's representative with a notation thereon of the action taken with respect to the original copy thereof by the secretary of state.
Source: SL 2001, ch 245, § 62.
47-14A-63. Fees for reservation--When paid.
Any fee set forth in § 47-14A-57 shall be paid at the time of the initial reservation of any name, at the time of the renewal of any such reservation and at the time of the filing of a notice of the transfer or cancellation of any such reservation.
Source: SL 2001, ch 245, § 63.
47-14A-64. Merger or consolidation of business trusts.
Pursuant to an agreement of merger or consolidation, a business trust may merge or consolidate with or into one or more business trusts or other business entities formed or organized or existing under the laws of the state or any other state or the United States or any foreign country or other foreign jurisdiction, with such business trust or other business entity as the agreement shall provide being the surviving or resulting business trust or other business entity. Unless otherwise provided in the governing instrument of a business trust, a merger or consolidation shall be approved by each business trust which is to merge or consolidate by all of the trustees and the beneficial owners of such business trust. In connection with a merger or consolidation hereunder, rights or securities of, or interests in, a business trust or other business entity which is a constituent party to the merger or consolidation may be exchanged for or converted into cash, property, rights, or securities of, or interests in, the surviving or resulting business trust or other business entity or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights, or securities of, or interests in, a business trust or other business entity which is not the surviving or resulting business trust or other business entity in the merger or consolidation. Notwithstanding prior approval, an agreement of merger or consolidation may be terminated or amended pursuant to a provision for such termination or amendment contained in the agreement of merger or consolidation.
Source: SL 2001, ch 245, § 64.
47-14A-65. Certificate of merger or consolidation to be filed with secretary--Contents.
If a business trust is merging or consolidating, the business trust or other business entity surviving or resulting in or from the merger or consolidation shall file a certificate of merger or consolidation in the Office of the Secretary of State. The certificate of merger or consolidation shall state:
(1) The name and jurisdiction of formation or organization of each of the business trust or other business entities which is to merge or consolidate;
(2) That an agreement of merger or consolidation has been approved and executed by each of the business trusts or other business entities which is to merge or consolidate;
(3) The name of the surviving or resulting business trust or other business entity;
(4) The future effective date or time (which shall be a date or time certain) of the merger or consolidation if it is not to be effective upon the filing of the certificate of merger or consolidation;
(5) That the executed agreement of merger or consolidation is on file at the principal place of business of the surviving or resulting business trust or other business entity, and shall state the address thereof;
(6) That a copy of the agreement of merger or consolidation will be furnished by the surviving or resulting business trust or other business entity, on request and without cost, to any beneficial owner of any business trust or any person holding an interest in any other business entity which is to merge or consolidate; and
(7) If the surviving or resulting entity is not a business trust or other business entity formed or organized or existing under the laws of the State of South Dakota, a statement that such surviving or resulting other business entity agrees that it may be served with process in the state in any action, suit, or proceeding for the enforcement of any obligation of any business trust which is to merge or consolidate, irrevocably appointing the secretary of state as its agent to accept service of process in any such action, suit, or proceeding and specifying the address to which a copy of such process shall be mailed to it by the secretary of state. In the event of service upon the secretary of state, the plaintiff in any such action, suit, or proceeding shall furnish the secretary of state with the address specified in the certificate of merger or consolidation provided for in this section and any other address which the plaintiff may elect to furnish, together with copies of such process as required by the secretary of state, and the secretary of state shall notify such surviving or resulting other business entity thereof at all such addresses furnished by the plaintiff by letter, certified mail, return receipt requested. Such letter shall enclose a copy of the process and any other papers served upon the secretary of state. The plaintiff shall, in the event of such service, serve process and any other papers in duplicate, to notify the secretary of state that service is being made pursuant to this section, and to pay the secretary of state the sum of fifty dollars for use of the state, which sum shall be taxed as part of the costs in the proceeding, if the plaintiff prevails therein. The secretary of state shall maintain an alphabetical record of any such process setting forth the name of the plaintiff and defendant, the title, docket number, and nature of the proceedings in which process has been served upon the secretary, the return date thereof, and the day and hour when the service was made. The secretary of state need not retain such information for a period longer than five years from the secretary's receipt of the service of process.
Source: SL 2001, ch 245, § 65.
47-14A-66. Validity of certain mergers not affected by failure to file certificate.
Any failure to file a certificate of merger or consolidation in connection with a merger or consolidation which was effective prior to July 1, 2001, does not affect the validity or effectiveness of any such merger or consolidation.
Source: SL 2001, ch 245, § 66.
47-14A-67. Effective date of merger or consolidation.
Unless a future effective date or time is provided in a certificate of merger or consolidation, in which event a merger or consolidation shall be effective at any such future effective date or time, a merger or consolidation shall be effective upon the filing in the Office of the Secretary of State of a certificate of merger or consolidation.
Source: SL 2001, ch 245, § 67.
47-14A-68. Certificate of merger or consolidation as certificate of cancellation.
A certificate of merger or consolidation shall act as a certificate of cancellation for a business trust which is not the surviving or resulting entity in the merger or consolidation.
Source: SL 2001, ch 245, § 68.
47-14A-69. Amendment to or adoption of governing instrument upon merger--Effective date.
Notwithstanding anything to the contrary contained in the governing instrument of a business trust, a governing instrument of a business trust containing a specific reference to this chapter may provide that an agreement of merger or consolidation approved in accordance with § 47-14A-64 may:
(1) Effect any amendment to the governing instrument of the business trust; or
(2) Effect the adoption of a new governing instrument of the business trust if it is the surviving or resulting business trust in the merger or consolidation.
Any amendment to the governing instrument of a business trust or adoption of a new governing instrument of the business trust made pursuant to the foregoing sentence shall be effective at the effective time or date of the merger or consolidation. The provisions of this section may not be construed to limit the accomplishment of a merger or consolidation or of any of the matters referred to herein by any other means provided for in the governing instrument of a business trust or other agreement or as otherwise permitted by law, including that the governing instrument of any constituent business trust to the merger or consolidation (including a business trust formed for the purpose of consummating a merger or consolidation) shall be the governing instrument of the surviving or resulting business trust.
Source: SL 2001, ch 245, § 69.
47-14A-70. Rights, property, and obligations of merging entities vest in resulting entity.
When any merger or consolidation has become effective under this chapter, for all purposes of the laws of the state, all of the rights, privileges, and powers of each of the business trusts and other business entities that have merged or consolidated, and all property, real, personal, and mixed, and all debts due to any of such business trusts and other business entities, as well as all other things and causes of action belonging to each of such business trusts and other business entities, shall be vested in the surviving or resulting business trust or other business entity, and shall thereafter be the property of the surviving or resulting business trust or other business entity as they were of each of the business trusts and other business entities that have merged or consolidated. The title to any real property vested by deed or otherwise, under the laws of the state, in any of such business trusts and other business entities, may not revert or be in any way impaired by reason of this chapter; but all rights of creditors and all liens upon any property of any of such business trusts and other business entities shall be preserved unimpaired, and all debts, liabilities and duties of each of the such business trusts and other business entities that have merged or consolidated shall thenceforth attach to the surviving or resulting business trust or other business entity, and may be enforced against it to the same extent as if the debts, liabilities, and duties had been incurred or contracted by it.
Source: SL 2001, ch 245, § 70.
47-14A-71. Provision for contractual appraisal rights.
A governing instrument or an agreement of merger or consolidation may provide that contractual appraisal rights with respect to a beneficial interest or another interest in a business trust shall be available for any class or group of beneficial owners or beneficial interests in connection with any amendment of a governing instrument, any merger or consolidation in which the business trust is a constituent party to the merger or consolidation or the sale of all or substantially all of the business trust's assets.
Source: SL 2001, ch 245, § 71.
47-14A-72. Authority of beneficial owner to bring derivative action.
A beneficial owner may bring an action in the circuit court in the right of a business trust to recover a judgment in its favor if trustees with authority to do so have refused to bring the action or if an effort to cause those trustees to bring the action is not likely to succeed.
Source: SL 2001, ch 245, § 72.
47-14A-73. Qualifications of plaintiff in derivative action.
In a derivative action, the plaintiff must be a beneficial owner at the time of bringing the action and:
(1) At the time of the transaction of which the plaintiff complains; or
(2) Plaintiff's status as a beneficial owner had devolved upon plaintiff by operation of law or pursuant to the terms of the governing instrument of the business trust from a person who was a beneficial owner at the time of the transaction.
Source: SL 2001, ch 245, § 73.
47-14A-74. Complaint to specify efforts to secure action by trustees.
In a derivative action, the complaint shall set forth with particularity the effort, if any, of the plaintiff to secure initiation of the action by the trustees, or the reasons for not making the effort.
Source: SL 2001, ch 245, § 74.
47-14A-75. Costs and attorney's fees of successful derivative action.
If a derivative action is successful, in whole or in part, or if anything is received by a business trust as a result of a judgment, compromise, or settlement of any such action, the court may award the plaintiff reasonable expenses, including reasonable attorney's fees. If anything is so received by the plaintiff, the court shall make such award of plaintiff's expenses payable out of those proceeds and direct plaintiff to remit to the business trust the remainder thereof, and if those proceeds are insufficient to reimburse plaintiff's reasonable expenses, the court may direct that any such award of plaintiff's expenses or a portion thereof be paid by the business trust.
Source: SL 2001, ch 245, § 75.
47-14A-76. Beneficial owner's right to bring derivative action determined by governing instrument.
A beneficial owner's right to bring a derivative action may be subject to such additional standards and restrictions, if any, as are set forth in the governing instrument of the business trust, including, without limitation, the requirement that beneficial owners owning a specified beneficial interest in the business trust join in the bringing of the derivative action.
Source: SL 2001, ch 245, § 76.
47-14A-77. Indemnification of trustee or beneficial owner.
Subject to such standards and restrictions, if any, as are set forth in the governing instrument of a business trust, a business trust may indemnify and hold harmless any trustee or beneficial owner or other person from and against any and all claims and demands whatsoever.
Source: SL 2001, ch 245, § 77.
47-14A-78. Absence of indemnity provision in governing instrument not conclusive.
The absence of a provision for indemnity in the governing instrument of a business trust may not be construed to deprive any trustee or beneficial owner or other person of any right to indemnity which is otherwise available to such person under the laws of this state.
Source: SL 2001, ch 245, § 78.
47-14A-79. Power of business trust to acquire interest held by beneficial owner.
Except to the extent otherwise provided in the governing instrument of a business trust, a business trust may acquire, by purchase, redemption, or otherwise, any beneficial interest in the business trust held by a beneficial owner of the business trust. Except to the extent otherwise provided in the governing instrument of a business trust, any such interest so acquired by a business trust shall be deemed canceled.
Source: SL 2001, ch 245, § 79.
47-14A-80. Beneficial owners entitled to obtain certain information.
Except to the extent otherwise provided in the governing instrument of a business trust, each beneficial owner of a business trust has the right, subject to such reasonable standards (including standards governing what information and documents are to be furnished at what time and location and at whose expense) as may be established by the trustees, to obtain from the business trust from time to time upon reasonable demand for any purpose reasonably related to the beneficial owner's interest as a beneficial owner of the business trust:
(1) A copy of the governing instrument and certificate of trust and all amendments thereto, together with copies of any written powers of attorney pursuant to which the governing instrument and any certificate and any amendments thereto have been executed;
(2) A current list of the name and last known business, residence, or mailing address of each beneficial owner and trustee;
(3) Information regarding the business and financial condition of the business trust; and
(4) Other information regarding the affairs of the business trust as is just and reasonable.
Source: SL 2001, ch 245, § 80.
47-14A-81. Trustees entitled to examine certain information.
Except to the extent otherwise provided in the governing instrument of a business trust, each trustee may examine all the information described in § 47-14A-80 for any purpose reasonably related to the trustee's position as a trustee.
Source: SL 2001, ch 245, § 81.
47-14A-82. Trustees authorized to keep certain information confidential.
Except to the extent otherwise provided in the governing instrument of a business trust, the trustees of a business trust may keep confidential from the beneficial owners, for such period of time as the trustees deem reasonable, any information that the trustees reasonably believe to be in the nature of trade secrets or other information, the disclosure of which the trustees in good faith believe is not in the best interest of the business trust or could damage the business trust or its business or which the business trust is required by law or by agreement with a third party to keep confidential.
Source: SL 2001, ch 245, § 82.
47-14A-83. Records maintained in other than written form--Demand for information to be in writing.
A business trust may maintain its records in other than a written form if such form is capable of conversion into a written form within a reasonable time.
Any demand by a beneficial owner or trustee under § 47-14A-80 shall be in writing and shall state the purpose of such demand.
Source: SL 2001, ch 245, § 83.
47-14A-84. Conversion of existing business entity to business trust--Filing requirements.
Any other business entity formed or organized or existing under the laws of the State of South Dakota or any other state or the United States or any foreign country or other foreign jurisdiction may convert to a business trust by complying with § 47-14A-89 and filing in the Office of the Secretary of State in accordance with this chapter:
(1) A certificate of conversion to business trust that has been executed by the trustees in accordance with this chapter; and
(2) A certificate of trust that complies with this chapter and has been executed by the trustees in accordance with this chapter.
Source: SL 2001, ch 245, § 84.
47-14A-85. Certificate of conversion--Contents.
The certificate of conversion to business trust shall state:
(1) The date on which and jurisdiction where the other business entity was first formed or organized or otherwise came into being and, if it has changed, its jurisdiction immediately prior to its conversion to a business trust;
(2) The name of the other business entity immediately prior to the filing of the certificate of conversion to business trust;
(3) The name of the business trust as set forth in its certificate of trust filed in accordance with § 47-14A-84; and
(4) The future effective date or time (which shall be a date or time certain) of the conversion to a business trust if it is not to be effective upon the filing of the certificate of conversion to business trust and the certificate of trust.
Source: SL 2001, ch 245, § 85.
47-14A-86. Effective of date of conversion to business trust--Effective date of commencement of business.
Upon the filing in the Office of the Secretary of State of the certificate of conversion to business trust and the certificate of trust or upon the future effective date or time of the certificate of conversion to business trust and the certificate of trust, the other business entity shall be converted into a business trust and the business trust shall thereafter be subject to all of the provisions of this chapter, except that notwithstanding § 47-14A-43, the existence of the business trust shall be deemed to have commenced on the date the other business entity commenced its existence in the jurisdiction in which the other business entity was first formed or organized or otherwise came into being.
Source: SL 2001, ch 245, § 86.
47-14A-87. Conversion to business trust not to affect liabilities incurred prior to conversion.
The conversion of any other business entity into a business trust may not be deemed to affect any obligations or liabilities of the other business entity incurred prior to its conversion to a business trust, or the personal liability of any person incurred prior to such conversion.
Source: SL 2001, ch 245, § 87.
47-14A-88. Rights, property, and obligations of converting entities vest in resulting entity.
When any conversion has become effective under this chapter, for all purposes of the laws of the State of South Dakota, all of the rights, privileges, and powers of the other business entity that has converted, and all property, real, personal, and mixed, and all debts due to such other business entity, as well as all other things and causes of action belonging to such other business entity, shall remain vested in the business trust to which such other business entity has converted and shall be the property of such business trust. The title to any real property vested by deed or otherwise in such other business entity may not revert or be in any way impaired by reason of this chapter; but all rights of creditors and all liens upon any property of such other business entity shall be preserved unimpaired, and all debts, liabilities, and duties of the other business entity that has converted shall remain attached to the business trust to which such other business entity has converted, and may be enforced against it to the same extent as if said debts, liabilities, and duties had been incurred or contracted by it in its capacity as a business trust. The rights, privileges, powers, and interests in property of the other business entity, as well as the debts, liabilities, and duties of the other business entity, may not be deemed as a consequence of the conversion, to have been transferred to the business trust to which such other business entity has converted for any purpose of the laws of the State of South Dakota.
Source: SL 2001, ch 245, § 88.
47-14A-89. Conversion deemed continuation of business entity as business trust.
Unless otherwise agreed, or as required under applicable non-South Dakota law, the converting other business entity is not required to wind up its affairs or pay its liabilities and distribute its assets, and the conversion may not be deemed to constitute a dissolution of such other business entity and shall constitute a continuation of the existence of the converting other business entity in the form of a business trust. When the other business entity has been converted to a business trust pursuant to this chapter, the business trust shall, for all purposes of the laws of the State of South Dakota, be deemed to be the same entity as the converting other business entity.
Source: SL 2001, ch 245, § 89.
47-14A-90. Conversion to be approved under business entity's governing instrument.
Prior to filing a certificate of conversion to business trust with the Office of the Secretary of State, the conversion shall be approved in the manner provided for by the document, instrument, agreement, or other writing, as the case may be, governing the internal affairs of the other business entity and the conduct of its business or by applicable law, as appropriate, and a governing instrument shall be approved by the same authorization required to approve the conversion.
Source: SL 2001, ch 245, § 90.
47-14A-91. Construction of chapter with other laws.
The provisions of this chapter may not be construed to limit the accomplishment of a change in the law governing, or the domicile of, an other business entity to the State of South Dakota by any other means provided for in an agreement governing the internal affairs of the other business entity or as otherwise permitted by law, including by the amendment of an agreement governing the internal affairs of the other business entity.
Source: SL 2001, ch 245, § 91.
47-14A-92. Disposition of rights and interests of business entity upon conversion.
In connection with a conversion pursuant to this chapter, rights or securities of, or interests in, the other business entity which is to be converted to a business trust may be exchanged for or converted into cash, property, rights, or securities of, or interests in, such business trust or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights, or securities of, or interests in, another business trust or other business entity.
Source: SL 2001, ch 245, § 92.
47-14A-93. Conversion of business trust to other business entity.
A business trust may convert to an other business entity formed or organized under the laws of the State of South Dakota, upon the authorization of such conversion in accordance with this section. If the governing instrument specifies the manner of authorizing a conversion of the business trust, the conversion shall be authorized as specified in the governing instrument. If the governing instrument does not specify the manner of authorizing a conversion of the business trust and does not prohibit a conversion of the business trust, the conversion shall be authorized in the same manner as is specified in the governing instrument for authorizing a merger or consolidation that involves the business trust as a constituent party to the merger or consolidation. If the governing instrument does not specify the manner of authorizing a conversion of the business trust or a merger or consolidation that involves the business trust as a constituent party and does not prohibit a conversion of the business trust, the conversion shall be authorized by the approval by all of the beneficial owners and all of the trustees. When the conversion of a business trust has become effective, the business trust shall file a certificate of cancellation in the Office of the Secretary of State in accordance with this chapter. Unless otherwise agreed, the conversion of a business trust to an other business entity pursuant to this section shall not require such business trust to wind up its affairs under §§ 47-14A-35 to 47-14A-41, inclusive, or pay its liabilities and distribute its assets under §§ 47-14A-35 to 47-14A-41, inclusive. In connection with a conversion of a business trust to an other business entity pursuant to this section, rights or securities of, or interests in, the business trust which is to be converted may be exchanged for or converted into cash, property, rights, or securities of, or interests in the other business entity into which the business trust is being converted or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights, or securities of, or interests in, any other business entity.
Source: SL 2001, ch 245, § 93.
47-14A-94. Provisions of law subject to change.
All provisions of this section may be altered from time to time or repealed and all rights of business trusts, trustees, beneficial owners, and other persons are subject to this reservation.
Source: SL 2001, ch 245, § 94.
47-14A-95. Construction.
The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this section.
It is the policy of this section to give maximum effect to the principle of freedom of contract and to the enforceability of governing instruments.
Source: SL 2001, ch 245, § 95.
47-14A-96. Citation of chapter.
This chapter may be cited as the South Dakota Business Trust Act.
Source: SL 2001, ch 245, § 96.
47-14B-1
Laws governing organization of foreign business trust.
47-14B-2
Registration of foreign business trust.
47-14B-3
Doing business in the state.
47-14B-4
Certification and filing of application.
47-14B-5
Name of foreign business trust.
47-14B-6
Office and agent of foreign business trust.
47-14B-7
Change of address of registered office of foreign business trust.
47-14B-8
Resignation of foreign business trust registered agent--Successor--Appointment.
47-14B-9
Resignation of foreign business trust registered agent--No successor appointed.
47-14B-10
Correction of false application of foreign business trust.
47-14B-11
Canceling a foreign business trust.
47-14B-12
Action, suit, or proceeding by foreign business trust.
47-14B-13
Failure of foreign business trust to register.
47-14B-14
Liability of beneficial owner or trustee of foreign business trust.
47-14B-15
Jurisdiction of circuit court for failure to register or for false registration.
47-14B-16
Application of § 47-14A-51.
47-14B-17
Service of process on foreign business trust.
47-14B-18
Service of process when due diligence fails.
47-14B-19
Service of process on unregistered foreign business trust.
47-14B-20
"Doing business" defined.
47-14B-21
Service upon secretary of state--Notice to foreign business trust.
47-14B-22
Filing fees-Documents not effective until fee paid.
47-14B-23
Application of chapter.
47-14B-24
Compliance with requirements--Violation.
47-14B-25
Citation of chapter.
47-14B-1. Laws governing organization of foreign business trust.
The laws of the state, territory, possession, or other jurisdiction or country under which a foreign business trust is organized govern its organization and internal affairs and the liability of its beneficial owners and trustees. A foreign business trust may not be denied registration by reason of any difference between those laws and the laws of the state.
Source: SL 2001, ch 245, § 97.
47-14B-2. Registration of foreign business trust.
Before doing business in the state, a foreign business trust shall register with the secretary of state. In order to register, a foreign business trust shall submit to the secretary of state:
(1) A copy executed by a trustee or other authorized person of an application for registration as a foreign business trust, setting forth:
(a) The name of the foreign business trust and, if different, the name under which it proposes to register and do business in the state;
(b) The state, territory, possession, or other jurisdiction or country where formed, the date of its formation and a statement from a trustee or other authorized person that, as of the date of filing, the foreign business trust validly exists as a business trust under the laws of the jurisdiction of its formation;
(c) The nature of the business or purposes to be conducted or promoted in the state;
(d) The address of the registered office and the name and address of the registered agent for service of process required to be maintained by §§ 47-14B-5 to 47-14B-9, inclusive;
(e) A statement that the secretary of state is appointed the agent of the trust for service of process under the circumstances set forth in § 47-14B-17; and
(f) The date on which the foreign business trust first did, or intends to do, business in the state.
(2) A fee as set forth in § 47-14B-22 shall be paid.
Source: SL 2001, ch 245, § 98.
47-14B-3. Doing business in the state.
No person may be deemed to be doing business in the state solely by reason of being a trustee or a beneficial owner of a foreign business trust.
Source: SL 2001, ch 245, § 99.
47-14B-4. Certification and filing of application.
If the secretary of state finds that an application for registration conforms to law and all requisite fees have been paid, the secretary of state shall:
(1) Certify that the application has been filed in the secretary of state's office by endorsing upon the original application the word, Filed, and the date and hour of the filing. This endorsement is conclusive of the date and time of its filing in the absence of actual fraud;
(2) File and index the endorsed application.
The secretary of state shall prepare and return to the person who filed the application or the person's representative a copy of the original signed application, similarly endorsed, and shall certify such copy as a true copy of the original signed application.
Source: SL 2001, ch 245, § 100.
47-14B-5. Name of foreign business trust.
A foreign business trust may register with the secretary of state under any name (whether or not it is the name under which it is registered in the jurisdiction of its formation) that could be registered by a domestic business trust. However, a foreign business trust may register under any name which is not such as to distinguish it upon the records in the Office of the Secretary of State from the name of any domestic or foreign corporation, business trust, limited liability company, or limited partnership reserved, registered, or organized under the laws of the state with the written consent of the other corporation, business trust, limited liability company, or limited partnership, which written consent shall be filed with the secretary of state.
Source: SL 2001, ch 245, § 101.
47-14B-6. Office and agent of foreign business trust.
Each foreign business trust shall have and maintain in the state:
(1) A registered office which may but need not be a place of its business in the state; and
(2) A registered agent for service of process on the foreign business trust, which agent may be either an individual resident of the state whose business office is identical with the foreign business trust's registered office, or a domestic corporation, or a domestic limited partnership, or a business trust, or a domestic limited liability company, or a foreign corporation, or a foreign limited partnership, or a foreign business trust, or a foreign limited liability company authorized to do business in the state having a business office identical with such registered office, which is generally open during normal business hours to accept service of process and otherwise perform the functions of a registered agent.
Source: SL 2001, ch 245, § 102.
47-14B-7. Change of address of registered office of foreign business trust.
A registered agent may change the address of the registered office of the foreign business trust for which he or she is registered agent to another address in the state by paying a fee as set forth in § 47-14B-22 and filing with the secretary of state a certificate, executed by such registered agent, setting forth the names of all the foreign business trusts represented by such registered agent, and the address at which such registered agent has maintained the registered office for each of such foreign business trusts, and further certifying to the new address to which each such registered office will be changed on a given day, and at which new address such registered agent will thereafter maintain the registered office for each of the foreign business trusts recited in the certificate. Upon the filing of such certificate, the secretary of state shall furnish to the registered agent a certified copy of the same under the secretary of state's hand and seal of office, and thereafter, or until further change of address, as authorized by law, the registered office in the state of each of the foreign business trusts recited in the certificate shall be located at the new address of the registered agent thereof as given in the certificate. In the event of a change of name of any person acting as a registered agent of a foreign business trust, such registered agent shall file with the secretary of state a certificate, executed by such registered agent, setting forth the new name of such registered agent, the name of such registered agent before it was changed, the names of all the foreign business trusts represented by such registered agent, and the address at which such registered agent has maintained the registered office for each of such foreign business trusts, and shall pay a fee as set forth in § 47-14B-22. Upon the filing of such certificate, the secretary of state shall furnish to the registered agent a certified copy of the same under the secretary of state's hand and seal of office. Filing a certificate under this section shall be deemed to be an amendment of the application of each foreign business trust affected thereby and each foreign business trust need not take any further action with respect thereto, to amend its application under § 47-14B-10. Any registered agent filing a certificate under this section shall promptly, upon such filing, deliver a copy of any such certificate to each foreign business trust affected thereby.
Source: SL 2001, ch 245, § 103.
47-14B-8. Resignation of foreign business trust registered agent--Successor--Appointment.
The registered agent of one or more foreign business trusts may resign and appoint a successor registered agent by paying a fee as set forth in § 47-14B-22 and filing a certificate with the secretary of state, stating that it resigns and the name and address of the successor registered agent. There shall be attached to such certificate a statement executed by each affected foreign business trust ratifying and approving such change of registered agent. Upon such filing, the successor registered agent shall become the registered agent of such foreign business trust as has ratified and approved such substitution and the successor registered agent's address, as stated in such certificate, shall become the address of each such foreign business trust's registered office in the state. The secretary of state shall furnish to the successor registered agent a certified copy of the certificate of resignation. Filing of such certificate of resignation shall be deemed to be an amendment of the application of each foreign business trust affected thereby and each such foreign business trust need not take any further action with respect thereto, to amend its application under § 47-14B-10.
Source: SL 2001, ch 245, § 104.
47-14B-9. Resignation of foreign business trust registered agent--No successor appointed.
The registered agent of a foreign business trust may resign without appointing a successor registered agent by paying a fee as set forth in § 47-14B-22 and filing a certificate with the secretary of state stating that it resigns as registered agent for the foreign business trust identified in the certificate, but such resignation shall not become effective until one hundred twenty days after the certificate is filed. There shall be attached to such certificate an affidavit of such registered agent, if an individual, or of the president, a vice president or the secretary thereof if a corporation, that at least thirty days prior to and on or about the date of the filing of the certificate, notices were sent by certified or registered mail to the foreign business trusts for which such registered agent is resigning as registered agent, at the principal office thereof within or outside the state, if known to such registered agent or, if not, to the last known address of the attorney or other individual at whose request such registered agent was appointed for such foreign business trust, of the resignation of such registered agent. After receipt of the notice of the resignation of its registered agent, the foreign business trust for which such registered agent was acting shall obtain and designate a new registered agent, to take the place of the registered agent so resigning. If such foreign business trust fails to obtain and designate a new registered agent as aforesaid prior to the expiration of the period of one hundred twenty days after the filing by the registered agent of the certificate of resignation, such foreign business trust may not be permitted to do business in the state and its registration shall be deemed to be canceled. After the resignation of the registered agent has become effective as provided in this section and if no new registered agent has been obtained and designated in the time and manner aforesaid, service of legal process against the foreign business trust for which the resigned registered agent had been acting shall thereafter be upon the secretary of state in accordance with § 47-14B-19.
Source: SL 2001, ch 245, § 105.
47-14B-10. Correction of false application of foreign business trust.
If any statement in the application for registration of a foreign business trust was false when made or any arrangements or other facts described have changed, making the application false in any respect, the foreign business trust shall promptly file in the Office of the Secretary of State a certificate, executed by a trustee or other authorized person, correcting such statement, together with a fee as set forth in § 47-14B-22.
Source: SL 2001, ch 245, § 106.
47-14B-11. Canceling a foreign business trust.
A foreign business trust may cancel its registration by filing with the secretary of state a certificate of cancellation, executed by a trustee or other authorized person, together with a fee as set forth in § 47-14B-22. A cancellation does not terminate the authority of the secretary of state to accept service of process on the foreign business trust with respect to causes of action arising out of the doing of business in the state.
Source: SL 2001, ch 245, § 107.
47-14B-12. Action, suit, or proceeding by foreign business trust.
A foreign business trust doing business in the state may not maintain any action, suit, or proceeding in the state until it has registered in the state, and has paid to the state all fees and penalties for the years or parts thereof, during which it did business in the state without having registered.
Source: SL 2001, ch 245, § 108.
47-14B-13. Failure of foreign business trust to register.
The failure of a foreign business trust to register in the state does not:
(1) Impair the validity of any contract or act of the foreign business trust;
(2) Impair the right of any other party to the contract to maintain any action, suit, or proceeding on the contract; or
(3) Prevent the foreign business trust from defending any action, suit, or proceeding in any court of the state.
Source: SL 2001, ch 245, § 109.
47-14B-14. Liability of beneficial owner or trustee of foreign business trust.
A beneficial owner or a trustee of a foreign business trust is not liable for the obligations of the foreign business trust solely by reason of the business trust's having done business in the state without registration.
Source: SL 2001, ch 245, § 110.
47-14B-15. Jurisdiction of circuit court for failure to register or for false registration.
The circuit court shall have jurisdiction to enjoin any foreign business trust, or any agent thereof, from doing any business in the state if such foreign business trust has failed to register under this section or if such foreign business trust has secured a certificate of the secretary of state on the basis of false or misleading representations. The attorney general shall, upon the attorney general's own motion or upon the relation of proper parties, proceed for this purpose by complaint in any county in which such foreign business trust is doing or has done business.
Source: SL 2001, ch 245, § 111.
47-14B-16. Application of § 47-14A-51.
Section 47-14A-51 is also applicable to foreign business trusts as if they were domestic business trusts.
Source: SL 2001, ch 245, § 112.
47-14B-17. Service of process on foreign business trust.
Service of legal process upon any foreign business trust shall be made by delivering a copy personally to any trustee of the foreign business trust in the state or the registered agent of the foreign business trust in the state, or by leaving it at the dwelling house or usual place of abode in the state of any such trustee or registered agent (if the registered agent be an individual), or at the registered office or other place of business of the foreign business trust in the state. If the registered agent be a corporation, service of process upon it as such may be made by serving, in the state, a copy thereof on the president, vice president, secretary, assistant secretary, or any director of the corporate registered agent. Service by copy left at the dwelling house or usual place of abode of any trustee or registered agent, or at the registered office or other place of business of the foreign business trust in the state, to be effective, must be delivered thereat at least six days before the return date of the process, and in the presence of an adult person, and the officer serving the process shall distinctly state the manner of service in the officer's return thereto. Process returnable forthwith must be delivered personally to the trustee or registered agent.
Source: SL 2001, ch 245, § 113.
47-14B-18. Service of process when due diligence fails.
In case the officer whose duty it is to serve legal process cannot by due diligence serve the process in any manner provided for by § 47-14B-17, the process against the foreign business trust may be served upon the secretary of state, and such service shall be as effectual for all intents and purposes as if made in any of the ways provided for in § 47-14B-17. In the event service is effected through the secretary of state in accordance with this section, the secretary of state shall forthwith notify the foreign business trust by letter, certified mail, return receipt requested, directed to the foreign business trust at its last registered office. Such letter shall enclose a copy of the process and any other papers served on the secretary of state pursuant to this section. The plaintiff shall, in the event of such service, serve process and any other papers in duplicate, notify the secretary of state that service is being effected pursuant to this section, and to pay to the secretary of state the sum of fifty dollars for the use of the state, which sum shall be taxed as a part of the costs in the proceeding if the plaintiff shall prevail therein. The secretary of state shall maintain an alphabetical record of any such service setting forth the name of the plaintiff and defendant, the title, docket number, and nature of the proceeding in which process has been served upon the secretary of state, the fact that service has been effected pursuant to this section, the return date thereof and the day and hour when the service was made. The secretary of state need not retain such information for a period longer than five years from receipt of the service of process.
Source: SL 2001, ch 245, § 114.
47-14B-19. Service of process on unregistered foreign business trust.
Any foreign business trust which does business in the state without having registered under this chapter shall be deemed to have thereby appointed and constituted the secretary of state its agent for the acceptance of legal process in any civil action, suit, or proceeding against it in any state or federal court in the state arising or growing out of any business done by it within the state. The doing of business in the state by such foreign business trust shall be a signification of the agreement of such foreign business trust that any such process when so served shall be of the same legal force and validity as if served upon an authorized manager or agent personally within the state.
Source: SL 2001, ch 245, § 115.
47-14B-20. "Doing business" defined.
Whenever the words, doing business, the doing of business, or business done in this state, by any such foreign business trust are used in this section, they mean the course or practice of carrying on any business activities in the state.
Source: SL 2001, ch 245, § 116.
47-14B-21. Service upon secretary of state--Notice to foreign business trust.
In the event of service upon the secretary of state, the secretary of state shall forthwith notify the foreign business trust thereof by letter, certified mail, return receipt requested, directed to the foreign business trust at the address furnished to the secretary of state by the plaintiff in such action, suit, or proceeding. Such letter shall enclose a copy of the process and any other papers served upon the secretary of state. The plaintiff shall, in the event of such service, serve process and any other papers in duplicate, notify the secretary of state that service is being made pursuant to this section, and pay to the secretary of state the sum of fifty dollars for the use of the state, which sum shall be taxed as part of the costs in the proceeding, if the plaintiff shall prevail therein. The secretary of state shall maintain an alphabetical record of any such process setting forth the name of the plaintiff and defendant, the title, docket number, and nature of the proceeding in which process has been served upon the secretary of state, the return date thereof, and the day and hour when the service was made. The secretary of state need not retain such information for a period longer than five years from receipt of the service of process.
Source: SL 2001, ch 245, § 117.
47-14B-22. Filing fees-Documents not effective until fee paid.
No document required to be filed under this chapter is effective until the applicable fee required by this section is paid. The following fees shall be paid to and collected by the secretary of state for the use of the state:
(1) Upon receipt for filing of an application for registration as a foreign business trust, a certificate, or a certificate of cancellation, a fee of one hundred twenty-five dollars; and
(2) Upon the receipt for filing of a certificate, a fee of fifty dollars.
Source: SL 2001, ch 245, § 118; SL 2009, ch 4, § 14.
47-14B-23. Application of chapter.
This chapter applies to all business trusts of the type described in this chapter now existing or hereafter created and all such business trusts existing on July 1, 2001, desiring to continue operations must have registered under the provisions of this chapter by filing in the Office of the Secretary of State a declaration of trust and paying a fee of fifty dollars prior to September 30, 2001.
Source: SL 2001, ch 245, § 119.
47-14B-24. Compliance with requirements--Violation.
No person may transact or conduct any business, within this state, under any business trust without first complying with the provisions and requirements of this chapter. A violation of this section is a Class 1 misdemeanor.
Source: SL 2001, ch 245, § 120.
47-14B-25. Citation of chapter.
This chapter may be cited as the South Dakota Foreign Business Trust Act.
Source: SL 2001, ch 245, § 121.
CHAPTER 47-15
COOPERATIVES--FORMATION AND GENERAL POWERS
47-15-1 Definitions.
47-15-2 Purposes--Banking and insurance prohibited.
47-15-3 Requisites for formation.
47-15-4 Articles of incorporation--Contents.
47-15-5 Particular provisions in articles or bylaws.
47-15-6 Filing articles with secretary of state--Beginning of corporate existence.
47-15-7 Issuance of certificate of incorporation--Certificate as conclusive evidence of proper incorporation.
47-15-8 Amendment of articles--Majority vote required.
47-15-9 Procedure for amending articles.
47-15-10 Filing with secretary of state--Certificate of amendment.
47-15-11 Effect of amendment.
47-15-12 Articles and bylaws--Action to invalidate amendment--Limitations.
47-15-13 Bankruptcy proceeding as amendment.
47-15-14 Amendment converting corporation to cooperative.
47-15-15 Adoption of restated articles.
47-15-15.1 Restated articles effective when restated certificate issued--Original articles superseded.
47-15-16 Bylaws--Adoption and amendment.
47-15-17 Bylaws--Majority vote.
47-15-18.1 47-15-18.1. Repealed by SL 2008, ch 275, § 56.
47-15-20 Offices and agents of preexisting cooperatives.
47-15-21 47-15-21 to 47-15-26. Repealed by SL 2008, ch 275, § 56.
47-15-27 Powers of cooperatives--Existence.
47-15-28 Powers of cooperatives--Actions.
47-15-29 Powers of cooperatives--Seals.
47-15-30 Powers of cooperatives--Contracts--Encumbrances.
47-15-31 Powers of cooperatives--Securities holdings.
47-15-32 Powers of cooperatives--Investments and lending.
47-15-33 Powers of cooperatives--Territorial.
47-15-34 Powers of cooperatives--Officers and agents.
47-15-35 Powers of cooperatives--Bylaws.
47-15-36 Powers of cooperatives--Donations.
47-15-37 Powers of cooperatives--Indemnification of agents.
47-15-38 Powers of cooperatives--Cessation of activities.
47-15-39 Powers of cooperatives--Effectuation of purpose.
47-15-40 Promotion expenses--Commissions on stock sales--Limitations.
47-15-41 Use of term "cooperative".
47-15-42 Unauthorized use of term "cooperative" as petty offense.
47-15-43 Injunction against unauthorized use of term "cooperative".
47-15-44 Cooperatives governed by chapter--Preexisting cooperatives.
47-15-45 Continuation of preexisting cooperatives.
47-15-46 Duration of existence of preexisting cooperatives.
47-15-47 Method of giving notice--Waiver of notice.
47-15-48 Cooperatives governed by other laws.
47-15-49 Severability and saving clause.
47-15-50 Citation of cooperative provisions.
47-15-51 Filing false document as felony.
47-15-1. Definitions.
Terms used in chapters 47-15 to 47-20, inclusive, mean:
(1) "Articles," articles of incorporation;
(2) "Cooperative," a cooperative corporation which is subject to the provisions of chapters 47-15 to 47-20, inclusive;
(3) "Corporation," a corporation which is not a cooperative;
(4) "Electronic transmission" or "electronically transmitted," 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;
(5) "Entity," a domestic and foreign corporation, limited liability company, partnership, cooperative or other legal entity, trust, domestic and foreign unincorporated entity or association, and bodies politic;
(6) "Foreign cooperative," a cooperative association organized and operated on a cooperative basis under the laws of any other state, territory, or possession of the United States, or of the District of Columbia or any foreign state, province, or country;
(7) "Individual," any natural person;
(8) "Member," a person who has been qualified and accepted for membership in a cooperative;
(9) "Patron," any person who purchases products or services provided in the normal course of the business of a cooperative. The term "patron" does not include a telecommunications company which purchases any products or services from a telecommunications cooperative or pays any fees or settlements to a telecommunications cooperative, other than local telecommunications services; and
(10) "Person," an entity or individual entity.
Source: SDC 1939 § 11.1101; SL 1949, ch 23; SL 1965, ch 23, § 1; SL 1987, ch 342; SL 1994, ch 351, § 120; SL 2018, ch 260, § 1.
47-15-2. Purposes--Banking and insurance prohibited.
Cooperatives may be organized under this chapter for any lawful purpose except banking and insurance.
Source: SDC 1939, § 11.1102 as enacted by SL 1965, ch 23, § 1; SL 1978, ch 337.
47-15-3. Requisites for formation.
Three or more individuals of legal age, one of whom must be a resident, may form a cooperative by signing, acknowledging, filing, and recording articles of incorporation.
Source: SDC 1939, § 11.1104 as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 2.
47-15-4. Articles of incorporation--Contents.
The articles of incorporation shall set forth that they are executed pursuant to the provisions of this chapter and shall state:
(1) The name of the cooperative;
(2) The period of existence, unless perpetual;
(3) The purposes for which organized. It is sufficient to state that the cooperative may engage in any activity within the purposes for which cooperatives may be organized, and all such activities shall then be deemed within its purposes, subject to express limitations;
(4) Whether the cooperative is organized with or without capital stock;
(5) The designation of classes of members, if more than one;
(6) The number and par value of shares of each authorized class of stock; if more than one class is authorized, the designation, preferences, limitations, and relative rights of each class shall also be set forth;
(7) Which classes of stock are membership stock;
(8) As to each class of stock, the rate of dividend, or that the rate of dividend may be fixed by the board, or that no dividend will be paid;
(9) Any reservation of a right to acquire or recall any stock;
(10) The basis of distribution of assets in the event of liquidation;
(11) The municipality in this state in which the cooperative's principal office is to be located and the information required by § 59-11-6;
(12) The number of directors, or that the number of directors shall be as stated in the bylaws;
(13) The name and address of each incorporator; and
(14) The names and addresses of at least three incorporators who will act as the temporary board and will serve until the first annual meeting of members or stockholders.
Source: SDC 1939, § 11.1105 as enacted by SL 1965, ch 23, § 1; SL 1966, ch 16, § 1; SL 1989, ch 390, § 1; SL 1990, ch 367, § 10; SL 1992, ch 60, § 2; SL 2008, ch 275, § 55.
47-15-5. Particular provisions in articles or bylaws.
It is not necessary to set forth in the articles of incorporation any of the powers granted by chapters 47-15 to 47-20, inclusive. The articles may include additional provisions, consistent with law, including provisions which are required or permitted to be set forth in the bylaws. Any provision required or permitted in the bylaws has equal force and effect if stated in the articles. Whenever a provision of the articles is inconsistent with a bylaw, the articles control. The bylaws of a cooperative may contain any provisions for the regulation and maintenance of the affairs of the cooperative not inconsistent with law or the articles of incorporation.
Source: SDC 1939, § 11.1106 as enacted by SL 1965, ch 23, § 1; SL 2000, ch 220, § 3.
47-15-6. Filing articles with secretary of state--Beginning of corporate existence.
The original articles of incorporation, duly signed, shall be delivered to the secretary of state for filing and recording. The legal corporate existence of a cooperative begins when the articles are so delivered.
Source: SDC 1939, § 11.1107 as enacted by SL 1965, ch 23, § 1; SL 1989, ch 390, § 2; SL 2012, ch 222, § 2.
47-15-7. Issuance of certificate of incorporation--Certificate as conclusive evidence of proper incorporation.
Upon receipt of the articles of incorporation and payment of the required fees the secretary of state shall issue a certificate of incorporation. The certificate of incorporation shall be conclusive evidence, except as against the state in a proceeding to cancel or revoke such certificate, that all conditions precedent to corporate existence have been met.
Source: SDC 1939, § 11.1108 as enacted by SL 1965, ch 23, § 1.
47-15-8. Amendment of articles--Majority vote required.
At any member meeting, a cooperative may adopt any amendment to its articles which is lawful under §§ 47-15-4 and 47-15-5, if a statement of the proposed amendment was contained in the notice of the meeting.
An amendment is adopted if approved by a majority of any quorum of members voting thereon at the meeting.
Source: SDC 1939, § 11.1135 as enacted by SL 1965, ch 23, § 1; SL 1986, ch 387.
47-15-9. Procedure for amending articles.
When any amendment to the articles is adopted, the president and secretary of the cooperative shall prepare and sign in duplicate, a certificate sealed with the seal of the cooperative, if it has a seal, stating:
(1) The name of the cooperative;
(2) The amendment and date of adoption;
(3) The number of members voting for and against the amendment;
(4) The number of members attending the meeting and a statement that such number constituted a quorum of members;
(5) That the notice of the meeting of members was given as required by law.
Source: SDC 1939, § 11.1136 (1) as enacted by SL 1965, ch 23, § 1.
47-15-10. Filing with secretary of state--Certificate of amendment.
One copy of the certificate required by § 47-15-9 shall be retained in the records of the cooperative and one copy shall be filed and recorded in the Office of the Secretary of State, who shall issue a certificate of amendment thereon.
Source: SDC 1939, § 11.1136 (2) as enacted by SL 1965, ch 23, § 1.
47-15-11. Effect of amendment.
No amendment to the articles may affect any existing cause of action or proceeding to which the cooperative is a party or existing rights of persons other than members or stockholders.
Source: SDC 1939, § 11.1136 (3) as enacted by SL 1965, ch 23, § 1.
47-15-12. Articles and bylaws--Action to invalidate amendment--Limitations.
No action may be maintained to invalidate any amendment to the articles or bylaws because of the manner of its adoption unless commenced within two years after its adoption.
Source: SDC 1939, § 11.1136 (4) as enacted by SL 1965, ch 23, § 1; SL 2021, ch 194, § 1.
47-15-13. Bankruptcy proceeding as amendment.
Certified copies of any order of a court of the United States, in proceedings under the bankruptcy laws, shall be filed and recorded as an amendment if the order effects an amendment to the articles. The principal officers of a cooperative shall cause each order to be promptly filed and recorded after it becomes final.
Source: SDC 1939, § 11.1138 as enacted by SL 1965, ch 23, § 1.
47-15-14. Amendment converting corporation to cooperative.
Any corporation may convert itself into a cooperative by adopting an amendment to its articles by which it elects to become subject to chapters 47-15 to 47-20, inclusive, together with changes in its articles required by said chapters and other desirable changes permitted by said chapters. Such amendment shall be adopted, filed, and recorded in the manner provided by the law then applicable to the corporation and the conversion shall be effective upon issuance of the certificate of amendment by the secretary of state.
Source: SDC 1939, § 11.1142 as enacted by SL 1965, ch 23, § 1; SL 1976, ch 287, § 2.
47-15-15. Adoption of restated articles.
A cooperative may, by action taken in the manner required for an amendment, adopt restated articles which shall state that they supersede existing articles and amendments. Restated articles shall meet all requirements of original articles.
Source: SDC 1939, § 11.1137 as enacted by SL 1965, ch 23, § 1; SL 1977, ch 381, § 9.
47-15-15.1. Restated articles effective when restated certificate issued--Original articles superseded.
Upon the issuance of the restated certificate of incorporation by the secretary of state, the restated articles of incorporation shall become effective and shall supersede the original articles of incorporation and all amendments thereto.
Source: SL 1977, ch 381, § 1.
47-15-16. Bylaws--Adoption and amendment.
Bylaws may be adopted and amended only by the members, unless the members adopt a bylaw which permits the board to make and amend specified bylaws. Any bylaw adopted or amended by the board shall be reported at the next regular member meeting. Any such bylaw shall be at any time subject to amendment or repeal by the members.
Source: SDC 1939, § 11.1109 as enacted by SL 1965, ch 23, § 1.
47-15-17. Bylaws--Majority vote.
Unless the bylaws provide otherwise, any bylaw may be adopted, amended, or repealed by a majority of the members present at a meeting, provided that the members voting must be sufficient in number to constitute a quorum as provided in chapter 47-16 or by bylaws.
Source: SDC 1939, § 11.1109 as enacted by SL 1965, ch 23, § 1.
47-15-20. Offices and agents of preexisting cooperatives.
For the purposes of chapters 47-15 to 47-20, inclusive, the street address, or the statement concerning the address, of a cooperative existing on July 1, 1965, becoming subject to said chapters, as set forth in the articles for its business office, shall be considered its registered office and the secretary of the cooperative shall be considered its registered agent unless either is amended pursuant to § 47-20-17.
Source: SDC 1939, § 11.1110 as enacted by SL 1965, ch 23, § 1; SL 1989, ch 390, § 3; SL 1990, ch 367, § 11.
47-15-27. Powers of cooperatives--Existence.
Unless otherwise provided by its articles, a cooperative may exist perpetually.
Source: SDC 1939, § 11.1103 (1) as enacted by SL 1965, ch 23, § 1.
47-15-28. Powers of cooperatives--Actions.
Unless otherwise provided by its articles, a cooperative may sue and be sued.
Source: SDC 1939, § 11.1103 (2) as enacted by SL 1965, ch 23, § 1.
47-15-29. Powers of cooperatives--Seals.
Unless otherwise provided by its articles, a cooperative may have a seal.
Source: SDC 1939, § 11.1103 (3) as enacted by SL 1965, ch 23, § 1.
47-15-30. Powers of cooperatives--Contracts--Encumbrances.
Unless otherwise provided by its articles, a cooperative may
(1) Make contracts, incur liabilities, and borrow money;
(2) Issue certificates representing indebtedness, or representing equity interests in its assets;
(3) Acquire property;
(4) Dispose of, mortgage, pledge, lease, or otherwise use in any manner any of its property, or any interest therein, wherever situated.
Source: SDC 1939, § 11.1103 (4) as enacted by SL 1965, ch 23, § 1.
47-15-31. Powers of cooperatives--Securities holdings.
Unless otherwise provided by its articles, a cooperative may purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in, or obligations of, other domestic or foreign cooperatives and corporations, partnerships or individuals, or direct or indirect obligations of the United States or of any other government, state, territory, governmental district, or municipality or of any instrumentality thereof.
Source: SDC 1939, § 11.1103 (5) as enacted by SL 1965, ch 23, § 1.
47-15-32. Powers of cooperatives--Investments and lending.
Unless otherwise provided by its articles, a cooperative may invest its funds, lend money for its purposes, and hold any property as security for repayment.
Source: SDC 1939, § 11.1103 (6) as enacted by SL 1965, ch 23, § 1.
47-15-33. Powers of cooperatives--Territorial.
Unless otherwise provided by its articles, a cooperative may conduct its business and affairs and have offices and exercise its powers in the United States or in any foreign country.
Source: SDC 1939, § 11.1103 (7) as enacted by SL 1965, ch 23, § 1.
47-15-34. Powers of cooperatives--Officers and agents.
Unless otherwise provided by its articles, a cooperative may elect officers and appoint agents, define their duties, and fix their compensation.
Source: SDC 1939, § 11.1103 (8) as enacted by SL 1965, ch 23, § 1.
47-15-35. Powers of cooperatives--Bylaws.
Unless otherwise provided by its articles, a cooperative may make and alter bylaws, consistent with its articles and the laws of this state, for the administration and regulation of its affairs.
Source: SDC 1939, § 11.1103 (9) as enacted by SL 1965, ch 23, § 1.
47-15-36. Powers of cooperatives--Donations.
Unless otherwise provided by its articles, a cooperative may make donations for charitable, scientific, educational, or religious purposes.
Source: SDC 1939, § 11.1103 (10) as enacted by SL 1965, ch 23, § 1.
47-15-37. Powers of cooperatives--Indemnification of agents.
Unless otherwise provided by its articles, a cooperative may indemnify any present or former director, officer, or agent against actual expenses necessarily incurred in defense of any proceeding in which he is a party because he is or was such director, officer, or agent. This section does not apply to those proceedings in which he is adjudged liable for negligence or misconduct in the performance of duty. Such indemnification shall not be exclusive of other rights to which he may be entitled.
Source: SDC 1939, § 11.1103 (11) as enacted by SL 1965, ch 23, § 1.
47-15-38. Powers of cooperatives--Cessation of activities.
Unless otherwise provided by its articles, a cooperative may cease its activities and surrender its franchise.
Source: SDC 1939, § 11.1103 (12) as enacted by SL 1965, ch 23, § 1.
47-15-39. Powers of cooperatives--Effectuation of purpose.
Unless otherwise provided by its articles, a cooperative may exercise all powers necessary or convenient to effect its purposes.
Source: SDC 1939, § 11.1103 (13) as enacted by SL 1965, ch 23, § 1.
47-15-40. Promotion expenses--Commissions on stock sales--Limitations.
No cooperative funds may be used, nor any stock issued, in payment of any promotion expenses in excess of ten percent of the paid-up capital stock or membership fees. No commission or expenses shall be paid on the sale of stock in excess of ten percent of the par value thereof.
Source: SDC 1939, § 11.1112 as enacted by SL 1965, ch 23, § 1.
47-15-41. Use of term "cooperative".
The term "cooperative" or any variation thereof, may be used either by any cooperative organized under this chapter or under other laws of this state relating to cooperative corporations, or by any foreign cooperative licensed to do business in this state or by any association of cooperatives, or corporations, whose members are cooperatives.
Source: SDC 1939, § 11.1155 (1) as enacted by SL 1965, ch 23, § 1.
47-15-42. Unauthorized use of term "cooperative" as petty offense.
No person other than a cooperative described in § 47-15-41 may use the term "cooperative," or any variation thereof, as part of his corporate or other business name or title. No person may in any other manner represent himself to be a cooperative. A violation of this section is a petty offense. Each day of improper use constitutes a separate offense.
Source: SDC 1939, § 11.1155 (2) as enacted by SL 1965, ch 23, § 1; SL 1983, ch 15, § 37.
47-15-43. Injunction against unauthorized use of term "cooperative".
Any cooperative may obtain an injunction against acts prohibited by § 47-15-42 without showing any damage to itself.
Source: SDC 1939, § 11.1155 (3) as enacted by SL 1965, ch 23, § 1.
47-15-44. Cooperatives governed by chapter--Preexisting cooperatives.
All foreign and domestic cooperatives are governed by the provisions of chapters 47-15 to 47-20, inclusive, except that application of said chapters to cooperative corporations existing before March 18, 1965, does not affect property rights of stockholders or members in such cooperatives which were accrued or established on March 18, 1965, nor does it affect any liability enforceable at such time, nor does it affect the validity or enforceability of contracts existing before March 18, 1965.
Source: SDC 1939, § 11.1156 as enacted by SL 1965, ch 23, § 1.
47-15-45. Continuation of preexisting cooperatives.
Corporations organized before July 1, 1965, under the provisions of chapters 4.16 and 11.10 of the South Dakota Code of 1939 shall continue in existence, but no new corporations may be formed thereunder.
Source: SL 1965, ch 23, § 2; SL 1966, ch 16, § 5.
47-15-46. Duration of existence of preexisting cooperatives.
Cooperatives organized prior to July 1, 1965 under the provisions of chapter 4.16 or 11.10 or 11.11 of the South Dakota Code of 1939 or amendments thereof are granted perpetual existence irrespective of the period of existence set forth in the articles of incorporation. Any such cooperative may nevertheless amend its articles to provide for a limited period of existence.
Source: SDC 1939, § 11.1105 (2) as enacted by SL 1965, ch 23, § 1; SL 1966, ch 16, § 1.
47-15-47. Method of giving notice--Waiver of notice.
If notice is required by chapters 47-15 to 47-20, inclusive, to be given to any person, the notice shall be given either personally, by mail, or electronic transmission. If mailed, the notice is given when deposited in the United States mail, with postage prepaid, addressed to the person's address as it appears on the records of the cooperative. If electronically transmitted, the notice is given when sent.
A signed waiver is equivalent to personal notice to the person so signing.
Source: SDC 1939, § 11.1117 as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 3.
47-15-48. Cooperatives governed by other laws.
The provisions of chapters 47-15 to 47-20, inclusive, shall not apply to cooperatives governed by chapter 40-23 or chapter 47-21.
Source: SDC 1939, § 11.1156 as enacted by SL 1965, ch 23, § 1.
47-15-49. Severability and saving clause.
If any provision of chapters 47-15 to 47-20, inclusive, or the application thereof to any person or circumstance is held invalid, the remainder of said chapters and the application of such provision to other persons or circumstances shall not be held invalid.
Source: SL 1965, ch 23, § 3.
47-15-50. Citation of cooperative provisions.
Chapters 47-15 to 47-20, inclusive, as amended from time to time may be cited as the "South Dakota Cooperative Association Act."
Source: SDC 1939, § 11.1157 as enacted by SL 1965, ch 23, § 1.
47-15-51. Filing false document as felony.
A person who files, or causes to be filed, a document required to be filed by this chapter, which he knows to be materially false in any respect, is guilty of a Class 6 felony.
Source: SL 1983, ch 15, § 36.
CHAPTER 47-16
COOPERATIVES--MEMBERSHIP, STOCK AND DISTRIBUTIONS
47-16-1 Classes of members--Provisions in bylaws.
47-16-2 Annual member meeting--Time of meeting.
47-16-3 Special meetings.
47-16-4 Member meetings--Location--Virtual participation.
47-16-5 Member meetings--Notice--Virtual meeting.
47-16-6 Notice to delegates or alternates.
47-16-7 Member meetings--Quorum.
47-16-8 Action without meeting.
47-16-9 Consent to action without meeting.
47-16-10 Votes at meeting.
47-16-11 Votes by member cooperatives.
47-16-12 Vote by member owning membership stock.
47-16-13 Proxy votes--Delegate votes.
47-16-14 Member voting.
47-16-15 Voting by representatives.
47-16-16 Voting by organizations.
47-16-17 Voting rights conditioned upon membership payment.
47-16-18 Other votes prohibited.
47-16-19 Bylaws provisions for voting.
47-16-20 Percentage of vote.
47-16-21 Capital stock--Classes of stock.
47-16-22 Membership stock--Transfer of stock.
47-16-23 Cooperative dealing in own stock.
47-16-24 Consideration for stock.
47-16-25 Reacquisition of stock.
47-16-26 Stockholders' preemptive rights.
47-16-27 Stock certificates--Conditions to issuance.
47-16-28 Statements required on stock certificates.
47-16-29 Stock subscriptions--Irrevocability.
47-16-30 Liability of subscribers.
47-16-31 Missing securities--Issuance of duplicate.
47-16-32 Missing securities--Redemption--Procedure.
47-16-33 Liability on securities wrongfully transferred--Notice.
47-16-34 Definition of transfers and transferors.
47-16-35 Actions by stockholders or members--Allegations respecting ownership.
47-16-36 Actions by stockholders or members--Additional allegations.
47-16-37 Approval of court required for termination of action.
47-16-38 Expenses of maintaining action--Disposition of proceeds.
47-16-39 Security for costs--Amount of security.
47-16-40 Distribution of net proceeds.
47-16-41 Deductions from total proceeds.
47-16-42 Procedure for distribution.
47-16-43 47-16-43. Repealed by SL 2009, ch 230, § 1.
47-16-44 Payments to employees.
47-16-45 Dividends on capital stock--Conditions to payment.
47-16-46 Distributions to patrons.
47-16-47 Creation of reserves--Credit to patrons.
47-16-48 Ratio of patronage as determining payment to patron.
47-16-49 Classification of patrons.
47-16-50 Credit to surplus and reserves.
47-16-51 Remaining funds--Distribution to patrons--Distinction between members and nonmembers--Classification of patrons.
47-16-52 Manner of payment.
47-16-53 Application of proceeds to prior losses.
47-16-54 Unclaimed credits--Forfeiture to cooperative.
47-16-55 Procedure for forfeiture--Resolution--Time limit for claim.
47-16-56 Notice to claimant--Contents of notice.
47-16-57 Notice by publication.
47-16-58 Applicability to preexisting claims.
47-16-59 Discretionary payment to claimant after forfeiture.
47-16-60 Filing false document as felony.
47-16-61 Report of forfeited sums to administrator.
47-16-1. Classes of members--Provisions in bylaws.
A cooperative may have one or more classes of members. Provisions for qualifications, requirements, method of acceptance, terms, conditions, termination, and other incidents of membership shall be set forth in the bylaws. Any person, including a partnership, a firm, an unincorporated association, a cooperative, a corporation, or a body politic, may become a member in accordance with the bylaws.
Source: SDC 1939, § 11.1113 as enacted by SL 1965, ch 23, § 1.
47-16-2. Annual member meeting--Time of meeting.
An annual member meeting of a cooperative shall be held at the time fixed in or pursuant to the bylaws. In the absence of a bylaw provision, such meeting shall be held within six months after the close of the fiscal year at the call of the president or board of directors.
Source: SDC 1939, § 11.1115 (2) as enacted by SL 1965, ch 23, § 1.
47-16-3. Special meetings.
Special member meetings of a cooperative may be called by the president, board of directors, or members having one-fifth of the votes entitled to be cast at such meeting.
Source: SDC 1939, § 11.1115 (3) as enacted by SL 1965, ch 23, § 1.
47-16-4. Member meetings--Location--Virtual participation.
Unless the articles of incorporation or bylaws provide otherwise, the board of directors shall provide that member meetings of a cooperative are held at the principal office or such other place or by means of communication as the board of directors may determine.
Unless the articles of incorporation or bylaws provide otherwise, the board of directors may allow a member, a delegate, or an alternate to participate in a member meeting by any means of communication through which the member, delegate, or alternate may communicate and vote at the meeting. Participation by such means of communication constitutes presence or attendance at the meeting.
Source: SDC 1939, § 11.1115 (1) as enacted by SL 1965, ch 23, § 1; SL 2021, ch 194, § 2.
47-16-5. Member meetings--Notice--Virtual meeting.
Written notice of a membership meeting of a cooperative, stating the place, day, and hour, and, in case of a special member meeting the purposes for which the meeting is called, shall be given no fewer than ten nor more than sixty days before the meeting, at the direction of the person calling the meeting.
The place of the meeting or special meeting may be virtual if the written notice specifies a means of communication to conduct the meeting that complies with the provisions of § 47-16-4.
Source: SDC 1939, § 11.1115 (4) as enacted by SL 1965, ch 23, § 1; SL 2021, ch 194, § 3.
47-16-6. Notice to delegates or alternates.
At any meeting of a cooperative at which members are to be represented by delegates, notice to such members may be given by notifying such delegates and their alternates. Notice may consist of a notice to all members or may be in the form of an announcement at the meeting at which such delegates or alternates were elected.
Source: SDC 1939, § 11.1115 (5) as enacted by SL 1965, ch 23, § 1.
47-16-7. Member meetings--Quorum.
A quorum at a member meeting of a cooperative shall be ten percent of the first one hundred members plus five percent of additional members, present or represented by delegate. Unless the bylaws fix a larger number of members to constitute a quorum, a quorum may never be more than fifty members nor fewer than five members, or a majority of all members, whichever is smaller. Members represented by signed vote may be counted in computing a quorum only on those questions as to which the signed vote is taken. The sufficiency or requirement of a quorum for the transaction of business at a district meeting of members shall be established in the bylaws. However, the quorum may not be fewer than five members.
Source: SDC 1939, § 11.1116 as enacted by SL 1965, ch 23, § 1; SL 2000, ch 220, § 1; SL 2021, ch 194, § 4.
47-16-8. Action without meeting.
Action without a membership meeting may be taken by a cooperative pursuant to § 47-16-9.
Source: SDC 1939, § 11.1115 (6) as enacted by SL 1965, ch 23, § 1.
47-16-9. Consent to action without meeting.
Any action which may be taken at a member meeting of a cooperative, may be taken without a meeting if a writing setting forth and approving the action taken shall be signed by a majority of the members entitled to vote on such action. In such cases, such consent shall have the same force and effect as if a meeting had been held.
Source: SDC 1939, § 11.1126 as enacted by SL 1965, ch 23, § 1.
47-16-10. Votes at meeting.
At any member meeting of a cooperative composed of individual members and entity members, each individual member or entity member is entitled to only one vote.
Source: SDC 1939, § 11.1114 (2) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 4.
47-16-11. Votes by member cooperatives.
In the case of a cooperative composed only of member cooperative corporations, such member cooperatives shall have only one vote, except that the articles may permit either or both:
(1) A member cooperative to cast additional votes not exceeding a number equal to its membership;
(2) A cooperative whose member-patrons include other cooperative corporations to base voting in whole or in part on a patronage basis.
Source: SDC 1939, § 11.1114 (2) as enacted by SL 1965, ch 23, § 1.
47-16-12. Vote by member owning membership stock.
A member owning membership stock of a cooperative gains no additional vote thereby.
Source: SDC 1939, § 11.1114 (3) as enacted by SL 1965, ch 23, § 1.
47-16-13. Proxy votes--Delegate votes.
Voting by proxy shall not be allowed in any cooperative, except that the bylaws may provide for representation of members by delegates apportioned territorially. A delegate shall cast the votes to which members represented by him are entitled.
Source: SDC 1939, § 11.1114 (4) as enacted by SL 1965, ch 23, § 1.
47-16-14. Member voting.
A member of a cooperative may submit a signed vote by mail or electronic means if the member has been previously notified in writing of the exact vote, motion or resolution upon which the vote is taken. The bylaws may limit use of signed votes.
Source: SDC 1939, § 11.1114 (5) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 5; SL 2021, ch 194, § 5.
47-16-15. Voting by representatives.
In the absence of written notice that a person has been designated to represent an entity member of a cooperative, the member may be represented by any of its principal officers. Unless the bylaws provide otherwise, an individual may represent more than one entity member, and may also vote as an individual if the individual is a member.
Source: SDC 1939, § 11.1114 (6) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 6.
47-16-16. Voting by organizations.
If the cooperative permits two or more persons, or a partnership, or an unincorporated association, or another cooperative, or a corporation, or a body politic to hold one membership, the bylaws may provide how such member vote is to be cast.
Source: SDC 1939, § 11.1114 (1) as enacted by SL 1965, ch 23, § 1.
47-16-17. Voting rights conditioned upon membership payment.
A person who has not fully paid for his membership may not vote except as expressly permitted in the bylaws.
Source: SDC 1939, § 11.1114 (1) as enacted by SL 1965, ch 23, § 1.
47-16-18. Other votes prohibited.
Except as permitted in §§ 47-16-13 to 47-16-17, inclusive, no person other than a member may vote at any member meeting of a cooperative.
Source: SDC 1939, § 11.1114 as enacted by SL 1965, ch 23, § 1.
47-16-19. Bylaws provisions for voting.
The bylaws of a cooperative may set forth provisions, not inconsistent with this chapter, relating to the methods and procedures for voting.
Source: SDC 1939, § 11.1114 (7) as enacted by SL 1965, ch 23, § 1.
47-16-20. Percentage of vote.
Whenever the articles of a cooperative require the vote of a greater proportion of the members than required by this chapter, the articles control.
Source: SDC 1939, § 11.1114 (8) as enacted by SL 1965, ch 23, § 1.
47-16-21. Capital stock--Classes of stock.
A cooperative organized with capital stock may issue the amount of stock stated in its articles. Such stock may be divided into two or more classes with such designations, preferences, limitations, and relative rights as shall be stated in the articles, except that:
(1) Stock as such has no voting power;
(2) Stock without par value shall not be authorized or issued;
(3) The rate of dividends upon stock shall not exceed eight percent of its par value for any year, and dividends may not be cumulative.
Source: SDC 1939, § 11.1118 (1) as enacted by SL 1965, ch 23, § 1.
47-16-22. Membership stock--Transfer of stock.
The articles of a cooperative may require that members own one or more shares of membership stock. Such stock shall be issued or transferred only to a person eligible to become a member, and only when such person satisfies other requisites for membership. Unless restricted by the articles, stock other than membership stock may be issued or transferred to any person.
Source: SDC 1939, § 11.1118 (2) as enacted by SL 1965, ch 23, § 1.
47-16-23. Cooperative dealing in own stock.
Unless the articles provide otherwise, a cooperative may acquire, recall, exchange, redeem, and reissue its own stock. Provisions in the articles and on the stock certificate may reserve to the cooperative a prior right to acquire any stock offered for sale, or a right to recall the stock of any stockholder, or both of said rights.
Source: SDC 1939, § 11.1118 (3) as enacted by SL 1965, ch 23, § 1.
47-16-24. Consideration for stock.
The consideration paid for stock recalled by the cooperative shall be its par value and accrued unpaid dividends, provided that if the book value of such stock is less than the par value, the consideration shall be such book value. The cooperative may set off obligations of the stockholder to it. If the remaining assets would be less than the aggregate amount payable to creditors and persons holding stock with preferential rights upon liquidation, no stock shall be acquired, recalled, exchanged, or redeemed for a consideration other than stock or certificates of equity interest of equal or subordinate rank.
Source: SDC 1939, § 11.1118 (3) as enacted by SL 1965, ch 23, § 1.
47-16-25. Reacquisition of stock.
When stock is acquired, recalled, exchanged, or redeemed by the cooperative, such stock is restored to the status of authorized but unissued stock.
Source: SDC 1939, § 11.1118 (4) as enacted by SL 1965, ch 23, § 1.
47-16-26. Stockholders' preemptive rights.
Stockholders of a cooperative as such have no preemptive right to purchase additional stock.
Source: SDC 1939, § 11.1118 (5) as enacted by SL 1965, ch 23, § 1.
47-16-27. Stock certificates--Conditions to issuance.
No stock certificate may be issued by a cooperative except upon payment of the par value of the stock it represents. No cooperative shall issue stock or bonds except for money, labor done, or money or property actually received; and all fictitious increase of stock or indebtedness shall be void. If payment for stock is not in money, the value of the consideration shall be determined by the board of directors and such determination, if made in good faith, shall be conclusive.
Source: SDC 1939, § 11.1119 as enacted by SL 1965, ch 23, § 1.
47-16-28. Statements required on stock certificates.
Each certificate for stock of a cooperative shall bear the manual or facsimile signature of a principal officer and shall state:
(1) The name of the cooperative, the number, par value, and class of the shares represented by the certificate, and whether or not it is membership stock.
(2) Any restrictions on the issuance or transfer of such stock, including those provided by law and the articles.
(3) If more than one class of stock is authorized, the designation of the several classes, and their respective preferences, limitations, and relative right. In lieu of the full statement, this information may be given in summary form, or the certificate may state that the cooperative will, upon request, furnish the information required by this subdivision.
Source: SDC 1939, § 11.1119 as enacted by SL 1965, ch 23, § 1.
47-16-29. Stock subscriptions--Irrevocability.
A subscription for stock of a cooperative is irrevocable for six months unless otherwise provided by the subscription agreement or unless all subscribers consent to the revocation.
Source: SDC 1939, § 11.1120 as enacted by SL 1965, ch 23, § 1.
47-16-30. Liability of subscribers.
Except for debts lawfully contracted between the member and the cooperative, no member or patron is liable for the debts of the cooperative to an amount exceeding the sum remaining unpaid on his subscription for shares of the cooperative, and the sum unpaid on such members membership fees, if such fee is required by the cooperative.
Source: SDC 1939, § 11.1120 as enacted by SL 1965, ch 23, § 1.
47-16-31. Missing securities--Issuance of duplicate.
When a security issued by a cooperative is missing, the cooperative shall issue a duplicate security if the owner so requests and furnishes an indemnity acceptable to the cooperative.
Source: SDC 1939, § 11.1121 (1) as enacted by SL 1965, ch 23, § 1.
47-16-32. Missing securities--Redemption--Procedure.
If records of a cooperative showing ownership of securities or apportionment of equity interest in the assets are missing and the information contained in such records is necessary to a proposed redemption of the interest, the cooperative may give notice and redeem as follows:
(1) The cooperative shall set aside an amount equal to the value of the interests to be redeemed;
(2) The cooperative shall give notice of such redemption to all owners of interests of which the cooperative has knowledge;
(3) If there are interests, the ownership of which is unknown to the cooperative, it shall publish notice of the redemption at least once in a newspaper of general circulation in the county of this state in which is located the last known address of each person to be named in the notice. If no address is listed or the address is outside this state, the notice shall be published in the county in which the holder of the property has its principal place of business within this state; and
(4) Any unclaimed outstanding interest represented by the missing records may then be terminated in accordance with §§ 47-16-54 to 47-16-59, inclusive.
Source: SDC 1939, § 11.1121 (2) as enacted by SL 1965, ch 23, § 1; SL 2012, ch 224, § 1.
47-16-33. Liability on securities wrongfully transferred--Notice.
A cooperative is not liable for acting upon wrongful transfers of its securities unless it has notice that the certificate was not transferred by a proper person or has notice that the transfer was wrongful.
Source: SDC 1939, § 11.1122 (1) as enacted by SL 1965, ch 23, § 1.
47-16-34. Definition of transfers and transferors.
As used in § 47-16-33:
(1) "Proper person" means the registered owner or last prior transferee, whether or not described as fiduciary for another, or his authorized agent, legal representative, or successor to his interest by operation of law;
(2) "Transfer" includes a redemption or recall of stock;
(3) "Wrongful transfer" means a transfer which is in excess of the authorization or capacity of the transferor, or which is made in breach of the transferor's fiduciary duty.
Source: SDC 1939, § 11.1122 (2) as enacted by SL 1965, ch 23, § 1.
47-16-35. Actions by stockholders or members--Allegations respecting ownership.
No action may be instituted or maintained in the right of any association by a member or stockholder unless he alleges in his complaint that he was a member or registered stockholder when any part of the transaction of which he complains took place, or that his stock thereafter devolved upon him by operation of law from a stockholder at such time.
Source: SDC 1939, § 11.1153 (1) (a) as enacted by SL 1965, ch 23, § 1.
47-16-36. Actions by stockholders or members--Additional allegations.
No action may be instituted or maintained in the right of any association by any member or stockholder unless he alleges in his complaint with particularity his efforts to secure from the board of directors such action as he desires. He shall allege further that he has either informed the corporation or board in writing of the ultimate facts of each cause of action against each director or that he has delivered to the cooperative or board a copy of the complaint which he proposes to file. He shall state the reasons for his failure to obtain such action or the reasons for not making such effort.
Source: SDC 1939, § 11.1153 (1) (b) as enacted by SL 1965, ch 23, § 1.
47-16-37. Approval of court required for termination of action.
An action instituted or maintained in the right of any association by any member or stockholder shall not be dismissed or compromised without the approval of the court.
Source: SDC 1939, § 11.1153 (2) as enacted by SL 1965, ch 23, § 1.
47-16-38. Expenses of maintaining action--Disposition of proceeds.
If anything is recovered or obtained as the result of an action instituted or maintained in the right of any association by any member or stockholder, whether by means of compromise and settlement or by a judgment, the court may, out of the proceeds of the action, award the plaintiff the reasonable expenses of maintaining the action, including reasonable attorney's fees, and may direct the plaintiff to account to the cooperative for the remainder of such proceeds.
Source: SDC 1939, § 11.1153 (3) as enacted by SL 1965, ch 23, § 1.
47-16-39. Security for costs--Amount of security.
In any action brought in the right of a cooperative by less than three percent of the members or by holders of less than three percent of any class of stock outstanding, the defendants may require the plaintiff to give security for the reasonable expenses of defending such action, including attorney's fees. The amount of such security may thereafter be increased or decreased in the discretion of the court upon showing that the security provided is or may be inadequate or is excessive.
Source: SDC 1939, § 11.1153 (4) as enacted by SL 1965, ch 23, § 1.
47-16-40. Distribution of net proceeds.
At least once annually the directors of a cooperative shall determine and distribute net proceeds as provided by §§ 47-16-41 to 47-16-53, inclusive.
Source: SDC 1939, § 11.1131 as enacted by SL 1965, ch 23, § 1.
47-16-41. Deductions from total proceeds.
In determining net proceeds of a cooperative, there shall be deducted from total proceeds:
(1) All operating expenses and costs;
(2) The cost of supplies, commodities, equipment, and other property or services procured or sold for patrons;
(3) The cost of services performed for patrons;
(4) All taxes and all other expenses;
(5) Reasonable and necessary reserves for depreciation, depletion and obsolescence of physical property, doubtful accounts, and other valuation reserves, all of which shall be established in accordance with usual and customary accounting practices.
Source: SDC 1939, § 11.1131 (1) as enacted by SL 1965, ch 23, § 1.
47-16-42. Procedure for distribution.
After the deductions required by § 47-16-41, the remainder of the total proceeds of a cooperative are net proceeds and shall be distributed and paid as provided by §§ 47-16-44 and 47-16-45.
Source: SDC 1939, § 11.1131 (2) as enacted by SL 1965, ch 23, § 1.
47-16-44. Payments to employees.
A share of the net proceeds of a cooperative may be set aside for or paid to employees. Such amount shall for all purposes except the computation of net proceeds be deemed an expense of operation of the cooperative.
Source: SDC 1939, § 11.1131 (2) (b) as enacted by SL 1965, ch 23, § 1.
47-16-45. Dividends on capital stock--Conditions to payment.
In a cooperative organized with capital stock such dividend from net proceeds may be paid upon capital stock as is authorized by the articles. No dividend may be paid if the capital is impaired or if payment of such dividend would result in an impairment of capital.
Source: SDC 1939, § 11.1131 (2) (c) as enacted by SL 1965, ch 23, § 1.
47-16-46. Distributions to patrons.
Unless the articles or bylaws of a cooperative otherwise expressly provide, none of the remainder of the net proceeds after distributions and payments pursuant to §§ 47-16-44 and 47-16-45 shall constitute income of the cooperative but all thereof shall be distributed and paid to patrons, whether members or not, as provided by §§ 47-16-47 to 47-16-49, inclusive.
Source: SDC 1939, § 11.1131 (3) as enacted by SL 1965, ch 23, § 1.
47-16-47. Creation of reserves--Credit to patrons.
Reasonable reserves for necessary purposes may be created by a cooperative, which shall be credited to patrons in accordance with the ratio which their patronage bears to total patronage.
Source: SDC 1939, § 11.1131 (3) (a) as enacted by SL 1965, ch 23, § 1.
47-16-48. Ratio of patronage as determining payment to patron.
All the remainder of the net proceeds of a cooperative after reserves created pursuant to § 47-16-47 shall be distributed and paid to patrons in accordance with the ratio which their patronage bears to total patronage.
Source: SDC 1939, § 11.1131 (3) (b) as enacted by SL 1965, ch 23, § 1.
47-16-49. Classification of patrons.
There shall be no distinction between the persons entitled to reserves and distributions under §§ 47-16-47 and 47-16-48, but such reserves and distribution may be based upon business done with particular departments or in particular commodities, supplies, or services, or upon classification of business according to the type or nature thereof.
Source: SDC 1939, § 11.1131 (3) (c) as enacted by SL 1965, ch 23, § 1.
47-16-50. Credit to surplus and reserves.
If the articles or bylaws of a cooperative so provide, any of the net proceeds may be credited to allocated or unallocated surplus or reserves of the cooperative.
Source: SDC 1939, § 11.1131 (4) (a) as enacted by SL 1965, ch 23, § 1.
47-16-51. Remaining funds--Distribution to patrons--Distinction between members and nonmembers--Classification of patrons.
If the articles or bylaws of a cooperative so provide, none of the remainder of the net proceeds after credits pursuant to § 47-16-50 shall constitute income to the cooperative, but all thereof shall be distributed and paid in accordance with the ratio which individual patronage bears to total patronage, either to all patrons, to member patrons only, or to all patrons with nonmembers receiving a lower proportion than members, as the bylaws may provide. There shall be no other distinction between members and nonmembers, but distribution may be based on business done with particular departments, or in particular commodities, supplies, or services, or upon classification of business according to type or nature thereof.
Source: SDC 1939, § 11.1131 (4) (b) as enacted by SL 1965, ch 23, § 1.
47-16-52. Manner of payment.
The distribution and payment of net proceeds of a cooperative under §§ 47-16-46 to 47-16-51, inclusive, may be in cash, credits, stock, certificates or interest, revolving fund certificates, letters of advice, or other certificates or securities of the cooperative or of other associations or corporations, in other property, or in any combination thereof.
Source: SDC 1939, § 11.1131 (5) as enacted by SL 1965, ch 23, § 1.
47-16-53. Application of proceeds to prior losses.
All or any part of the net proceeds of a cooperative may be applied to losses incurred in prior years, and the bylaws may also include any reasonable provisions for the apportionment of losses.
Source: SDC 1939, § 11.1131 (6) as enacted by SL 1965, ch 23, § 1.
47-16-54. Unclaimed credits--Forfeiture to cooperative.
Any share of corporate stock membership, credit, dividend, profit, patronage refund, distribution, interest, payment, or other money or property right held by a cooperative for, or owing by it to, a member, stockholder, or participating patron, or other person or persons entitled thereto, who has not within six years claimed the same or corresponded in writing with the cooperative concerning the same may be forfeited to the cooperative in the manner provided by §§ 47-16-55 to 47-16-59, inclusive.
Source: SDC 1939, § 11.1132 as enacted by SL 1965, ch 23, § 1.
47-16-55. Procedure for forfeiture--Resolution--Time limit for claim.
A motion or resolution may be passed or adopted by the board of directors of a cooperative declaring the forfeiture of any money or property described in § 47-16-54 unless the same is claimed by the person or persons entitled thereto within six months after notice of such forfeiture is given.
Source: SDC 1939, § 11.1132 (1) as enacted by SL 1965, ch 23, § 1.
47-16-56. Notice to claimant--Contents of notice.
If the name and address of any person entitled to receive the money or property mentioned in § 47-16-54 is shown on the records of the cooperative, and the money or property is of the value of fifty dollars or more, a notice shall be mailed or electronically transmitted to each person at the last known address. The notice shall describe the money or property referred to, state the name of each person who appears to be entitled to money or property as shown by the records of the cooperative, and state that the money or property will be forfeited to the cooperative six months from the date the notice is mailed or electronically transmitted unless the money or property is claimed and proper evidence of ownership is submitted within that time. The notice shall be dated and signed and mailed or electronically transmitted on behalf of the cooperative by its secretary or any other duly authorized individual.
Source: SDC 1939, § 11.1132 (2) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 7.
47-16-57. Notice by publication.
If the name or address of any person entitled to receive the money or property described in § 47-16-54 is not shown upon the records of the cooperative, or if the name or address is known by the cooperative's secretary to be incorrect, then the cooperative shall publish a notice at least once in a newspaper of general circulation in the county of this state in which is located the last known address of each person to be named in the notice. If no address is listed or the address is outside this state, the notice shall be published in the county in which the holder of the property has its principal place of business within this state. No cooperative is required to publish any item that is less than one hundred twenty-five dollars, unless the cooperative considers the publication to be in the interest of the cooperative. The notice may state that the forfeiture becomes effective six months after the first publication.
Source: SDC 1939, § 11.1132 (3) as enacted by SL 1965, ch 23, § 1; SL 2012, ch 224, § 2; SL 2013, ch 230, § 1.
47-16-58. Applicability to preexisting claims.
Sections 47-16-54 to 47-16-57, inclusive, apply to all money or property described in § 47-16-54, payment or delivery of which was authorized either before or after July 1, 1965.
Source: SDC 1939, § 11.1132 (4) as enacted by SL 1965, ch 23, § 1.
47-16-59. Discretionary payment to claimant after forfeiture.
Notwithstanding the forfeiture of any money or property as provided in §§ 47-16-54 to 47-16-58, inclusive, the board of directors, in its discretion, at any time after such forfeiture, may authorize the payment of any such money, or delivery of any such property, to the person or persons who would have been entitled to receive the same in the absence of such forfeiture.
Source: SDC 1939, § 11.1132 (5) as enacted by SL 1965, ch 23, § 1.
47-16-60. Filing false document as felony.
A person who files, or causes to be filed, a document required to be filed by this chapter, which he knows to be materially false in any respect, is guilty of a Class 6 felony.
Source: SL 1983, ch 15, § 38.
47-16-61. Report of forfeited sums to administrator.
Cooperatives organized pursuant to chapters 47-15 and 47-21 shall report to the administrator all sums forfeited pursuant to procedures as provided in §§ 47-16-54 to 47-16-59, inclusive. A municipally owned utility which provides for forfeiture of unclaimed property by ordinance shall deposit sums forfeited to its treasury and annually report such deposits to the administrator.
Source: SL 1992, ch 312, § 40.
CHAPTER 47-17
COOPERATIVES--DIRECTORS, OFFICERS AND EMPLOYEES
47-17-1 Board of directors as manager of cooperative--Qualifications of directors.
47-17-2 Compensation of directors.
47-17-3 Number of directors.
47-17-4 First directors as temporary board--Election of permanent directors--Territorial directors--Directors' terms of office--Alternates.
47-17-4.1 Use of funds or employee activity to promote election to office prohibited--Directors and officers permitting violation subject to civil fine.
47-17-5 Removal of directors.
47-17-6 Vacancies on board of directors.
47-17-7 Liability of directors for improper distribution of assets.
47-17-7.1 Directors not liable for distribution in good faith reliance on financial statements or accountant's representation.
47-17-8 Board meetings.
47-17-9 Quorum at meeting.
47-17-10 Waiver of notice of meeting.
47-17-11 Specification of purpose of meeting.
47-17-12 Directors' executive committee--Powers of committee.
47-17-13 Action without meeting of directors--Written consent.
47-17-14 Principal officers of cooperative--Election by board of directors.
47-17-15 Other officers.
47-17-16 Authority of officers.
47-17-17 Removal of officers.
47-17-18 Compensation of officers.
47-17-19 47-17-19. Repealed by SL 2007, ch 260, § 8.
47-17-20 Filing false document as felony.
47-17-21 Indemnification of directors, officers, agents, and employees against liability under certain circumstances.
47-17-22 Circumstances under which directors, officers, agents, and employees may not be indemnified.
47-17-23 Indemnification of successful director, officer, agent, or employee for expenses incurred in proceeding.
47-17-1. Board of directors as manager of cooperative--Qualifications of directors.
The business and affairs of a cooperative shall be managed by a board of directors. Each director shall be a member or a representative of a member who is an entity member. The bylaws shall prescribe any other qualifications for directors and may provide that directors be from specified territorial districts.
Source: SDC 1939, § 11.1123 (1) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 8.
47-17-2. Compensation of directors.
Unless the bylaws of a cooperative provide otherwise, only the members may establish compensation or other benefits for a director, not available generally to officers and employees, for services as director.
Source: SDC 1939, § 11.1128 (1) as enacted by SL 1965, ch 23, § 1.
47-17-3. Number of directors.
The number of directors of a cooperative shall not be less than five, provided that in a cooperative with less than fifty members, the number of directors shall not be less than three. Subject to such limitation, the number shall be fixed in the articles, or if the articles so provide, in the bylaws.
Source: SDC 1939, § 11.1123 (2) as enacted by SL 1965, ch 23, § 1.
47-17-4. First directors as temporary board--Election of permanent directors--Territorial directors--Directors' terms of office--Alternates.
The directors of a cooperative constituting the temporary board, named in the articles, shall hold office until the first member meeting. At that meeting and thereafter, at or in conjunction with the annual member meeting, directors shall be elected by a majority of the members voting in the manner and for the terms provided in the bylaws. If the bylaws provide that directors be from specified territorial districts, the articles may limit voting for any director to members from within the territorial district from which the director is to be elected. The bylaws may provide that directors may be elected at district director election meetings held for said purpose. Unless the bylaws provide otherwise, a director's term of office is one year. Each director holds office for the term for which elected and until the director's successor takes office. The bylaws may permit selection of alternates to take the place of directors absent at a meeting of the board.
Source: SDC 1939, § 11.1123 (3) as enacted by SL 1965, ch 23, § 1; SL 2000, ch 220, § 5; SL 2021, ch 194, § 6.
47-17-4.1. Use of funds or employee activity to promote election to office prohibited--Directors and officers permitting violation subject to civil fine.
No cooperative funds may be used, nor any stock issued, to promote, encourage, or publicly favor the candidacy, election, or reelection of any member to any elective office within the cooperative. No employee of a cooperative may promote, encourage or publicly favor the candidacy, election, or reelection of any member to any elective office within the cooperative, provided that this shall not be construed to deprive employees, who are also members, of the right to vote in cooperative elections.
Directors and officers of any cooperative who knowingly permit such use of funds or employee activity are subject to a civil fine of not more than five hundred dollars for each offense.
Source: SL 1968, ch 11, §§ 1, 2; SL 1983, ch 15, § 40; SL 1983, ch 331, § 4.
47-17-5. Removal of directors.
Unless the bylaws of a cooperative provide otherwise, a director may be removed upon a majority vote of all members.
Source: SDC 1939, § 11.1123 (4) as enacted by SL 1965, ch 23, § 1.
47-17-6. Vacancies on board of directors.
Unless the bylaws of a cooperative provide otherwise, any vacancy existing in the board of directors may be filled until the next annual meeting by appointment by a majority vote of the directors then in office.
Source: SDC 1939, § 11.1123 (5) as enacted by SL 1965, ch 23, § 1.
47-17-7. Liability of directors for improper distribution of assets.
Directors of cooperatives who negligently or in bad faith vote for any distribution of assets contrary to chapters 47-15 to 47-20, inclusive, or the articles are jointly and severally liable to the cooperative for the value of assets distributed in excess of the amount which could have been distributed without violating said chapters or the articles.
Source: SDC 1939, § 11.1129 as enacted by SL 1965, ch 23, § 1.
47-17-7.1. Directors not liable for distribution in good faith reliance on financial statements or accountant's representation.
A director of a cooperative shall not be liable for any unauthorized dividend or distribution of assets if he relied and acted in good faith upon financial statements of the cooperative represented to him to be correct by the president or the officer of the cooperative having charge of his books of account, or stated in a written report by a certified public accountant failing to reflect the financial condition of the cooperative, nor shall he be so liable if in good faith in determining the amount available for any such dividend or distribution he considered the assets to be of their book value.
Source: SL 1978, ch 338, § 3.
47-17-8. Board meetings.
The board of directors of a cooperative shall provide that board meetings are held upon such notice as is prescribed in the bylaws.
Unless the articles of incorporation or bylaws provide otherwise, a member of the board of directors or any committee designated by the board of directors may participate in a meeting of such board or committee by any means of communication through which the member, delegate, or alternate may communicate and vote at the meeting. Participation by such means of communication constitutes presence or attendance at the meeting.
Source: SDC 1939, § 11.1124 (1) as enacted by SL 1965, ch 23, § 1; SL 1997, ch 257, § 1; SL 2021, ch 194, § 7.
47-17-9. Quorum at meeting.
Unless a greater number is required in the bylaws of a cooperative, a majority of the directors in office shall constitute a quorum for transaction of business. Unless a greater number is required in the bylaws, an act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board.
Source: SDC 1939, § 11.1124 (2) as enacted by SL 1965, ch 23, § 1.
47-17-10. Waiver of notice of meeting.
A signed waiver of notice of a meeting of the board of directors of a cooperative is equivalent to personal notice to the individual signing the waiver. Attendance at a meeting is a waiver of notice of the meeting, except when a director attends the meeting and objects to the transaction of business because the meeting was not lawfully convened.
Source: SDC 1939, § 11.1124 (3) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 9.
47-17-11. Specification of purpose of meeting.
Unless the bylaws of a cooperative provide otherwise, the purposes of any meeting of the board of directors need not be specified in the notice or waiver of notice of such meeting.
Source: SDC 1939, § 11.1124 (4) as enacted by SL 1965, ch 23, § 1.
47-17-12. Directors' executive committee--Powers of committee.
If the bylaws of a cooperative so provide, the board of directors may elect an executive committee to consist of three or more directors. When the board is not in session, such committee shall have all powers of the board except in respect to:
(1) Powers reserved by the board to itself;
(2) Apportionment or distribution of proceeds;
(3) Election of officers;
(4) Filling of vacancies in the board; and
(5) Amendments to the bylaws.
The board may elect other directors as alternates for members of the executive committee.
Source: SDC 1939, § 11.1125 as enacted by SL 1965, ch 23, § 1.
47-17-13. Action without meeting of directors--Written consent.
Any action which may be taken at a meeting of the directors or executive committee of a cooperative may be taken without a meeting if a writing setting forth and approving the action taken shall be signed by all of the directors or executive committee members entitled to vote on such action. In such cases, such consent shall have the same force and effect as if a meeting had been held.
Source: SDC 1939, § 11.1126 as enacted by SL 1965, ch 23, § 1.
47-17-14. Principal officers of cooperative--Election by board of directors.
The principal officers of a cooperative are a president, one or more vice-presidents as prescribed in the bylaws, a secretary, and a treasurer. The principal officers shall be elected annually by the board of directors at a time and manner pursuant to the bylaws. Each principal officer except the secretary and the treasurer shall be a director of the cooperative. The offices of secretary and treasurer may be combined in one individual.
Source: SDC 1939, § 11.1127 (1) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 10.
47-17-15. Other officers.
Any officer of a cooperative other than those mentioned in § 47-17-14 may be chosen by the board of directors or as provided in the bylaws.
Source: SDC 1939, § 11.1127 (2) as enacted by SL 1965, ch 23, § 1.
47-17-16. Authority of officers.
All officers of a cooperative shall have such authority and perform such duties as the bylaws provide, or as the board of directors may determine not inconsistent with the bylaws.
Source: SDC 1939, § 11.1127 (3) as enacted by SL 1965, ch 23, § 1.
47-17-17. Removal of officers.
Any officer of a cooperative may be removed by the board of directors whenever in its judgment the best interests of the cooperative will be served thereby. Election or appointment shall not of itself create contract rights.
Source: SDC 1939, § 11.1127 (3) as enacted by SL 1965, ch 23, § 1.
47-17-18. Compensation of officers.
Unless the bylaws of a cooperative provide otherwise, for prior or future services of any officer or employee, the board of directors may provide reasonable compensation, pension, bonuses, or other benefits to such officer or employee, and pension or other benefits to a member of his family or his beneficiaries. No officer or employee who is a director may take part in the vote on his salary for services rendered the cooperative.
Source: SDC 1939, § 11.1128 (2) as enacted by SL 1965, ch 23, § 1.
47-17-20. Filing false document as felony.
A person who files, or causes to be filed, a document required to be filed by this chapter, which he knows to be materially false in any respect, is guilty of a Class 6 felony.
Source: SL 1983, ch 15, § 39.
47-17-21. Indemnification of directors, officers, agents, and employees against liability under certain circumstances.
Except as otherwise provided in § 47-17-22, a cooperative may indemnify a director, officer, agent, or employee who is a party to a proceeding by reason of being a director, officer, agent, or employee, against liability incurred in the proceeding if the director, officer, agent, or employee:
(1) Acted in good faith; and
(2) Reasonably believed:
(a) In the case of conduct in an official capacity, that the conduct was in the best interests of the cooperative; and
(b) In all other cases, that the conduct was at least not opposed to the best interests of the cooperative; and
(3) In the case of any criminal proceeding, had no reasonable cause to believe the conduct was unlawful.
A cooperative may also, except as provided in § 47-17-22, indemnify a director, officer, agent, or employee who is a party to a proceeding against liability incurred in the proceeding if the director, officer, agent, or employee engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the articles of incorporation.
The conduct of a director, officer, agent, or employee with respect to an employee benefit plan for a purpose the director, officer, agent, or employee reasonably believed to be in the interests of the participants in, and the beneficiaries of, the plan is conduct that satisfies the requirement of subsection (2)(b).
The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director, officer, agent, or employee did not meet the relevant standard of conduct described in this section.
Source: SL 2007, ch 260, § 4; SL 2009, ch 232, § 4.
47-17-22. Circumstances under which directors, officers, agents, and employees may not be indemnified.
Unless otherwise ordered by a court, a cooperative may not indemnify a director, officer, agent, or employee:
(1) In connection with a proceeding by or in the right of the cooperative, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director, officer, agent, or employee has met the relevant standard of conduct pursuant to § 47-17-21; or
(2) In connection with any proceeding with respect to conduct for which the director, officer, agent, or employee was adjudged liable on the basis that the director, officer, agent, or employee received a financial benefit to which the director, officer, agent, or employee was not entitled, whether or not involving action in the official capacity of the director, officer, agent, or employee.
Source: SL 2007, ch 260, § 5; SL 2009, ch 232, § 5.
47-17-23. Indemnification of successful director, officer, agent, or employee for expenses incurred in proceeding.
A cooperative shall indemnify a director, officer, agent, or employee who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director, officer, agent, or employee was a party by reason of being a director, officer, agent, or employee of the cooperative, against reasonable expenses incurred in connection with the proceeding.
Source: SL 2007, ch 260, § 6; SL 2009, ch 232, § 6.
47-18-1
Merger or consolidation--Preparation of plan--Approval of plan.
47-18-2
Articles of merger or consolidation--Contents--Effective date.
47-18-3
Effect of merger or consolidation--Surviving cooperative.
47-18-4
Rights and duties of surviving cooperative.
47-18-5
Amendment of surviving cooperative's articles.
47-18-5.1
Merger or consolidation of cooperative and its subsidiary.
47-18-6
Division of cooperative--Plan of division--Approval of plan.
47-18-7
Manner of approval of plan.
47-18-8
Articles of division--Contents and filing.
47-18-9
Disposal of assets--Authorization by members--Notice and approval.
47-18-10
Mortgaging assets to secure payment of debts.
47-18-11
Voluntary dissolution--Notice and approval.
47-18-12
Liquidation of assets--Distribution of proceeds.
47-18-13
Certificate of dissolution--Contents of certificate.
47-18-14
Filing and recording certificate of dissolution.
47-18-15
Involuntary dissolution--Action by attorney general--Grounds for involuntary
dissolution.
47-18-16
Default cured prior to entry of decree--Abatement of action.
47-18-16.1
Repealed.
47-18-16.2
Petition for reinstatement--Filing fee--Penalty for expired years.
47-18-16.3
Administrative dissolution of cooperative.
47-18-16.4
Notice of grounds for dissolution--Time limit for corrections--Subsequent existence--Authority of agent.
47-18-16.5
Application for reinstatement.
47-18-16.6
Denial of reinstatement--Appeal--Court action.
47-18-17
Liquidation of assets by court--Proper parties to bring action.
47-18-18
Power and authority of court--Appointment of receiver.
47-18-19
Creditors' claims--Notice--Time for filing.
47-18-20
Decree of dissolution--Filing and recording.
47-18-21
Action as staying all other proceedings.
47-18-22
Dismissal of action.
47-18-23
Title to property omitted from final distribution.
47-18-24
Appointment of trustee for property.
47-18-25
Court supervision of trustee.
47-18-26
Assets distributable to unknown persons--Deposit in state treasury--Subsequent
claim--Time limitation.
47-18-27
Dissolution as not impairing preexisting rights--Time limitation.
47-18-28
Filing false document as felony.
47-18-1. Merger or consolidation--Preparation of plan--Approval of plan.
If otherwise lawful, any two or more cooperatives may merge or consolidate under this chapter or under the law of the state where the surviving or new cooperative will exist. Before a cooperative may merge or consolidate with any other cooperative, a written plan of merger or consolidation shall be prepared by the board of directors or by a committee selected by the board or the members for that purpose. Such plan shall set forth all the terms of the merger or consolidation and the proposed effect thereof on all members and stockholders of the cooperative. In case of consolidation, the plan shall also contain the articles of incorporation of the new cooperative. The members shall approve the plan in the manner provided in § 47-15-8 for amendments to the articles.
Source: SDC 1939, § 11.1139 as enacted by SL 1965, ch 23, § 1.
47-18-2. Articles of merger or consolidation--Contents--Effective date.
Articles of merger or consolidation of cooperatives shall set forth the approved plan and such other information as is required by § 47-15-9. They shall be signed by two principal officers of each cooperative merging or consolidating, sealed with the seal of each such cooperative, filed, and recorded as an amendment to the articles. Unless otherwise specified in the plan, the merger, or consolidation is effective when the articles are so recorded.
Source: SDC 1939, § 11.1140 (1) as enacted by SL 1965, ch 23, § 1.
47-18-3. Effect of merger or consolidation--Surviving cooperative.
After the effective date of a merger or consolidation, the cooperatives which are parties to the plan become a single cooperative. In the case of a merger, the surviving cooperative is that cooperative so designated in the plan. In the case of a consolidation, the new cooperative is the cooperative provided for in the plan. The separate existence of all cooperatives which are parties to the plan, except the surviving or new cooperative, then ceases.
Source: SDC 1939, § 11.1140 (2) as enacted by SL 1965, ch 23, § 1.
47-18-4. Rights and duties of surviving cooperative.
After a merger or consolidation, the surviving or new cooperative possesses all the rights and all the property of each of the individual cooperatives, and is responsible for all their obligations. Title to any property is vested in the surviving or new cooperative with no reversion or impairment thereof caused by the merger or consolidation. No right of any creditor may be impaired by the merger or consolidation without his consent.
Source: SDC 1939, § 11.1140 (3) as enacted by SL 1965, ch 23, § 1.
47-18-5. Amendment of surviving cooperative's articles.
The articles of the cooperative surviving a merger are deemed amended to the extent provided in the plan of merger.
Source: SDC 1939, § 11.1140 (4) as enacted by SL 1965, ch 23, § 1.
47-18-5.1. Merger or consolidation of cooperative and its subsidiary.
A cooperative that owns shares of a domestic or foreign subsidiary corporation that carries at least ninety percent of the voting power of each class and series of the outstanding shares of the subsidiary that has voting power may merge the subsidiary into itself or into another such subsidiary without the approval of the board of directors or shareholders of the subsidiary, unless the articles of incorporation of any such corporation otherwise provide, and unless, in the case of a foreign subsidiary, approval by the subsidiary's board of directors or shareholders is required by the laws under which the subsidiary is organized. If approval of a merger by the subsidiary's shareholders is not required, the cooperative shall, within ten days after the effective date of the merger, notify each of the subsidiary's other shareholders, if any, that the merger has become effective. After the effective date of the merger or consolidation, the entities that were parties to the plan become a single cooperative. The procedure used to accomplish the merger or consolidation shall be as otherwise set forth in this chapter for mergers or consolidations of cooperatives. The subsidiary corporation shall be deemed the non-surviving cooperative for purposes of applying this chapter, as the context may require.
Source: SL 2009, ch 231, § 1.
47-18-6. Division of cooperative--Plan of division--Approval of plan.
Any cooperative may divide itself into two or more cooperatives under this chapter. A written plan of division shall be prepared by the board of directors or by a committee selected by the board for that purpose. Such plan shall set forth all the terms of the division and the proposed effect thereof on all members and stockholders of the cooperative. The plan shall also contain the articles of each new cooperative being formed and any amendments to the articles of the remaining cooperative.
Source: SDC 1939, § 11.1141 (1) as enacted by SL 1965, ch 23, § 1.
47-18-7. Manner of approval of plan.
The members of a cooperative shall approve the plan of division in the manner provided in § 47-15-8 for amendments to articles.
Source: SDC 1939, § 11.1141 (2) as enacted by SL 1965, ch 23, § 1.
47-18-8. Articles of division--Contents and filing.
Articles of division of a cooperative shall set forth the approved plan and such other information as required by § 47-15-9 and shall be filed and recorded as an amendment to the articles. Each part of the plan which contains the articles of a new cooperative shall be separately filed and recorded as articles of incorporation for such new cooperative.
Source: SDC 1939, § 11.1141 (3) as enacted by SL 1965, ch 23, § 1.
47-18-9. Disposal of assets--Authorization by members--Notice and approval.
Except as authorized by the members, the board of directors of a cooperative may not dispose of all or substantially all of the cooperative's fixed assets. At any meeting the members may authorize the disposition of all or substantially all of a cooperative's fixed assets if:
(1) Notice that such disposition will be considered at such meeting has been given to all persons entitled to vote thereon; and
(2) Such disposition has been approved by three-fourths of those voting at the meeting.
Source: SDC 1939, § 11.1130 (1) as enacted by SL 1965, ch 23, § 1.
47-18-10. Mortgaging assets to secure payment of debts.
Unless the bylaws of a cooperative provide otherwise, the board of directors may secure payment of a cooperative's debts by mortgaging the cooperative's rights, privileges, authority and franchises, revenues, and other property.
Source: SDC 1939, § 11.1130 (2) as enacted by SL 1965, ch 23, § 1.
47-18-11. Voluntary dissolution--Notice and approval.
At any member meeting of a cooperative, whether or not a quorum is present, a cooperative may dissolve if:
(1) Notice that a resolution for dissolution will be considered and acted upon has been given to all members and to all other persons entitled by the articles to vote thereon pursuant to resolution adopted by the board of directors, and
(2) Such resolution is adopted by members holding three-fourths of the member votes cast thereon. The articles may permit stockholders to vote on the resolution for dissolution.
Source: SDC 1939, § 11.1143 (1) as enacted by SL 1965, ch 23, § 1.
47-18-12. Liquidation of assets--Distribution of proceeds.
When the resolution for dissolution of a cooperative is adopted, either a committee designated by the resolution or the board of directors shall liquidate all assets and pay the net proceeds of such liquidation available for distribution to all persons entitled to the same by law, the articles and the bylaws.
Source: SDC 1939, § 11.1143 (2) as enacted by SL 1965, ch 23, § 1.
47-18-13. Certificate of dissolution--Contents of certificate.
A certificate of dissolution of a cooperative shall be signed by a majority of directors or of committee members and shall be sealed with the cooperative's seal, if any, stating:
(1) The name of the cooperative;
(2) The name and address of each director or committee member;
(3) The date of adoption of the resolution of dissolution;
(4) A statement that all liquidation activities have been completed and that there are no suits pending against the cooperative.
Source: SDC 1939, § 11.1143 (3) as enacted by SL 1965, ch 23, § 1.
47-18-14. Filing and recording certificate of dissolution.
The certificate of dissolution required by § 47-18-13 shall be filed and recorded as provided in § 47-15-9 and thereupon the existence of the cooperative ceases.
Source: SDC 1939, § 11.1143 (4) as enacted by SL 1965, ch 23, § 1.
47-18-15. Involuntary dissolution--Action by attorney general--Grounds for involuntary dissolution.
A cooperative may be dissolved involuntarily by a decree of the circuit court where the principal office or registered agent is located in an action commenced by the attorney general when it is established that:
(1) The cooperative's certificate of incorporation was procured through fraud; or
(2) The cooperative has continued to exceed or abuse the authority conferred upon it by chapters 47-15 to 47-20, inclusive; or
(3) The cooperative failed to comply with a court order for the production of books, records, or other documents of the cooperative as provided in § 47-20-3.
Source: SDC 1939, § 11.1144 (1) as enacted by SL 1965, ch 23, § 1; SL 1989, ch 390, § 5.
47-18-16. Default cured prior to entry of decree--Abatement of action.
If the cooperative cures a default under subdivision 47-18-15(3) prior to entry of the court's final decree in an action brought under § 47-18-15 and pays all penalties and court costs that have accrued, the cause of action with respect to the default so cured will abate.
Source: SDC 1939, § 11.1144 (2) as enacted by SL 1965, ch 23, § 1; SL 1989, ch 390, § 6.
47-18-16.2. Petition for reinstatement--Filing fee--Penalty for expired years.
A cooperative whose corporate charter existence has been revoked as provided by § 47-18-16.1 may petition for reinstatement as a corporation prior to July 1, 1980 on forms provided by the secretary of state. The petition shall be executed on behalf of the corporation by its president or secretary. The petition shall be filed with the secretary of state. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document. Such renewal of corporate existence shall be made on forms prescribed and furnished by the secretary of state. Filing fee shall be as stated in § 47-20-8. In addition to the above fee, a penalty of twenty dollars per year for the period of duration which its corporate existence has been expired shall be charged.
Source: SL 1976, ch 288, § 3; SL 1977, ch 381, § 7; SL 2012, ch 222, § 3.
47-18-16.3. Administrative dissolution of cooperative.
The secretary of state may commence a proceeding under § 47-18-16.4 to administratively dissolve a cooperative if:
(1) The cooperative does not pay within sixty days after they are due any fees or penalties imposed by chapters 47-15 to 47-20, inclusive, or other law;
(2) The cooperative does not deliver its annual report to the secretary of state within sixty days after it is due;
(3) The cooperative is without a registered agent or registered office in this state for sixty days or more;
(4) The cooperative does not notify the secretary of state within sixty days that its registered agent has been changed or that its registered agent has resigned; or
(5) The cooperative's period of duration stated in its articles of incorporation expires.
Source: SL 1989, ch 390, § 7; SL 2008, ch 275, § 58.
47-18-16.4. Notice of grounds for dissolution--Time limit for corrections--Subsequent existence--Authority of agent.
If the secretary of state determines that one or more grounds exist under § 47-18-16.3 for dissolving a cooperative, he shall serve the cooperative with written notice of his determination under § 47-15-22. If the cooperative does not correct each ground for dissolution or demonstrate to the reasonable satisfaction of the secretary of state that each ground determined by the secretary of state does not exist within sixty days after service of the notice is perfected, the secretary of state shall administratively dissolve the cooperative by signing a certificate of dissolution that recites the ground or grounds for dissolution and its effective date. The secretary of state shall file the original of the certificate and serve a copy on the cooperative under § 47-15-22. A cooperative administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business and affairs under this chapter. Administrative dissolution of a cooperative does not terminate the authority of its registered agent.
Source: SL 1989, ch 390, § 8.
47-18-16.5. Application for reinstatement.
Any cooperative administratively dissolved under § 47-18-16.4 may apply to the secretary of state for reinstatement within two years after the effective date of dissolution. The application shall:
(1) Recite the name of the cooperative and the effective date of its administrative dissolution; and
(2) State that the ground or grounds for dissolution either did not exist or have been eliminated.
If the secretary of state determines that the application contains the information required and that the information is correct, he shall cancel the certificate of dissolution and prepare an original and one copy of a certificate of reinstatement that recites his determination and the effective date of reinstatement, file the original of the certificate, and serve the copy on the cooperative under § 47-15-22. When the reinstatement is effective, it relates back to and takes effect as of the effective date of the administrative dissolution and the cooperative resumes carrying on its business as if the administrative dissolution had never occurred.
Source: SL 1989, ch 390, § 9.
47-18-16.6. Denial of reinstatement--Appeal--Court action.
If the secretary of state denies a cooperative's application for reinstatement following administrative dissolution, he shall serve the corporation under § 47-15-22 with a written notice that explains the reason or reasons for denial. The cooperative may appeal the denial of reinstatement to the circuit court wherein its registered office is located within thirty days after service of the notice of denial is perfected. The cooperative appeals by petitioning the court to set aside the dissolution and attaching to the petition copies of the secretary of state's certificate of dissolution, the cooperative's application for reinstatement, and the secretary of state's notice of denial. The court may summarily order the secretary of state to reinstate the dissolved cooperative or may take other action the court considers appropriate. The court's final decision may be appealed as in any other civil proceedings.
Source: SL 1989, ch 390, § 10.
47-18-17. Liquidation of assets by court--Proper parties to bring action.
The circuit court for the county where the principal office or registered agent of the cooperative is located may liquidate the assets and business of such cooperative when an action for that purpose is filed by or on behalf of:
(1) A majority of the designated committee or directors when a resolution is adopted pursuant to § 47-18-11;
(2) The attorney general when a decree of dissolution has been obtained pursuant to § 47-18-15;
(3) A judgment creditor whose execution is returned unsatisfied when it is established that the cooperative is unable to pay its debts as they become due in the usual course of its business;
(4) Any creditor when it is established that the cooperative is dissolving pursuant to §§ 47-18-11 to 47-18-14, inclusive, or §§ 47-18-16.3 to 47-18-16.6, inclusive, without making adequate provision for payment of all creditors.
Source: SDC 1939, § 11.1145 (1) as enacted by SL 1965, ch 23, § 1; SL 1989, ch 390, § 11.
47-18-18. Power and authority of court--Appointment of receiver.
Upon the filing of any action under § 47-18-17, the court acquires exclusive jurisdiction of all matter pertaining to the liquidation of such cooperative and the distribution of its assets to persons entitled thereto and may determine and order paid the expense of such liquidation proceedings. The court has power to issue injunctions, appoint receivers with such duties and powers as the court may direct, and take any other action necessary to the cooperative's liquidation. A receiver appointed in such proceeding has authority to sue and be sued as receiver for the cooperative.
Source: SDC 1939, § 11.1145 (2) as enacted by SL 1965, ch 23, § 1.
47-18-19. Creditors' claims--Notice--Time for filing.
The court having jurisdiction of an action under § 47-18-17 shall fix the time within which creditors may file claims and shall prescribe the notice to be given to interested persons. Creditors who do not file their claims within the time limit may not participate in any distribution thereafter made, unless the court upon good cause shown extends their time for filing.
Source: SDC 1939, § 11.1145 (3) as enacted by SL 1965, ch 23, § 1.
47-18-20. Decree of dissolution--Filing and recording.
When the court approves the final distribution of a cooperative's assets, it shall enter a decree in the nature of a certificate of dissolution which shall be filed and recorded in the secretary of state's office.
Source: SDC 1939, § 11.1145 (4) as enacted by SL 1965, ch 23, § 1.
47-18-21. Action as staying all other proceedings.
The filing of an action under § 47-18-17 operates as a stay of all other proceedings against the cooperative until such time as the court issues its final judgment or directs otherwise.
Source: SDC 1939, § 11.1145 (5) as enacted by SL 1965, ch 23, § 1.
47-18-22. Dismissal of action.
The court having jurisdiction of an action brought under § 47-18-17 upon proper cause shown may at any time order the proceedings dismissed upon such terms and conditions as the court may impose.
Source: SDC 1939, § 11.1145 (6) as enacted by SL 1965, ch 23, § 1.
47-18-23. Title to property omitted from final distribution.
Upon the filing and recording of the certificate or decree of dissolution of a cooperative, title to any property omitted from the final distribution vests in the surviving directors or committee members who signed the certificate, as trustees. They have all the powers of the cooperative with respect to such property and shall distribute the property or its proceeds to the persons beneficially entitled thereto.
Source: SDC 1939, § 11.1146 (1) as enacted by SL 1965, ch 23, § 1.
47-18-24. Appointment of trustee for property.
When no trustee mentioned in § 47-18-23 can be found, the circuit court for the county where the property is located has power to appoint trustees upon application of any person having an interest in such property or its disposition.
Source: SDC 1939, § 11.1146 (2) as enacted by SL 1965, ch 23, § 1.
47-18-25. Court supervision of trustee.
Any trustee mentioned in § 47-18-23 may at any time make application to the proper circuit court for supervision of liquidation pursuant to §§ 47-18-17 to 47-18-22, inclusive.
Source: SDC 1939, § 11.1146 (3) as enacted by SL 1965, ch 23, § 1.
47-18-26. Assets distributable to unknown persons--Deposit in state treasury--Subsequent claim--Time limitation.
Upon liquidation of a cooperative, the assets distributable to persons who are unknown or cannot be found may be reduced to cash and deposited with the state treasury. If claimed within ten years thereafter such funds shall be paid without interest to persons entitled thereto upon proof satisfactory to the state treasurer of their right thereto. If not claimed within ten years, such funds shall become the property of the state to be used in furthering agriculture.
Source: SDC 1939, § 11.1147 as enacted by SL 1965, ch 23, § 1.
47-18-27. Dissolution as not impairing preexisting rights--Time limitation.
Except as provided in §§ 47-18-17 to 47-18-22, inclusive, the dissolution of a cooperative does not impair any remedy available to or against such cooperative, its directors, stockholders, or members for any claim existing or any liability incurred prior to such dissolution if a proceeding thereon is commenced within two years after the date of recording the certificate or decree of dissolution.
Source: SDC 1939, § 11.1148 as enacted by SL 1965, ch 23, § 1.
47-18-28. Filing false document as felony.
A person who files, or causes to be filed, a document required to be filed by this chapter, which he knows to be materially false in any respect, is guilty of a Class 6 felony.
Source: SL 1983, ch 15, § 41.
47-19-1
Authorization to do business locally--Certificate of authority.
47-19-2
Application for certificate--Contents--Filing.
47-19-3
Rights conferred by certificate.
47-19-4
Filing false document as felony.
47-19-1. Authorization to do business locally--Certificate of authority.
A foreign cooperative is authorized to do business in this state upon issuance of a certificate of authority to that effect by the secretary of state.
Source: SDC 1939, § 11.1149 as enacted by SL 1965, ch 23, § 1.
47-19-2. Application for certificate--Contents--Filing.
In order to procure the certificate required by § 47-19-1, a foreign cooperative shall make application therefor to the secretary of state, which application shall set forth:
(1) The name of the cooperative and the state or country under whose laws it is incorporated;
(2) The date of incorporation and the period of duration of the cooperative;
(3) The street address of the principal office of the cooperative in the state or country under the laws of which it is incorporated;
(4) The information required by § 59-11-6;
(5) The purpose or purposes of the cooperative which it proposes to pursue in the transaction of business in this state;
(6) The names and respective addresses of the directors and officers of the cooperative;
(7) A statement of its aggregate number of members, and of the number of members by classes, if any;
(8) A statement of the aggregate number of authorized and issued capital stock itemized by classes, par value of stock, stock without par value, and series, if any, within a class; and
(9) Such additional information as may be necessary in order to enable the secretary of state to determine whether such cooperative is entitled to a certificate of authority to transact business in this state and to determine and assess fees payable.
Such application shall be made on forms prescribed and furnished by the secretary of state and an original shall be executed by the chairman of the board of directors, by its president or by another officer. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document.
Source: SDC 1939, § 11.1149 as enacted by SL 1965, ch 23, § 1; SL 1989, ch 390, § 12; SL 1990, ch 367, § 12; SL 2008, ch 275, § 59; SL 2012, ch 222, § 4.
47-19-3. Rights conferred by certificate.
Upon issuance of the secretary of state's certificate of authority a foreign cooperative is entitled to all rights, exemptions and privileges of a cooperative organized for the same purposes under the laws of this state.
Source: SDC 1939, § 11.1150 as enacted by SL 1965, ch 23, § 1.
47-19-4. Filing false document as felony.
A person who files, or causes to be filed, a document required to be filed by this chapter, which he knows to be materially false in any respect, is guilty of a Class 6 felony.
Source: SL 1983, ch 15, § 42.
47-20-1
Books and records required--List of members and stockholders.
47-20-2
Inspection of books and records.
47-20-3
Court order for production of books and records--Violation--Penalty.
47-20-4
Annual financial report to stockholders or members--Contents of report.
47-20-5, 47-20-6. Repealed.
47-20-7
Delivery of annual report to secretary of state--Fee--Returning improper report.
47-20-8 to 47-20-9. Repealed.
47-20-10
Filing and receipt of documents.
47-20-11
Recordation of documents.
47-20-12
Repealed.
47-20-12.1
Filing false document as felony.
47-20-13
Fees collectible by secretary of state.
47-20-14
Fees collectible from foreign corporations.
47-20-15
Registered office required.
47-20-16
Registered agent required.
47-20-17
Change of registered office or registered agent--Procedure.
47-20-1. Books and records required--List of members and stockholders.
A cooperative shall keep correct and complete books and records of account, and shall also keep minutes of the proceedings of meetings of its members, board, and executive committee. The cooperative shall keep at its principal office records of the names and addresses of all members and stockholders with the amount of stock held by each, and of ownership of equity interests.
Source: SDC 1939, § 11.1133 (1) as enacted by SL 1965, ch 23, § 1.
47-20-2. Inspection of books and records.
At any reasonable time, any member or stockholder of a cooperative, or his agent or attorney, upon written notice stating the purposes thereof, delivered or sent to the cooperative at least one week in advance, may examine for a proper purpose any books or records pertinent to the purpose specified in such notice.
Source: SDC 1939, § 11.1133 (1) as enacted by SL 1965, ch 23, § 1.
47-20-3. Court order for production of books and records--Violation--Penalty.
In any proceedings, or upon petition for such purpose any court of record may, upon notice and after hearing at which proper cause is shown, and upon suitable terms, order any of the cooperative's books or records, and any other pertinent documents in its possession, or duly authenticated copies thereof, to be brought within this state. Such documents shall be kept at such place and for such time and purposes as the order designates. Any cooperative failing to comply with the order is subject to dissolution, and its directors and officers are liable for contempt of court.
Source: SDC 1939, § 11.1133 (2) as enacted by SL 1965, ch 23, § 1.
47-20-4. Annual financial report to stockholders or members--Contents of report.
Within nine months after the close of its fiscal year, each cooperative organized under chapters 47-15 to 47-20, inclusive, shall mail or electronically transmit to each of its stockholders or members, at the stockholder's or member's last known address, a financial report signed by a principal officer, managing agent, or a public accountant, showing its assets and liabilities and proceeds or loss for the preceding fiscal year.
Source: SDC 1939, § 11.1134 (5) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 11.
47-20-7. Delivery of annual report to secretary of state--Fee--Returning improper report.
The annual report shall be delivered to the secretary of state pursuant to §§ 59-11-24 to 59-11-26, inclusive. A fee of thirty dollars shall be paid to the secretary of state for filing the report. If the report does not conform to requirements, it shall be returned to the cooperative for necessary corrections.
Source: SDC 1939, § 11.1134 (3) as enacted by SL 1965, ch 23, § 1; SL 1966, ch 16, § 2; SL 1986, ch 383, § 6; SL 2003, ch 8, § 15; SL 2008, ch 275, § 61.
47-20-10. Filing and receipt of documents.
When any document is to be filed and recorded under chapters 47-15 to 47-20, inclusive, an original and one exact or conforming copy of the document shall be delivered to the secretary of state. He shall stamp on both the original and the copy the date of filing and return the copy to the cooperative with his certificate of filing.
Source: SDC 1939, § 11.1151 (1) as enacted by SL 1965, ch 23, § 1; SL 1989, ch 390, § 15.
47-20-11. Recordation of documents.
Any document referred to in chapters 47-15 to 47-20, inclusive, is recorded when left for record in the proper office with all required fees paid.
Source: SDC 1939, § 11.1151 (2) as enacted by SL 1965, ch 23, § 1.
47-20-12.1. Filing false document as felony.
A person who files, or causes to be filed, a document required to be filed by this chapter, which he knows to be materially false in any respect, is guilty of a Class 6 felony.
Source: SL 1983, ch 15, § 43.
47-20-13. Fees collectible by secretary of state.
The secretary of state shall charge and collect the fees provided by §§ 47-1A-122 and 47-1A-122.1 for filing the instruments and issuing the certificates relating to domestic corporations therein provided. The fees applicable to amended articles of incorporation shall apply to restated articles of incorporation and fees applicable to the articles of incorporation shall apply to articles of merger or consolidation.
Source: SDC 1939, § 11.1152 as enacted by SL 1965, ch 23, § 1; SL 1966, ch 16, § 4; SL 1967, ch 12; SL 2005, ch 202, § 5.
47-20-14. Fees collectible from foreign corporations.
The secretary of state shall charge and collect the fees provided by §§ 47-1A-122 and 47-1A-122.1 for filing instruments and issuing certificates relating to foreign corporations.
Source: SDC 1939, § 11.1152 as enacted by SL 1965, ch 23, § 1; SL 1966, ch 16, § 4; SL 1967, ch 12; SL 2005, ch 202, § 6.
47-20-15. Registered office required.
Each corporation shall have and continuously maintain in this state a registered office which may be, but need not be, the same as its place of business.
Source: SL 1977, ch 381, § 2.
47-20-16. Registered agent required.
Each corporation shall have and continuously maintain in this state a registered agent, which agent may be either an individual resident in this state whose business office is identical with such registered office, or a domestic corporation, or a foreign corporation authorized to do or engage in any business in this state, or a domestic limited liability company, or a domestic limited liability partnership, having a business office identical with such registered office.
Source: SL 1977, ch 381, § 3; SL 2006, ch 228, § 4.
47-20-17. Change of registered office or registered agent--Procedure.
A corporation may change its registered office or change its registered agent, or both, upon filing in the Office of the Secretary of State a statement setting forth:
(1) The name of the corporation;
(2) The street address, or a statement that there is no street address, of its current registered office;
(3) If the address of its current registered office is to be changed, the street address, or a statement that there is no street address, of its new registered office;
(4) The name of its current registered agent;
(5) If its current registered agent is to be changed, the name of the new registered agent and the new agent's written consent to the appointment. Such consent may be given by electronic signature pursuant to chapter 53-12 ;
(6) That the address of its registered office and the address of the business office of its registered agent, as changed, will be identical; and
(7) That such change was authorized by resolution duly adopted by the board of directors.
Source: SL 1977, ch 381, § 4; SL 1989, ch 390, § 16; SL 2004, ch 280, § 8.
47-21-1
Definitions.
47-21-2
Purpose and authority.
47-21-3
Name of cooperative--Exceptions.
47-21-4
Exclusive use of particular words.
47-21-5
Requirement that name be distinct.
47-21-6
Incorporators--Requisites and qualifications.
47-21-7
Articles of incorporation--Unnecessary recitals--Signing of articles.
47-21-8
Amendment of articles--Procedure--Two-thirds vote required.
47-21-9
Required recitals in amendment--Affidavit of compliance.
47-21-10
Board of directors--Bylaws--Meetings by teleconference.
47-21-11
Compensation of directors.
47-21-12
First directors--Term of office.
47-21-13
Election of directors--Maximum term of office.
47-21-14
Quorum of directors.
47-21-15
Husband and wife as directors.
47-21-16
Powers of board of directors.
47-21-17
Directors not disqualified from acknowledging instruments.
47-21-18
Adoption of first bylaws by directors--Subsequent bylaws adopted by members.
47-21-19
Provisions of bylaws.
47-21-20
Bylaw provision dividing area served into districts--Election of directors by districts--District meetings--Proxy voting prohibited.
47-21-21
Officers--Election and qualifications--Removal of officers.
47-21-21.1
Repealed.
47-21-21.2
Indemnification of directors, officers, agents, and employees against liability under
certain circumstances.
47-21-21.3
Circumstances under which directors, officers, agents, and employees may not be
indemnified.
47-21-21.4
Indemnification of successful director, officer, agent, or employee for expenses
incurred in proceeding.
47-21-22
Conversion of corporation into cooperative.
47-21-23
Submission of conversion proposition to stockholders--Notice of meeting.
47-21-24
Two-thirds vote required for approval--Articles of conversion--Contents of articles--Affidavit of compliance.
47-21-25
Consolidating cooperatives.
47-21-26
Submission of consolidation proposition to members--Notice of meeting.
47-21-27
Majority vote required for approval--Articles of consolidation--Contents of articles--Affidavit of compliance.
47-21-28
Merging cooperatives.
47-21-29
Submission of merger proposition to members--Notice of meeting.
47-21-30
Majority vote required for approval--Articles of merger--Contents of articles--Affidavit of compliance.
47-21-31
Articles of consolidation as governing consolidated cooperative--Articles of
surviving cooperative as governing merged cooperative.
47-21-32
Transfer of rights and obligations to surviving cooperative.
47-21-33
Liabilities after consolidation or merger--Preexisting claims--Substitution of parties.
47-21-34
Rights of creditors and lienors unaffected by consolidation or merger.
47-21-35
Dissolution before commencement of business--Articles of dissolution--Majority
approval required--Contents of articles.
47-21-36
Dissolution after commencement of business.
47-21-37
Submission of dissolution proposition to members--Majority vote required.
47-21-38
Certificate of election to dissolve--Contents of certificate--Submission to secretary
of state.
47-21-39
Cessation of business--Continuance of corporate existence--Notice to creditors--Publication.
47-21-40
Liquidation of affairs of cooperative--Distribution of assets--Rights of patrons--Rights of members--Distribution of remains.
47-21-41
Articles of dissolution--Contents of articles.
47-21-42
Delivery of articles to secretary of state--Fees--Effective date of action--Certificates
of election to dissolve.
47-21-43
Fee schedule of secretary of state.
47-21-44
Encumbering cooperative property in favor of governmental agency permitted.
47-21-45
Circumstances under which property may be transferred--Majority vote required--Transfer to security holders.
47-21-46
Place of recordation of encumbrance.
47-21-46.1
Filing and recording of trust deed or mortgage in Office of Secretary of State--Effect.
47-21-46.2
Filing required under chapter 57A-9 to be maintained in Office of Secretary of State--Contents of financing statement--Termination of effectiveness.
47-21-46.3
Filing of mortgage or trust deed covering less than fee simple interest--Effect--Termination--Sufficiency of description.
47-21-46.4
Applicability of other laws--Single filing--Index.
47-21-46.5
Assignment or discharge of trust deed or mortgage.
47-21-46.6
Filing fee.
47-21-47
After-acquired property as subject to encumbrance--Recordation as notice.
47-21-48
Encumbrance against personal property--Continuance of lien without refiling.
47-21-49
Members of cooperatives--Qualifications.
47-21-50
Use of electric energy required--Failure to make energy available.
47-21-51
Husband and wife as members--Membership not transferable--Additional
qualifications of members.
47-21-52
Liability of members for acts of cooperative.
47-21-53
Annual members' meeting.
47-21-54
Special meetings for members--Procedure for calling.
47-21-55
Notice of meeting--Contents of notice--Method of giving notice.
47-21-56
Quorum for members' meetings--Quorum for district meeting--Adjournment for
failure of quorum.
47-21-57
Voting by members--Spouse voting for member--Mail voting.
47-21-58
Waiver of notice--Attendance as waiver--Exceptions.
47-21-59
Powers of cooperative--Capacity to sue and be sued.
47-21-60
Powers of cooperative--Perpetual existence.
47-21-61
Powers of cooperative--Corporate seal.
47-21-62
Powers of cooperative--Generation and distribution of electric energy.
47-21-63
Powers of cooperative--Dealing in property and equipment.
47-21-64
Powers of cooperative--Franchises, licenses and easements.
47-21-65
Powers of cooperative--Borrowing--Security for borrowing.
47-21-66
Powers of cooperative--Construction and maintenance of facilities on public lands.
47-21-67
Powers of cooperative--Eminent domain.
47-21-68
Powers of cooperative--Joining other cooperatives.
47-21-69
Powers of cooperative--Extraterritorial powers.
47-21-1. Definitions.
Terms used in this chapter mean:
(1) "Cooperative," any corporation organized under this chapter or which becomes subject to this chapter in the manner hereinafter provided;
(2) "Person," any natural person, firm, association, corporation, limited liability company, business trust, partnership, federal agency, state or political subdivision, or agency thereof, or any body politic;
(3) "Rural area," any area certified to a rural electric cooperative under the provisions of chapter 49-34A, or an area in which it is permitted to serve under the provisions of chapter 49-34A.
Source: SL 1947, ch 33, § 3; SDC Supp 1960, § 11.2203; SL 1963, ch 33; SL 1965, ch 254, § 2; SL 1969, ch 231, § 63; SL 1970, ch 261, § 2; SL 1975, ch 283, § 58; SL 1994, ch 351, § 122.
47-21-2. Purpose and authority.
Cooperatives may be organized under this chapter for any lawful purpose except banking, securities, and insurance. Cooperatives proposing to provide local exchange telephone service in a rural telephone company's service area may do so only in compliance with the procedures contained in section 251(f) of the Communication Act of 1934, as amended by the Telecommunications Act of 1996.
Source: SL 1947, ch 33, § 2; SDC Supp 1960, § 11.2202; SL 1989, ch 392, § 1; SL 1994, ch 349, § 1; SL 1997, ch 258, § 1.
47-21-3. Name of cooperative--Exceptions.
The name of a cooperative shall include the words "electric" and "cooperative," and the abbreviation "Inc.," unless in an affidavit made by its president or vice-president, and filed with the secretary of state, or in an affidavit made by a person signing articles of incorporation, consolidation, merger, or conversion, which relate to such cooperative, and filed, together with any such articles, with the secretary of state, it shall appear that the cooperative desires to do business in another state and is or would be precluded therefrom by reason of the inclusion of such words or either thereof in its name; provided, however, that this section shall not apply to any corporation which becomes subject to this chapter by complying with the provisions of §§ 47-21-22 to 47-21-24, inclusive, or § 47-21-74 and which elects to retain a corporate name which does not comply with this section.
Source: SL 1947, ch 33, § 5; SDC Supp 1960, § 11.2205.
47-21-4. Exclusive use of particular words.
Only a cooperative or corporation doing business in this state pursuant to this chapter shall use both the words "electric" and "cooperative" in its name.
Source: SL 1947, ch 33, § 5; SDC Supp 1960, § 11.2205.
47-21-5. Requirement that name be distinct.
The name of a cooperative shall be distinct from the name of any other cooperative or corporation organized under the laws of, or authorized to do business in this state.
Source: SL 1947, ch 33, § 5; SDC Supp 1960, § 11.2205.
47-21-6. Incorporators--Requisites and qualifications.
Five or more natural persons, or two or more cooperatives, may organize a cooperative in the manner hereinafter provided.
Source: SL 1947, ch 33, § 6; SDC Supp 1960, § 11.2206.
47-21-7. Articles of incorporation--Unnecessary recitals--Signing of articles.
Articles of incorporation of a cooperative shall recite that they are executed pursuant to this chapter and shall state:
(1) The name of the cooperative;
(2) The address of its principal office;
(3) The names and addresses of the incorporators; and
(4) The names and addresses of its directors;
and may contain any provisions not inconsistent with this chapter deemed necessary or advisable for the conduct of its business.
It shall not be necessary to recite in the articles of incorporation of a cooperative the purpose for which it is organized or any of its corporate powers.
Such articles shall be signed by each incorporator and acknowledged by at least two of the incorporators, or on their behalf, if they are cooperatives.
Source: SL 1947, ch 33, § 7; SDC Supp 1960, § 11.2207.
47-21-8. Amendment of articles--Procedure--Two-thirds vote required.
A cooperative may amend its articles of incorporation by complying with the requirements of this section and § 47-21-9, provided, however, that a change of location of principal office may be effected in the manner set forth in § 47-21-76. The proposed amendment shall be presented to a meeting of the members, the notice of which shall set forth or have attached thereto the proposed amendment. If the proposed amendment, with any changes, is approved by the affirmative vote of not less than two-thirds of those members voting thereon at such meeting, articles of amendment shall be executed and acknowledged on behalf of the cooperative by its president or vice-president and its seal shall be affixed thereto and attested by its secretary.
Source: SL 1947, ch 33, § 15; SDC Supp 1960, § 11.2215.
47-21-9. Required recitals in amendment--Affidavit of compliance.
The articles of amendment required by § 47-21-8 shall recite that they are executed pursuant to this chapter and shall state:
(1) The name of the cooperative;
(2) The address of its principal office; and
(3) The amendment to its articles of incorporation.
The president or vice-president executing such articles of amendment shall make and annex thereto an affidavit stating that the provisions of § 47-21-8 in respect of the amendment set forth in such articles were duly complied with.
Source: SL 1947, ch 33, § 15; SDC Supp 1960, § 11.2215.
47-21-10. Board of directors--Bylaws--Meetings by teleconference.
The business of a cooperative shall be managed by a board of not less than five directors, each of whom shall be a member of the cooperative or of another cooperative or corporation, which is a member thereof. If the member is an entity other than a natural person, the cooperative may provide in its bylaws for the election of a representative of the entity to qualify as a director. The bylaws shall prescribe the number of directors, their qualifications, other than those prescribed in this chapter, the manner of holding meetings of the board of directors and of electing successors to directors who shall resign, die, or otherwise be incapable of acting. The bylaws may also provide for the removal of directors from office and for the election of their successors.
Unless restricted by the articles of incorporation or bylaws, members of the board of directors or any committee designated by the board of directors may participate in a meeting of such board or committee by means of teleconference or similar communications equipment which allows all persons participating in the meeting to hear each other at the same time. Participation by a board or committee member in a teleconference constitutes presence in person at a meeting.
Source: SL 1947, ch 33, § 12; SDC Supp 1960, § 11.2212 (1); SL 1997, ch 257, § 2; SL 2001, ch 246, § 1.
47-21-11. Compensation of directors.
Unless the bylaws of a cooperative provide otherwise, only the members may establish compensation or other benefits for a director, not available generally to officers and employees, for services as director.
Source: SL 1947, ch 33, § 12; SDC Supp 1960, § 11.2212 (1); SL 1985, ch 370; SL 1990, ch 368.
47-21-12. First directors--Term of office.
The directors of a cooperative named in any articles of incorporation, consolidation, merger, or conversion, shall hold office for their terms and until their successors are elected and qualify.
Source: SL 1947, ch 33, § 12; SDC Supp 1960, § 11.2212 (2).
47-21-13. Election of directors--Maximum term of office.
Directors shall be elected at the annual meeting of the cooperative unless the bylaws of the cooperative provide for the election of directors by district. In case of a failure to hold the annual meeting, as specified in the bylaws, directors shall be elected at a special meeting called for that purpose. Directors shall hold office for such term as the bylaws prescribe, which term may not exceed three years, or until their successors are elected, are qualified and have entered upon the discharge of their duties.
Source: SL 1947, ch 33, § 12; SDC Supp 1960, § 11.2212 (2); SL 1993, ch 338.
47-21-14. Quorum of directors.
A majority of the board of directors of a cooperative shall constitute a quorum.
Source: SL 1947, ch 33, § 12; SDC Supp 1960, § 11.2212 (3).
47-21-15. Husband and wife as directors.
If a husband and wife hold a joint membership in a cooperative, either one, but not both, may be elected a director.
Source: SL 1947, ch 33, § 12; SDC Supp 1960, § 11.2212 (4).
47-21-16. Powers of board of directors.
The board of directors may exercise all of the powers of a cooperative not conferred upon the members by this chapter or its articles of incorporation or bylaws.
Source: SL 1947, ch 33, § 12; SDC Supp 1960, § 11.2212 (5).
47-21-17. Directors not disqualified from acknowledging instruments.
No person who is authorized to take acknowledgments under the laws of this state shall be disqualified from taking acknowledgments of instruments executed in favor of a cooperative or to which it is a party, by reason of being an officer, director, employee, or member of such cooperative.
Source: SL 1947, ch 33, § 30; SDC Supp 1960, § 11.2230.
47-21-18. Adoption of first bylaws by directors--Subsequent bylaws adopted by members.
The board of directors shall adopt the first bylaws of a cooperative to be adopted following an incorporation, conversion, merger, or consolidation. Thereafter the members shall adopt, amend, or repeal the bylaws by the affirmative vote of a majority of those members voting thereon at a meeting of the members.
Source: SL 1947, ch 33, § 8; SDC Supp 1960, § 11.2208.
47-21-19. Provisions of bylaws.
The bylaws of a cooperative shall set forth the rights and duties of members and directors and may contain other provisions for the regulation and management of the affairs of the cooperative not inconsistent with this chapter or with its articles of incorporation. The bylaws of a cooperative may contain any provisions for the regulation and maintenance of the affairs of the cooperative not inconsistent with law or the articles of incorporation.
Source: SL 1947, ch 33, § 8; SDC Supp 1960, § 11.2208; SL 2000, ch 220, § 4.
47-21-20. Bylaw provision dividing area served into districts--Election of directors by districts--District meetings--Proxy voting prohibited.
The bylaws may provide for the division of the territory served or to be served by a cooperative into two or more districts for any purpose, including, without limitation, the nomination and election of directors and the election and functioning of district delegates. In such case the bylaws shall prescribe the boundaries of the district, or the manner of establishing such boundaries, and the manner of changing such boundaries, and the manner in which such districts shall function. No member at any district meeting and no district delegate at any meeting shall vote by proxy or by mail. The bylaws may provide that directors may be elected at district director election meetings held for said purpose.
Source: SL 1947, ch 33, § 13; SDC Supp 1960, § 11.2213; SL 2000, ch 220, § 6.
47-21-21. Officers--Election and qualifications--Removal of officers.
The officers of a cooperative shall consist of a president, vice-president, secretary, and treasurer, who shall be elected annually by and from the board of directors. When a person holding any such offices ceases to be a director he shall cease to hold such office. The offices of secretary and of treasurer may be held by the same person. The board of directors may also elect or appoint such other officers, agents, or employees as it deems necessary or advisable and shall prescribe their powers and duties. Any officer may be removed from office and his successor elected in the manner prescribed in the bylaws.
Source: SL 1947, ch 33, § 14; SDC Supp 1960, § 11.2214.
47-21-21.2. Indemnification of directors, officers, agents, and employees against liability under certain circumstances.
Except as otherwise provided in § 47-21-21.3, a cooperative may indemnify a director, officer, agent, or employee who is a party to a proceeding by reason of being a director, officer, agent, or employee against liability incurred in the proceeding if the director, officer, agent, or employee:
(1) Acted in good faith; and
(2) Reasonably believed:
(a) In the case of conduct in an official capacity, that the conduct was in the best interests of the cooperative; and
(b) In all other cases, that the conduct was at least not opposed to the best interests of the cooperative; and
(3) In the case of any criminal proceeding, had no reasonable cause to believe the conduct was unlawful.
A cooperative may also, except as provided in § 47-21-21.3, indemnify a director, officer, agent, or employee who is a party to a proceeding against liability incurred in the proceeding if the director, officer, agent, or employee engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the articles of incorporation.
The conduct of a director, officer, agent, or employee with respect to an employee benefit plan for a purpose the director, officer, agent, or employee reasonably believed to be in the interests of the participants in, and the beneficiaries of, the plan is conduct that satisfies the requirement of subsection (2)(b) of this section.
The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director, officer, agent, or employee did not meet the relevant standard of conduct described in this section.
Source: SL 2007, ch 260, § 1; SL 2009, ch 232, § 1.
47-21-21.3. Circumstances under which directors, officers, agents, and employees may not be indemnified.
Unless otherwise ordered by a court, a cooperative may not indemnify a director, officer, agent, or employee:
(1) In connection with a proceeding by or in the right of the cooperative, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director, officer, agent, or employee has met the relevant standard of conduct pursuant to § 47-21-21.2; or
(2) In connection with any proceeding with respect to conduct for which the director, officer, agent, or employee was adjudged liable on the basis that the director, officer, agent, or employee received a financial benefit to which the director, officer, agent, or employee was not entitled, whether or not involving action in the official capacity of the director, officer, agent, or employee.
Source: SL 2007, ch 260, § 2; SL 2009, ch 232, § 2.
47-21-21.4. Indemnification of successful director, officer, agent, or employee for expenses incurred in proceeding.
A cooperative shall indemnify a director, officer, agent, or employee who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director, officer, agent, or employee was a party by reason of being a director, officer, agent, or employee of the cooperative, against reasonable expenses incurred in connection with the proceeding.
Source: SL 2007, ch 260, § 3; SL 2009, ch 232, § 3.
47-21-22. Conversion of corporation into cooperative.
Any corporation organized under the laws of this state and supplying or having the corporate power to supply electric energy may be converted into a cooperative by complying with the requirements of §§ 47-21-23 and 47-21-24 and shall thereupon become subject to this chapter with the same effect as if originally organized under this chapter.
Source: SL 1947, ch 33, § 20; SDC Supp 1960, § 11.2220.
47-21-23. Submission of conversion proposition to stockholders--Notice of meeting.
The proposition for the conversion of the corporation described in § 47-21-22 into a cooperative and proposed articles of conversion to give effect thereto shall be submitted to a meeting of the members or stockholders of such corporation, or in case of a corporation having no members or stockholders, to a meeting of the incorporators of such corporation, the notice of which shall have attached thereto a copy of the proposed articles of conversion.
Source: SL 1947, ch 33, § 20; SDC Supp 1960, § 11.2220 (1).
47-21-24. Two-thirds vote required for approval--Articles of conversion--Contents of articles--Affidavit of compliance.
If the proposition for the conversion of the corporation described in § 47-21-22 into a cooperative and the proposed articles of conversion, with any amendments, are approved by the affirmative vote of not less than two-thirds of those members of such corporation voting thereon at such meeting, or, if such corporation is a stock corporation, by the affirmative vote of the holders of not less than two-thirds of those shares of the capital stock of such corporation represented at such meeting and voting thereon, or in the case of a corporation having no members and no shares of its capital stock outstanding, by the affirmative vote of not less than two-thirds of its incorporators, articles of conversion in the form approved shall be executed and acknowledged on behalf of such corporation by its president or vice-president and its seal shall be affixed thereto and attested by its secretary. The articles of conversion shall recite that they are executed pursuant to this chapter and shall state:
(1) The name of the corporation and the address of its principal office prior to its conversion into a cooperative;
(2) The statute or statutes under which it was organized;
(3) A statement that such corporation elects to become a cooperative, nonprofit membership corporation subject to this chapter;
(4) Its name as a cooperative;
(5) The address of the principal office of the cooperative;
(6) The names and addresses of the directors of the cooperative; and
(7) The manner in which members, stockholders or incorporators of such corporation may or shall become members of the cooperative;
and may contain any provisions not inconsistent with this chapter deemed necessary or advisable for the conduct of the business of the cooperative. The president or vice-president executing such articles of conversion shall make and annex thereto an affidavit stating that the provisions of this section and § 47-21-23 were duly complied with in respect of such articles. The articles of conversion shall be deemed to be the articles of incorporation of the cooperative.
Source: SL 1947, ch 33, § 20; SDC Supp 1960, § 11.2220 (2).
47-21-25. Consolidating cooperatives.
Any two or more cooperatives (each of which is hereinafter designated a "consolidating cooperative"), may consolidate into a new cooperative (hereinafter designated the "new cooperative") by complying with the requirements of §§ 47-21-26 and 47-21-27.
Source: SL 1947, ch 33, § 17; SDC Supp 1960, § 11.2217.
47-21-26. Submission of consolidation proposition to members--Notice of meeting.
The proposition for the consolidation of the consolidating cooperatives into the new cooperative and proposed articles of consolidation to give effect thereto shall be submitted to a meeting of the members of each consolidating cooperative, the notice of which shall have attached thereto a copy of the proposed articles of consolidation.
Source: SL 1947, ch 33, § 17; SDC Supp 1960, § 11.2217 (1).
47-21-27. Majority vote required for approval--Articles of consolidation--Contents of articles--Affidavit of compliance.
If the proposed consolidation and the proposed articles of consolidation, with any amendments, are approved by the affirmative vote of a majority of those members of each consolidating cooperative voting thereon at each such meeting, articles of consolidation in the form approved shall be executed and acknowledged on behalf of each consolidating cooperative by its president or vice-president and its seal shall be affixed thereto and attested by its secretary. The articles of consolidation shall recite that they are executed pursuant to this chapter and shall state:
(1) The name of each consolidating cooperative and the address of its principal office;
(2) The name of the new cooperative and the address of its principal office;
(3) A statement that each consolidating cooperative agrees to the consolidation;
(4) The names and addresses of the directors of the new cooperative; and
(5) The terms and conditions of the consolidation and the mode of carrying the same into effect, including the manner in which members of the consolidating cooperatives may or shall become members of the new cooperative;
and may contain any provisions not inconsistent with this chapter deemed necessary or advisable for the conduct of the business of the new cooperative. The president or vice-president of each consolidating cooperative executing such articles of consolidation shall make and annex thereto an affidavit stating that the provisions of this section and § 47-21-26 in respect of such articles were duly complied with by such cooperative.
Source: SL 1947, ch 33, § 17; SDC Supp 1960, § 11.2217 (2); SL 1994, ch 350, § 1.
47-21-28. Merging cooperatives.
Any one or more cooperatives (each of which is hereinafter designated a "merging cooperative") may merge into another cooperative (hereinafter designated the "surviving cooperative"), by complying with the requirements of §§ 47-21-29 and 47-21-30.
Source: SL 1947, ch 33, § 18; SDC Supp 1960, § 11.2218.
47-21-29. Submission of merger proposition to members--Notice of meeting.
The proposition for the merger of the merging cooperatives into the surviving cooperative and proposed articles of merger to give effect thereto shall be submitted to a meeting of the members of each merging cooperative and of the surviving cooperative, the notice of which shall have attached thereto a copy of the proposed articles of merger.
Source: SL 1947, ch 33, § 18; SDC Supp 1960, § 11.2218 (1).
47-21-30. Majority vote required for approval--Articles of merger--Contents of articles--Affidavit of compliance.
If the proposed merger and the proposed articles of merger, with any amendments, are approved by the affirmative vote of a majority of those members of each cooperative voting thereon at each such meeting, articles of merger in the form approved shall be executed and acknowledged on behalf of each such cooperative by its president or vice-president and its seal shall be affixed thereto and attested by its secretary. The articles of merger shall recite that they are executed pursuant to this chapter and shall state:
(1) The name of each merging cooperative and the address of its principal office;
(2) The name of the surviving cooperative and the address of its principal office;
(3) A statement that each merging cooperative and the surviving cooperative agree to the merger;
(4) The names and addresses of the directors of the surviving cooperative; and
(5) The terms and conditions of the merger and the mode of carrying the same into effect, including the manner in which members of the merging cooperatives may or shall become members of the surviving cooperative; and may contain any provisions not inconsistent with this chapter deemed necessary or advisable for the conduct of the business of the surviving cooperative. The president or vice-president of such cooperative executing such articles of merger shall make and annex thereto an affidavit stating that the provisions of this section and § 47-21-29 in respect of such articles were duly complied with by such cooperative.
Source: SL 1947, ch 33, § 18; SDC Supp 1960, § 11.2218 (2); SL 1994, ch 350, § 2.
47-21-31. Articles of consolidation as governing consolidated cooperative--Articles of surviving cooperative as governing merged cooperative.
In the case of consolidation the existence of the consolidating cooperatives shall cease and the articles of consolidation shall be deemed to be the articles of incorporation of the new cooperative; and in the case of a merger the separate existence of the merging cooperatives shall cease and the articles of incorporation of the surviving cooperative shall be deemed to be amended to the extent, if any, that changes therein are provided for in the articles of merger.
Source: SL 1947, ch 33, § 19; SDC Supp 1960, § 11.2219 (1).
47-21-32. Transfer of rights and obligations to surviving cooperative.
All the rights, privileges, immunities, and franchises and all property, real and personal, including without limitation applications for membership, all debts due on whatever account and all other choses in action, of each of the consolidating or merging cooperatives shall be deemed to be transferred to and vested in the new or surviving cooperative without further act or deed.
Source: SL 1947, ch 33, § 19; SDC Supp 1960, § 11.2219 (2).
47-21-33. Liabilities after consolidation or merger--Preexisting claims--Substitution of parties.
The new or surviving cooperative shall be responsible and liable for all the liabilities and obligations of each of the consolidating or merging cooperatives and any claim existing or action or proceeding pending by or against any of the consolidating or merging cooperatives may be prosecuted as if the consolidation or merger had not taken place, but the new or surviving cooperative may be substituted in its place.
Source: SL 1947, ch 33, § 19; SDC Supp 1960, § 11.2219 (3).
47-21-34. Rights of creditors and lienors unaffected by consolidation or merger.
Neither the rights of creditors nor any liens upon the property of any of the consolidating or merging cooperatives shall be impaired by such consolidation or merger.
Source: SL 1947, ch 33, § 19; SDC Supp 1960, § 11.2219 (4).
47-21-35. Dissolution before commencement of business--Articles of dissolution--Majority approval required--Contents of articles.
A cooperative which has not commenced business may be dissolved by delivering to the secretary of state articles of dissolution which shall be executed and acknowledged on behalf of the cooperative by a majority of the incorporators and which shall state:
(1) The name of the cooperative;
(2) The address of its principal office;
(3) That the cooperative has not commenced business;
(4) That any sums received by the cooperative, less any part thereof disbursed for expenses of the cooperative, have been returned or paid to those entitled thereto;
(5) That no debt of the cooperative is unpaid; and
(6) That a majority of the incorporators elect that the cooperative be dissolved.
Source: SL 1947, ch 33, § 21; SDC Supp 1960, § 11.2221 (1).
47-21-36. Dissolution after commencement of business.
A cooperative which has commenced business may be dissolved in the manner provided by §§ 47-21-37 to 47-21-41, inclusive.
Source: SL 1947, ch 33, § 21; SDC Supp 1960, § 11.2221 (2).
47-21-37. Submission of dissolution proposition to members--Majority vote required.
The proposition to dissolve a cooperative which has commenced business shall be submitted to the members of the cooperative at any annual or special meeting, the notice of which shall set forth such proposition. The members at any such meeting shall approve, by the affirmative vote of not less than a majority of all members of the cooperative, the proposition that the cooperative be dissolved.
Source: SL 1947, ch 33, § 21; SDC Supp 1960, § 11.2221 (2).
47-21-38. Certificate of election to dissolve--Contents of certificate--Submission to secretary of state.
Upon approval pursuant to § 47-21-37 of a proposition to dissolve, a certificate of election to dissolve (hereinafter designated the "certificate"), executed and acknowledged on behalf of the cooperative by its president or vice-president under its seal, attested by its secretary and stating:
(1) The name of the cooperative;
(2) The address of its principal office; and
(3) That the members of the cooperative have duly voted that the cooperative be dissolved,
shall, together with an affidavit made by its president or vice-president executing the certificate, stating that the statements in the certificate are true, be submitted to the secretary of state for filing.
Source: SL 1947, ch 33, § 21; SDC Supp 1960, § 11.2221 (2).
47-21-39. Cessation of business--Continuance of corporate existence--Notice to creditors--Publication.
Upon the filing by the secretary of state of the certificate and affidavit required by § 47-21-38, the cooperative shall cease to carry on its business except to the extent necessary for the termination thereof, but its corporate existence shall continue until articles of dissolution have been filed by the secretary of state. The board of directors shall immediately cause notice of the dissolution proceedings to be mailed to each known creditor of and claimant against the cooperative and to be published once a week for two successive weeks in a newspaper of general circulation in the county in which the principal office of the cooperative is located.
Source: SL 1947, ch 33, § 21; SDC Supp 1960, § 11.2221 (2).
47-21-40. Liquidation of affairs of cooperative--Distribution of assets--Rights of patrons--Rights of members--Distribution of remains.
The board of directors shall liquidate and settle the affairs of a cooperative which has filed the certificate and affidavit described in § 47-21-38, collect sums owing to it, liquidate its property and assets, pay and discharge its debts, obligations, and liabilities, other than those to patrons arising by reason of their patronage, and do all other things required to terminate its business, and after paying or discharging or adequately providing for the payment or discharge of all its debts, obligations, and liabilities, other than those to patrons arising by reason of their patronage, shall distribute any remaining sums, first to patrons for the prorata return of all amounts standing to their credit by reason of their patronage, and second to members for the prorata repayment of membership fees. Any sums then remaining shall be distributed among its members and former members in proportion to their patronage.
Source: SL 1947, ch 33, § 21; SDC Supp 1960, § 11.2221 (2).
47-21-41. Articles of dissolution--Contents of articles.
The board of directors shall, upon completion of the acts required by § 47-21-40, authorize the execution of articles of dissolution, which shall be executed and acknowledged on behalf of the cooperative by its president or vice-president, and its seal shall be affixed thereto and attested by its secretary. The articles of dissolution shall recite that they are executed pursuant to this chapter and shall state:
(1) The name of the cooperative;
(2) The address of its principal office;
(3) The date on which the certificate of election to dissolve was filed by the secretary of state;
(4) That there are no actions or suits pending against the cooperative;
(5) That all debts, obligations, and liabilities of the cooperative have been paid and discharged or that adequate provision has been made therefor; and
(6) That the provisions of §§ 47-21-36 to 47-21-40, inclusive, have been duly complied with.
The president or vice-president executing the articles of dissolution shall make and annex thereto an affidavit stating that the statements made therein are true.
Source: SL 1947, ch 33, § 21; SDC Supp 1960, § 11.2221 (2).
47-21-42. Delivery of articles to secretary of state--Fees--Effective date of action--Certificates of election to dissolve.
Articles of incorporation, amendment, consolidation, merger, conversion, or dissolution, when executed and acknowledged and accompanied by such affidavits as may be required by applicable provisions of this chapter shall be presented to the secretary of state for filing in the records of his office. If the secretary of state shall find that the articles presented conform to the requirements of this chapter he shall, upon the payment of the fees as in this chapter provided, file such articles in the records of his office and upon such filing the incorporation, amendment, consolidation, merger, conversion, or dissolution provided for therein shall be in effect. The provisions of this section shall also apply to certificates of election to dissolve and affidavits executed in connection therewith pursuant to § 47-21-38.
Source: SL 1947, ch 33, § 22; SDC Supp 1960, § 11.2222.
47-21-43. Fee schedule of secretary of state.
The secretary of state shall charge and collect for:
(1) Filing articles of incorporation, ten dollars;
(2) Filing articles of consolidation or merger, ten dollars;
(3) Filing articles of amendment, ten dollars;
(4) Filing articles of conversion, ten dollars;
(5) Filing certificate of election to dissolve, two dollars;
(6) Filing articles of dissolution, two dollars; and
(7) Filing certificate of change of principal office, one dollar.
Source: SL 1947, ch 33, § 32; SDC Supp 1960, § 11.2232.
47-21-44. Encumbering cooperative property in favor of governmental agency permitted.
The board of directors of a cooperative shall have full power to authorize the execution and delivery of a mortgage or mortgages or a deed or deeds of trust of, or the pledging or encumbering of, any or all of the property, assets, rights, privileges, licenses, franchises, and permits of the cooperative whether acquired or to be acquired, and wherever situated, as well as the revenues therefrom, all upon such terms and conditions as the board of directors shall determine, to secure any indebtedness of the cooperative to United States of America or any agency or instrumentality thereof or any other lender.
Source: SL 1947, ch 33, § 24; SDC Supp 1960, § 11.2224 (1); SL 1971, ch 259, § 1.
47-21-45. Circumstances under which property may be transferred--Majority vote required--Transfer to security holders.
A cooperative may not, except as provided by § 47-21-44, sell, lease, or otherwise dispose of all or a substantial portion of its property unless such sale, lease, or other disposition is authorized by the affirmative vote of not less than a majority of all members of the cooperative; members voting thereon must be present and vote in person; provided however, that notwithstanding any other provision of this chapter, or any other provisions of law, the board of directors may, upon the authorization of a majority of all members of a cooperative at a meeting of the members thereof, called for that purpose, sell, lease, or otherwise dispose of all or a substantial portion of its property to another cooperative or to the holder or holders of any notes, bonds or other evidences of indebtedness issued to United States of America or any agency or instrumentality thereof or any other lender.
Source: SL 1947, ch 33, § 24; SDC Supp 1960, § 11.2224 (2); SL 1961, ch 28; SL 1971, ch 259, § 2.
47-21-46. Place of recordation of encumbrance.
Any mortgage, deed of trust, or other instrument executed by a cooperative pursuant to this chapter, which affects real and personal property and which is recorded in the real property records in any county in which such property is located or is to be located shall have the same force and effect as if the mortgage, deed of trust, or other instrument, were also recorded, filed, or indexed as provided by law in the proper office in such county as a mortgage of personal property.
Source: SL 1947, ch 33, § 26; SDC Supp 1960, § 11.2226.
47-21-46.1. Filing and recording of trust deed or mortgage in Office of Secretary of State--Effect.
Any trust deed or mortgage executed by a cooperative organized under the provisions of this chapter or qualified in accordance with the provisions of § 47-21-74 or §§ 47-1A-1501 to 47-1A-1532, inclusive, relative to the qualification of foreign cooperatives to transact business in this state, shall be filed and recorded in the Office of the Secretary of State. The filing and recording of the trust deed or mortgage creates a lien upon the property, real and personal, from the time of the filing. The filing and recording in the Office of the Secretary of State has the same effect to any property as the filing or recording of a similar instrument in each office of the register of deeds where the property is situated.
Source: SL 2009, ch 233, § 1.
47-21-46.2. Filing required under chapter 57A-9 to be maintained in Office of Secretary of State--Contents of financing statement--Termination of effectiveness.
Notwithstanding any provision to the contrary in chapter 57A-9, any filing required under the uniform commercial code in order to perfect a security interest against the personal property or fixtures of a debtor rural electric cooperative shall be made and maintained in the Office of the Secretary of State. If the financing statement covers goods of a debtor rural electric cooperative which are or are to become fixtures, no description of the real estate or the name of the record owner thereof is required. Filing of a financing statement against the property of a debtor rural electric cooperative is effective until released or terminated.
Source: SL 2009, ch 233, § 2.
47-21-46.3. Filing of mortgage or trust deed covering less than fee simple interest--Effect--Termination--Sufficiency of description.
A mortgage or trust deed to secure a debt executed by a rural electric cooperative, covering the whole or part of its easements or other less than fee simple interests in real estate used in the transmission or distribution of electric service, and also covering the fixtures of the rural electric cooperative which are annexed to it, may be filed in the Office of the Secretary of State along with, or as part of, the financing statement covering the fixtures. The filing of the mortgage or deed of trust has the same effect, and is notice of the rights and interest of the mortgagee or trustee in the easements and other less than fee simple interest in real estate to the same extent as if the mortgage or deed of trust were duly recorded in the office of the register of deeds of each county in which the real estate is situated. The effectiveness of the filing terminates at the same time as provided in § 47-21-46.2 for the termination of the effectiveness of a fixture filing. For the purpose of this section, a mortgage or deed of trust filed under this section contains a sufficient description to give notice of the rights and interest of the mortgagee or trustee in the easements and other less than fee simple interest in the real estate used for the transmission and distribution of electric service of the rural electric cooperative if the mortgage or deed of trust states that the security includes easements, rights-of-way of, or transmission or distribution systems of, or lines of, the rural electric cooperative, or all property owned by the rural electric cooperative. A mortgage or deed of trust filed before July 1, 2009, pursuant to § 47-21-46, which complies with the provisions of this section, is considered filed and effective under this section as of July 1, 2009. Section 47-21-46 applies to real estate owned in fee simple by a rural electric cooperative. Any mortgage or deed of trust filed before July 1, 2009, with the Office of the Secretary of State pursuant to chapter 57A-9, that complies with the provisions of this section, is considered filed and effective under this section as of July 1, 2009.
Source: SL 2009, ch 233, § 3.
47-21-46.4. Applicability of other laws--Single filing--Index.
To the extent not superceded by the specific provisions of §§ 47-21-46.1 to 47-21-46.4, inclusive, the uniform commercial code and other applicable laws remain in full force and effect and supplement the provisions of §§ 47-21-46.1 to 47-21-46.4, inclusive. Any rural electric cooperative may make a single filing under §§ 47-21-46.1 to 47-21-46.3, inclusive, and the secretary of state shall accept the same as a single filing. The financing statement shall identify the rural electric cooperative as a transmitting utility and shall be indexed under § 57A-9-501(b), but the index may also refer to the secretary of state's recording data for real estate records under §§ 47-21-46.1 to 47-21-46.3, inclusive, and the retention by the secretary of state of a microfilm or other photographic copy of the document filed in the real estate records shall be sufficient to comply with the retention requirements of § 57A-9-522.
Source: SL 2009, ch 233, § 4.
47-21-46.5. Assignment or discharge of trust deed or mortgage.
Any trust deed or mortgage described in § 47-21-46 to 47-21-46.3, inclusive, may be assigned or discharged by filing for record in the Office of the Secretary of State and in the Office of the Register of Deeds of each county, if any, in which the trust deed or mortgage has been filed for record an instrument of assignment or discharge executed in the manner and providing the information required with respect to real estate mortgages by §§ 44-8-13 and 44-8-14, respectively. However, no such instrument need provide the description of the mortgaged property, except that an instrument of discharge whereby less than all the mortgaged property is released from the lien of the trust deed or mortgage shall provide the full description of, or clearly identify by reference to numbered or lettered portions of the descriptions as the same appears in the trust deed or mortgage, the property so released.
Source: SL 2009, ch 233, § 5.
47-21-46.6. Filing fee.
The secretary of state shall charge and collect a filing fee of one dollar per page for each document filed pursuant to §§ 47-21-46.1 to 47-21-46.3, inclusive, and § 49-34-11.
Source: SL 2009, ch 233, § 6.
47-21-47. After-acquired property as subject to encumbrance--Recordation as notice.
All after-acquired property of a cooperative described or referred to as being mortgaged or pledged in any mortgage, deed of trust, or other instrument described in § 47-21-46, shall become subject to the lien thereof immediately upon the acquisition of such property by such cooperative whether or not such property was in existence at the time of the execution of such mortgage, deed of trust, or other instrument. Recordation of any such mortgage, deed of trust, or other instrument shall constitute notice and otherwise have the same effect with respect to such after-acquired property as it has under the laws relating to recordation, with respect to property owned by such cooperative at the time of the execution of such mortgage, deed of trust, or other instrument and therein described or referred to as being mortgaged or pledged thereby.
Source: SL 1947, ch 33, § 26; SDC Supp 1960, § 11.2226.
47-21-48. Encumbrance against personal property--Continuance of lien without refiling.
The lien upon personal property of any mortgage, deed of trust, or other instrument described in § 47-21-46 shall, after recordation thereof, continue in existence and of record for the period of time specified therein without the refiling thereof or the filing of any renewal certificate, affidavit, or other supplemental information required by the laws relating to the renewal, maintenance, or extension of liens upon personal property.
Source: SL 1947, ch 33, § 26; SDC Supp 1960, § 11.2226.
47-21-49. Members of cooperatives--Qualifications.
Each incorporator of a cooperative shall be a member thereof, but no other person may become a member thereof unless such other person agrees to use electric energy furnished by the cooperative when it is made available through its facilities.
Source: SL 1947, ch 33, § 9; SDC Supp 1960, § 11.2209.
47-21-50. Use of electric energy required--Failure to make energy available.
Any member of a cooperative, other than a member which is itself a cooperative, who agrees to use electric energy shall cease to be a member if he does not use electric energy supplied by the cooperative within six months after it is made available to him or if electric energy is not made available to him by the cooperative within two years after he becomes a member, or such lesser period as the bylaws of the cooperative may provide.
Source: SL 1947, ch 33, § 9; SDC Supp 1960, § 11.2209.
47-21-51. Husband and wife as members--Membership not transferable--Additional qualifications of members.
A husband and wife may hold a joint membership in a cooperative. Membership in a cooperative shall not be transferable, except as provided in the bylaws. The bylaws may prescribe additional qualifications and limitations in respect of membership.
Source: SL 1947, ch 33, § 9; SDC Supp 1960, § 11.2209.
47-21-52. Liability of members for acts of cooperative.
No member shall be liable or responsible for any debts of the cooperative and the property of the members shall not be subject to execution therefor.
Source: SL 1947, ch 33, § 25; SDC Supp 1960, § 11.2225.
47-21-53. Annual members' meeting.
An annual meeting of the members of a cooperative shall be held at such time and place as shall be provided by the bylaws.
Source: SL 1947, ch 33, § 10; SDC Supp 1960, § 11.2210 (1).
47-21-54. Special meetings for members--Procedure for calling.
Special meetings of the members of a cooperative may be called by the president, by the board of directors, by any three directors, or by not less than ten percentum of the members.
Source: SL 1947, ch 33, § 10; SDC Supp 1960, § 11.2210 (2).
47-21-55. Notice of meeting--Contents of notice--Method of giving notice.
Except as otherwise provided in this chapter, written or printed notice stating the time and place of each meeting of the members of a cooperative, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each member, either personally or by mail, not less than ten days nor more than twenty-five days before the date of the meeting, unless the constitution requires a different notice in respect of one or more of the purposes of the meeting in which case only the notice required by the constitution shall be given. If mailed, such notice shall be deemed to be given when deposited in the United States mail with postage prepaid addressed to the member at his address as it appears on the records of the cooperative.
Source: SL 1947, ch 33, § 10; SDC Supp 1960, § 11.2210 (3).
47-21-56. Quorum for members' meetings--Quorum for district meeting--Adjournment for failure of quorum.
Unless the bylaws prescribe the presence of a greater percentage or number of the members for a quorum, a quorum for the transaction of business at all meetings of the members of a cooperative having not more than one thousand members, shall be five percent of all members, present in person, and of a cooperative having more than one thousand members, shall be fifty members, present in person. If less than a quorum is present at any meeting, a majority of those present in person may adjourn the meeting from time to time without further notice. The sufficiency or requirement of a quorum for the transaction of business at a district meeting of members shall be established in the bylaws. However, the quorum may not be less than five members.
Source: SL 1947, ch 33, § 10; SDC Supp 1960, § 11.2210 (4); SL 2000, ch 220, § 2.
47-21-57. Voting by members--Spouse voting for member--Mail voting.
Each member of a cooperative is entitled to one vote on each matter submitted to a vote at a meeting of the members. The spouse of a member may vote on behalf of the member unless the member has indicated otherwise. Members may vote by mail for any issue authorized by the bylaws of the cooperative, except the election of directors, purposes prohibited by § 47-21-20, or a vote required by § 47-21-45. If a cooperative's bylaws allow mail voting, they shall also prescribe any conditions or limitations of such voting. Member ballots voted by mail shall be returned before or at any membership meeting, and each ballot submitted counts as a member present and voting at a meeting for any quorum requirements of § 47-21-56 or a cooperative's bylaws. No cooperative member may vote by proxy on any issue.
Source: SL 1947, ch 33, § 10; SDC Supp 1960, § 11.2210 (5); SL 1984, ch 299; SL 1998, ch 270, § 1.
47-21-58. Waiver of notice--Attendance as waiver--Exceptions.
Any person entitled to notice of a meeting may waive such notice in writing either before or after such meeting. If any such person shall attend such meeting, such attendance shall constitute a waiver of notice of such meeting, unless such person participates therein solely to object to the transaction of any business because the meeting has not been legally called or convened.
Source: SL 1947, ch 33, § 11; SDC Supp 1960, § 11.2211.
47-21-59. Powers of cooperative--Capacity to sue and be sued.
A cooperative shall have power to sue and be sued in its corporate name.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (1).
47-21-60. Powers of cooperative--Perpetual existence.
A cooperative shall have power to have perpetual existence.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (2).
47-21-61. Powers of cooperative--Corporate seal.
A cooperative shall have power to adopt a corporate seal and alter the same.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (3).
47-21-62. Powers of cooperative--Generation and distribution of electric energy.
A cooperative may generate, manufacture, purchase, acquire, accumulate, and transmit electric energy, and may distribute, sell, supply, and dispose of electric energy to its members, to governmental agencies and political subdivisions, and to other persons.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (4); SL 1997, ch 258, § 2.
47-21-63. Powers of cooperative--Dealing in property and equipment.
A cooperative may construct, purchase, lease as lessee, or otherwise acquire, and equip, maintain, and operate, and sell, assign, convey, lease as lessor, mortgage, pledge, or otherwise dispose of or encumber, transmission and distribution lines or systems, electric generating plants, land, buildings, structures for office, distribution of energy or warehousing, dams, plants and equipment, which are necessary to accomplish the purpose for which the cooperative is organized.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (5); SL 1994, ch 349, § 2.
47-21-64. Powers of cooperative--Franchises, licenses and easements.
A cooperative shall have power to purchase, lease as lessee, or otherwise acquire, and to use, and exercise and to sell, assign, convey, mortgage, pledge, or otherwise dispose of or encumber, franchises, rights, privileges, licenses, and easements.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (6).
47-21-65. Powers of cooperative--Borrowing--Security for borrowing.
A cooperative shall have power to borrow money and otherwise contract indebtedness, and to issue notes, bonds, and other evidences of indebtedness, and to secure the payment thereof by mortgage, pledge, or deed of trust of, or any other encumbrance upon, any or all of its then owned or after-acquired real or personal property, assets, franchises, or revenues.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (7).
47-21-66. Powers of cooperative--Construction and maintenance of facilities on public lands.
A cooperative may construct, maintain, and operate transmission and distribution lines along, upon, under, and across publicly owned lands and public thoroughfares, including all roads, highways, streets, alleys, bridges, and causeways.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (8); SL 1994, ch 349, § 3.
47-21-67. Powers of cooperative--Eminent domain.
A cooperative shall have power to exercise the power of eminent domain in the manner provided by the laws of this state for the exercise of such power by other corporations constructing or operating electric transmission and distribution lines or systems.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (9).
47-21-68. Powers of cooperative--Joining other cooperatives.
A cooperative may become a member of other cooperatives, corporations, or organizations engaged in the purposes as set forth in § 47-21-2, and may own stock therein.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (10); SL 1989, ch 392, § 2; SL 1994, ch 349, § 4.
47-21-69. Powers of cooperative--Extraterritorial powers.
A cooperative shall have power to conduct its business and exercise its powers within or without this state.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (11).
47-21-70. Powers of cooperative--Bylaws.
A cooperative shall have power to adopt, amend, and repeal bylaws.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (12).
47-21-71. Powers of cooperative--Other powers.
A cooperative shall have power to do and perform any other acts and things, and to have and exercise any other powers which may be necessary, to accomplish the purpose for which the cooperative is organized.
Source: SL 1947, ch 33, § 4; SDC Supp 1960, § 11.2204 (13).
47-21-72. Requirement that cooperative be nonprofit--Disposition of revenues.
A cooperative shall be operated on a nonprofit basis for the mutual benefit of its members and patrons. The bylaws of a cooperative or its contracts with consumers shall contain provisions relative to the disposition of revenues and receipts necessary and appropriate to establish and maintain its nonprofit and cooperative character. In addition to provisions of the bylaws relative to the disposition of revenues and receipts, the board of directors of the cooperative before allocating and crediting margins to its patrons may, by resolution, provide for the adoption of margin stabilization plans, revenue, or expense deferral plans or other plans that provide for the retention of revenues and receipts in excess of those needed to meet current losses and expenses. Reasonable reserves may be created by the cooperative for payment of the incremental cost of electric power and energy purchased by the cooperative for resale to its patrons.
Source: SL 1947, ch 33, § 23; SDC Supp 1960, § 11.2223; SL 1992, ch 322, § 1.
47-21-72.1. Directors not liable for distribution in good faith reliance on financial statements or accountants' reports.
A director of a rural electric cooperative shall not be liable for any unauthorized dividend or distribution of assets if he relied and acted in good faith upon financial statements of the cooperative represented to him to be correct by the president or the officer of the cooperative having charge of his books of account, or stated in a written report by a certified public accountant failing to reflect the financial condition of the cooperative, nor shall he be so liable if in good faith in determining the amount available for any such dividend or distribution he considered the assets to be of their book value.
Source: SL 1978, ch 338, § 1.
47-21-73. Municipal corporation or county grant to use public streets.
Subject to the provisions of §§ 31-26-1 to 31-26-8, inclusive, any municipal corporation or county may grant to any cooperative, upon such terms as the proper authorities thereof shall determine, the use of any street or highway within its limits for the purposes set forth in § 47-21-2, and such use of such street or highway may not be held to be an additional burden.
Source: SL 1947, ch 33, § 27; SDC Supp 1960, § 11.2227; SL 1992, ch 60, § 2; SL 1994, ch 349, § 5.
47-21-74. Foreign cooperatives--Conditions to local operation--Statement to secretary of state--Contents of statement.
Any foreign nonprofit or cooperative corporation supplying or authorized to supply electric energy and owning or operating electric transmission or distribution lines in an adjacent state may construct or acquire extensions of such lines in this state and operate such extensions. Any such corporation, before constructing or operating such extensions, shall, by its president or vice-president, under its seal attested by its secretary, make and forward to the secretary of state a statement, duly sworn to, setting forth:
(1) The name of such corporation and the location of its principal office or place of business without this state, and in case such corporation is to have any place of business or principal office within this state, the location thereof;
(2) The names and addresses of the officers of such corporation and the name and address of the agent or manager of such corporation who will represent it in this state; and
(3) That it constitutes and appoints the secretary of state its true and lawful agent upon whom the summons, notices, pleadings, or process in any action or proceeding against it may be served in respect of any liability arising out of any business, contract, or transaction in this state and that it stipulates that service thereof upon the secretary of state or his deputy shall be accepted irrevocably as a valid service upon it and that such appointment and stipulation shall continue in force irrevocably so long as any liability of such corporation remains outstanding in this state.
Upon compliance with the requirements of this section such corporation shall have all the rights, powers, privileges, and immunities of a cooperative.
Source: SL 1947, ch 33, § 31; SDC Supp 1960, § 11.2231.
47-21-75. Construction to comply with National Electrical Safety Code--Compliance establishes due care in negligence claim.
Construction of electric lines by a cooperative shall comply with the standards of the National Electrical Safety Code in effect at the time of the construction. Proof of compliance with the requirements of the applicable National Electrical Safety Code establishes due care in the defense of a negligence claim alleging a violation of that standard.
Source: SL 1947, ch 33, § 28; SL 1951, ch 21; SDC Supp 1960, § 11.2228; SL 2007, ch 261, § 1.
47-21-76. Change of location of principal office--Certificate to secretary of state.
A cooperative may, upon authorization of its board of directors or its members, change the location of its principal office by filing a certificate reciting such change of principal office, executed and acknowledged by its president or vice-president under its seal attested by its secretary, in the Office of the Secretary of State.
Source: SL 1947, ch 33, § 16; SDC Supp 1960, § 11.2216.
47-21-77. Securities regulation laws inapplicable.
The provisions of chapter 47-31B do not apply to any note, bond or other evidence of indebtedness issued by any cooperative pursuant to this chapter to the United States of America or any agency or other instrumentality thereof, to any member of such cooperative, or to any mortgage, deed of trust, or other instrument executed to secure the same. Chapter 47-31B does not apply to the issuance of membership certificates or any other evidence of member interest by any cooperative or any such foreign corporation.
Source: SL 1947, ch 33, § 33; SDC Supp 1960, § 11.2233; SL 1971, ch 259, § 3; SL 1989, ch 30, § 77; SL 2004, ch 278, § 65.
47-21-78. Construction of chapter.
This chapter shall be construed liberally. The enumeration of any object, purpose, power, manner, method, or thing shall not be deemed to exclude like or similar objects, purposes, powers, manners, methods, or things.
Source: SL 1947, ch 33, § 34; SDC Supp 1960, § 11.2234.
47-21-79. Limitation of actions.
No action or suit may be brought against a cooperative or foreign corporation doing business in this state pursuant to this chapter, or against any agent, servant, or employee thereof, by reason of the maintenance of electric transmission or distribution lines on any real property after the expiration of a period of two years of continuous maintenance of such lines.
Source: SL 1947, ch 33, § 29; SDC Supp 1960, § 11.2229.
47-21-80. Severability and saving clause.
If any provision of this chapter or the application of such provision to any person or circumstance is held invalid, the remainder of the chapter and the application of such provision to other persons or circumstances shall not be affected thereby.
Source: SL 1947, ch 33, § 35; SDC Supp 1960, § 11.2235.
47-21-81. Citation of chapter.
This chapter may be cited as the "Electric Cooperative Law."
Source: SL 1947, ch 33, § 1; SDC Supp 1960, § 11.2201.
47-21-82. Cooperatives able to use property and funds to promote economic development and may lend money--Restrictions on loans.
Unless otherwise provided in its articles, a cooperative may use its property and funds to promote and encourage economic development and may lend money for any purpose the board of directors determines to be in the best interest of the cooperative.
However, such loans may only be made from funds received by way of loan or grant from the Rural Electrification Administration of the United States Department of Agriculture, or out of cash and securities representing equity or accumulated margins belonging to the cooperative or funds received from any other source, provided that no loan may be made out of funds derived from the pledging, assigning, or encumbering of revenues to be earned from the future sale of electricity.
Source: SL 1991, ch 378, § 1.
47-21-83. Forfeiture of unclaimed credits.
Any cooperative organized under this chapter is subject to §§ 47-16-54 to 47-16-57, inclusive. The provisions of §§ 47-16-54 to 47-16-57, inclusive, apply to all money or property described in § 47-16-54 the payment or delivery of which was authorized either before or after July 1, 1993.
Source: SL 1993, ch 339.
47-21-84. Application of South Dakota's Public Communications Network Infrastructure.
The provisions of §§ 49-31-60 and 49-31-61 apply to all cooperatives organized under this chapter.
Source: SL 1997, ch 258, § 3.
47-22-1
Definitions.
47-22-2
Applicability to domestic corporations.
47-22-2.1
Applicability to corporations existing prior to 1965.
47-22-3
Applicability to foreign corporations.
47-22-4
Purposes and authority of corporations--Particular purposes--Exceptions.
47-22-5
Incorporators--Articles of incorporation.
47-22-6
Contents of articles of incorporation--Necessary recitals.
47-22-7
Corporate name--Indication of purpose.
47-22-8
Repealed.
47-22-8.1
Use of same or similar name prohibited--Non-English name to be transliterated.
47-22-9
Reservation of name--Parties entitled to reserve.
47-22-10
Procedure for reservation of name--Maximum time of reservation.
47-22-11
Transfer of reserved right--Notification to secretary of state.
47-22-12
Articles of incorporation--Endorsement and filing by secretary of state--Issuance of
certificate of incorporation.
47-22-13
Commencement of corporate existence--Certificate as conclusive evidence of
compliance--Exceptions.
47-22-14
Amending articles of incorporation.
47-22-15
Procedure for amendment.
47-22-16
Resolution of amendment--Submission to members at meeting--Notice of meeting--Contents of notice--Written notice of adoption required--Majority vote required.
47-22-17
Procedure in absence of members entitled to vote--Adoption of amendment by board
of directors.
47-22-18
Submission of more than one amendment.
47-22-19
Articles of amendment--Contents of articles.
47-22-20
Delivery to secretary of state--Fees--Endorsement and filing--Issuance of certificate
of amendment.
47-22-21
Effective date of amendment.
47-22-22
Preexisting actions unaffected--Change of name as not abating action.
47-22-23
Restatement of articles of incorporation--Procedure.
47-22-24
Resolution of restatement--Submission to members.
47-22-25
Notice of proposed restatement--Contents of notice.
47-22-26
Vote of membership--Majority vote required.
47-22-27
Procedure in absence of members entitled to vote--Adoption of restatement by board
of directors.
47-22-28
Approval of restated articles--Contents of articles--Delivery to secretary of state.
47-22-28.1
Restated articles may incorporate proposed amendments--Conditions.
47-22-29
Approval by secretary of state--Fees--Endorsement and filing--Issuance of restated
certificate of incorporation.
47-22-30
Effective date of restated articles.
47-22-31
Meeting of first board of directors--Organization meeting--Notice of meeting.
47-22-32
First meeting of members--Notice of meeting.
47-22-33
Adoption of initial bylaws--Amendment of bylaws--Permissible contents of bylaws.
47-22-33.1
Method of providing notice to members or directors.
47-22-34
Changing number of board of directors--Bylaws controlling absent provision in
articles.
47-22-35
Emergency bylaws--Conditions creating emergency.
47-22-1. Definitions.
As used in chapters 47-22 to 47-28, inclusive, unless the context otherwise requires, the term:
(1) "Articles of incorporation" means the original or restated articles of incorporation or articles of consolidation and all amendments thereto including articles of merger.
(2) "Board of directors" means the group of persons vested with the management of the affairs of the corporation irrespective of the name by which such group is designated.
(3) "Bylaws" means the code or codes of rules adopted for the regulation or management of the affairs of the corporation irrespective of the name or names by which such rules are designated.
(4) "Corporation" or "domestic corporation" means a nonprofit corporation subject to the provisions of chapters 47-22 to 47-28, inclusive, except a foreign corporation.
(5) "Foreign corporation" means a nonprofit corporation organized under laws other than the laws of this state.
(6) "Insolvent" means inability of a corporation to pay its debts as they become due in the usual course of its affairs.
(7) "Member" means one having membership rights in a corporation in accordance with the provisions of its articles of incorporation or bylaws and may include municipal corporations of this state or other states;
(8) "Nonprofit corporation" means a corporation no part of the income or profit of which is distributable to its members, directors or officers.
Source: SL 1965, ch 24, § 2; SL 2001, ch 247, § 1.
47-22-2. Applicability to domestic corporations.
The provisions of chapters 47-22 to 47-28, inclusive, relating to domestic corporations shall apply to:
(1) All corporations organized hereunder; and
(2) All nonprofit corporations organized before July 1, 1965, under any act repealed.
Source: SL 1965, ch 24, § 3.
47-22-2.1. Applicability to corporations existing prior to 1965.
Any nonprofit corporation in existence prior to 1965 may continue to operate as provided by its charter notwithstanding chapters 47-22 to 47-28, inclusive.
Source: SL 1984, ch 300.
47-22-3. Applicability to foreign corporations.
The provisions of chapters 47-22 to 47-28, inclusive, relating to foreign corporations shall apply to all foreign nonprofit corporations doing or engaging in any business in this state for a purpose or purposes for which a corporation might be organized under this chapter.
Source: SL 1965, ch 24, § 3.
47-22-4. Purposes and authority of corporations--Particular purposes--Exceptions.
Corporations may be organized under this chapter for any lawful purpose, including, but not limited to, any one or more of the following purposes:
(1) Agricultural;
(2) Animal husbandry;
(3) Athletic;
(4) Benevolent;
(5) Charitable;
(6) Civic;
(7) Cultural;
(8) Educational;
(9) Eleemosynary;
(10) Fraternal;
(11) Horticultural;
(12) Literary;
(13) Patriotic;
(14) Political;
(15) Religious;
(16) Scientific;
(17) Social; and
(18) Professional, commercial, industrial, or trade association. However, labor unions, cooperative organizations, other than housing cooperatives, communals, and organizations subject to any of the provisions of the banking laws of this state may not be organized under this chapter. Notwithstanding any other provision of this title, any insurance organization formed under this chapter is subject to Title 58.
Source: SDC 1939, §§ 11.1401, 11.1501, 11.1701, 11.1801; SL 1965, ch 24, § 4; SL 1966, ch 17, § 2; SL 1972, ch 245; SL 1998, ch 271, § 1; SL 2016, ch 221, § 1.
47-22-5. Incorporators--Articles of incorporation.
One or more natural persons of the age of majority may act as incorporators of a corporation by delivering to the secretary of state the articles of incorporation for such corporation. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document.
Source: SDC 1939, §§ 11.1501, 11.1801; SL 1965, ch 24, § 30; SL 1972, ch 154, § 10; SL 1989, ch 393, § 1; SL 1990, ch 367, § 13; SL 2012, ch 222, § 5; SL 2016, ch 221, § 2.
47-22-6. Contents of articles of incorporation--Necessary recitals.
The articles of incorporation shall set forth:
(1) The name of the corporation;
(2) The period of duration, which may be perpetual;
(3) The purpose or purposes for which the corporation is organized;
(4) If the corporation is to have no members, a statement to that effect;
(5) If the corporation is to have one or more classes of members, any provision which the incorporators elect to set forth in the articles of incorporation designating the class or classes of members and stating the qualifications and rights of the members of each class;
(6) If the directors or any of them are not to be elected or appointed by one or more classes of members, a statement of the manner in which such directors shall be elected or appointed;
(7) Any provisions, not inconsistent with law, which the incorporators elect to set forth in the articles of incorporation for the regulation of the internal affairs of the corporation, including any provision for distribution of assets on dissolution or final liquidation;
(8) The information required by § 59-11-6;
(9) The number of directors constituting the initial board of directors, and the names and addresses of the persons who are to serve as the initial directors; and
(10) The name and address of each incorporator.
It is not necessary to set forth in the articles of incorporation any of the corporate powers enumerated in chapters 47-22 to 47-28, inclusive.
Source: SDC 1939, §§ 11.1402, 11.1501, 11.1701, 11.1801; SL 1965, ch 24, § 31; SL 1989, ch 393, § 2; SL 1990, ch 367, § 14; SL 2004, ch 280, § 4; SL 2008, ch 275, § 62.
47-22-7. Corporate name--Indication of purpose.
The corporate name shall not contain any word or phrase which indicates or implies that it is organized for any purpose other than one or more of the purposes contained in its articles of incorporation.
Source: SL 1965, ch 24, § 7 (1).
47-22-8.1. Use of same or similar name prohibited--Non-English name to be transliterated.
In order to protect the public against confusion between corporations or between corporations and limited partnerships, the name of any nonprofit corporation:
(1) May not be the same as or must be distinguishable upon the records of the secretary of state from the name of any other corporation, whether for profit or not for profit, organized under the laws of this state; or the name of any foreign corporation, whether for profit or not for profit, authorized to engage in any business in this state; or any corporate name reserved or registered as permitted by the laws of this state; or the name of any limited partnership certified or registered in this state. Corporate names or limited partnership names already in use, with generic, proper, geographical, or descriptive terms which have acquired a secondary meaning shall be protected. This subdivision does not apply if the applicant files with the secretary of state either:
(a) The written consent signed by the president or a vice-president and by the secretary or an assistant secretary of the other corporation; by a holder of a reserved or registered name; or by a general partner of a limited partnership to use the same or a distinguishable name;
(b) A certified copy of a final decree of a court of competent jurisdiction establishing the prior right of the applicant to the use of such name in this state; or
(c) In the case of a foreign corporation if the corporate name is not available for use, a resolution of its board of directors adopting an assumed name for use in transacting business in this state, which assumed name is not deceptively similar to the name of any domestic corporation, any foreign corporation authorized to engage in any business in this state, or any corporate name reserved or registered as permitted by the laws of this state, or the name of any limited partnership certified or registered in this state, or any other assumed name filed with the secretary of state by a foreign corporation authorized to transact business in this state;
(2) Shall be transliterated into letters of the English alphabet, if it is not in English.
Source: SL 1989, ch 393, § 4; SL 1992, ch 323, § 1; SL 1998, ch. 272, § 1.
47-22-9. Reservation of name--Parties entitled to reserve.
The exclusive right to the use of a corporate name may be reserved by:
(1) Any person intending to organize a corporation under this chapter;
(2) Any domestic corporation intending to change its name;
(3) Any foreign corporation intending to make application for a certificate of authority to do or engage in any business in this state;
(4) Any foreign corporation authorized to do or engage in any business in this state and intending to change its name;
(5) Any person intending to organize a foreign corporation and intending to have such corporation make application for a certificate of authority to do or engage in any business in this state.
Source: SL 1965, ch 24, § 8.
47-22-10. Procedure for reservation of name--Maximum time of reservation.
The reservation of the exclusive right to the use of a corporate name shall be made by filing with the secretary of state an application to reserve a specified corporate name, executed by the applicant. If the secretary of state finds that the name is available for corporate use, he shall reserve the same for the exclusive use of the applicant for a period of one hundred twenty days, which period shall not be extended.
Source: SL 1965, ch 24, § 8.
47-22-11. Transfer of reserved right--Notification to secretary of state.
The right to the exclusive use of a specified corporate name reserved pursuant to § 47-22-9 may be transferred to any other person or corporation by filing in the Office of the Secretary of State a notice of such transfer, executed by the applicant for whom the name was reserved, and specifying the name and address of the transferee.
Source: SL 1965, ch 24, § 8.
47-22-12. Articles of incorporation--Endorsement and filing by secretary of state--Issuance of certificate of incorporation.
One original and one exact or conforming copy of the articles of incorporation shall be delivered to the secretary of state. If the secretary of state finds that the articles of incorporation conform to law, when all fees have been paid as prescribed in chapter 47-28, he shall:
(1) Endorse the word "filed" on the original and the copy and the month, day, and year of filing;
(2) File the original in his office; and
(3) Issue a certificate of incorporation to which he shall affix the copy.
The certificate of incorporation, together with the copy of the articles of incorporation affixed thereto, shall be returned to the incorporators or their representative.
Source: SL 1965, ch 24, § 32; SL 1989, ch 393, § 5.
47-22-13. Commencement of corporate existence--Certificate as conclusive evidence of compliance--Exceptions.
Upon the issuance of the certificate of incorporation, the corporate existence shall begin, and such certificate of incorporation shall be conclusive evidence that all conditions precedent required to be performed by the incorporators have been complied with and that the corporation has been incorporated under this chapter, except as against the state in a proceeding to cancel or revoke the certificate of incorporation or for involuntary dissolution of the corporation.
Source: SL 1965, ch 24, § 33.
47-22-14. Amending articles of incorporation.
A corporation may amend its articles of incorporation, from time to time, in any and as many respects as may be desired, so long as its articles of incorporation as amended contain only such provisions as are lawful under chapters 47-22 to 47-28, inclusive.
Source: SDC 1939, § 11.1302; SL 1965, ch 24, § 35.
47-22-15. Procedure for amendment.
Amendments to the articles of incorporation shall be made in the manner provided by § 47-22-16 or 47-22-17.
Source: SL 1965, ch 24, § 36.
47-22-16. Resolution of amendment--Submission to members at meeting--Notice of meeting--Contents of notice--Written notice of adoption required--Majority vote required.
If the members are entitled to vote on an amendment to the articles of incorporation, the board of directors or the members shall adopt a resolution setting forth the proposed amendment and directing that it be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice setting forth the proposed amendment or a summary of the changes to be effected thereby shall be given to each member entitled to vote at such meeting within the time and in the manner provided in chapter 47-23 for the giving of notice of meetings of members. If the members adopt a resolution setting forth a proposed amendment, written notice shall also be provided to the board of directors. The proposed amendment shall be adopted upon receiving at least a majority of the vote entitled to be cast by members present or represented by proxy at any meeting of the members.
Source: SL 1965, ch 24, § 36 (1); SL 2000, ch 221, § 1.
47-22-17. Procedure in absence of members entitled to vote--Adoption of amendment by board of directors.
Where there are no members, or no members entitled to vote on an amendment to the articles of incorporation, an amendment shall be adopted at a meeting of the board of directors upon receiving the vote of a majority of the directors in office.
Source: SL 1965, ch 24, § 36 (2).
47-22-18. Submission of more than one amendment.
Any number of amendments to the articles of incorporation may be submitted and voted upon at any one meeting.
Source: SL 1965, ch 24, § 36.
47-22-19. Articles of amendment--Contents of articles.
An original and an exact or conforming copy of the articles of amendment shall be executed by the chairman of the board of directors, by the corporation's president, or by another of its officers or, if the corporation has not been formed, by an incorporator, and shall set forth:
(1) The name of the corporation;
(2) The amendment so adopted;
(3) If there are members entitled to vote thereon:
(a) A statement setting forth the date of the meeting of members at which the amendment was adopted, that a quorum was present at such meeting, and that such amendment received at least a majority of the votes entitled to be cast by members present or represented by proxy at such meeting; or
(b) A statement that such amendment was adopted by a consent in writing signed by all members entitled to vote with respect thereto;
(4) If there are no members, or no members entitled to vote thereon, a statement of such fact, the date of the meeting of the board of directors at which the amendment was adopted, and a statement of the fact that such amendment received the vote of a majority of the directors in office.
Source: SL 1965, ch 24, § 37; SL 1989, ch 393, § 6; SL 1990, ch 367, § 15.
47-22-20. Delivery to secretary of state--Fees--Endorsement and filing--Issuance of certificate of amendment.
The original and the copy of the articles of amendment shall be delivered to the secretary of state. If the secretary of state finds that the articles of amendment conform to law, when all fees have been paid as prescribed in chapter 47-28, he shall:
(1) Endorse the word "filed" on the original and the copy and the month, day, and year of filing;
(2) File the original in his office; and
(3) Issue a certificate of amendment to which he shall affix the copy.
The certificate of amendment, together with the copy of the articles of amendment affixed thereto, shall be returned to the corporation or its representative.
Source: SL 1965, ch 24, § 38; SL 1989, ch 393, § 7.
47-22-21. Effective date of amendment.
Upon the issuance of the certificate of amendment by the secretary of state, the amendment shall become effective and the articles of incorporation shall be deemed to be amended accordingly.
Source: SL 1965, ch 24, § 38.
47-22-22. Preexisting actions unaffected--Change of name as not abating action.
No amendment to the articles of incorporation shall affect any existing cause of action in favor of or against such corporation, or any pending action to which such corporation shall be a party, or the existing rights of persons other than members; and, in the event the corporation name shall be changed by amendment, no action brought by or against such corporation under its former name shall abate for that reason.
Source: SDC 1939, § 11.1302; SL 1965, ch 24, § 38.
47-22-23. Restatement of articles of incorporation--Procedure.
A domestic corporation may at any time restate its articles of incorporation as theretofore amended, in the manner provided by §§ 47-22-24 to 47-22-30, inclusive.
Source: SL 1965, ch 24, § 39.
47-22-24. Resolution of restatement--Submission to members.
If there are members entitled to vote thereon, the board of directors shall adopt a resolution setting forth the proposed restated articles of incorporation and directing that they be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting.
Source: SL 1965, ch 24, § 39.
47-22-25. Notice of proposed restatement--Contents of notice.
Written notice setting forth the proposed restated articles or a summary of the provisions thereof shall be given to each member entitled to vote thereon, within the time and in the manner provided in chapter 47-23 for the giving of notice of meetings of members. If the meeting be an annual meeting, the proposed restated articles or a summary of the provisions thereof may be included in the notice of such annual meeting.
Source: SL 1965, ch 24, § 39.
47-22-26. Vote of membership--Majority vote required.
At the meeting required by § 47-22-25 a vote of the members entitled to vote thereon shall be taken on the proposed restated articles, which shall be adopted upon receiving the affirmative vote of a majority of the members entitled to vote thereon present at such meeting or represented by proxy.
Source: SL 1965, ch 24, § 39.
47-22-27. Procedure in absence of members entitled to vote--Adoption of restatement by board of directors.
If there are no members, or no members entitled to vote thereon, the proposed restated articles shall be adopted at a meeting of the board of directors upon receiving the affirmative vote of a majority of the directors in office.
Source: SL 1965, ch 24, § 39.
47-22-28. Approval of restated articles--Contents of articles--Delivery to secretary of state.
Upon approval pursuant to § 47-22-26 or 47-22-27, one original and one exact or conforming copy of the restated articles of incorporation shall be executed by the chairman of the board of directors, by its president, or by another of its officers and shall set forth:
(1) The name of the corporation;
(2) The period of its duration;
(3) The purpose or purposes which the corporation is authorized to pursue; and
(4) Any other provisions, not inconsistent with law, which are then set forth in the articles of incorporation as theretofore amended, except that it shall not be necessary to set forth in the restated articles of incorporation the registered office of the corporation, its registered agent, its directors, or its incorporators.
The restated articles of incorporation shall state that they correctly set forth the provisions of the articles of incorporation as theretofore amended, that they have been duly adopted as required by law and that they supersede the original articles of incorporation and all amendments thereto.
The original and the copy of the restated articles of incorporation shall be delivered to the secretary of state.
Source: SL 1965, ch 24, § 39; SL 1989, ch 393, § 8.
47-22-28.1. Restated articles may incorporate proposed amendments--Conditions.
When filing restated articles of incorporation with the secretary of state pursuant to § 47-22-28, the restated articles may incorporate proposed amendments if:
(1) The provisions of §§ 47-22-16 and 47-22-17 have been complied with;
(2) The information required pursuant to § 47-22-19 accompanies the filing;
(3) The filing contains a statement that, except for any indicated amendment, the restated articles of incorporation correctly set forth without change the corresponding provisions of the articles of incorporation; and
(4) The filing contains a statement that the restated articles of incorporation as amended supersede the original articles of incorporation and all previous amendments.
Source: SL 1999, ch 219, § 1.
47-22-29. Approval by secretary of state--Fees--Endorsement and filing--Issuance of restated certificate of incorporation.
If the secretary of state finds that restated articles delivered to him pursuant to § 47-22-28 conform to law, when all fees have been paid as prescribed in chapter 47-28, he shall:
(1) Endorse the word "filed" on the original and the copy and the month, day, and year of filing;
(2) File the original in his office; and
(3) Issue a restated certificate of incorporation to which he shall affix the copy.
The restated certificate of incorporation, together with the copy of the restated articles of incorporation affixed thereto, shall be returned to the corporation or its representative.
Source: SL 1965, ch 24, § 39; SL 1989, ch 393, § 9.
47-22-30. Effective date of restated articles.
Upon the issuance of the restated certificate of incorporation by the secretary of state, the restated articles of incorporation shall become effective and shall supersede the original articles of incorporation and all amendments thereto.
Source: SL 1965, ch 24, § 39.
47-22-31. Meeting of first board of directors--Organization meeting--Notice of meeting.
After the issuance of the certificate of incorporation an organization meeting of the board of directors named in the articles of incorporation shall be held, either within or without this state, at the call of a majority of the incorporators, for the purpose of adopting bylaws, electing officers and the transaction of such other business as may come before the meeting. The incorporators calling the meeting shall give at least three days' notice thereof by mail to each director so named, which notice shall state the time and place of the meeting.
Source: SL 1965, ch 24, § 34.
47-22-32. First meeting of members--Notice of meeting.
A first meeting of the members may be held at the call of the directors, or a majority of them, upon at least three days' notice, for such purposes as shall be stated in the notice of the meeting.
Source: SL 1965, ch 24, § 34.
47-22-33. Adoption of initial bylaws--Amendment of bylaws--Permissible contents of bylaws.
The initial bylaws of a corporation shall be adopted by its board of directors. The power to alter, amend, or repeal the bylaws or adopt new bylaws shall be vested in the board of directors unless otherwise provided in the articles of incorporation or the bylaws. The bylaws may contain any provisions for the regulation and management of the affairs of a corporation not inconsistent with law or the articles of incorporation.
Source: SDC 1939, §§ 11.1407, 11.1501, 11.1502; SL 1965, ch 24, § 13.
47-22-33.1. Method of providing notice to members or directors.
If so provided in the articles of incorporation or bylaws of the corporation, any written notice required to be provided to any member or director pursuant to any provision of chapters 47-22 to 47-28, inclusive, may be sent by any reasonable means of transmission set forth in the articles of incorporation or bylaws of the corporation, including, but not limited to, traditional mail, hand delivery, email, or electronic facsimile.
Source: SL 2016, ch 221, § 15.
47-22-34. Changing number of board of directors--Bylaws controlling absent provision in articles.
Unless the articles of incorporation provide that a change in the number of directors shall be made only by amendment to the articles of incorporation, a change in the number of directors made by amendment to the bylaws shall be controlling. In all other cases, whenever a provision of the articles of incorporation is inconsistent with a bylaw, the provision of the articles of incorporation shall be controlling.
Source: SL 1965, ch 24, § 31.
47-22-35. Emergency bylaws--Conditions creating emergency.
The board of directors of any corporation may adopt emergency bylaws, which shall, notwithstanding any different provision elsewhere in chapters 47-22 to 47-28, inclusive, or in the articles of incorporation or bylaws, be operative during any emergency in the conduct of the affairs of the corporation resulting from any national security, national health, or other declared emergency requiring such action.
Source: SL 1965, ch 24, § 14; SL 2021, ch 195, § 1, eff. Mar. 3, 2021.
47-22-36. Provisions of emergency bylaws--Meetings of directors--Attendance--Priorities.
The emergency bylaws adopted pursuant to § 47-22-35 may make any provision that may be practical and necessary for the circumstances of the emergency, including provisions that:
(1) A meeting of the board of directors may be called by any officer or director in such manner and under such conditions as shall be prescribed in the emergency bylaws;
(2) The director or directors in attendance at the meeting, or any greater number fixed by the emergency bylaws, shall constitute a quorum; and
(3) The officers or other persons designated on a list approved by the board of directors before the emergency, all in such order or priority and subject to such conditions and for such period of time (not longer than reasonably necessary after the termination of the emergency) as may be provided in the emergency bylaws or in the resolution approving the list, shall, to the extent required to provide a quorum at any meeting of the board of directors be deemed directors for such meeting.
Source: SL 1965, ch 24, § 14.
47-22-37. Modification of lines of succession during emergency.
The board of directors, either before or during any emergency described in § 47-22-35, may provide, and from time to time modify, lines of succession in the event that during any such emergency any or all officers or agents of the corporation shall for any reason be rendered incapable of discharging their duties.
Source: SL 1965, ch 24, § 14.
47-22-38. Changing head office during emergency.
The board of directors, either before or during any emergency described in § 47-22-35, may, effective in the emergency, change the head office or designate several alternative head offices or regional offices, or authorize the officers so to do.
Source: SL 1965, ch 24, § 14.
47-22-39. Duration of emergency bylaws.
To the extent not inconsistent with any emergency bylaws adopted pursuant to § 47-22-35, the bylaws of the corporation shall remain in effect during any emergency described in § 47-22-35 and upon its termination the emergency bylaws shall cease to be operative.
Source: SL 1965, ch 24, § 14.
47-22-40. Notice of meetings during emergency--Quorum.
Unless otherwise provided in emergency bylaws, notice of any meeting of the board of directors during any emergency described in § 47-22-35 may be given only to such of the directors as it may be feasible to reach at the time and by such means as may be feasible at the time, including publication or radio.
To the extent required to constitute a quorum at any meeting of the board of directors during any such emergency, the officers of the corporation who are present shall, unless otherwise provided in emergency bylaws, be deemed, in order of rank and within the same rank in order of seniority, directors for such meeting.
Source: SL 1965, ch 24, § 14.
47-22-41. Liability for actions during emergency--Willful misconduct.
No officer, director, or employee acting in accordance with any emergency bylaws shall be liable except for willful misconduct. No officer, director, or employee shall be liable for any action taken by him in good faith in any emergency described in § 47-22-35 in furtherance of the ordinary affairs of the corporation even though not authorized by the bylaws then in effect.
Source: SL 1965, ch 24, § 14.
47-22-52. Powers of corporation--Perpetual succession.
Each corporation shall have power to have perpetual succession by its corporate name unless a limited period of duration is stated in its articles of incorporation.
Source: SDC 1939, § 11.1405; SL 1965, ch 24, § 5 (1).
47-22-53. Powers of corporation--Capacity to sue and be sued.
Each corporation shall have power to sue and be sued, complain and defend, in its corporate name.
Source: SL 1965, ch 24, § 5 (2).
47-22-54. Powers of corporation--Corporate seal.
Each corporation shall have power to have a corporate seal which may be altered at pleasure, and to use the same by causing it, or a facsimile thereof, to be impressed or affixed or in any other manner reproduced.
Source: SL 1965, ch 24, § 5 (3).
47-22-55. Powers of corporation--Dealing in real or personal property.
Each corporation shall have power to purchase, take, receive, lease, take by gift, devise or bequest, or otherwise acquire, own, hold, improve, use and otherwise deal in and with, real or personal property, or any interest therein, wherever situated.
Source: SDC 1939, §§ 11.1703, 11.1803; SL 1965, ch 24, § 5 (4).
47-22-56. Powers of corporation--Disposal of corporate assets.
Each corporation shall have power to sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise dispose of all or any part of its property and assets.
Source: SL 1965, ch 24, § 5 (5).
47-22-57. Powers of corporation--Lending money.
Each corporation shall have power to lend money to its employees other than its officers and directors, and otherwise assist its employees, officers, and directors.
Source: SL 1965, ch 24, § 5 (6).
47-22-58. Powers of corporation--Securities holdings--Government obligations.
Each corporation shall have power to purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in, or obligations of, other domestic, or foreign corporations, whether for profit or not for profit, associations, partnerships, or individuals, or direct or indirect obligations of the United States, or of any other government, state, territory, governmental district, or municipality or of any instrumentality thereof.
Source: SL 1965, ch 24, § 5 (7).
47-22-59. Powers of corporation--Contracting--Borrowing--Issuance of securities.
Each corporation shall have power to make contracts and incur liabilities, borrow money at such rates of interest as the corporation may determine, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of all or any of its property, franchises, and income.
Source: SL 1965, ch 24, § 5 (8).
47-22-60. Powers of corporation--Lending--Investing--Property holding.
Each corporation shall have power to lend money for its corporate purposes, invest and reinvest its funds, and take and hold real and personal property as security for the payment of funds so loaned or invested.
Source: SL 1965, ch 24, § 5 (9).
47-22-61. Powers of corporation--Extraterritorial operations.
Each corporation shall have power to conduct its affairs, carry on its operations, and have offices and exercise the powers granted by chapters 47-22 to 47-28, inclusive, in any state, territory, district, or possession of the United States, or in any foreign country.
Source: SL 1965, ch 24, § 5 (10).
47-22-62. Powers of corporation--Officers and agents.
Each corporation shall have power to elect or appoint officers and agents of the corporation, who may be directors or members, and define their duties and fix their compensation.
Source: SL 1965, ch 24, § 5 (11).
47-22-63. Powers of corporation--Adoption of bylaws.
Each corporation shall have power to make and alter bylaws, not inconsistent with its articles of incorporation or with the laws of this state, for the administration and regulation of the affairs of the corporation.
Source: SDC 1939, §§ 11.1407, 11.1501, 11.1502; SL 1965, ch 24, § 5 (12).
47-22-64. Powers of corporation--Donations--Wartime donations.
Each corporation shall have power to make donations for the public welfare or for charitable, scientific, or educational purposes; and in time of war to make donations in aid of war activities.
Source: SL 1965, ch 24, § 5 (13).
47-22-65.1. Powers of corporation--Indemnification--Defense of actions.
Each nonprofit corporation may:
(1) Indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right of the corporation, by reason of the fact that that person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, limited liability company, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys' fee, judgments, fines, and amounts paid in settlement actually and reasonably incurred by that person in connection with such action, suit, or proceeding if that person acted in good faith and in a manner that person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which that person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such conduct was unlawful; and
(2) Indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that that person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, limited liability company, partnership, joint venture, trust, or other enterprise against expenses, including attorneys' fees, actually and reasonably incurred by that person in connection with the defense or settlement of such action or suit if that person acted in good faith and in a manner that person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification may be made in respect of any claim, issue or matter as to which such person has been adjudged to be liable for negligence or misconduct in performance of any duty to the corporation unless and only to the extent that the court in which such action or suit was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which the court deems proper.
Source: SL 1986, ch 388, § 2; SL 1994, ch 351, § 124.
47-22-65.2. Indemnification against expenses and attorneys' fees.
To the extent that a director, officer, employee, or agent of a nonprofit corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subdivisions 47-22-65.1(1) and (2), or in defense of any claim, issue or matter therein, he shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him in connection therewith.
Source: SL 1986, ch 388, § 3.
47-22-65.3. Authorization of indemnification--Requirements--Manner of determination.
Any indemnification under subdivisions 47-22-65.1(1) and (2), unless ordered by a court, shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subdivisions 47-22-65.1(1) and (2). Such determination shall be made by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding, or if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion.
Source: SL 1986, ch 388, § 4.
47-22-65.4. Authorization of payment of expenses prior to final disposition of action--Receipt of undertaking--Terms and conditions.
Any expense incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of such director or officer to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized by §§ 47-22-65.1 to 47-22-65.8, inclusive. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate.
Source: SL 1986, ch 388, § 5.
47-22-65.5. Indemnification not exclusive of other rights--Continuation of benefits to former employees--Benefits to deceased employees.
No indemnification provided by §§ 47-22-65.1 to 47-22-65.8, inclusive, is exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs and personal representatives of such a person.
Source: SL 1986, ch 388, § 6.
47-22-65.6. Powers of corporation--Purchase and maintenance of liability insurance.
Any nonprofit corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, limited liability company, partnership, joint venture, trust, or other enterprise against any liability asserted against that person and incurred by that person in such capacity, or arising out of such status, whether or not the corporation would have the power to indemnify that person against such liability under the provisions of §§ 47-22-65.1 to 47-22-65.8, inclusive.
Source: SL 1986, ch 388, § 7; SL 1994, ch 351, § 125.
47-22-65.7. Corporation defined.
For purposes of §§ 47-22-65.1 to 47-22-65.8, inclusive, references to "the corporation" includes, in addition to the resulting corporation, any constituent corporation, including any constituent of a constituent, which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee, or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, limited liability company, partnership, joint venture, trust, or other enterprise, shall stand in the same position under the provisions of §§ 47-22-65.1 to 47-22-65.8, inclusive, with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
Source: SL 1986, ch 388, § 8; SL 1994, ch 351, § 126.
47-22-65.8. Definition of other terms.
For purposes of §§ 47-22-65.1 to 47-22-65.8, inclusive, references to "other enterprises" include employee benefit plans; references to "fines" include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" include any service as a director, officer, employee, or agent of the corporation which impose duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries. Any person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan is deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in §§ 47-22-65.1 to 47-22-65.8, inclusive.
Source: SL 1986, ch 388, § 9.
47-22-66. Powers of corporation--Pension plans.
Each corporation shall have power to pay pensions and establish pension plans or pension trusts for any or all of its directors, officers, and employees.
Source: SL 1965, ch 24, § 5 (15).
47-22-67. Powers of corporation--Cessation of activities.
Each corporation shall have power to cease its corporate activities and surrender its corporate franchise.
Source: SL 1965, ch 24, § 5 (16).
47-22-68. Powers of corporation--Other powers.
Each corporation shall have power to have and exercise all powers necessary or convenient to effect any or all of the purposes for which the corporation is organized.
Source: SL 1965, ch 24, § 5 (17).
47-22-68.1. Restrictions on private foundations--Definition of terms.
Terms as used in §§ 47-22-68.1 to 47-22-68.9, inclusive, shall have the following meaning:
(1) "Excess business holdings," as defined in section 4943(c) of the Internal Revenue Code;
(2) "Internal Revenue Code," the United States Internal Revenue Code of 1954, as amended;
(3) "Private foundation," as defined in section 509(a) of the Internal Revenue Code;
(4) "Self-dealing," as defined in section 4941(d) of the Internal Revenue Code;
(5) "Taxable expenditure," as defined in section 4945(d) of the Internal Revenue Code.
Source: SL 1972, ch 244, § 1.
47-22-68.2. Restrictive provisions as to income and property deemed incorporated in foundation charter.
Any instrument creating a corporation which is a private foundation and any instrument governing the use, retention, or disposition by such corporation of any of its income or property shall be deemed to have incorporated within such instrument with the same effect as though such language were set forth verbatim in such instrument the provisions set forth in §§ 47-22-68.3 to 47-22-68.7, inclusive, and except as the contrary is provided in §§ 47-22-68.8 and 47-22-68.9, such provisions shall govern the corporation as to the use, retention, and disposition of its income and property irrespective of any provisions of any such instrument, statute, or other law of this state to the contrary.
Source: SL 1972, ch 244, § 2.
47-22-68.3. Self-dealing by foundation prohibited.
The corporation described in § 47-22-68.2 shall not engage in any act of self-dealing which would give rise to any liability for the tax imposed by section 4941(a) of the Internal Revenue Code.
Source: SL 1972, ch 244, § 2 (2).
47-22-68.4. Distributions required of foundation.
The corporation described in § 47-22-68.2 shall distribute for each of its taxable years amounts at least sufficient to avoid liability for the tax imposed by section 4942(a) of the Internal Revenue Code.
Source: SL 1972, ch 244, § 2 (1).
47-22-68.5. Excess business holdings prohibited to foundation.
The corporation described in § 47-22-68.2 shall not retain any excess business holdings which would give rise to any liability for the tax imposed by section 4943(a) of the Internal Revenue Code.
Source: SL 1972, ch 244, § 2 (3).
47-22-68.6. Investments which jeopardize charitable purpose prohibited to foundation.
The corporation described in § 47-22-68.2 shall not make any investments which would jeopardize the carrying out of any of the exempt purposes of the corporation, within the meaning of section 4944 of the Internal Revenue Code so as to give rise to any liability for the tax imposed by section 4944(a) of the Internal Revenue Code.
Source: SL 1972, ch 244, § 2 (4).
47-22-68.7. Taxable expenditures prohibited to foundation.
The corporation described in § 47-22-68.2 shall not make any taxable expenditure which would give rise to any liability for the tax imposed by section 4945(a) of the Internal Revenue Code.
Source: SL 1972, ch 244, § 2 (5).
47-22-68.8. Judicial determination that required restrictions would be contrary to charter.
Sections 47-22-68.2 to 47-22-68.7, inclusive, shall not apply to any corporation to the extent that a court of competent jurisdiction shall determine that such application would be contrary to the terms of any instrument described in § 47-22-68.2 and that such instrument may not properly be changed to conform to §§ 47-22-68.2 to 47-22-68.7, inclusive.
Source: SL 1972, ch 244, § 3.
47-22-68.9. State powers over corporation unimpaired.
Nothing in §§ 47-22-68.1 to 47-22-68.8, inclusive, shall impair the rights and powers of the attorney general or the courts of this state with respect to any corporation.
Source: SL 1972, ch 244, § 4.
47-22-69. Ultra vires unavailable to invalidate transfers of property.
No act of a corporation and no conveyance or transfer of real or personal property to or by a corporation shall be invalid by reason of the fact that the corporation was without capacity or power to do such act or to make or receive such conveyance or transfer.
Source: SL 1965, ch 24, § 6.
47-22-70. Circumstances under which ultra vires may be asserted--Actions by members or directors--Injunctions.
Notwithstanding § 47-22-69, the fact that a corporation is without capacity or power to do an act or to make or receive a conveyance or transfer of real or personal property may be asserted in a proceeding by a member or a director against the corporation to enjoin the doing or continuation of unauthorized acts, or the transfer of real or personal property by or to the corporation. If the unauthorized acts or transfer sought to be enjoined are being, or are to be, performed pursuant to any contract to which the corporation is a party, the court may, if all of the parties to the contract are parties to the proceeding and if it deems the same to be equitable, set aside and enjoin the performance of such contract, and in so doing may allow to the corporation or the other parties to the contract, as the case may be, compensation for the loss or damage sustained by either of them which may result from the action of the court in setting aside and enjoining the performance of such contract, but anticipated profits to be derived from the performance of the contract shall not be awarded by the court as a loss or damage sustained.
Source: SL 1965, ch 24, § 6 (1).
47-22-71. Circumstances under which ultra vires may be asserted--Actions by corporation against officers or directors.
Notwithstanding § 47-22-69, the fact that a corporation was without capacity or power to do an act or to make or receive a conveyance or transfer of real or personal property may be asserted in a proceeding by the corporation, whether acting directly or through a receiver, trustee, or other legal representative, or through members in a representative suit, against the officers or directors of the corporation for exceeding their authority.
Source: SL 1965, ch 24, § 6 (2).
47-22-72. Circumstances under which ultra vires may be asserted--Actions by attorney general to dissolve or enjoin corporation.
Notwithstanding § 47-22-69, the fact that a corporation is without capacity or power to do an act or to make or receive a conveyance or transfer of real or personal property may be asserted in a proceeding by the attorney general, as provided in chapter 47-26, to dissolve the corporation, or in a proceeding by the attorney general to enjoin the corporation from performing unauthorized acts, or in any other proceeding by the attorney general.
Source: SL 1965, ch 24, § 6 (3).
47-22-73. Unauthorized acting as corporation--Liability.
All persons who assume to act as a corporation without authority so to do shall be jointly and severally liable for all debts and liabilities incurred or arising as a result thereof.
Source: SL 1965, ch 24, § 98.
47-22-74. Legislative power to prescribe additional regulations.
The Legislature shall at all times have power to prescribe such regulations, provisions, and limitations as it may deem advisable, which regulations, provisions, and limitations shall be binding upon any and all corporations subject to the provisions of chapters 47-22 to 47-28, inclusive, and the Legislature shall have power to amend, repeal, or modify said chapters at pleasure.
Source: SL 1965, ch 24, § 100.
47-22-74.1. Privacy protection policy for social security numbers of volunteers.
Before a nonprofit corporation in the regular course of business or in the provision of services requests that a volunteer provide the volunteer's social security number, the corporation shall adopt a privacy protection policy that sets forth the manner in which the corporation intends to secure and protect any social security numbers in its possession or in the possession of a third party with whom the corporation shares or will share the numbers. The policy must specify measures that limit access to social security numbers and processes and procedures that mitigate against the improper disclosure of social security numbers. The corporation shall:
(1) Provide the policy to any volunteer who has been requested to provide the volunteer's social security number to the nonprofit corporation; and
(2) Make the policy available in printed form, upon request.
Source: SL 2019, ch 197, § 1.
47-22-75. Prior incorporations validated--Previously pending actions.
All articles of incorporation, including amendments, of any association, society, or corporation established for charitable purposes filed in the Office of the Secretary of State of this state prior to July 1, 1957 which did not set forth the amount of property of any kind such association, society, or corporation might hold or the disposition to be made of its property in case of its dissolution and all acts done in reliance thereon are hereby in all things legalized, cured, and validated and are hereby declared to be in all respects of like force and effect as though such articles had set forth such matters.
No action or proceeding filed and pending on July 1, 1957 shall be barred or the rights of any party thereto in any manner affected by the enactment of this section.
Source: SL 1957, ch 506, §§ 1, 2; SDC Supp 1960, § 65.0338.
47-22-76. Rights vested under prior statutes unaffected.
No rights, privileges, and immunities vested or accrued by and under prior statutes repealed by chapter 24 of the Session Laws of 1965, no suit pending, no rights of action conferred, and no duties, restrictions, liabilities, and penalties imposed or required by and under such statutes shall be impaired, diminished, or affected thereby.
Source: SL 1965, ch 24, § 101.
47-22-77. Severability and saving clause.
If a court of competent jurisdiction shall adjudge to be invalid or unconstitutional any clause, sentence, paragraph, section, or part of chapters 47-22 to 47-28, inclusive, such judgment or decree shall not affect, impair, invalidate, or nullify the remainder of said chapters, but the effect thereof shall be confined to the clause, sentence, paragraph, section, or part of said chapters so adjudged to be invalid or unconstitutional.
Source: SL 1965, ch 24, § 102.
47-22-78. Citation of nonprofit corporation law.
Chapters 47-22 to 47-28, inclusive, shall be known and may be cited as the "South Dakota Nonprofit Corporation Act."
Source: SL 1965, ch 24, § 1.
CHAPTER 47-23
NONPROFIT CORPORATIONS--MEMBERS, DIRECTORS, OFFICERS AND AGENTS
47-23-1 Classes of members--Corporations without members--Articles of incorporation as governing--Certificates of membership.
47-23-2 Exoneration from personal liability.
47-23-2.1 Liability of director, trustee, committee member, or officer serving without compensation.
47-23-3 Members' meetings--Time and place.
47-23-4 Annual members' meeting--Time and place--Failure to hold meeting.
47-23-5 Special meetings--Electronic communication.
47-23-6 Taking action without meeting--Written consent--Effect of written consent.
47-23-7 Notice to members of meeting--Manner of giving notice.
47-23-8 Articles or bylaws as limiting right to vote--Vote in absence of limitation provision.
47-23-9 Voting procedure--Proxy votes--Ballots.
47-23-10 Cumulative voting for directors.
47-23-11 Corporations without members entitled to vote--Powers of directors.
47-23-12 Bylaw provisions governing vote or quorum--Quorum in absence of bylaw provision--Majority vote required.
47-23-13 Board of directors--Qualifications of directors.
47-23-14 Number of directors--Bylaws as governing--Increasing or decreasing number of directors--Decrease as not affecting term.
47-23-15 First board of directors--Term of office.
47-23-16 Election or appointment of directors--Term of office.
47-23-17 Classes of directors--Term of office.
47-23-18 Removal of directors.
47-23-19 Vacancy on board of directors--Filling by majority vote of remaining directors--Term of office.
47-23-20 Quorum of directors--Provisions of articles or bylaws as governing.
47-23-21 Meetings by teleconference.
47-23-22 Committees--Authority and function--Responsibility of board of directors.
47-23-23 Articles or bylaws as governing vote of directors.
47-23-24 Corporate officers--Appointment and term of office--Ex officio members of board of directors.
47-23-25 Removal of officers--Contract rights unaffected.
47-23-26 Notice to members or directors--Written waiver.
47-23-27 Indemnification of corporate agents for liability from good faith acts on behalf of corporation.
47-23-28 Definition of terms.
47-23-29 Immunity of volunteers of nonprofit organizations, free clinics, certain hospitals, and governmental entities.
47-23-30 Person not immune where negligent operation of vehicle caused injury.
47-23-31 Effect on other statutes concerning immunity.
47-23-32 Waiver of immunity to extent of risk sharing pool or liability insurance coverage--Volunteer serving as director, officer, or trustee exempt.
47-23-1. Classes of members--Corporations without members--Articles of incorporation as governing--Certificates of membership.
A corporation may have one or more classes of members or may have no members. If the corporation has one or more classes of members, the designation of such class or classes and the qualifications and rights of the members of each class shall be set forth in the articles of incorporation or by the bylaws. A corporation may issue certificates evidencing membership therein.
Source: SL 1965, ch 24, § 12.
47-23-2. Exoneration from personal liability.
The directors, officers, employees, and members of the corporation shall not, as such, be liable on its obligations.
Source: SDC 1939, § 11.1406; SL 1965, ch 24, § 12.
47-23-2.1. Liability of director, trustee, committee member, or officer serving without compensation.
No director, trustee, committee member, or officer serving without compensation, other than reimbursement for actual expenses, of any corporation organized under this chapter or under similar laws of another state, or any hospital organized pursuant to chapter 34-8, 34-9, or 34-10 is liable, and no cause of action may be brought, for damages resulting from the exercise of judgment or discretion in connection with the duties or responsibilities of such director, trustee, committee member, or officer while acting in an official capacity as such director, trustee, committee member, or officer, unless the act or omission involved willful or wanton misconduct. The immunity provided by this section applies to any member of an advisory board, serving without compensation, other than reimbursement for actual expenses, of any corporation described by this section.
Source: SL 1987, ch 343, § 1; SL 2006, ch 230, § 1; SL 2016, ch 221, § 5.
47-23-3. Members' meetings--Time and place.
Meetings of members of a corporation may be held via electronic communication or at such place, either within or without this state, as may be provided in the articles or bylaws. In the absence of any such provision, all meetings shall be held at the registered office of the corporation in this state, unless a special meeting is called and held electronically pursuant to § 47-23-5.
Source: SDC 1939, §§ 11.1301, 11.1408; SL 1965, ch 24, § 15; SL 2021, ch 195, § 2, eff. Mar. 3, 2021.
47-23-4. Annual members' meeting--Time and place--Failure to hold meeting.
An annual meeting of the members of a corporation shall be held at such time as may be provided in the bylaws. Failure to hold the annual meeting at the designated time shall not work a forfeiture or dissolution of the corporation. The articles of incorporation or bylaws may provide that an annual or regular meeting of members does not need to be held at a geographic location and may instead be held by any means of electronic communication which allows the members to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the members, pose questions, and make comments.
Source: SL 1965, ch 24, § 15; SL 2016, ch 221, § 6.
47-23-5. Special meetings--Electronic communication.
Special meetings of the members of a corporation may be called by the president or by the board of directors. Special meetings of the members may also be called by such other officers or persons or number or proportion of members as may be provided in the articles of incorporation or the bylaws. In the absence of a provision fixing the number or proportion of members entitled to call a meeting, a special meeting of members may be called by members having one-twentieth of the votes entitled to be cast at such meeting. The call of a special meeting may provide that the meeting be held by any means of electronic communication that allows the members to:
(1) Substantially see or hear the proceedings concurrently with their occurrence;
(2) Vote on matters submitted to the members; and
(3) Pose questions and make comments.
Source: SL 1965, ch 24, § 15; SL 2021, ch 195, § 3, eff. Mar. 3, 2021.
47-23-6. Taking action without meeting--Written consent--Effect of written consent.
Any action required by chapters 47-22 to 47-28, inclusive, to be taken at a meeting of the members or directors of a corporation, or any action which may be taken at a meeting of the members or directors or of a committee of directors, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the members entitled to vote with respect to the subject matter thereof, or all of the directors, or all of the members of the committee of directors, as the case may be. If permitted in the articles of incorporation or the bylaws, such consent and signature may be transmitted by any reasonable means including, but not limited to, traditional mail, hand delivery, email, or electronic facsimile.
Such consent shall have the same force and effect as a unanimous vote, and may be stated as such in any articles or document filed with the secretary of state under chapters 47-22 to 47-28, inclusive.
Source: SL 1965, ch 24, § 97; SL 2016, ch 221, § 7.
47-23-7. Notice to members of meeting--Manner of giving notice.
Unless otherwise provided in the articles of incorporation or the bylaws, written notice stating the place, day, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the president, or the secretary, or the officers or persons calling the meeting, to each member entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the member at his address as it appears on the records of the corporation, with postage thereon prepaid. If permitted in the articles of incorporation or the bylaws, notice of meetings may be given by any reasonable means including, but not limited to, traditional mail, hand delivery, email, or electronic facsimile.
Source: SL 1965, ch 24, § 16; SL 2016, ch 221, § 8.
47-23-8. Articles or bylaws as limiting right to vote--Vote in absence of limitation provision.
The right of the members, or any class or classes of members, to vote may be limited, enlarged, or denied to the extent specified in the articles of incorporation or the bylaws. Unless so limited, enlarged, or denied, each member, regardless of class, shall be entitled to one vote on each matter submitted to a vote of members.
Source: SL 1965, ch 24, § 17.
47-23-9. Voting procedure--Proxy votes--Ballots.
A member entitled to vote may vote in person or, unless the articles of incorporation or the bylaws otherwise provide, may vote by proxy executed in writing by the member or by his duly authorized attorney in fact. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Except as otherwise provided in the articles of incorporation or bylaws, any action that may be taken at any annual, regular, or special meeting of members may be taken without a meeting if the corporation delivers a ballot to every member entitled to vote on the matter. Each ballot must:
(1) Set forth each proposed action;
(2) Provide an opportunity to vote for or against, or withhold a vote for, each proposed action;
(3) Be delivered to each member by any means of transmission set forth in the bylaws or articles of incorporation. If no method is set forth in the bylaws or articles of incorporation, ballots may be delivered by any reasonable means, including, but not limited to, traditional mail, hand delivery, email, or electronic facsimile;
(4) Indicate the number of responses needed to meet the quorum requirements;
(5) State the percentage of approvals necessary to approve each matter other than election of directors; and
(6) Specify the time by which a ballot must be received in order to be counted.
Unless otherwise provided in the articles of incorporation or bylaws, approval by ballot, pursuant to this section, of action other than election of directors is valid only when the number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action, and the number of approvals equals or exceeds the number of votes that would be required to approve the matter at a meeting at which the total number of votes cast was the same as the number of votes cast by ballot. Except as otherwise provided in the articles of incorporation or bylaws, a ballot may not be revoked.
Source: SL 1965, ch 24, § 17; SL 2016, ch 221, § 9.
47-23-10. Cumulative voting for directors.
The articles of incorporation or the bylaws may provide that in all elections for directors every member entitled to vote shall have the right to cast the whole number of his votes for one candidate or distribute them upon two or more candidates, as he may prefer.
Source: SL 1965, ch 24, § 17.
47-23-11. Corporations without members entitled to vote--Powers of directors.
If a corporation has no members or its members have no right to vote, the directors shall have the sole voting power.
Source: SL 1965, ch 24, § 17.
47-23-12. Bylaw provisions governing vote or quorum--Quorum in absence of bylaw provision--Majority vote required.
The bylaws may provide the number or percentage of members entitled to vote represented in person or by proxy, or the number or percentage of votes represented in person or by proxy, which shall constitute a quorum at a meeting of members. In the absence of any such provision, members holding one-tenth of the votes entitled to be cast on the matter to be voted upon represented in person or by proxy shall constitute a quorum. A majority of the votes entitled to be cast on a matter to be voted upon by the members present or represented by proxy at a meeting at which a quorum is present shall be necessary for the adoption thereof unless a greater proportion is required by chapters 47-22 to 47-28, inclusive, the articles of incorporation or the bylaws.
Source: SL 1965, ch 24, § 18.
47-23-13. Board of directors--Qualifications of directors.
Except as authorized by § 47-23-22, the affairs of a corporation shall be managed by a board of directors. Directors need not be members of the corporation unless the articles of incorporation or the bylaws so require. The articles of incorporation or the bylaws may prescribe other qualifications for directors.
Source: SL 1965, ch 24, § 19; SL 1989, ch 394, § 1; SL 2016, ch 221, § 10.
47-23-14. Number of directors--Bylaws as governing--Increasing or decreasing number of directors--Decrease as not affecting term.
The number of directors of a corporation shall not be less than three. Subject to such limitation, the number of directors shall be fixed by the bylaws, except as to the number of the first board of directors which number shall be fixed by the articles of incorporation. The number of directors may be increased or decreased from time to time by amendment to the bylaws, unless the articles of incorporation provide that a change in the number of directors shall be made only by amendment of the articles of incorporation. No decrease in number shall have the effect of shortening the term of any incumbent director. In the absence of a bylaw fixing the number of directors, the number shall be the same as that stated in the articles of incorporation.
Source: SL 1965, ch 24, § 20.
47-23-15. First board of directors--Term of office.
The directors constituting the first board of directors shall be named in the articles of incorporation and shall hold office until the first annual election of directors or for such other period as may be specified in the articles of incorporation or the bylaws.
Source: SL 1965, ch 24, § 20.
47-23-16. Election or appointment of directors--Term of office.
Directors after the first board shall be elected or appointed in the manner and for the terms provided in the articles of incorporation or the bylaws. In the absence of a provision fixing the term of office, the term of office of a director shall be one year.
Source: SL 1965, ch 24, § 20.
47-23-17. Classes of directors--Term of office.
Directors may be divided into classes and the terms of office of the several classes need not be uniform. Each director shall hold office for the term for which he is elected or appointed and until his successor shall have been elected or appointed and qualified.
Source: SL 1965, ch 24, § 20.
47-23-18. Removal of directors.
A director may be removed from office pursuant to any procedure therefor provided in the articles of incorporation.
Source: SL 1965, ch 24, § 20.
47-23-19. Vacancy on board of directors--Filling by majority vote of remaining directors--Term of office.
Any vacancy occurring in the board of directors and any directorship to be filled by reason of an increase in the number of directors may be filled by the affirmative vote of a majority of the remaining directors, though less than a quorum of the board of directors, unless the articles of incorporation or the bylaws provide that a vacancy or directorship so created shall be filled in some other manner, in which case such provision shall control.
A director elected or appointed, as the case may be, to fill a vacancy shall be elected or appointed for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of directors may be filled by the board of directors for a term of office continuing only until the next election of directors.
Source: SL 1965, ch 24, § 21.
47-23-20. Quorum of directors--Provisions of articles or bylaws as governing.
A majority of the number of directors fixed by the bylaws, or in the absence of a bylaw fixing the number of directors, then of the number stated in the articles of incorporation, shall constitute a quorum for the transaction of business, unless otherwise provided in the articles of incorporation or the bylaws; but in no event shall a quorum consist of less than one-third of the number of directors so fixed or stated. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by chapters 47-22 to 47-28, inclusive, the articles of incorporation or the bylaws.
Source: SL 1965, ch 24, § 22.
47-23-21. Meetings by teleconference.
Meetings of the board of directors, regular or special, may be held either within or without this state, and upon such notice as the bylaws may prescribe. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.
Unless restricted by the articles of incorporation or bylaws, members of the board of directors or any committee designated by the board of directors may participate in a meeting of such board or committee by means of teleconference or similar communications equipment which allows all persons participating in the meeting to hear each other at the same time. Participation by a board or committee member in a teleconference constitutes presence in person at a meeting.
Source: SL 1965, ch 24, § 24; SL 1997, ch 257, § 3.
47-23-22. Committees--Authority and function--Responsibility of board of directors.
If the articles of incorporation or the bylaws so provide, the board of directors may designate one or more committees each of which shall consist of one or more directors and such additional members as specified in the resolution which such additional members need not be a director or member of the nonprofit corporation, or resident of the state. Such committees, to the extent provided in the articles of incorporation or in the bylaws of the corporation, shall have and exercise the authority or function of the board of directors in the management of the corporation. The designation of such committees and the delegation thereto of authority shall not operate to relieve the board of directors, or any individual director of any responsibility imposed upon it or any individual director by law except those responsibilities related to the authority or function the committee is authorized to exercise. Other committees not having and exercising the authority of the board of directors in the management of the corporation may be designated by a resolution adopted by a majority of the directors present at a meeting at which a quorum is present. Members of committees created under this section have the same rights of indemnification and immunity as are provided to the board of directors in chapters 47-22 to 47-28, inclusive, unless otherwise provided in the articles of incorporation or bylaws.
Source: SL 1965, ch 24, § 23; SL 2016, ch 221, § 11.
47-23-23. Articles or bylaws as governing vote of directors.
Whenever, with respect to any action to be taken by the members or directors of a corporation, the articles of incorporation or bylaws require the vote or concurrence of a greater proportion of the directors or members or any class of members than required by chapters 47-22 to 47-28, inclusive, the provisions of the articles of incorporation or bylaws shall control.
Source: SL 1965, ch 24, § 95.
47-23-24. Corporate officers--Appointment and term of office--Ex officio members of board of directors.
The officers of a corporation shall consist of a president, one or more vice-presidents, a secretary, a treasurer, and such other officers and assistant officers as may be deemed necessary, each of whom shall be elected or appointed at such time and in such manner and for such terms not exceeding three years as may be prescribed in the articles of incorporation or the bylaws. In the absence of any such provision, all officers shall be elected or appointed annually by the board of directors. If the bylaws so provide, any two or more offices may be held by the same person, except the offices of president and secretary.
The articles of incorporation or the bylaws may provide that any one or more officers of the corporation shall be ex officio members of the board of directors.
The officers of a corporation may be designated by such additional titles as may be provided in the articles of incorporation or the bylaws.
Unless the articles of incorporation or the bylaws so prescribe, officers need not be directors.
Source: SL 1965, ch 24, § 25.
47-23-25. Removal of officers--Contract rights unaffected.
Any officer or agent elected or appointed may be removed by the persons authorized to elect or appoint such officer whenever in their judgment the best interests of the corporation will be served thereby. The removal of an officer or agent shall be without prejudice to the contract rights, if any, of the officer so removed. Election or appointment of an officer or agent shall not of itself create contract rights.
Source: SL 1965, ch 24, § 26.
47-23-26. Notice to members or directors--Written waiver.
Whenever any notice is required to be given to any member or director of a corporation under the provisions of chapters 47-22 to 47-28, inclusive, or under the provisions of the articles of incorporation or bylaws of the corporation, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice.
Source: SL 1965, ch 24, § 96.
47-23-27. Indemnification of corporate agents for liability from good faith acts on behalf of corporation.
A nonprofit corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative other than an action by or in the right of the corporation by reason of the fact that that person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent or another corporation, limited liability company, partnership, joint venture, trust, or other enterprise, against expenses including attorneys' fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by that person in connection with the action, suit, or proceeding if that person acted in good faith and in a manner that person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful.
Source: SL 1978, ch 338, § 6; SL 1994, ch 351, § 127.
47-23-28. Definition of terms.
Terms used in §§ 47-23-28 to 47-23-32, inclusive, mean:
(1) "Free clinic," a clinic in which health care services are offered voluntarily through a nonprofit corporation by health care professionals licensed or certified under the laws of this state to patients without charge or at a charge based on a sliding fee scale or the ability to pay;
(2) "Governmental entity," any county, municipality, township, school district, chartered governmental units, other special districts, or any association, authority, board, commission, division, office, officer, task force, or other agency of the State of South Dakota;
(3) "Nonprofit corporation," any corporation organized under chapters 47-22 to 47-28, inclusive, and which is exempt from taxation pursuant to Section 501(a) of the Internal Revenue Code, 26 U.S.C. Section 501(a);
(4) "Nonprofit organization," any organization which is exempt from taxation pursuant to Section 501(c) of the Internal Revenue Code, 26 U.S.C. Section 501(c) as amended;
(5) "Volunteer," an individual performing services for a nonprofit organization, a nonprofit corporation, a hospital organized pursuant to chapter 34-8, 34-9, or 34-10, or a governmental entity without compensation, other than reimbursement for actual expenses incurred. The term includes a volunteer serving as a director, officer, trustee, or direct service volunteer.
Source: SL 1987, ch 344, § 1; SL 1993, ch 340, § 1.
47-23-29. Immunity of volunteers of nonprofit organizations, free clinics, certain hospitals, and governmental entities.
Any volunteer, including any volunteer who is a licensed health care professional under Title 36, providing services on behalf of a nonprofit organization, a nonprofit corporation, a free clinic, any hospital organized pursuant to chapter 34-8, 34-9, or 34-10, or a governmental entity are immune from civil liability in any action brought in any court in this state on the basis of any act or omission resulting in damage or injury if:
(1) The individual was acting in good faith and within the scope of such individual's official functions and duties for the nonprofit organization, the nonprofit corporation, the free clinic, a hospital organized pursuant to chapter 34-8, 34-9, or 34-10, or a governmental entity; and
(2) The damage or injury was not caused by gross negligence or willful and wanton misconduct by such individual.
Source: SL 1987, ch 344, § 2; SL 1993, ch 340, § 2; SL 2013, ch 231, § 1.
47-23-30. Person not immune where negligent operation of vehicle caused injury.
No immunity provided in §§ 47-23-28 to 47-23-32, inclusive, extends to any person causing personal injury or wrongful death resulting from the negligent operation of a motor vehicle.
Source: SL 1987, ch 344, § 3.
47-23-31. Effect on other statutes concerning immunity.
Sections 47-23-28 to 47-23-32, inclusive, shall not be construed to constitute a modification or repeal of §§ 20-9-3, 20-9-4, 20-9-4.1, 34-48A-23, and 34-48A-24.
Source: SL 1987, ch 344, § 4.
47-23-32. Waiver of immunity to extent of risk sharing pool or liability insurance coverage--Volunteer serving as director, officer, or trustee exempt.
To the extent that any volunteer, nonprofit corporation, nonprofit organization, governmental entity, or hospital organized pursuant to chapter 34-8, 34-9, or 34-10 participates in a risk sharing pool or purchases liability insurance and to the extent that coverage is afforded thereunder, the immunity provided by § 47-23-29 is deemed to have been waived and may not be raised by way of affirmative defense. This section does not apply to a volunteer serving as a director, officer, or trustee.
Source: SL 1987, ch 344, § 5.
CHAPTER 47-24
NONPROFIT CORPORATIONS--RECORDS, FISCAL AFFAIRS AND REPORTS
47-24-1 Books, records, minutes, and member lists.
47-24-2 Inspection of books or records.
47-24-3 Shares of stock prohibited--Dividends and profits prohibited.
47-24-3.1 Directors not liable for distribution in good faith reliance on financial statements or accountant's report.
47-24-4 Compensation of members, directors, or officers--Distributions upon final liquidation.
47-24-5 Loans to directors or officers--Liability for assenting to loan.
47-24-6 Report required of domestic corporation.
47-24-7 47-24-7. Repealed by SL 2008, ch 275, § 65.
47-24-8 47-24-8. Repealed by SL 2003, ch 8, § 16
47-24-9 47-24-9 to 47-24-12. Repealed by SL 2008, ch 275, § 65.
47-24-13 47-24-13. Repealed by SL 1989, ch 393, § 20
47-24-13.1 Administrative dissolution.
47-24-13.2 Notice of dissolution--Time limit for corrections--Continued existence--Authority of registered agent.
47-24-14 Petition for reinstatement after dissolution of corporate existence--Execution and filing.
47-24-14.1 Denial of reinstatement--Appeal--Court action.
47-24-15 Change of name required on reinstatement.
47-24-16 Conforming petition for reinstatement filed--Certificate.
47-24-17 Notice to attorney general before sale, transfer, conversion, or merger of at least thirty percent of assets--Information to be submitted to secretary of state.
47-24-18 Definitions.
47-24-19 Protection--Nonprofit corporations--Charitable trusts.
47-24-20 Exceptions.
47-24-21 Personal affiliation information--Definitions.
47-24-22 Personal affiliation information--Right to privacy--Public agencies--Prohibitions.
47-24-23 Personal affiliation information--Privacy violation--Civil action.
47-24-24 Personal affiliation information--Exemptions.
47-24-25 Personal affiliation information--Public benefit.
47-24-26 Personal affiliation information--Fraud investigation.
47-24-1. Books, records, minutes, and member lists.
Each corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its members, board of directors, and committees having any of the authority of the board of directors; and shall keep at its registered office or principal office a record of the names and addresses of its members entitled to vote. If authorized by the articles of incorporation or bylaws, the records required by this section may be kept in electronic format.
Source: SDC 1939, § 11.0801; SL 1965, ch 24, § 27; SL 2016, ch 221, § 12.
47-24-2. Inspection of books or records.
All books and records of a corporation may be inspected by any member, or his agent or attorney, for any proper purpose at any reasonable time.
Source: SDC 1939, § 11.0801; SL 1965, ch 24, § 27.
47-24-3. Shares of stock prohibited--Dividends and profits prohibited.
A corporation shall not have or issue shares of stock. No dividend shall be paid and no part of the income or profit of a corporation shall be distributed to its members, directors, or officers.
Source: SL 1965, ch 24, § 28.
47-24-3.1. Directors not liable for distribution in good faith reliance on financial statements or accountant's report.
A director of a nonprofit corporation shall not be liable for any unauthorized dividend or distribution of assets if he relied and acted in good faith upon financial statements of the corporation represented to him to be correct by the president or the officer of the corporation having charge of his books of account, or stated in a written report by a certified public accountant failing to reflect the financial condition of the corporation, nor shall he be so liable if in good faith in determining the amount available for any such dividend or distribution he considered the assets to be of their book value.
Source: SL 1978, ch 338, § 5.
47-24-4. Compensation of members, directors, or officers--Distributions upon final liquidation.
A corporation may pay compensation in a reasonable amount to its members, directors, or officers for services rendered, may confer benefits upon its members in conformity with its purposes, and may make distributions upon dissolution or final liquidation as permitted by chapter 47-26, and no such payment, benefit, or distribution shall be deemed to be a dividend or a distribution of income or profit.
Source: SL 1965, ch 24, § 28.
47-24-5. Loans to directors or officers--Liability for assenting to loan.
No loans shall be made by a corporation to its directors or officers. Any director or officer who assents to or participates in the making of any such loan shall be liable to the corporation for the amount of such loan until the repayment thereof.
Source: SL 1965, ch 24, § 29.
47-24-6. Report required of domestic corporation.
Any domestic nonprofit corporation authorized to engage in business in this state shall file a report pursuant to §§ 59-11-24 to 59-11-26, inclusive.
Source: SL 1978, ch 339, § 1; SL 1989, ch 393, § 14; SL 2004, ch 280, § 9; SL 2008, ch 275, § 64.
47-24-13.1. Administrative dissolution.
The secretary of state may commence a proceeding under § 47-24-13.2 to administratively dissolve a corporation if:
(1) The corporation does not pay within sixty days after they are due any fees or penalties imposed by chapters 47-22 to 47-28, inclusive, or other law;
(2) The corporation does not deliver its annual report to the secretary of state within sixty days after it is due;
(3) The corporation is without a registered agent in this state for sixty days or more;
(4) The corporation does not notify the secretary of state within sixty days that its registered agent has been changed or that its registered agent has resigned; or
(5) The corporation's period of duration stated in its articles of incorporation expires.
Source: SL 1989, ch 393, § 21; SL 2008, ch 275, § 66.
47-24-13.2. Notice of dissolution--Time limit for corrections--Continued existence--Authority of registered agent.
If the secretary of state determines that one or more grounds exist under § 47-24-13.1 for dissolving a corporation, he shall serve the corporation with written notice of his determination under § 47-22-48. If the corporation does not correct each ground for dissolution or demonstrate to the reasonable satisfaction of the secretary of state that each ground determined by the secretary of state does not exist within sixty days after service of the notice is perfected under § 47-22-48, the secretary of state shall administratively dissolve the corporation by signing a certificate of dissolution that recites the ground or grounds for dissolution and its effective date. The secretary of state shall file the original of the certificate and serve a copy on the corporation under § 47-22-48. A corporation administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business and affairs under chapter 47-26 and notify claimants under §§ 47-26-4 and 47-26-34. Administrative dissolution of a corporation does not terminate the authority of its registered agent.
Source: SL 1989, ch 393, § 22.
47-24-14. Petition for reinstatement after dissolution of corporate existence--Execution and filing.
Any corporation whose corporate existence has been revoked or dissolved may petition for reinstatement as a corporation organized under the laws of South Dakota. Such petition for reinstatement shall be made upon forms prescribed and furnished by the secretary of state and the information therein contained shall be given as of the date of the execution of such petition. Such petition shall be executed for the corporation by the chairman of the board of directors, by its president, or by another of its officers or if the corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that fiduciary. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document.
Source: SL 1978, ch 339, § 9; SL 1984, ch 301; SL 1989, ch 393, § 23; SL 1992, ch 324; SL 2012, ch 222, § 6.
47-24-14.1. Denial of reinstatement--Appeal--Court action.
If the secretary of state denies a corporation's petition for reinstatement following administrative dissolution, he shall serve the corporation under § 47-22-48 with a written notice that explains the reason or reasons for denial. The corporation may appeal the denial of reinstatement to the circuit court of the county where the corporation's registered office or principal office was located within thirty days after service of the notice of denial is perfected. The corporation appeals by petitioning the court to set aside the dissolution and attaching to the petition copies of the secretary of state's certificate of dissolution, the corporation's application for reinstatement and the secretary of state's notice of denial. The court may order the secretary of state to reinstate the dissolved corporation or may take other action the court considers appropriate. The court's final decision may be appealed in the same manner as in any other civil proceedings.
Source: SL 1989, ch 393, § 24.
47-24-15. Change of name required on reinstatement.
If the corporate name of any reinstated corporation is deceptively similar to the corporate name either reserved or registered pursuant to §§ 47-22-9 to 47-22-11, inclusive, or to a corporate name of any corporation to which a certificate of incorporation or certificate of authority has been granted, or to the name of any limited partnership certified or registered in this state, such reinstated corporation shall be required to adopt another name.
Source: SL 1978, ch 339, § 10; SL 1989, ch 393, § 25.
47-24-16. Conforming petition for reinstatement filed--Certificate.
If a petition for reinstatement is filed and complies with the law, upon payment of the fee as provided under § 47-28-6, together with submission of the reports required under § 47-24-9, the secretary of state shall endorse the word "filed" on the original and the copy and the month, day, and year of filing. He shall file the original in his office and issue a certificate of reinstatement of corporation to which he shall affix the copy.
The certificate of reinstatement of corporation, together with the copy of the petition for reinstatement, shall be returned to the applicants or their representatives.
Source: SL 1978, ch 339, § 11; SL 1982, ch 321, § 1; SL 1989, ch 393, § 26.
47-24-17. Notice to attorney general before sale, transfer, conversion, or merger of at least thirty percent of assets--Information to be submitted to secretary of state.
At least ten days prior to the sale, transfer, conversion, or merger of at least thirty percent of the assets of a nonprofit corporation, the corporation shall give written notice to the attorney general. The following information shall, within sixty days of such sale, transfer, or merger, be submitted to the secretary of state:
(1) Name and address of the parties involved in the sale, transfer, conversion, or merger;
(2) Terms and conditions of the sale, transfer, conversion, or merger;
(3) Dollar value of the assets being sold, transferred, converted, or merged, including an account of how the value was determined; and
(4) An explanation of how the sale, transfer, conversion, or merger furthers the purpose of the nonprofit corporation.
The information shall be submitted on forms provided by the secretary of state.
Source: SL 1997, ch 260, § 1; SL 2016, ch 221, § 13.
47-24-18. Definitions.
Terms as used in §§ 47-24-19 and 47-24-20 mean:
(1) "Nonprofit corporation," as defined in § 47-22-1;
(2) "Charitable trust," as defined in section 4947(a)(1) of the United States Internal Revenue Code as amended and in effect on January 1, 2021.
Source: SL 2021, ch 196, § 1.
47-24-19. Protection--Nonprofit corporations--Charitable trusts.
An executive branch agency, bureau, department, division, board, commission, officer, or official may not require any annual filing or reporting of a nonprofit corporation or charitable trust that is more stringent, restrictive, or expansive than that required by state or federal law.
Source: SL 2021, ch 196, § 2.
47-24-20. Exceptions.
The provisions in § 47-24-19 do not apply to:
(1) Any information required to determine eligibility for or compliance with a state grant or contract; or
(2) Any information required for, or obtained in the course of, a state fraud investigation or an enforcement action by the state.
Any information obtained shall be confidential and its disclosure is restricted as provided by law.
Source: SL 2021, ch 196, § 3.
47-24-21. Personal affiliation information--Definitions.
Terms used in §§ 47-24-21 to 47-24-26, inclusive, mean:
(1) "Personal affiliation information," any list, record, register, registry, roll, roster, or other compilation of data of any kind that directly or indirectly identifies a natural person as a member, supporter, volunteer, or donor of financial or nonfinancial support to any nonprofit corporation; and
(2) "Public agency," any state or local governmental unit in this state, including any department, agency, office, commission, board, division, county, municipality, township, school district, court, or other judicial or quasi-judicial body.
Source: SL 2021, ch 197, § 1.
47-24-22. Personal affiliation information--Right to privacy--Public agencies--Prohibitions.
Any natural person who supports a nonprofit corporation has a right to personal privacy and confidentiality regarding the release of personal affiliation information by a public agency. A public agency may not:
(1) Require any natural person or nonprofit corporation to provide the public agency with personal affiliation information or otherwise compel the release of personal affiliation information;
(2) Release, publicize, or otherwise publicly disclose personal affiliation information in the public agency's possession; or
(3) Request or require a current or prospective contractor or grantee with the public agency to provide the public agency with a list of nonprofit corporations to which it has provided financial or nonfinancial support.
Source: SL 2021, ch 197, § 2.
47-24-23. Personal affiliation information--Privacy violation--Civil action.
A natural person alleging a violation of § 47-24-22 may bring a civil action for appropriate injunctive relief, actual damages, or both.
In an action brought under this section, a court may award all or a portion of the costs of litigation, including reasonable attorney fees and witness fees, to the complainant in the action if the court determines that the award is appropriate.
Source: SL 2021, ch 197, § 3.
47-24-24. Personal affiliation information--Exemptions.
The provisions of §§ 47-24-21 to 47-24-23, inclusive, do not apply to:
(1) Any report or disclosure required by state law to be filed with the secretary of state;
(2) Any official record or minutes required by law to be maintained by a public agency if the personal affiliation information was voluntarily disclosed by the donor;
(3) Any lawful warrant for personal affiliation information issued by a court of competent jurisdiction;
(4) A lawful request for discovery of personal affiliation information in litigation if the following conditions are met:
(a) The requestor demonstrates a compelling need for the personal affiliation information by clear and convincing evidence; and
(b) The requestor obtains a protective order barring disclosure of personal affiliation information to any person not named in the litigation;
(5) Admission of personal affiliation information as relevant evidence before a court of competent jurisdiction. However, no court filing may publicly reveal personal affiliation information absent a specific finding of good cause;
(6) A review of personal affiliation information necessary for a sales or use tax audit of a nonprofit corporation by the Department of Revenue; or
(7) A review of personal affiliation information necessary for purposes of an audit, examination, or investigation of a nonprofit corporation pursuant to chapter 4-11.
Source: SL 2021, ch 197, § 4.
47-24-25. Personal affiliation information--Public benefit.
Personal affiliation information derived from a donation to a nonprofit corporation that is affiliated with a public agency may be disclosed if the donor has not previously requested anonymity from the nonprofit corporation.
Source: SL 2021, ch 197, § 5.
47-24-26. Personal affiliation information--Fraud investigation.
The provisions of § 47-24-22 do not apply to any information required for, or obtained in the course of, a state fraud investigation or an enforcement action by the state. Any information obtained shall be confidential, and its disclosure is restricted as provided by law.
Source: SL 2021, ch 197, § 6.
47-25-1
Merger of corporations--Plan of merger--Contents of plan.
47-25-2
Amendment of surviving corporation's articles.
47-25-3
Consolidation of corporations--Plan of consolidation--Contents of plan.
47-25-4
Articles of consolidation as governing new corporation.
47-25-5
Adoption of plan of merger or consolidation.
47-25-6
Resolution of merger or consolidation--Submission to members--Notice of proposed plan.
47-25-7
Two-thirds vote required for approval.
47-25-8
Corporations having no members entitled to vote--Approval by directors.
47-25-9
Abandonment of merger or consolidation plan.
47-25-10
Approval of articles of merger or consolidation--Contents of approval--Delivery to
secretary of state.
47-25-11
Endorsement and approval by secretary of state--Issuance of certificate of merger or
consolidation.
47-25-12
Effective date of merger or consolidation.
47-25-13
Formation of single corporation--Surviving corporation.
47-25-14
Cessation of previous corporate existence.
47-25-15
Rights and duties of surviving corporation.
47-25-16
Transfer of assets and liabilities to surviving corporation--Title to real estate.
47-25-17
New corporation as responsible for claims and liabilities--Preexisting rights unimpaired.
47-25-18
Merger or consolidation involving foreign corporation.
47-25-19
Compliance with local law by local corporation--Compliance with foreign law by foreign
corporation.
47-25-20
Compliance with local law by surviving corporation--Submission to service of process
locally.
47-25-21
Effect of merger or consolidation of foreign and domestic corporation.
47-25-22
Surviving corporation as governed by foreign law.
47-25-23
Abandonment of merger or consolidation.
47-25-24
Transfer of substantially all corporate assets.
47-25-25
Vote upon transfer of corporate assets--Notice of meeting--Contents of notice.
47-25-26
Authorization of transfer by members--Two-thirds vote required.
47-25-27
Abandonment of transfer plan after vote of members--Rights of third parties.
47-25-28
Authorization for transfer in corporation having no members entitled to vote.
47-25-1. Merger of corporations--Plan of merger--Contents of plan.
Any two or more domestic corporations may merge into one of such corporations pursuant to a plan of merger approved in the manner provided in this chapter.
Each corporation shall adopt a plan of merger setting forth:
(1) The names of the corporation proposing to merge, and the name of the corporation into which they propose to merge, which is hereinafter designated as the surviving corporation;
(2) The terms and conditions of the proposed merger;
(3) A statement of any changes in the articles of incorporation of the surviving corporation to be effected by such merger;
(4) Such other provisions with respect to the proposed merger as are deemed necessary or desirable.
Source: SL 1965, ch 24, § 40.
47-25-2. Amendment of surviving corporation's articles.
When a merger has been effected pursuant to this chapter, the articles of incorporation of the surviving corporation shall be deemed to be amended to the extent, if any, that changes in its articles of incorporation are stated in the plan of merger.
Source: SL 1965, ch 24, § 44 (6).
47-25-3. Consolidation of corporations--Plan of consolidation--Contents of plan.
Any two or more domestic corporations may consolidate into a new corporation pursuant to a plan of consolidation approved in the manner provided in this chapter.
Each corporation shall adopt a plan of consolidation setting forth:
(1) The names of the corporations proposing to consolidate, and the name of the new corporation into which they propose to consolidate, which is hereinafter designated as the new corporation;
(2) The terms and conditions of the proposed consolidation;
(3) With respect to the new corporation, all of the statements required to be set forth in articles of incorporation for corporations organized under chapter 47-22;
(4) Such other provisions with respect to the proposed consolidation as are deemed necessary or desirable.
Source: SL 1965, ch 24, § 41.
47-25-4. Articles of consolidation as governing new corporation.
When a consolidation has been effected pursuant to this chapter, the statements set forth in the articles of consolidation and which are required or permitted to be set forth in the articles of incorporation of corporations organized under chapter 47-22 shall be deemed to be the articles of incorporation of the new corporation.
Source: SL 1965, ch 24, § 44 (6).
47-25-5. Adoption of plan of merger or consolidation.
A plan of merger or consolidation shall be adopted in the manner provided by §§ 47-25-6 to 47-25-9, inclusive.
Source: SL 1965, ch 24, § 42.
47-25-6. Resolution of merger or consolidation--Submission to members--Notice of proposed plan.
Where the members of any merging or consolidating corporation are entitled to vote thereon, the board of directors of such corporation shall adopt a resolution approving the proposed plan and directing that it be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice setting forth the proposed plan or a summary thereof shall be given to each member entitled to vote at such meeting within the time and in the manner provided in chapter 47-23 for the giving of notice of meetings of members.
Source: SL 1965, ch 24, § 42 (1).
47-25-7. Two-thirds vote required for approval.
The proposed plan shall be adopted upon receiving at least two-thirds of the votes entitled to be cast by members present or represented by proxy at each meeting pursuant to § 47-25-6.
Source: SL 1965, ch 24, § 42 (1).
47-25-8. Corporations having no members entitled to vote--Approval by directors.
Where any merging or consolidating corporation has no members, or no members entitled to vote thereon, a plan of merger or consolidation shall be adopted at a meeting of the board of directors of such corporation upon receiving the vote of a majority of the directors in office.
Source: SL 1965, ch 24, § 42 (2).
47-25-9. Abandonment of merger or consolidation plan.
After approval of a plan of merger or consolidation pursuant to § 47-25-7 or 47-25-8 and at any time prior to the filing of the articles of merger or consolidation, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the plan of merger or consolidation.
Source: SL 1965, ch 24, § 42.
47-25-10. Approval of articles of merger or consolidation--Contents of approval--Delivery to secretary of state.
Upon approval, an original and one exact or conforming copy of articles of merger or articles of consolidation shall be executed by each corporation by the chairman of its board of directors, by its president or by another of its officers or if the corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that fiduciary and shall set forth:
(1) The plan of merger or the plan of consolidation;
(2) If the members of any merging or consolidating corporation are entitled to vote thereon, then as to each such corporation:
(a) A statement setting forth the date of the meeting of members at which the plan was adopted, that a quorum was present at such meeting, and that such plan received at least two-thirds of the votes entitled to be cast by members present or represented by proxy at such meeting; or
(b) A statement that such amendment was adopted by a consent in writing signed by all members entitled to vote with respect thereto;
(3) If any merging or consolidating corporation has no members or no members entitled to vote thereon, then as to each such corporation a statement of such fact, the date of the meeting of the board of directors at which the plan was adopted and a statement of the fact that such plan received the vote of a majority of the directors in office.
The original and the copy of the articles of merger or articles of consolidation shall be acknowledged and delivered to the secretary of state.
Source: SL 1965, ch 24, § 43; SL 1989, ch 393, § 27.
47-25-11. Endorsement and approval by secretary of state--Issuance of certificate of merger or consolidation.
If the secretary of state finds that articles of merger or articles of consolidation delivered to him conform to law, when all fees have been paid, he shall:
(1) Endorse the word "filed" on the original and the copy and the month, day, and year of filing;
(2) File the original in his office; and
(3) Issue a certificate of merger or a certificate of consolidation to which he shall affix the copy.
The certificate of merger or certificate of consolidation, together with the copy of the articles of merger or articles of consolidation affixed thereto, shall be returned to the surviving or new corporation, as the case may be, or its representative.
Source: SL 1965, ch 24, § 43; SL 1989, ch 393, § 28.
47-25-12. Effective date of merger or consolidation.
Upon the issuance of the certificate of merger, or the certificate of consolidation by the secretary of state, the merger or consolidation shall be effected.
Source: SL 1965, ch 24, § 44.
47-25-13. Formation of single corporation--Surviving corporation.
When a merger or consolidation has been effected pursuant to this chapter, the several corporations parties to the plan of merger or consolidation shall be a single corporation, which, in the case of a merger, shall be that corporation designated in the plan of merger as the surviving corporation, and, in the case of a consolidation, shall be the new corporation provided for in the plan of consolidation.
Source: SL 1965, ch 24, § 44 (1).
47-25-14. Cessation of previous corporate existence.
When a merger or consolidation has been effected pursuant to this chapter, the separate existence of all corporations parties to the plan of merger or consolidation, except the surviving or new corporation, shall cease.
Source: SL 1965, ch 24, § 44 (2).
47-25-15. Rights and duties of surviving corporation.
When a merger or consolidation has been effected pursuant to this chapter, the surviving or new corporation shall have all the rights, privileges, immunities, and powers and shall be subject to all the duties and liabilities of a corporation organized under chapter 47-22.
Source: SL 1965, ch 24, § 44 (3).
47-25-16. Transfer of assets and liabilities to surviving corporation--Title to real estate.
When a merger or consolidation has been effected pursuant to this chapter, the surviving or new corporation shall thereupon and thereafter possess all the rights, privileges, immunities, and franchises, as well of a public as of a private nature, of each of the merging or consolidating corporations; and all property, real, personal, and mixed, and all debts due on whatever account, and all other choses in action, and all and every other interest, of or belonging to or due to each of the corporations so merged or consolidated, shall be taken and deemed to be transferred to and vested in such single corporation without further act or deed; and the title to any real estate, or any interest therein, vested in any of such corporations shall not revert or be in any way impaired by reason of such merger or consolidation.
Source: SL 1965, ch 24, § 44 (4).
47-25-17. New corporation as responsible for claims and liabilities--Preexisting rights unimpaired.
When a merger or consolidation has been effected pursuant to this chapter, the surviving or new corporation shall thenceforth be responsible and liable for all the liabilities and obligations of each of the corporations so merged or consolidated; and any claim existing or action or proceeding pending by or against any of such corporations may be prosecuted as if such merger or consolidation had not taken place, or such surviving or new corporation may be substituted in its place. Neither the rights of creditors nor any liens upon the property of any such corporation shall be impaired by such merger or consolidation.
Source: SL 1965, ch 24, § 44 (5).
47-25-18. Merger or consolidation involving foreign corporation.
One or more foreign corporations and one or more domestic corporations may be merged or consolidated in the manner provided by §§ 47-25-19 and 47-25-20, if such merger or consolidation is permitted by the laws of the state under which each such foreign corporation is organized.
Source: SL 1965, ch 24, § 45.
47-25-19. Compliance with local law by local corporation--Compliance with foreign law by foreign corporation.
Each domestic corporation merging or consolidating with a foreign corporation shall comply with the provisions of this chapter with respect to the merger or consolidation, as the case may be, of domestic corporations and each foreign corporation shall comply with the applicable provisions of the laws of the state under which it is organized.
Source: SL 1965, ch 24, § 45 (1).
47-25-20. Compliance with local law by surviving corporation--Submission to service of process locally.
If the surviving or new corporation of a merger or consolidation described in § 47-25-18, as the case may be, is to be governed by the laws of any state other than this state, it shall comply with the provisions of chapter 47-27 with respect to foreign corporations if it is to conduct affairs in this state, and in every case it shall file with the secretary of state of this state:
(1) An agreement that it may be served with process in this state in any proceeding for the enforcement of any obligation of any domestic corporation which is a party to such merger or consolidation; and
(2) An irrevocable appointment of the secretary of state of this state as its agent to accept service of process in any such proceeding.
Source: SL 1965, ch 24, § 45 (2).
47-25-21. Effect of merger or consolidation of foreign and domestic corporation.
The effect of a merger or consolidation described in § 47-25-18 shall be the same as in the case of the merger or consolidation of domestic corporations, if the surviving or new corporation is to be governed by the laws of this state.
Source: SL 1965, ch 24, § 45.
47-25-22. Surviving corporation as governed by foreign law.
If the surviving or new corporation in a merger or consolidation described in § 47-25-18 is to be governed by the laws of any state other than this state, the effect of such merger or consolidation shall be the same as in the case of the merger or consolidation of domestic corporations except insofar as the laws of the other state provide otherwise.
Source: SL 1965, ch 24, § 45.
47-25-23. Abandonment of merger or consolidation.
After approval by the members or, if there be no members entitled to vote thereon, by the board of directors, and at any time prior to the filing of the articles of merger or consolidation, a merger or consolidation described in § 47-25-18 may be abandoned pursuant to provisions thereof, if any, set forth in the plan of merger or consolidation.
Source: SL 1965, ch 24, § 45.
47-25-24. Transfer of substantially all corporate assets.
A sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets of a corporation may be made upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property, real or personal, including shares of any corporation for profit, domestic or foreign, as may be authorized in the manner provided by §§ 47-25-25 to 47-25-28, inclusive.
Source: SL 1965, ch 24, § 46.
47-25-25. Vote upon transfer of corporate assets--Notice of meeting--Contents of notice.
Where there are members entitled to vote thereon, the board of directors shall adopt a resolution recommending a sale, lease, exchange, mortgage, pledge, or other disposition described by § 47-25-24 and directing that it be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice stating that the purpose, or one of the purposes, of such meeting is to consider the sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets of the corporation shall be given to each member entitled to vote at such meeting, within the time and in the manner provided by chapter 47-23 for the giving of notice of meetings of members.
Source: SL 1965, ch 24, § 46 (1).
47-25-26. Authorization of transfer by members--Two-thirds vote required.
At the meeting required by § 47-25-25 the members may authorize the sale, lease, exchange, mortgage, pledge, or other disposition described by § 47-25-24 and may fix, or may authorize the board of directors to fix, any or all of the terms and conditions thereof and the consideration to be received by the corporation therefor. Such authorization shall require the vote of at least two-thirds of the votes entitled to be cast by members present or represented by proxy at such meeting.
Source: SL 1965, ch 24, § 46 (1).
47-25-27. Abandonment of transfer plan after vote of members--Rights of third parties.
After authorization by a vote of members pursuant to § 47-25-26, the board of directors, nevertheless, in its discretion, may abandon a sale, lease, exchange, mortgage, pledge, or other disposition of assets described in § 47-25-24, subject to the rights of third parties under any contracts relating thereto, without further action or approval by members.
Source: SL 1965, ch 24, § 46 (1).
47-25-28. Authorization for transfer in corporation having no members entitled to vote.
Where there are no members, or no members entitled to vote thereon, a sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets of a corporation shall be authorized upon receiving the vote of a majority of the directors in office.
Source: SL 1965, ch 24, § 46 (2).
47-25A-1
Definitions.
47-25A-2
Required approvals.
47-25A-3
Domestication--Plan of domestication.
47-25A-4
Domestication of a domestic nonprofit corporation in a foreign jurisdiction.
47-25A-5
Articles of domestication.
47-25A-6
Effect of domestication--Liability of member of foreign nonprofit corporation
domesticated in this state.
47-25A-7
Abandonment of domestication.
47-25A-8
For-profit conversion--Plan of for-profit conversion.
47-25A-9
Conversion of domestic nonprofit corporation to domestic or foreign business
corporation.
47-25A-10
Articles of for-profit conversion.
47-25A-11
Effect of for-profit conversion--Liability of member of domestic nonprofit
corporation that converts to domestic business corporation.
47-25A-12
Abandonment of for-profit conversion.
47-25A-13
Foreign for-profit domestication and conversion.
47-25A-14
Articles of domestication and conversion.
47-25A-15
Effect of foreign for-profit domestication and conversion--Liability of shareholder.
47-25A-16
Abandonment of foreign for-profit domestication and conversion.
47-25A-17
Effect of conversion.
47-25A-18
Abandonment of entity conversion.
47-25A-19
Conversion of domestic business corporation to domestic nonprofit corporation.
47-25A-20
Plan of nonprofit conversion.
47-25A-21
Effect of conversion of domestic business corporation to domestic nonprofit
corporation.
47-25A-22
Abandonment of conversion of domestic business corporation to domestic nonprofit
corporation.
47-25A-1. Definitions.
Terms used in this chapter, mean:
(1) "Conversion," a transaction authorized by §§ 47-25A-8 to 47-25A-22, inclusive;
(2) "Converting corporation," the domestic or foreign nonprofit or business corporation that approves a conversion pursuant to §§ 47-25A-8 to 47-25A-22, inclusive, or the applicable laws of the foreign jurisdiction;
(3) "Converting entity," the domestic or foreign entity that approves a conversion pursuant to §§ 47-25A-8 to 47-25A-22, inclusive;
(4) "Domesticated corporation," the domesticating corporation as it continues in existence after a domestication;
(5) "Domesticating corporation," the domestic nonprofit corporation that adopts a plan of domestication pursuant to §§ 47-25A-3 to 47-25A-7, inclusive, or the foreign nonprofit corporation that approves a domestication pursuant to the applicable laws of the foreign jurisdiction;
(6) "Domestication," a transaction authorized by §§ 47-25A-3 to 47-25A-7, inclusive;
(7) "Surviving corporation," the corporation as it continues in existence immediately after consummation of a for-profit conversion pursuant to §§ 47-25A-3 to 47-25A-22, inclusive;
(8) "Surviving entity," the unincorporated entity as it continues in existence immediately after consummation of an entity conversion pursuant to §§ 47-25A-3 to 47-25A-22, inclusive.
Source: SL 2016, ch 221, § 16.
47-25A-2. Required approvals.
If a domestic or foreign nonprofit corporation may not be a party to a merger or sale of its assets without the approval of the attorney general, the Division of Insurance, or the Public Utilities Commission, the corporation may not be a party to a conversion or domestication without the prior approval of that agency.
Source: SL 2016, ch 221, § 17.
47-25A-3. Domestication--Plan of domestication.
(a) A foreign nonprofit corporation may become a domestic nonprofit corporation only if the domestication is authorized by the laws of the foreign jurisdiction.
(b) A domestic nonprofit corporation may become a foreign nonprofit corporation if the domestication is permitted by the laws of the foreign jurisdiction. Regardless of whether the laws of the foreign jurisdiction require the adoption of a plan of domestication, the domestication must be approved by the adoption by the corporation of a plan of domestication.
(c) The plan of domestication must include:
(1) A statement of the jurisdiction in which the corporation is to be domesticated;
(2) The terms and conditions of the domestication;
(3) The manner and basis of canceling or reclassifying the memberships of the corporation following its domestication into memberships, obligations, rights to acquire memberships, cash, other property, or any combination of the foregoing; and
(4) Any desired amendments to the articles of incorporation or bylaws of the corporation following its domestication.
(d) The plan of domestication may also include a provision that the plan may be amended prior to filing the document required by the laws of this state or the other jurisdiction to consummate the domestication; except that, subsequent to approval of the plan by the members, the plan may not be amended without the approval of the members to change:
(1) The amount or kind of memberships, obligations, rights to acquire memberships, cash, or other property to be received by the members under the plan;
(2) The articles of incorporation to be in effect immediately following the domestication; or
(3) Any of the other terms or conditions of the plan if the change would adversely affect any of the members in any material respect.
(e) If any debt security, note or similar evidence of indebtedness for money borrowed, whether secured or unsecured, or a contract of any kind, issued, incurred or executed by a domestic nonprofit corporation before July 1, 2016 contains a provision applying to a merger of the corporation and the document does not refer to a domestication of the corporation, the provision shall be deemed to apply to a domestication of the corporation until such time as the provision is amended subsequent to that date.
Source: SL 2016, ch 221, § 18.
47-25A-4. Domestication of a domestic nonprofit corporation in a foreign jurisdiction.
In the case of a domestication of a domestic nonprofit corporation in a foreign jurisdiction:
(1) The plan of domestication must be adopted by the board of directors;
(2) After adopting the plan of domestication the board of directors must submit the plan to the members for their approval, if there are members entitled to vote on the plan. The board of directors must also transmit to the members a recommendation that the members approve the plan, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make such a recommendation, in which case the board of directors must transmit to the members the basis for that determination;
(3) The board of directors may condition its submission of the plan of domestication to the members on any basis;
(4) If the approval of the members is to be given at a meeting, the corporation must notify each member, whether or not entitled to vote, of the meeting of members at which the plan of domestication is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the plan and must contain or be accompanied by a copy or summary of the plan. The notice must include or be accompanied by a copy of the proposed articles of incorporation and bylaws to be in effect immediately after the domestication;
(5) Unless the articles of incorporation or bylaws, or the board of directors acting pursuant to subdivision (3) of this section, requires a greater vote or a greater number of votes to be present, the approval of the plan of domestication by the members requires the approval of the members at a meeting at which a quorum exists, and, if any class of members is entitled to vote as a separate group on the plan, the approval of each such separate class at a meeting at which a quorum of the class exists;
(6) Separate voting by classes is required by each class of members that:
(i) Are to be reclassified under the plan of domestication into a different class of memberships, or into obligations, rights to acquire memberships, cash, other property, or any combination of the foregoing;
(ii) Would be entitled to vote as a separate group on a provision of the plan that, if contained in a proposed amendment to articles of incorporation, would require action by separate classes; or
(iii) Is entitled under the articles of incorporation or bylaws to vote as a class to approve an amendment of the articles of incorporation;
(7) If any provision of the articles of incorporation, bylaws, or an agreement to which any of the directors, members of a designated body, or members are parties, adopted or entered into before July 1, 2016, applies to a merger of the corporation and that document does not refer to a domestication of the corporation, the provision shall be deemed to apply to a domestication of the corporation until such time as the provision is amended subsequent to that date.
Source: SL 2016, ch 221, § 19.
47-25A-5. Articles of domestication.
(a) Articles of domestication must be signed on behalf of the domesticating corporation by any officer or other duly authorized representative. The articles of domestication must set forth:
(1) The name and jurisdiction of incorporation of the domesticating corporation;
(2) The name and jurisdiction of incorporation of the domesticated entity; and
(3) If the domesticating corporation is a domestic nonprofit corporation, a statement that the plan of domestication was approved in accordance with the laws of this state, or, if the domesticating corporation is a foreign nonprofit corporation, a statement that the domestication was approved in accordance with the laws of its jurisdiction of incorporation.
(b) If the domesticated corporation is a domestic nonprofit corporation, the articles of domestication shall contain all of the provisions required to be contained in the articles of incorporation of a nonprofit corporation as set forth in § 47-22-6. The name of the domesticated corporation must satisfy the requirements of §§ 47-22-7 and 47-22-8.1.
(c) The articles of domestication must be delivered to the Office of the Secretary of State for filing.
(d) If the domesticating corporation is a qualified foreign nonprofit corporation, its certificate of authority is cancelled automatically on the effective date of its domestication.
Source: SL 2016, ch 221, § 20.
47-25A-6. Effect of domestication--Liability of member of foreign nonprofit corporation domesticated in this state.
(a) Except as otherwise prohibited by law, when a domestication becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the domesticating corporation remains in the domesticated corporation without reversion or impairment;
(2) The liabilities of the domesticating corporation remain the liabilities of the domesticated corporation;
(3) An action or proceeding pending against the domesticating corporation continues against the domesticated corporation as if the domestication had not occurred;
(4) The articles of domestication, or the articles of incorporation attached to the articles of domestication, constitute the articles of incorporation of a foreign corporation domesticating in this state;
(5) The memberships in the domesticating corporation are reclassified into memberships, obligations, rights to acquire memberships, or cash or other property in accordance with the terms of the domestication, and the members are entitled only to the rights provided by those terms; and
(6) The domesticating corporation is deemed to:
(i) Be incorporated under and subject to the same body of law of as the domesticated corporation for all purposes; and
(ii) Be the same corporation without interruption as the domesticating corporation.
(b) The personal liability of a member in a foreign nonprofit corporation that is domesticated in this state is as follows:
(1) The domestication does not discharge any personal liability under the laws of the foreign jurisdiction to the extent any such personal liability arose before the effective time of the articles of domestication;
(2) The member does not have personal liability under the laws of the foreign jurisdiction for any debt, obligation, or liability of the corporation that arises after the effective time of the articles of domestication;
(3) The provisions of the laws of the foreign jurisdiction continue to apply to the collection or discharge of any personal liability preserved by subdivision (1), as if the domestication had not occurred;
(4) The member has whatever rights of contribution from other members are provided by the laws of the foreign jurisdiction with respect to any personal liability preserved by subdivision (1), as if the domestication had not occurred.
Source: SL 2016, ch 221, § 21.
47-25A-7. Abandonment of domestication.
(a) Unless otherwise provided in a plan of domestication of a domestic nonprofit corporation, after the plan has been adopted and approved, and at any time before the domestication has become effective, it may be abandoned by the board of directors without action by the members.
(b) If a domestication is abandoned under paragraph (a) after articles of domestication have been filed with the Office of the Secretary of State but before the domestication has become effective, a statement that the domestication has been abandoned in accordance with this section, signed by an officer or other duly authorized representative, must be delivered to the Office of the Secretary of State for filing prior to the effective date of the domestication. The statement takes effect upon filing and the domestication is abandoned and does not become effective.
(c) If the domestication of a foreign nonprofit corporation in this state is abandoned in accordance with the laws of the foreign jurisdiction after articles of domestication are filed with the Office of the Secretary of State, a statement that the domestication has been abandoned, signed by an officer or other duly authorized representative, must be delivered to the Office of the Secretary of State for filing. The statement takes effect upon filing and the domestication is abandoned and does not become effective.
Source: SL 2016, ch 221, § 22.
47-25A-8. For-profit conversion--Plan of for-profit conversion.
(a) A domestic nonprofit corporation may become a domestic business corporation pursuant to a plan of for-profit conversion.
(b) A domestic nonprofit corporation may become a foreign business corporation if the for-profit conversion is permitted by the laws of the foreign jurisdiction. Regardless of whether the laws of the foreign jurisdiction require the adoption of a plan of for-profit conversion, the foreign for-profit conversion shall be approved by the adoption by the domestic nonprofit corporation of a plan of for-profit conversion.
(c) The plan of for-profit conversion must include:
(1) The terms and conditions of the conversion;
(2) The manner and basis of:
(i) Issuing at least one share in the corporation following its conversion; and
(ii) Otherwise reclassifying the memberships in the corporation, if any, following its conversion into shares and other securities, obligations, rights to acquire shares or other securities, cash, other property, or any combination of the foregoing;
(3) Any desired amendments to the articles of incorporation or bylaws of the corporation following its conversion; and
(4) If the domestic nonprofit corporation is to be converted to a foreign business corporation, a statement of the jurisdiction in which the corporation will be incorporated after the conversion.
(d) The plan of for-profit conversion may also include a provision that the plan may be amended prior to filing articles of for-profit conversion, except that subsequent to approval of the plan by the members the plan may not be amended without the approval of the members to change:
(1) The amount or kind of shares and other securities, obligations, rights to acquire shares or other securities, cash, or other property to be received by the members under the plan;
(2) The articles of incorporation to be in effect immediately following the conversion; or
(3) Any of the other terms or conditions of the plan if the change would adversely affect any of the members in any material respect.
(e) If any debt security, note, or similar evidence of indebtedness for money borrowed, whether secured or unsecured, or a contract of any kind, issued, incurred, or executed by a domestic nonprofit corporation before July 1, 2016 contains a provision applying to a merger of the corporation and the document does not refer to a for-profit conversion of the corporation, the provision shall be deemed to apply to a for-profit conversion of the corporation until such time as the provision is amended subsequent to that date.
(f) The attorney general shall be provided with notice of the proposed for-profit conversion at least ten days prior to any conversion.
Source: SL 2016, ch 221, § 23.
47-25A-9. Conversion of domestic nonprofit corporation to domestic or foreign business corporation.
In the case of a conversion of a domestic nonprofit corporation to a domestic or foreign business corporation:
(1) The plan of for-profit conversion must be adopted by the board of directors;
(2) After adopting the plan of for-profit conversion, the board of directors must submit the plan to the members for their approval if there are members entitled to vote on the plan. The board of directors must also transmit to the members a recommendation that the members approve the plan, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make such a recommendation, in which case the board of directors must transmit to the members the basis for that determination;
(3) The board of directors may condition its submission of the plan of for-profit conversion to the members on any basis;
(4) If the approval of the members is to be given at a meeting, the corporation must notify each member of the meeting of members at which the plan of for-profit conversion is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the plan and must contain or be accompanied by a copy or summary of the plan. The notice shall include or be accompanied by a copy of the proposed articles of incorporation to be in effect immediately after the for-profit conversion;
(5) Unless the articles of incorporation, or the board of directors acting pursuant to subdivision (3), require a greater vote or a greater number of votes to be present, the approval of the plan of for-profit conversion by the members requires the approval of each class of members of the corporation voting as a separate class at a meeting at which a quorum of the class exists; and
(6) If any provision of the articles of incorporation, bylaws, or an agreement to which any of the directors or members are parties, adopted or entered into before July 1, 2016, applies to a merger of the corporation and the document does not refer to a for-profit conversion of the corporation, the provision shall be deemed to apply to a for-profit conversion of the corporation until such time as the provision is amended subsequent to that date.
Source: SL 2016, ch 221, § 24.
47-25A-10. Articles of for-profit conversion.
(a) Articles of for-profit conversion must be signed on behalf of the converting corporation by any officer or other duly authorized representative. The articles must set forth:
(1) If the surviving corporation is a domestic business corporation, the name of the corporation immediately before the filing of the articles of for-profit conversion and if that name does not satisfy the requirements of the business corporation act, or the corporation desires to change its name in connection with the conversion, a name that satisfies the requirements of the business corporation act;
(2) If the surviving corporation is a foreign business corporation, its name after the conversion and its jurisdiction of incorporation; and
(3) A statement that the plan of for-profit conversion was duly approved by the members in the manner required by this chapter and the articles of incorporation.
(b) If the surviving corporation is a domestic business corporation, the articles of for-profit conversion shall either contain all of the provisions that the business corporation act requires to be set forth in the articles of incorporation of a domestic business corporation and any other desired provisions permitted by the business corporation act, or shall have attached articles of incorporation that satisfy the requirements of the business corporation act. In either case, provisions that would not be required to be included in restated articles of incorporation of a domestic business corporation may be omitted, except that the name and address of the initial registered agent of the business corporation must be included.
(c) The articles of for-profit conversion must be delivered to the Office of the Secretary of State for filing.
Source: SL 2016, ch 221, § 25.
47-25A-11. Effect of for-profit conversion--Liability of member of domestic nonprofit corporation that converts to domestic business corporation.
(a) Except as otherwise prohibited by law, when a conversion of a domestic nonprofit corporation to a domestic or foreign business corporation becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the corporation remains in the corporation without reversion or impairment;
(2) The liabilities of the corporation remain the liabilities of the corporation;
(3) An action or proceeding pending against the corporation continues against the corporation as if the conversion had not occurred;
(4) The articles of incorporation of the domestic or foreign business corporation become effective;
(5) The memberships of the corporation are reclassified into shares or other securities, obligations, rights to acquire shares or other securities, or into cash or other property in accordance with the plan of conversion, and the members are entitled only to the rights provided in the plan of for-profit conversion; and
(6) The corporation is deemed to:
(i) Be a domestic or foreign business corporation for all purposes; and
(ii) Be the same corporation without interruption as the nonprofit corporation.
(b) The personal liability of a member in a domestic nonprofit corporation that converts to a domestic business corporation is as follows:
(1) The conversion does not discharge any personal liability of the member as a member of the nonprofit corporation to the extent any such personal liability arose before the effective time of the articles of for-profit conversion;
(2) The member does not have personal liability for any debt, obligation, or liability of the business corporation that arises after the effective time of the articles of for-profit conversion;
(3) The laws of this state continue to apply to the collection or discharge of any personal liability preserved by subdivision (1), as if the conversion had not occurred;
(4) The member has whatever rights of contribution from other members are provided by the laws of this state with respect to any personal liability preserved by subdivision (1), as if the conversion had not occurred.
(c) A member who becomes subject to personal liability for some or all of the debts, obligations, or liabilities of the business corporation has personal liability only for those debts, obligations, or liabilities of the business corporation that arise after the effective time of the articles of for-profit conversion.
Source: SL 2016, ch 221, § 26.
47-25A-12. Abandonment of for-profit conversion.
(a) Unless otherwise provided in a plan of for-profit conversion of a domestic nonprofit corporation, after the plan has been adopted and approved, and at any time before the for-profit conversion has become effective, it may be abandoned by the board of directors without action by the members.
(b) If a for-profit conversion is abandoned under paragraph (a) after articles of for-profit conversion are filed with the Office of the Secretary of State but before the for-profit conversion has become effective, a statement that the for-profit conversion has been abandoned in accordance with this section, signed by an officer or other duly authorized representative, must be delivered to the Office of the Secretary of State for filing prior to the effective date of the for-profit conversion. The statement takes effect upon filing and the for-profit conversion is abandoned and does not become effective.
Source: SL 2016, ch 221, § 27.
47-25A-13. Foreign for-profit domestication and conversion.
A foreign business corporation may become a domestic nonprofit corporation if the domestication and conversion is permitted by the laws of the foreign jurisdiction.
Source: SL 2016, ch 221, § 28.
47-25A-14. Articles of domestication and conversion.
(a) After the conversion of a foreign business corporation to a domestic nonprofit corporation is authorized as required by the laws of the foreign jurisdiction, articles of domestication and conversion shall be signed by any officer or other duly authorized representative. The articles shall set forth:
(1) The name of the corporation immediately before the filing of the articles of domestication and conversion and, if that name is unavailable for use in this state or the corporation desires to change its name in connection with the domestication and conversion, a name that satisfies the requirements § § 47-22-7 and 47-22-8.1;
(2) The jurisdiction of incorporation of the corporation immediately before the filing of the articles of domestication and conversion and the date the corporation was incorporated in that jurisdiction; and
(3) A statement that the domestication and conversion of the corporation in this state was duly authorized as required by the laws of the jurisdiction in which the corporation was incorporated immediately before its domestication and conversion in this state.
(b) The articles of domestication and conversion shall contain all of the provisions required to be contained in the articles of incorporation of a nonprofit corporation as set forth in § 47-22-6. The name of the domesticated corporation must satisfy the requirements of § § 47-22-7 and 47-2-2-8.1.
(c) The articles of domestication and conversion must be delivered to the Office of the Secretary of State for filing.
Source: SL 2016, ch 221, § 29.
47-25A-15. Effect of foreign for-profit domestication and conversion--Liability of shareholder.
(a) When a domestication and conversion of a foreign business corporation to a domestic nonprofit corporation becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the corporation remains in the corporation without reversion or impairment;
(2) The liabilities of the corporation remain the liabilities of the corporation;
(3) An action or proceeding pending against the corporation continues against the corporation as if the domestication and conversion had not occurred;
(4) The articles of domestication and conversion, or the articles of incorporation attached to the articles of domestication and conversion, constitute the articles of incorporation of the corporation;
(5) Memberships, securities, obligations, rights to acquire memberships or securities of the corporation, or cash or other property shall be issued or paid as provided pursuant to the laws of the foreign jurisdiction; and
(6) The corporation is deemed to:
(i) Be a domestic corporation for all purposes; and
(ii) Be the same corporation without interruption as the foreign business corporation.
(b) The personal liability of a shareholder of the foreign business corporation who becomes a member of the domestic nonprofit corporation in the domestication and conversion is as follows:
(1) The domestication and conversion does not discharge any personal liability under the laws of the foreign jurisdiction to the extent any such personal liability arose before the effective time of the articles of domestication and conversion;
(2) The member does not have personal liability under the laws of the foreign jurisdiction for any debt, obligation, or liability of the corporation that arises after the effective time of the articles of domestication and conversion;
(3) The provisions of the laws of the foreign jurisdiction continue to apply to the collection or discharge of any personal liability preserved by subdivision (1), as if the domestication and conversion had not occurred;
(4) The member has whatever rights of contribution from other members are provided by the laws of the foreign jurisdiction with respect to any personal liability preserved by subdivision (1), as if the domestication and conversion had not occurred.
(c) A shareholder of a foreign business corporation who becomes subject to personal liability for some or all of the debts, obligations, or liabilities of the corporation as a result of its domestication and conversion in this state has personal liability only for those debts, obligations, or liabilities of the corporation that arise after the effective time of the articles of domestication and conversion.
Source: SL 2016, ch 221, § 30.
47-25A-16. Abandonment of foreign for-profit domestication and conversion.
If the domestication and conversion of a foreign business corporation to a domestic nonprofit corporation is abandoned in accordance with the laws of the foreign jurisdiction after articles of domestication and conversion have been filed with the Office of the Secretary of State, a statement that the domestication and conversion has been abandoned, signed by an officer or other duly authorized representative, must be delivered to the Office of the Secretary of State for filing. The statement takes effect upon filing and the domestication and conversion is abandoned and does not become effective.
Source: SL 2016, ch 221, § 31.
47-25A-17. Effect of conversion.
(a) Except as otherwise prohibited by law, when a conversion under sections §§ 47-25A-13 to 47-25A-22, inclusive, becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the converting entity remains in the surviving entity without reversion or impairment;
(2) The liabilities of the converting entity remain the liabilities of the surviving entity;
(3) An action or proceeding pending against the converting entity continues against the surviving entity as if the conversion had not occurred;
(4) In the case of a surviving entity that is a filing entity, its articles of incorporation or governing documents and rules become effective;
(5) The memberships or interests of the converting entity are reclassified into memberships, interests, other securities, obligations, rights to acquire memberships, interests or securities, or into cash or other property in accordance with the plan of conversion; and the members or of the converting entity are entitled only to the rights provided to them under the terms of the conversion and to any appraisal rights they may have under the governing law of the converting entity; and
(6) The surviving entity is deemed to:
(i) Be incorporated or organized under and subject to the governing law of the converting entity for all purposes; and
(ii) Be the same nonprofit corporation or unincorporated entity without interruption as the converting entity.
(b) A member who is subject to personal liability for some or all of the debts, obligations, or liabilities of the surviving entity has personal liability only for those debts, obligations, or liabilities of the surviving entity that arise after the effective time of the articles of entity conversion.
Source: SL 2016, ch 221, § 32.
47-25A-18. Abandonment of entity conversion.
(a) Unless otherwise provided in a plan of entity conversion of a domestic nonprofit corporation, after the plan is adopted and at any time before the entity conversion has become effective, it may be abandoned by the board of directors without action by the members.
(b) If an entity conversion is abandoned after articles of entity conversion are filed with the Office of the Secretary of State but before the entity conversion becomes effective, a statement that the entity conversion has been abandoned in accordance with this section, signed by an officer or other duly authorized representative, must be delivered to the Office of the Secretary of State for filing prior to the effective date of the entity conversion. Upon filing, the statement takes effect and the entity conversion is abandoned and does not become effective.
Source: SL 2016, ch 221, § 33.
47-25A-19. Conversion of domestic business corporation to domestic nonprofit corporation.
A domestic business corporation may become a domestic nonprofit corporation pursuant to a plan of nonprofit conversion only if incorporating pursuant to this chapter is not prohibited by any other law of this state. If the law of a domestic business corporation does not provide procedures for the approval of either a nonprofit conversion or a merger, a plan of nonprofit conversion must be adopted and approved, and the conversion effectuated in accordance with this chapter.
Source: SL 2016, ch 221, § 34.
47-25A-20. Plan of nonprofit conversion.
(a) The plan of nonprofit conversion must be adopted by the shareholders. The plan for nonprofit conversion must include:
(1) The terms and conditions of the conversion;
(2) The manner and basis of reclassifying the shareholders in the corporation;
(3) Any desired amendments to the articles of incorporation or bylaws of the corporation following its conversion;
(4) The articles of incorporation to be in effect immediately following the conversion; and
(5) Any of the terms or conditions of the plan if the change would adversely affect any of the shareholders in any material respect.
The plan for nonprofit conversion may also include a provision that the plan may be amended prior to filing articles of nonprofit conversion.
(b) After the plan for nonprofit conversion is authorized, the articles of conversion must be signed on behalf of the converting corporation by any officer or other duly authorized representative.
The articles shall set forth:
(1) The name of the corporation immediately before the filing of the articles of conversion and, if that name is unavailable for use in this state or the corporation desires to change its name in connection with the conversion, a name that satisfies the requirements of § § 47-22-7 and 47-22-8.1;
(2) The jurisdiction of incorporation of the corporation immediately before the filing of the articles of conversion and the date the corporation was incorporated; and
(3) A statement that the conversion of the corporation in this state was duly authorized as required by the laws of this state.
(c) The articles of conversion shall contain all of the provisions required to be contained in the articles of incorporation of a nonprofit corporation as set forth in § 47-22-6 and any other desired provisions permitted to be included. Provisions that would not be required to be included in restated articles of incorporation may be omitted, except that the name and address of the initial registered agent of the domestic business corporation must be included.
(d) The articles of nonprofit conversion must be delivered to the Office of the Secretary of State for filing.
Source: SL 2016, ch 221, § 35.
47-25A-21. Effect of conversion of domestic business corporation to domestic nonprofit corporation.
(a) When a conversion of a domestic business corporation to a domestic nonprofit corporation becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the corporation remains in the corporation without reversion or impairment;
(2) The liabilities of the corporation remain the liabilities of the corporation;
(3) An action or proceeding pending against the corporation continues against the corporation as if the conversion had not occurred;
(4) The articles of conversion, or the articles of incorporation attached to the articles of conversion, constitute the articles of incorporation of the corporation;
(5) Memberships, securities, obligations, rights to acquire memberships or securities of the corporation, or cash or other property shall be issued or paid as provided pursuant to the laws of this state; and
(6) The corporation is deemed to:
(i) Be a domestic nonprofit corporation for all purposes; and
(ii) Be the same corporation without interruption.
(b) The personal liability of a shareholder of the domestic business corporation who becomes a member of the domestic nonprofit corporation in the conversion is as follows:
(1) The conversion does not discharge any personal liability under the laws of this state to the extent any such personal liability arose before the effective time of the articles of conversion;
(2) The member does not have personal liability under the laws of this state for any debt, obligation, or liability of the corporation that arises after the effective time of the articles of conversion;
(3) The provisions of the laws of this state continue to apply to the collection or discharge of any personal liability preserved by subdivision (1), as if the conversion had not occurred;
(4) The member has whatever rights of contribution from other members are provided by the laws of this state with respect to any personal liability preserved by subdivision (1), as if the conversion had not occurred.
(c) A shareholder of a domestic business corporation who becomes subject to personal liability for some or all of the debts, obligations, or liabilities of the corporation as a result of its conversion in this state has personal liability only for those debts, obligations, or liabilities of the corporation that arise after the effective time of the articles of conversion.
Source: SL 2016, ch 221, § 36.
47-25A-22. Abandonment of conversion of domestic business corporation to domestic nonprofit corporation.
If the conversion of a domestic business corporation to a domestic nonprofit corporation is abandoned in accordance with the laws of this state after articles of conversion have been filed with the Office of the Secretary of State, a statement that the conversion has been abandoned, signed by an officer or other duly authorized representative, must be delivered to the Office of the Secretary of State for filing. The statement takes effect upon filing and the conversion is abandoned and does not become effective.
Source: SL 2016, ch 221, § 37.
47-26-1
Procedure for dissolution.
47-26-2
Vote of members--Meeting for vote--Notice of meeting--Contents of notice--Two-thirds vote required.
47-26-3
Dissolution by board of directors in corporation without members entitled to vote.
47-26-4
Resolution to dissolve--Cessation of business affairs--Notice of proposed dissolution
to creditors--Collection and distribution of assets.
47-26-5
Manner of distribution of assets--Particular assets--Remaining assets.
47-26-6
Plan for distribution of assets--Adoption of plan.
47-26-6.1
Notice to attorney general.
47-26-7
Membership vote on plan--Meeting--Notice of meeting--Two-thirds vote required.
47-26-8
Adoption of plan by corporation having no members entitled to vote.
47-26-9
Articles of dissolution--Time for adoption--Contents.
47-26-10
Delivery of articles to secretary of state--Endorsement and filing by secretary of state--Issuance of certificate of dissolution.
47-26-11
Cessation of corporate existence--Exceptions.
47-26-12
Revocation of dissolution action--Procedure.
47-26-13
Revocation of dissolution resolution--Meeting--Notice of meeting--Two-thirds vote
required.
47-26-14
Revocation in corporation having no members entitled to vote.
47-26-15
Effect of adoption of revocation resolution.
47-26-16
Involuntary dissolution by court decree--Action by attorney general--Grounds of
action.
47-26-17
Repealed.
47-26-18
Repealed.
47-26-19
Venue of attorney general's action--Service of process.
47-26-20
Service by publication--Contents of publication--Newspaper of publication.
47-26-21
Including several corporations in one notice--Mailing notice to corporation--Attorney
general's certificate of mailing--Number and time of publication--Time for default.
47-26-22
Power of court in liquidation proceedings--Actions by member or director.
47-26-23
Power of court in liquidation proceedings--Action by creditor.
47-26-24
Power of court in liquidation proceedings--Application by corporation.
47-26-25
Power of court in liquidation proceedings--Action by attorney general.
47-26-26
Venue of actions.
47-26-27
Proper parties to action.
47-26-28
Preservation of corporate assets--Injunctions and receivers.
47-26-29
Appointment of liquidating receiver--Authority of receiver--Order appointing
receiver.
47-26-30
Disposition of assets resulting from sale of corporate property--Manner of
distribution--Disposition of remaining assets.
47-26-31
Expenses of liquidation--Compensation of receiver--Attorneys' fees.
47-26-32
Capacity of receiver to sue and be sued--Jurisdiction of court.
47-26-33
Qualifications of receiver--Bond.
47-26-34
Claims of creditors--Proof of claim--Time for filing--Failure to file timely proofs.
47-26-35
Discontinuance of liquidation proceedings--Redelivery of assets to corporation.
47-26-36
Decree of involuntary dissolution--Cessation of corporate existence.
47-26-37
Copy of decree filed with secretary of state--Fee.
47-26-38
Disposition of undistributable assets--Unknown claimants--Deposit with state
treasurer for subsequent payment.
47-26-39
Preexisting rights and claims unaffected by dissolution--Time for assertion--Protection of remedy.
47-26-40
Dissolution by expiration of period of duration--Extension of period of duration.
47-26-1. Procedure for dissolution.
A corporation may dissolve and wind up its affairs in the manner provided by §§ 47-26-2 to 47-26-4, inclusive.
Source: SL 1965, ch 24, § 47.
47-26-2. Vote of members--Meeting for vote--Notice of meeting--Contents of notice--Two-thirds vote required.
Where there are members entitled to vote thereon, the board of directors shall adopt a resolution recommending that the corporation be dissolved, and directing that the question of such dissolution be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice stating that the purpose, or one of the purposes, of such meeting is to consider the advisability of dissolving the corporation, shall be given to each member entitled to vote at such meeting, within the time and in the manner provided in chapter 47-23 for the giving of notice of meetings of members. A resolution to dissolve the corporation shall be adopted upon receiving at least two-thirds of the votes entitled to be cast by members present or represented by proxy.
Source: SL 1965, ch 24, § 47 (1).
47-26-3. Dissolution by board of directors in corporation without members entitled to vote.
Where there are no members, or no members entitled to vote thereon, the dissolution of the corporation shall be authorized at a meeting of the board of directors upon the adoption of a resolution to dissolve by the vote of a majority of the directors in office.
Source: SL 1965, ch 24, § 47 (2).
47-26-4. Resolution to dissolve--Cessation of business affairs--Notice of proposed dissolution to creditors--Collection and distribution of assets.
Upon the adoption of a resolution to dissolve by the members, or by the board of directors where there are no members or no members entitled to vote thereon, the corporation shall cease to conduct its affairs except insofar as may be necessary for the winding up thereof, shall immediately cause a notice of the proposed dissolution to be mailed to each known creditor of the corporation, and shall proceed to collect its assets and apply and distribute them as provided in this chapter.
Source: SL 1965, ch 24, § 47.
47-26-5. Manner of distribution of assets--Particular assets--Remaining assets.
The assets of a corporation in the process of dissolution shall be applied and distributed as follows:
(1) All liabilities and obligations of the corporation shall be paid and discharged, or adequate provision shall be made therefor;
(2) Assets held by the corporation upon condition requiring return, transfer or conveyance, which condition occurs by reason of the dissolution, shall be returned, transferred, or conveyed in accordance with such requirements;
(3) Assets received and held by the corporation subject to limitations permitting their use only for charitable, religious, eleemosynary, benevolent, educational, or similar purposes, but not held upon a condition requiring return, transfer, or conveyance by reason of the dissolution, shall be transferred or conveyed to one or more domestic or foreign corporations, societies, or organizations engaged in activities substantially similar to those of the dissolving corporation, pursuant to a plan of distribution adopted as provided in this chapter;
(4) Other assets, if any, shall be distributed in accordance with the provisions of the articles of incorporation or the bylaws to the extent that the articles of incorporation or bylaws determine the distributive rights of members, or any class or classes of members, or provide for distribution to others;
(5) Any remaining assets may be distributed to such persons, societies, organizations, or domestic or foreign corporations, whether for profit or nonprofit, as may be specified in a plan of distribution adopted as provided in this chapter.
Source: SL 1965, ch 24, § 48.
47-26-6. Plan for distribution of assets--Adoption of plan.
A plan providing for the distribution of assets, not inconsistent with the provisions of chapters 47-22 to 47-28, inclusive, may be adopted by a corporation in the process of dissolution and shall be adopted by a corporation for the purpose of authorizing any transfer or conveyance of assets for which this chapter requires a plan of distribution, in the manner provided by §§ 47-26-7 and 47-26-8.
Source: SL 1965, ch 24, § 49.
47-26-6.1. Notice to attorney general.
At least ten days prior to a meeting to dissolve under this chapter, or conversion from a nonprofit corporation to a domestic business corporation or other business entity authorized by law, the corporation shall provide notice to the attorney general which notice shall include a copy of the plan for distribution of assets required pursuant to § 47-26-6 or plan of conversion pursuant to § 47-25A-8 or 47-25A-9.
Source: SL 2016, ch 221, § 14.
47-26-7. Membership vote on plan--Meeting--Notice of meeting--Two-thirds vote required.
Where there are members entitled to vote thereon, the board of directors shall adopt a resolution recommending a plan of distribution and directing the submission thereof to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice setting forth the proposed plan of distribution or a summary thereof shall be given to each member entitled to vote at such meeting, within the time and in the manner provided by chapter 47-23 for the giving of notice of meeting of members. Such plan of distribution shall be adopted upon receiving at least two-thirds of the votes entitled to be cast by members present or represented by proxy at such meeting.
Source: SL 1965, ch 24, § 49 (1).
47-26-8. Adoption of plan by corporation having no members entitled to vote.
Where there are no members, or no members entitled to vote thereon, a plan of distribution shall be adopted at a meeting of the board of directors upon receiving the vote of a majority of the directors in office.
Source: SL 1965, ch 24, § 49 (2).
47-26-9. Articles of dissolution--Time for adoption--Contents.
If voluntary dissolution proceedings have not been revoked, when all debts, liabilities, and obligations of the corporation shall have been paid and discharged, or adequate provision has been made therefor, and all of the remaining property and assets of the corporation have been transferred, conveyed, or distributed in accordance with the provisions of this chapter, an original articles of dissolution shall be executed by the chairman of its board of directors, by its president, or by another of its officers or if the corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that fiduciary, which statement shall set forth:
(1) The name of the corporation;
(2) If there are members entitled to vote thereon:
(a) A statement setting forth the date of the meeting of members at which the resolution to dissolve was adopted, that a quorum was present at such meeting, and that such resolution received at least two-thirds of the votes entitled to be cast by members present or represented by proxy at such meeting; or
(b) A statement that such resolution was adopted by a consent in writing signed by all members entitled to vote with respect thereto;
(3) If there are no members or no members entitled to vote thereon, a statement of such fact, the date of the meeting of the board of directors at which the resolution to dissolve was adopted and a statement of the fact that such resolution received the vote of a majority of the directors in office;
(4) That all debts, obligations, and liabilities of the corporation have been paid and discharged or that adequate provision has been made therefor;
(5) A copy of the plan of distribution, if any, as adopted by the corporation, or a statement that no plan was so adopted;
(6) That all the remaining property and assets of the corporation have been transferred, conveyed, or distributed in accordance with the provisions of this chapter; and
(7) That there are no suits pending against the corporation in any court, or that adequate provision has been made for the satisfaction of any judgment, order, or decree which may be entered against it in any pending suit.
Source: SL 1965, ch 24, § 51; SL 1989, ch 393, § 29; SL 2012, ch 222, § 7.
47-26-10. Delivery of articles to secretary of state--Endorsement and filing by secretary of state--Issuance of certificate of dissolution.
The original articles of dissolution shall be delivered to the secretary of state. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document. If the secretary of state finds that the articles of dissolution conform to law, when all fees have been paid as prescribed in chapter 47-28, the secretary of state shall:
(1) Endorse the word "filed" on the original and the copy and the month, day, and year of filing;
(2) File the original in his office; and
(3) Issue a certificate of dissolution to which he shall affix the copy.
The certificate of dissolution, together with the copy of the articles of dissolution affixed thereto, shall be returned to the representative of the dissolved corporation.
Source: SL 1965, ch 24, § 52; SL 1989, ch 393, § 30; SL 2012, ch 222, § 8.
47-26-11. Cessation of corporate existence--Exceptions.
Upon the issuance of a certificate of dissolution pursuant to § 47-26-10 the existence of the corporation shall cease, except for the purpose of suits, other proceedings and appropriate corporate action by members, directors, and officers as provided in this chapter.
Source: SL 1965, ch 24, § 52.
47-26-12. Revocation of dissolution action--Procedure.
A corporation may, at any time prior to the issuance of a certificate of dissolution by the secretary of state, revoke the action theretofore taken to dissolve the corporation, in the manner provided by §§ 47-26-13 and 47-26-14.
Source: SL 1965, ch 24, § 50.
47-26-13. Revocation of dissolution resolution--Meeting--Notice of meeting--Two-thirds vote required.
Where there are members entitled to vote thereon, the board of directors shall adopt a resolution recommending that the voluntary dissolution proceedings be revoked, and directing that the question of such revocation be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice stating that the purpose, or one of the purposes, of such meeting is to consider the advisability of revoking the voluntary dissolution proceedings, shall be given to each member entitled to vote at such meeting, within the time and in the manner provided in chapter 47-23 for the giving of notice of meetings of members. A resolution to revoke the voluntary dissolution proceedings shall be adopted upon receiving at least two-thirds of the votes entitled to be cast by members present or represented by proxy at such meeting.
Source: SL 1965, ch 24, § 50 (1).
47-26-14. Revocation in corporation having no members entitled to vote.
Where there are no members, or no members entitled to vote thereon, a resolution to revoke the voluntary dissolution proceedings shall be adopted at a meeting of the board of directors upon receiving the vote of a majority of the directors in office.
Source: SL 1965, ch 24, § 50 (2).
47-26-15. Effect of adoption of revocation resolution.
Upon the adoption of a resolution to revoke voluntary dissolution proceedings by the members, or by the board of directors where there are no members or no members entitled to vote thereon, the corporation may thereupon again conduct its affairs.
Source: SL 1965, ch 24, § 50.
47-26-16. Involuntary dissolution by court decree--Action by attorney general--Grounds of action.
The provisions of § 47-24-13.1 notwithstanding, a corporation may be dissolved involuntarily by a decree of the circuit court in an action filed by the attorney general if it is established that:
(1) The corporation procured its articles of incorporation through fraud; or
(2) The corporation has continued to exceed or abuse the authority conferred upon it by law.
Source: SL 1965, ch 24, § 53; SL 1967, ch 14, § 1; SL 1989, ch 393, § 31.
47-26-19. Venue of attorney general's action--Service of process.
Every action for the involuntary dissolution of a corporation shall be commenced by the attorney general either in the circuit court for the county in which the registered office of the corporation is situated, or in the circuit court for Hughes County. Summons shall issue and be served as in other civil actions.
Source: SL 1965, ch 24, § 55.
47-26-20. Service by publication--Contents of publication--Newspaper of publication.
If process in an action for the involuntary dissolution of a corporation is returned not found, the attorney general shall cause publication to be made as in other civil cases in some newspaper published in the county where the registered office of the corporation is situated, containing a notice of the pendency of such action, the title of the court, the title of the action, and the date on or after which default may be entered. If no newspaper is published in the county where the registered office of the corporation is situated, publication of such notice shall be made in some newspaper having general circulation in the community where such registered office is situated.
Source: SL 1965, ch 24, § 55.
47-26-21. Including several corporations in one notice--Mailing notice to corporation--Attorney general's certificate of mailing--Number and time of publication--Time for default.
The attorney general may include in one notice published pursuant to § 47-26-20 the names of any number of corporations against which actions are then pending in the same court. The attorney general shall cause a copy of such notice to be mailed to the corporation at its registered office within ten days after the first publication thereof. The certificate of the attorney general of the mailing of such notice shall be prima facie evidence thereof. Such notice shall be published at least once each week for two successive weeks, and the first publication thereof may begin at any time after the summons has been returned. Unless a corporation shall have been served with summons, no default shall be taken against it earlier than thirty days after the first publication of such notice.
Source: SL 1965, ch 24, § 55.
47-26-22. Power of court in liquidation proceedings--Actions by member or director.
Courts of equity shall have full power to liquidate the assets and affairs of a corporation in an action by a member or director when it is made to appear:
(1) That the directors are deadlocked in the management of the corporate affairs and that irreparable injury to the corporation is being suffered or is threatened by reason thereof, and either that the members are unable to break the deadlock or there are no members having voting rights; or
(2) That the acts of the directors or those in control of the corporation are illegal, oppressive, or fraudulent; or
(3) That the members entitled to vote in the election of directors are deadlocked in voting power and have failed for at least two years to elect successors to directors whose terms have expired or would have expired upon the election of their successors; or
(4) That the corporate assets are being misapplied or wasted; or
(5) That the corporation is unable to carry out its purposes.
Source: SL 1965, ch 24, § 56 (1).
47-26-23. Power of court in liquidation proceedings--Action by creditor.
Courts of equity shall have full power to liquidate the assets and affairs of a corporation in an action by a creditor:
(1) When the claim of the creditor has been reduced to judgment and an execution thereon has been returned unsatisfied and it is established that the corporation is insolvent; or
(2) When the corporation has admitted in writing that the claim of the creditor is due and owing and it is established that the corporation is insolvent.
Source: SL 1965, ch 24, § 56 (2).
47-26-24. Power of court in liquidation proceedings--Application by corporation.
Courts of equity shall have full power to liquidate the assets and affairs of a corporation upon application by a corporation to have its dissolution continued under the supervision of the court.
Source: SL 1965, ch 24, § 56 (3).
47-26-25. Power of court in liquidation proceedings--Action by attorney general.
Courts of equity shall have full power to liquidate the assets and affairs of a corporation when an action has been filed by the attorney general to dissolve a corporation and it is established that liquidation of its affairs should precede the entry of a decree of dissolution.
Source: SL 1965, ch 24, § 56 (4).
47-26-26. Venue of actions.
Proceedings under §§ 47-26-22 to 47-26-25, inclusive, shall be brought in the county in which the registered office or the principal office of the corporation is situated.
Source: SL 1965, ch 24, § 56.
47-26-27. Proper parties to action.
It shall not be necessary to make directors or members parties to any action or proceedings under §§ 47-26-22 to 47-26-25, inclusive, unless relief is sought against them personally.
Source: SL 1965, ch 24, § 56.
47-26-28. Preservation of corporate assets--Injunctions and receivers.
In proceedings to liquidate the assets and affairs of a corporation the court shall have power to issue injunctions, to appoint a receiver or receivers pendente lite, with such powers and duties as the court, from time to time, may direct, and to take such other proceedings as may be required to preserve the corporate assets wherever situated, and carry on the affairs of the corporation until a full hearing can be had.
Source: SL 1965, ch 24, § 57.
47-26-29. Appointment of liquidating receiver--Authority of receiver--Order appointing receiver.
After a hearing had upon such notice as the court may direct to be given to all parties to proceedings to liquidate the assets and affairs of a corporation and to any other parties in interest designated by the court, the court may appoint a liquidating receiver or receivers with authority to collect the assets of the corporation. Such liquidating receiver or receivers shall have authority, subject to the order of the court, to sell, convey, and dispose of all or any part of the assets of the corporation wherever situated, either at public or private sale. The order appointing such liquidating receiver or receivers shall state their powers and duties. Such powers and duties may be increased or diminished at any time during the proceedings.
Source: SL 1965, ch 24, § 57.
47-26-30. Disposition of assets resulting from sale of corporate property--Manner of distribution--Disposition of remaining assets.
The assets of the corporation or the proceeds resulting from a sale, conveyance, or other disposition thereof shall be applied and distributed as follows:
(1) All costs and expenses of the court proceedings and all liabilities and obligations of the corporation shall be paid, satisfied and discharged, or adequate provision shall be made therefor;
(2) Assets held by the corporation upon condition requiring return, transfer, or conveyance, which condition occurs by reason of the dissolution or liquidation, shall be returned, transferred, or conveyed in accordance with such requirements;
(3) Assets received and held by the corporation subject to limitations permitting their use only for charitable, religious, eleemosynary, benevolent, educational, or similar purposes, but not held upon a condition requiring return, transfer, or conveyance by reason of the dissolution or liquidation, shall be transferred or conveyed to one or more domestic or foreign corporations, societies, or organizations engaged in activities substantially similar to those of the dissolving or liquidating corporation, pursuant to a plan of distribution adopted as provided in this chapter, or where no plan of distribution has been adopted, shall be transferred or conveyed to one or more domestic or foreign corporations, societies, or organizations engaged in activities substantially similar to those of the dissolving or liquidating corporation as the court may direct;
(4) Other assets, if any, shall be distributed in accordance with the provisions of the articles of incorporation or the bylaws to the extent that the articles of incorporation or bylaws determine the distributive rights of members, or any class or classes of members, or provide for distribution to others;
(5) Any remaining assets may be distributed to such persons, societies, organizations, or domestic or foreign corporations, whether for profit or not for profit, specified in the plan of distribution adopted as provided in this chapter, or where no plan of distribution has been adopted, as the court may direct.
Source: SL 1965, ch 24, § 57.
47-26-31. Expenses of liquidation--Compensation of receiver--Attorneys' fees.
The court in proceedings to liquidate the assets and affairs of a corporation shall have power to allow, from time to time, as expenses of the liquidation, compensation to the receiver or receivers and to attorneys in the proceeding, and to direct the payment thereof out of the assets of the corporation or the proceeds of any sale or disposition of such assets.
Source: SL 1965, ch 24, § 57.
47-26-32. Capacity of receiver to sue and be sued--Jurisdiction of court.
A receiver of a corporation appointed under the provisions of § 47-26-28 or 47-26-29 shall have authority to sue and defend in all courts in his own name as receiver of such corporation. The court appointing such receiver shall have exclusive jurisdiction of the corporation and its property, wherever situated.
Source: SL 1965, ch 24, § 57.
47-26-33. Qualifications of receiver--Bond.
A receiver shall in all cases be a citizen of the United States or a corporation for profit authorized to act as receiver, which corporation may be a domestic corporation or a foreign corporation authorized to transact business in this state, and shall in all cases give such bond as the court may direct with such sureties as the court may require.
Source: SL 1965, ch 24, § 58.
47-26-34. Claims of creditors--Proof of claim--Time for filing--Failure to file timely proofs.
In proceedings to liquidate the assets and affairs of a corporation the court may require all creditors of the corporation to file with the clerk of the court or with the receiver, in such form as the court may prescribe, proofs under oath of their respective claims. If the court requires the filing of claims it shall fix a date, which shall be not less than four months from the date of the order, as the last day for the filing of claims, and shall prescribe the notice that shall be given to creditors and claimants of the date so fixed. Prior to the date so fixed, the court may extend the time for the filing of claims. Creditors and claimants failing to file proofs of claim on or before the date so fixed may be barred, by order of court, from participating in the distribution of the assets of the corporation.
Source: SL 1965, ch 24, § 59.
47-26-35. Discontinuance of liquidation proceedings--Redelivery of assets to corporation.
The liquidation of the assets and affairs of a corporation may be discontinued at any time during the liquidation proceedings when it is established that cause for liquidation no longer exists. In such event the court shall dismiss the proceedings and direct the receiver to redeliver to the corporation all its remaining property and assets.
Source: SL 1965, ch 24, § 60.
47-26-36. Decree of involuntary dissolution--Cessation of corporate existence.
In proceedings to liquidate the assets and affairs of a corporation, when the costs and expenses of such proceedings and all debts, obligations, and liabilities of the corporation shall have been paid and discharged and all of its remaining property and assets distributed in accordance with the provisions of this chapter, or in case its property and assets are not sufficient to satisfy and discharge such costs, expenses, debts, and obligations, and all the property and assets have been applied so far as they will go to their payment, the court shall enter a decree dissolving the corporation, whereupon the existence of the corporation shall cease.
Source: SL 1965, ch 24, § 61.
47-26-37. Copy of decree filed with secretary of state--Fee.
In case the court shall enter a decree dissolving a corporation, it shall be the duty of the clerk of such court to cause a certified copy of the decree to be filed with the secretary of state. No fee shall be charged by the secretary of state for the filing thereof.
Source: SL 1965, ch 24, § 62.
47-26-38. Disposition of undistributable assets--Unknown claimants--Deposit with state treasurer for subsequent payment.
Upon the voluntary or involuntary dissolution of a corporation, the portion of the assets distributable to any person who is unknown or cannot be found, or who is under disability and there is no person legally competent to receive such distributive portion, shall be reduced to cash and deposited with the state treasurer and shall be paid over to such person or to his legal representative upon proof satisfactory to the state treasurer of his right thereto.
Source: SL 1965, ch 24, § 63.
47-26-39. Preexisting rights and claims unaffected by dissolution--Time for assertion--Protection of remedy.
The dissolution of a corporation either:
(1) By the issuance of a certificate of dissolution by the secretary of state; or
(2) By a decree of court when the court has not liquidated the assets and affairs of the corporation as provided in this chapter; or
(3) By expiration of its period of duration,
shall not take away or impair any remedy available to or against such corporation, its directors, officers, or members, for any right or claim existing, or any liability incurred, prior to such dissolution if action or other proceeding thereon is commenced within two years after the date of such dissolution. Any such action or proceeding by or against the corporation may be prosecuted or defended by the corporation in its corporate name. The members, directors, and officers shall have power to take such corporate or other action as shall be appropriate to protect such remedy, right, or claim.
Source: SL 1965, ch 24, § 64.
47-26-40. Dissolution by expiration of period of duration--Extension of period of duration.
If a corporation was dissolved by the expiration of its period of duration, such corporation may amend its articles of incorporation at any time within two years after the date of such dissolution so as to extend its period of duration. Such amendment shall be considered to be a petition for reinstatement under § 47-24-14.
Source: SL 1965, ch 24, § 64; SL 1989, ch 393, § 33.
47-27-1
Certificate of authority to do business--Application--Contents of application--Forms--Execution.
47-27-2
Delivery of application to secretary of state.
47-27-3
Approval by secretary of state--Endorsement and filing.
47-27-4
Issuance of certificate of authority--Authority conferred by certificate.
47-27-5
Circumstances under which certificate may not be denied--Difference between
local and foreign law--Regulation of internal affairs of corporation prohibited.
47-27-6
Certificate as conferring no greater rights than those enjoyed by local
corporations.
47-27-7
Corporate name as affecting right to certificate--Purpose indicated by name.
47-27-8
Name similar to or same as other corporation.
47-27-9
Change of name to prohibited name--Suspension of certificate of authority.
47-27-10
Certificate as not authorizing acts prohibited locally.
47-27-11
Certificate as requisite for doing business.
47-27-12
Failure to obtain certificate as barring suit within state.
47-27-13
Failure to obtain certificate as not barring defense to action within state.
47-27-14
Liability for doing business in state without certificate--Fees and reports--Interest and penalties--Action by attorney general.
47-27-15, 47-27-16.
Repealed.
47-27-17
Circumstances under which new certificate of authority is necessary--Change
of corporate name--Additional corporate purposes--Application for new
certificate of authority.
47-27-18
Annual reports by foreign corporations.
47-27-19 to 47-27-28. Repealed.
47-27-29
Contract or tort within state as consent to serve secretary of state.
47-27-30, 47-27-31. Repealed.
47-27-32
Withdrawal of foreign corporation from state--Certificate of withdrawal--Application to secretary of state--Contents of application.
47-27-33
Endorsement and filing by secretary of state--Issuance of certificate of
withdrawal.
47-27-34
Cessation of authority to conduct local business.
47-27-35
Revocation of certificate of authority--Grounds for revocation.
47-27-36
Notice and procedure for revocation--Time for notice--Corrective action by
corporation.
47-27-37
Issuance and filing of certificate of revocation--Notice to corporation.
47-27-38
Cessation of authority to do business locally.
47-27-1. Certificate of authority to do business--Application--Contents of application--Forms--Execution.
Any foreign corporation, in order to procure a certificate of authority to engage in business in this state, shall make application to the secretary of state, which application shall set forth:
(1) The name of the corporation and the state or country under the laws of which it is incorporated;
(2) The date of incorporation and the period of duration of the corporation;
(3) The street address of the principal office of the corporation in the state or country under whose laws it is incorporated;
(4) The information required by § 59-11-6;
(5) The purpose or purposes of the corporation in engaging in business in this state;
(6) The names and respective addresses of the directors and officers of the corporation; and
(7) Such additional information as may be necessary in order to enable the secretary of state to determine whether such corporation is entitled to a certificate of authority to engage in business in this state.
An original and one exact or conforming copy of the application shall be made on forms prescribed and furnished by the secretary of state and shall be executed and acknowledged by the chair of the board of directors, by the corporation's president, or by another of the corporation's officers.
Source: SL 1965, ch 24, § 69; SL 1989, ch 393, § 34; SL 1990, ch 367, § 16; SL 2004, ch 280, § 6; SL 2008, ch 275, § 68.
47-27-2. Delivery of application to secretary of state.
The original application for a certificate of authority shall be delivered to the secretary of state, together with a certificate of existence (or a document of similar import) duly acknowledged by the secretary of state or other official having custody of corporate records in the state or country under whose laws it is incorporated. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document.
Source: SL 1965, ch 24, § 70; SL 1989, ch 393, § 35; SL 2012, ch 222, § 9.
47-27-3. Approval by secretary of state--Endorsement and filing.
If the secretary of state finds that an application delivered to him pursuant to § 47-27-2 conforms to law, when all fees have been paid as prescribed in chapter 47-28, he shall:
(1) Endorse the word "filed" on the original and the copy and the month, day, and year of filing;
(2) File in his office the original of the application and the certificate of existence or equivalent document; and
(3) Issue a certificate of authority to conduct affairs in this state to which he shall affix the copy.
The certificate of authority, together with the copy of the application affixed thereto, shall be returned to the corporation or its representative.
Source: SL 1965, ch 24, § 70; SL 1989, ch 393, § 36.
47-27-4. Issuance of certificate of authority--Authority conferred by certificate.
Upon the issuance of a certificate of authority by the secretary of state, the corporation shall be authorized to do or engage in any business in this state for those purposes set forth in its application, subject, however, to the right of this state to suspend or to revoke such authority as provided in this chapter.
Source: SL 1965, ch 24, § 71.
47-27-5. Circumstances under which certificate may not be denied--Difference between local and foreign law--Regulation of internal affairs of corporation prohibited.
A foreign corporation shall not be denied a certificate of authority by reason of the fact that the laws of the state or country under which such corporation is organized governing its organization and internal affairs differ from the laws of this state, and nothing contained in chapters 47-22 to 47-28, inclusive, shall be construed to authorize this state to regulate the organization or the internal affairs of such corporation.
Source: SL 1965, ch 24, § 65.
47-27-6. Certificate as conferring no greater rights than those enjoyed by local corporations.
A foreign corporation which shall have received a certificate of authority under this chapter shall, until a certificate of revocation or of withdrawal shall have been issued as provided in this chapter, enjoy the same, but no greater, rights and privileges as a domestic corporation organized for the purposes set forth in the application pursuant to which such certificate of authorization is issued; and, except as otherwise provided in chapters 47-22 to 47-28, inclusive, shall be subject to the same duties, restrictions, penalties and liabilities now or hereafter imposed upon a domestic corporation of like character.
Source: SL 1965, ch 24, § 66.
47-27-7. Corporate name as affecting right to certificate--Purpose indicated by name.
No certificate of authority shall be issued to a foreign corporation if the corporate name of such corporation shall contain any word or phrase which indicates or implies that it is organized for any purpose other than one or more of the purposes contained in its articles of incorporation.
Source: SL 1965, ch 24, § 67 (1).
47-27-8. Name similar to or same as other corporation.
No certificate of authority may be issued to any corporation unless its corporate name conforms to the requirements of chapter 47-22 pertaining to names of corporations.
Source: SL 1965, ch 24, § 67 (2); SL 1989, ch 393, § 37; SL 1992, ch 323, § 2.
47-27-9. Change of name to prohibited name--Suspension of certificate of authority.
Whenever a foreign corporation which is authorized to conduct affairs in this state shall change its name to one under which a certificate of authority would not be granted to it on application therefor, the certificate of authority of such corporation shall be suspended and it shall not thereafter do or engage in any business in this state until it has changed its name to a name which is available to it under the laws of this state.
Source: SL 1965, ch 24, § 68.
47-27-10. Certificate as not authorizing acts prohibited locally.
No foreign corporation shall be entitled to procure a certificate of authority under this chapter to conduct in this state any affairs which a corporation organized under chapter 47-22 is prohibited from conducting.
Source: SL 1965, ch 24, § 65.
47-27-11. Certificate as requisite for doing business.
No foreign corporation shall have the right to do or engage in any business in this state until it shall have procured a certificate of authority so to do from the secretary of state.
Source: SL 1965, ch 24, § 65.
47-27-12. Failure to obtain certificate as barring suit within state.
No foreign corporation which is doing or engaging in any business in this state without a certificate of authority shall be permitted to maintain any action, suit, or proceeding in any court of this state until such corporation shall have obtained a certificate of authority. Nor shall any action, suit, or proceeding be maintained in any court of this state by any successor or assignee of such corporation on any right, claim, or demand arising out of the conduct of affairs by such corporation in this state, until a certificate of authority shall have been obtained by such corporation or by a corporation which has acquired all or substantially all of its assets.
Source: SL 1965, ch 24, § 82.
47-27-13. Failure to obtain certificate as not barring defense to action within state.
The failure of a foreign corporation to obtain a certificate of authority to do or engage in any business in this state shall not impair the validity of any contract or act of such corporation, and shall not prevent such corporation from defending any action, suit or proceeding in any court of this state.
Source: SL 1965, ch 24, § 82.
47-27-14. Liability for doing business in state without certificate--Fees and reports--Interest and penalties--Action by attorney general.
A foreign corporation which does or engages in any business in this state without a certificate of authority shall be liable to this state, for the years or parts thereof during which it did or engaged in any business in this state without a certificate of authority, in an amount equal to all fees which would have been imposed by chapter 47-28 upon such corporation had it duly applied for and received a certificate of authority to do or engage in any business in this state as required by this chapter and thereafter filed all reports required by this chapter and chapter 47-28, plus all interest and penalties imposed by this chapter or chapter 47-28 for failure to pay such fees. The attorney general shall bring proceedings to recover all amounts due this state under the provisions of this section.
Source: SL 1965, ch 24, § 82.
47-27-17. Circumstances under which new certificate of authority is necessary--Change of corporate name--Additional corporate purposes--Application for new certificate of authority.
Any foreign corporation authorized to do or engage in business in this state shall procure an amended certificate of authority if it changes its corporate name or desires to pursue other or additional purposes than those set forth in its application for a certificate of authority by making application therefor to the secretary of state.
The requirements for the form and contents of such application, manner of its execution, filing of an original and one exact or conforming copy of the application with the secretary of state, issuance of an amended certificate of authority and effect thereof are the same as for an original application for a certificate of authority.
Source: SL 1965, ch 24, § 77; SL 1990, ch 367, § 17.
47-27-18. Annual reports by foreign corporations.
Any foreign corporation authorized to engage in business in this state, shall file an annual report pursuant to §§ 59-11-24 to 59-11-26, inclusive.
Source: SL 1965, ch 24, § 83; SL 1966, ch 21; SL 1967, ch 14, § 3; SL 1989, ch 393, § 40; SL 2004, ch 280, § 10; SL 2008, ch 275, § 69.
47-27-29. Contract or tort within state as consent to serve secretary of state.
If a foreign corporation makes a contract with a resident of South Dakota to be performed in whole or in part by either party in South Dakota, or if such foreign corporation commits a tort in whole or in part in South Dakota against a resident of South Dakota, such acts shall be deemed to be doing business in South Dakota by the foreign corporation and shall be deemed equivalent to the appointment by the foreign corporation of the secretary of state of the State of South Dakota and his successors to be its true and lawful attorney upon whom may be served all lawful process in any actions or proceedings against the foreign corporation arising from or growing out of such contract or tort. The making of the contract or the committing of the tort shall be deemed to be the agreement of the foreign corporation that any process against it which is so served upon the secretary of state shall be of the same legal force and effect as if served personally within the State of South Dakota.
Source: SL 1965, ch 24, § 74.
47-27-32. Withdrawal of foreign corporation from state--Certificate of withdrawal--Application to secretary of state--Contents of application.
Any foreign corporation authorized to engage in business in this state may withdraw from this state after obtaining from the secretary of state a certificate of withdrawal. To obtain a certificate of withdrawal, the foreign corporation shall deliver to the secretary of state an application for withdrawal, which shall set forth:
(1) The name of the corporation and the state or country under whose laws it is incorporated;
(2) That the corporation is not doing or engaging in any business in this state;
(3) That the corporation surrenders its authority to do or engage in any business in this state;
(4) That the corporation revokes the authority of its registered agent in this state to accept service of process and consents that service of process in any action, suit or proceeding based upon any cause of action arising in this state during the time the corporation was authorized to conduct affairs in this state may thereafter be made on such corporation by service thereof on the secretary of state; and
(5) A post office address to which the secretary of state may mail a copy of any process against the corporation that may be served on him.
The original application for withdrawal shall be made on forms prescribed and furnished by the secretary of state and shall be executed by the chairman of the board, by the corporation's president or by another of the corporation's officers, or, if the corporation is in the hands of a receiver, trustee or by other court-appointed fiduciary, by that fiduciary.
Source: SL 1965, ch 24, § 78; SL 1989, ch 393, § 43; SL 2012, ch 222, § 10.
47-27-33. Endorsement and filing by secretary of state--Issuance of certificate of withdrawal.
The original application for withdrawal shall be delivered to the secretary of state. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document. If the secretary of state finds that such application conforms to the provisions of this chapter, when all fees have been paid as prescribed in chapter 47-28, the secretary of state shall:
(1) Endorse the word "filed" on the original and the copy and the month, day, and year of filing;
(2) File the original in his office; and
(3) Issue a certificate of withdrawal to which he shall affix the copy.
The certificate of withdrawal, together with the copy of the application for withdrawal affixed, shall be returned to the corporation or its representative.
Source: SL 1965, ch 24, § 79; SL 1989, ch 393, § 44; SL 2012, ch 222, § 11.
47-27-34. Cessation of authority to conduct local business.
Upon the issuance of a certificate of withdrawal pursuant to § 47-27-33, the authority of the corporation to conduct affairs in this state shall cease.
Source: SL 1965, ch 24, § 79.
47-27-35. Revocation of certificate of authority--Grounds for revocation.
The certificate of authority of a foreign corporation to do or engage in any business in this state may be revoked by the secretary of state upon the conditions prescribed in § 47-27-36 when:
(1) The corporation has failed to file its annual report within the time required or has failed to pay any fees or penalties prescribed by this chapter or chapter 47-28 when they have become due and payable; or
(2) The corporation has failed to appoint and maintain a registered agent in this state; or
(3) The corporation has failed, after change of its registered agent, to file in the Office of the Secretary of State a statement of such change; or
(4) The corporation has failed to file in the Office of the Secretary of State any amendment to its articles of incorporation or any articles of merger within the time prescribed by this chapter; or
(5) A misrepresentation has been made of any material matter in any application, report, affidavit, or other document submitted by such corporation pursuant to chapters 47-22 to 47-28, inclusive.
Source: SL 1965, ch 24, § 80; SL 2008, ch 275, § 71.
47-27-36. Notice and procedure for revocation--Time for notice--Corrective action by corporation.
No certificate of authority of a foreign corporation shall be revoked by the secretary of state unless:
(1) He shall have given the corporation not less than sixty days' notice thereof by mail addressed to its registered office in this state; and
(2) The corporation shall fail prior to revocation to file such annual report, or pay such fees or penalties, or file the required statement or change of registered agent, or file such articles of amendment or articles of merger, or correct such misrepresentation.
Source: SL 1965, ch 24, § 80.
47-27-37. Issuance and filing of certificate of revocation--Notice to corporation.
Upon revoking any certificate of authority, the secretary of state shall:
(1) Issue an original and one exact or conforming copy of a certificate of revocation;
(2) File the original in his office; and
(3) Mail to the corporation at its registered office in this state a notice of revocation accompanied by the copy.
Source: SL 1965, ch 24, § 81; SL 1989, ch 393, § 45.
47-27-38. Cessation of authority to do business locally.
Upon the issuance of such certificate of revocation, the authority of the corporation to do or engage in any business in this state shall cease.
Source: SL 1965, ch 24, § 81.
47-28-1
General powers of secretary of state.
47-28-2
Appeal from actions of secretary of state--Notice of disapproval by secretary of state--Time for notice.
47-28-3
Appeal to circuit court--Venue--Petition and supporting documents--Trial de novo.
47-28-4
Right of foreign corporation to appeal revocation of certificate of authority--Procedure for appeal--Trial de novo.
47-28-5
Appeal from order of circuit court--Procedure.
47-28-6
Filing fees.
47-28-7
Fee for service of process.
47-28-8
Fee for certified copy.
47-28-9
Prima facie effect of certificates of secretary of state--Admissibility.
47-28-10
Repealed.
47-28-11
Interrogatories by secretary of state to determine compliance with statutes.
47-28-12
Answer to interrogatories--Time for answer--Extension of time--Proper party to
answer.
47-28-13
Withholding filing of documents pending answer--Certification of certain answers
to attorney general.
47-28-14
Interrogatories and answers as confidential--Exception in case of criminal
proceedings.
47-28-15
Failure to answer interrogatories--Civil fine.
47-28-16
Director or officer failing to answer interrogatories or signing false report--Civil fine.
47-28-17
Forms prescribed by secretary of state--Use not mandatory.
47-28-18
Filing by electronic transmission.
47-28-19
Delayed effective time and date of filings.
47-28-1. General powers of secretary of state.
The secretary of state shall have the power and authority reasonably necessary to enable him to administer chapters 47-22 to 47-28, inclusive, efficiently and to perform the duties therein imposed upon him.
Source: SL 1965, ch 24, § 91.
47-28-2. Appeal from actions of secretary of state--Notice of disapproval by secretary of state--Time for notice.
If the secretary of state shall fail to approve any articles of incorporation, amendment, merger, consolidation, or dissolution, or any other document required by chapters 47-22 to 47-28, inclusive, to be approved by the secretary of state before the same shall be filed in his office, he shall, within ten days after the delivery thereof to him give written notice of his disapproval to the person or corporation, domestic or foreign, delivering the same, specifying the reasons therefor.
Source: SL 1965, ch 24, § 92.
47-28-3. Appeal to circuit court--Venue--Petition and supporting documents--Trial de novo.
From disapproval of any articles or document described in § 47-28-2, the person or corporation delivering the same to the secretary of state may appeal to the circuit court for the county in which the registered office of such corporation is, or is proposed to be, situated by filing with the clerk of such court a petition setting forth a copy of the articles or other document sought to be filed and a copy of the written disapproval thereof by the secretary of state; whereupon the matter shall be tried de novo by the court, and the court shall either sustain the action of the secretary of state or direct him to take such action as the court may deem proper.
Source: SL 1965, ch 24, § 92.
47-28-4. Right of foreign corporation to appeal revocation of certificate of authority--Procedure for appeal--Trial de novo.
If the secretary of state shall revoke the certificate of authority to conduct affairs in this state of any foreign corporation, pursuant to the provisions of chapter 47-27, such foreign corporations may, in the manner provided by § 47-28-3, appeal to the circuit court for the county where the registered office of such corporation in this state is situated, by filing with the clerk of such court a petition setting forth a copy of its certificate of authority to conduct affairs in this state and a copy of the notice of revocation given by the secretary of state; whereupon the matter shall be tried de novo by the court, and the court shall either sustain the action of the secretary of state or direct him to take such action as the court may deem proper.
Source: SL 1965, ch 24, § 92.
47-28-5. Appeal from order of circuit court--Procedure.
Appeals from all final orders and judgments entered by the circuit court under § 47-28-3 or 47-28-4 in review of any ruling or decision of the secretary of state may be taken as in other civil actions.
Source: SL 1965, ch 24, § 92.
47-28-6. Filing fees.
The secretary of state shall charge and collect for:
(1) Filing articles of incorporation and issuing a certificate of incorporation, thirty dollars;
(2) Filing articles of amendment and issuing a certificate of amendment, fifteen dollars;
(3) Filing articles of merger or consolidation and issuing a certificate of merger or consolidation, fifteen dollars;
(4) Repealed by SL 2008, ch 275, § 72;
(5) Filing articles of dissolution, five dollars;
(6) Filing an application of a foreign corporation for a certificate of authority to conduct affairs in this state and issuing a certificate of authority, one hundred twenty-five dollars;
(7) Filing an application of a foreign corporation for an amended certificate of authority to conduct affairs in this state and issuing an amended certificate of authority, twenty-five dollars;
(8) Filing an application for withdrawal of a foreign corporation and issuing a certificate of withdrawal, five dollars;
(9) Filing any other statement or report, including an annual report, of a foreign corporation, ten dollars;
(10) Filing an annual report of a domestic nonprofit corporation under chapter 47-24, ten dollars;
(11) Filing a petition for reinstatement and issuing a certificate of reinstatement, thirty dollars; and
(12) Filing a notice of sale, transfer, or merger, fifteen dollars.
Source: SL 1965, ch 24, § 85; SL 1967, ch 14, § 5; SL 1978, ch 339, § 3; SL 1982, ch 321, § 2; SL 1989, ch 393, § 46; SL 2003, ch 8, § 19; SL 2008, ch 275, § 72; SL 2009, ch 4, § 15.
47-28-7. Fee for service of process.
The secretary of state shall charge and collect, at the time of any service of process on the secretary of state as resident agent of a corporation, thirty dollars, which amount may be recovered as taxable costs by the party to the suit or action causing the service to be made if the party prevails in the suit or action.
Source: SL 1965, ch 24, § 86 (2); SL 2003, ch 8, § 20; SL 2009, ch 4, § 16.
47-28-8. Fee for certified copy.
The secretary of state shall charge and collect for furnishing a certified copy of any document, instrument, or paper relating to a corporation, two dollars per page, and fifteen dollars for the certificate and affixing the seal.
Source: SL 1965, ch 24, § 86 (1); SL 1997, ch 141, § 8; SL 2003, ch 8, § 21; SL 2009, ch 4, § 17; SL 2016, ch 2, § 7.
47-28-9. Prima facie effect of certificates of secretary of state--Admissibility.
All certificates issued by the secretary of state in accordance with the provisions of chapters 47-22 to 47-28, inclusive, and all copies of documents filed in his office in accordance with the provisions of said chapters when certified by him, shall be taken and received in all courts, public offices, and official bodies as prima facie evidence of the facts therein stated. A certificate by the secretary of state under the great seal of this state, as to the existence or nonexistence of the facts relating to corporations which would not appear from a certified copy of any of the foregoing documents or certificates shall be taken and received in all courts, public offices, and official bodies as prima facie evidence of the existence or nonexistence of the facts therein stated.
Source: SL 1965, ch 24, § 93.
47-28-11. Interrogatories by secretary of state to determine compliance with statutes.
The secretary of state may propound to any corporation, domestic or foreign, subject to the provisions of chapters 47-22 to 47-28, inclusive, and to any officer or director thereof, such interrogatories as may be reasonably necessary and proper to enable him to ascertain whether such corporation has complied with all the provisions of said chapters applicable to such corporations.
Source: SL 1965, ch 24, § 89.
47-28-12. Answer to interrogatories--Time for answer--Extension of time--Proper party to answer.
Interrogatories propounded pursuant to § 47-28-11 shall be answered within thirty days after the mailing thereof, or within such additional time as shall be fixed by the secretary of state, and the answers thereto shall be full and complete and shall be made in writing and under oath. If such interrogatories be directed to an individual they shall be answered by him, and if directed to a corporation they shall be answered by the president, vice-president, secretary, or assistant secretary, or treasurer or assistant treasurer thereof.
Source: SL 1965, ch 24, § 89.
47-28-13. Withholding filing of documents pending answer--Certification of certain answers to attorney general.
The secretary of state need not file any document to which interrogatories propounded pursuant to § 47-28-11 relate until such interrogatories be answered as provided in § 47-28-12, and not then if the answers thereto disclose that such document is not in conformity with the provisions of chapters 47-22 to 47-28, inclusive. The secretary of state shall certify to the attorney general, for such action as the attorney general may deem appropriate, all interrogatories and answers thereto which disclose a violation of any of the provisions of said chapters.
Source: SL 1965, ch 24, § 89.
47-28-14. Interrogatories and answers as confidential--Exception in case of criminal proceedings.
Interrogatories propounded by the secretary of state and the answers thereto shall not be open to public inspection nor shall the secretary of state disclose any facts or information obtained therefrom except insofar as his official duty may require the same to be made public or in the event such interrogatories or the answers thereto are required for evidence in any criminal proceedings or in any other action by this state.
Source: SL 1965, ch 24, § 90.
47-28-15. Failure to answer interrogatories--Civil fine.
Each corporation, domestic or foreign, that fails or refuses to answer truthfully and fully within the time prescribed by this chapter interrogatories propounded by the secretary of state in accordance with the provisions of this chapter, is subject to a civil fine in any amount not exceeding five hundred dollars.
Source: SL 1965, ch 24, § 87; SL 1967, ch 14, § 6; SL 1983, ch 15, § 45; SL 1983, ch 331, § 5.
47-28-16. Director or officer failing to answer interrogatories or signing false report--Civil fine.
Each director and officer of a corporation, domestic or foreign, who fails or refuses within the time prescribed by this chapter to answer truthfully and fully interrogatories propounded to him by the secretary of state in accordance with the provisions of this chapter, or who signs any article, statement, report, application, or other document filed with the secretary of state which is known to such officer or director to be false in any material respect, is subject to a civil fine in any amount not exceeding five hundred dollars.
Source: SL 1965, ch 24, § 88; SL 1983, ch 15, § 46; SL 1983, ch 331, § 6.
47-28-17. Forms prescribed by secretary of state--Use not mandatory.
All reports required by chapters 47-22 to 47-28, inclusive, to be filed in the Office of the Secretary of State shall be made on forms which shall be prescribed and furnished by the secretary of state. Forms for all other documents to be filed in the Office of the Secretary of State shall be furnished by the secretary of state on request therefor, but the use thereof, unless otherwise specifically prescribed in said chapters, shall not be mandatory.
Source: SL 1965, ch 24, § 94.
47-28-18. Filing by electronic transmission.
Notwithstanding any provision to the contrary in chapters 47-22 to 47-28, inclusive, filings with the Office of Secretary of State may be made by electronic transmission if and to the extent permitted by the Office of Secretary of State.
Source: SL 2016, ch 221, § 3.
47-28-19. Delayed effective time and date of filings.
Notwithstanding any provision to the contrary in chapters 47-22 to 47-28, inclusive, filings with the Office of Secretary of State may specify delayed effective time and date, and if it does so the document becomes effective at the time and date specified. If a delayed effective date is indicated, 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 it is filed.
Source: SL 2016, ch 221, § 4.
47-29-1
Cemetery corporations authorized--Nonprofit corporation law as applicable.
47-29-2
Permissible bylaw provisions--General management--Conformity with other
corporation law.
47-29-3
Cemetery lot owners as members of corporation--Vote--Jointly owned lots--Proxy
voting.
47-29-4
Quorum of members--Proxies counted.
47-29-5
Notice of election of directors--Publication of notice--Time of publication--Notice
of other meetings.
47-29-6
Directors required to be members.
47-29-7
Grounds previously used for burial--Lot owners as members of corporation.
47-29-8
Transfer of lot to individual owner for burial--Succession to ownership of lot--Joint
owners.
47-29-9
Failure to inter or care for lot or mausoleum--Resale of lot--Transfer of mausoleum
to municipality--Notice required.
47-29-10
Other laws applicable to nonperpetual care cemeteries.
47-29-11
Power of corporation to hold real estate--Maximum holdings--Platting and sale of
lots.
47-29-12
Additional holdings of real property--Sale of additional holdings.
47-29-13
Surveying and platting of cemetery grounds--Recordation--Lot numbering.
47-29-14
Sale of unplatted and unused ground.
47-29-15
Sale of platted but unused, unsold and unneeded ground--Determination by
governing body of corporation--Confirmation.
47-29-16
Circuit court petition for confirmation--Contents of petition--Hearing--Notice of
hearing--Method of notice--Including multiple tracts in petition.
47-29-17
Order granting or denying petition--Order as conclusive absent appeal.
47-29-18
Judgment as vacating plat or survey--Replatting.
47-29-19
Extension of cemetery boundaries--Purchase of lands--Condemnation of lands--Condemnation laws applicable.
47-29-20
Improvements on cemetery lands--Prohibited uses.
47-29-21
Authorization to hold personal property.
47-29-22
Authorization to establish perpetual fund--Donations--Election of trustees--Bond and
accounting of trustees.
47-29-23
Distribution of proceeds from sale of cemetery lots--Use in care of cemetery--Expenses--Profit prohibited.
47-29-24
Percentage of proceeds used to pay debts.
47-29-25
Cemetery property as exempt from taxation and local assessments--Appropriation for
state highway purposes of unused lands.
47-29-26
Validation of previous cemetery lot deeds.
47-29-1. Cemetery corporations authorized--Nonprofit corporation law as applicable.
Incorporations for the purpose of establishing, operating, or maintaining cemeteries may be formed under the provisions of chapters 47-22 to 47-28, inclusive, relating to nonprofit corporations so far as applicable and conformable to the powers, duties, limitations, and policy in this chapter prescribed for cemetery corporations or associations.
Source: SDC 1939, § 11.1901; SL 1966, ch 17, § 1.
47-29-2. Permissible bylaw provisions--General management--Conformity with other corporation law.
Cemetery corporations may make such provisions in their bylaws for general management and operation of the corporation, elections of directors and officers, removals and filling of vacancies, and corporate meetings as may be permitted by and conformable to the statutes under which the same are organized and conformable to their articles of incorporation and this chapter.
Source: SDC 1939, § 11.1902.
47-29-3. Cemetery lot owners as members of corporation--Vote--Jointly owned lots--Proxy voting.
The owner or owners or proprietors of a lot or lots in any cemetery, and none other, shall by virtue of such ownership or proprietorship of any such lot be members of the cemetery corporation and entitled to one vote only for each such person owning a lot or lots in said cemetery. If there be more than one proprietor of a single lot then such one of said proprietors as the majority of the proprietors of such lot may designate shall cast the vote for same. Written proxy shall entitle a member to vote for another in addition to his own vote.
Source: SDC 1939, § 11.1903.
47-29-4. Quorum of members--Proxies counted.
Five members of a cemetery corporation entitled to a vote under the provisions of § 47-29-3 shall constitute a quorum of the corporation to transact business of any kind including the election of officers, adoption, amendment, or repeal of bylaws, or amendment of articles of incorporation. Written proxies may be counted in making up the quorum.
Source: SDC 1939, § 11.1903; SL 1983, ch 329, § 1.
47-29-5. Notice of election of directors--Publication of notice--Time of publication--Notice of other meetings.
Notice of any election of directors or officers of a cemetery corporation, except the original organization election, shall be given by publishing the same in a newspaper published in the county in which the cemetery is located and nearest the vicinity thereof stating the time and place of election and officers to be elected. Such notice must be published at least ten days before the date fixed for such election. The notice required for other meetings of the officers or directors shall be as fixed in the bylaws.
Source: SDC 1939, § 11.1903.
47-29-6. Directors required to be members.
Each director of a cemetery corporation shall be a member of the cemetery corporation.
Source: SDC 1939, § 11.1903; SL 1983, ch 329, § 2.
47-29-7. Grounds previously used for burial--Lot owners as members of corporation.
When grounds purchased or otherwise acquired for cemetery purposes have been previously used as a burial ground, those who are lot owners at the time of the purchase shall continue to own the same and be members of the corporation with all the privileges the purchase of a corporation lot confers.
Source: SDC 1939, § 11.1904.
47-29-8. Transfer of lot to individual owner for burial--Succession to ownership of lot--Joint owners.
Whenever an interment is made in any cemetery lot transferred to an individual owner by the corporation, the same thereby becomes forever inalienable while any person is buried therein and descends in regular line of succession to the heirs-at-law of the owner, but any one or more of such heirs or any other joint owners may release to each other his or their interest in the same.
Source: SDC 1939, § 11.1905.
47-29-9. Failure to inter or care for lot or mausoleum--Resale of lot--Transfer of mausoleum to municipality--Notice required.
Any cemetery lot or lots, or parts of lots, transferred to an individual owner by the corporation, or any mausoleum if the charter of the mausoleum corporation has expired, and in which no interment has been made and which for a period of ten years or more remains uncared for and neglected by the owner or owners thereof, except where such owner or owners are entitled to perpetual care of such lot or lots, or parts of lots, may be resold by the association or the title to and responsibility for the repair and care of the building and grounds upon which the mausoleum is located may be transferred to the municipality in which the mausoleum is located. Notice of either the resale or title transfer shall be given and is final upon its publication for three successive weeks in a legal newspaper of the county where the lots or mausoleum are located. Resale of a cemetery lot or transfer of the title to a mausoleum may be made at any time after the completion of the publication.
Source: SDC 1939, § 11.1905; SL 1984, ch 302, § 1.
47-29-10. Other laws applicable to nonperpetual care cemeteries.
Any nonperpetual care cemetery, including nonperpetual care cemetery organizations excepted from the provisions of chapter 55-12 by § 55-12-1, shall be subject to the duties imposed and the rights provided by §§ 47-29-8 and 47-29-9.
Source: SDC Supp 1960, § 11.19A11 as enacted by SL 1966, ch 18.
47-29-11. Power of corporation to hold real estate--Maximum holdings--Platting and sale of lots.
Every cemetery corporation has power to purchase or take by gift, grant, or devise, or to hold real property not exceeding one hundred sixty acres for the sole use and purpose of a burial ground and to lay out the same into lots, with convenient avenues and walks, and to sell the lots for the sole use and purpose of burying the dead.
Source: SDC 1939, § 11.1906; SL 1949, ch 24; SL 1955, ch 16.
47-29-12. Additional holdings of real property--Sale of additional holdings.
Any cemetery corporation shall also have power to acquire any real property other than real property specified in § 47-29-11, if such acquirement is by gift, by devise under a will, or by purchase at foreclosure sale of any such real property on which such corporation holds a lien. Any such real property heretofore so acquired by such corporation may continue to be owned and held by such corporation. Any such real property so acquired and outside the boundaries of other real estate acquired for cemetery purposes may be sold and conveyed by such corporation, the same as with reference to real property owned and held by other corporations.
Source: SDC 1939, § 11.1906 as added by SL 1955, ch 16.
47-29-13. Surveying and platting of cemetery grounds--Recordation--Lot numbering.
A cemetery corporation shall cause its land, or such portion thereof as may from time to time become necessary for that purpose, to be surveyed into lots, avenues, and walks, and platted, and the plat of ground as surveyed shall be acknowledged and recorded in the office of the register of deeds of the county. Each lot shall be regularly numbered by the surveyor and such number shall be marked on the plat and recorded.
Source: SDC 1939, § 11.1906; SL 1949, ch 24; SL 1955, ch 16.
47-29-14. Sale of unplatted and unused ground.
Any cemetery association or cemetery corporation which owns a tract of land which is included within the boundaries of real estate acquired for cemetery purposes, and which lies adjacent to the outer boundaries thereof, and which tract has not been surveyed as required by § 47-29-13 and in which tract no interment has been made, may sell the same when it is determined by it that such tract will not be needed for cemetery purposes.
Source: SDC 1939, § 11.1906 as added by SL 1949, ch 24; SL 1955, ch 16.
47-29-15. Sale of platted but unused, unsold and unneeded ground--Determination by governing body of corporation--Confirmation.
If any cemetery association or cemetery corporation owns a tract of land surveyed and platted as required by § 47-29-13 which is included within the boundaries of real estate acquired for cemetery purposes, and which tract lies adjacent to the outer boundaries of such real estate acquired for cemetery purposes, and in which tract no interment has been made, and in which tract nobody holds any existing right, acquired by purchase or otherwise, to make an interment, said corporation or association may sell such tract either as an entirety or in subdivisions, if and when it is determined, as hereinafter provided, that there is no reasonable ground for belief that such tract or any part thereof will be needed for interment purposes for a period of twenty years in the future. Such determination shall be by the governing body of such corporation or association, confirmed as provided in §§ 47-29-16 and 47-29-17.
Source: SDC 1939, § 11.1906 as added by SL 1955, ch 16.
47-29-16. Circuit court petition for confirmation--Contents of petition--Hearing--Notice of hearing--Method of notice--Including multiple tracts in petition.
Before making any sale or conveyance of the whole or any part of a tract described in § 47-29-15, the cemetery corporation or association shall file with the circuit court for the county in which such corporation or association maintains a cemetery a petition for confirmation of the determination made under § 47-29-15, which petition shall set forth the facts showing that such tract is eligible under said section for sale and conveyance. Such court shall thereupon by order appoint a time and place for hearing on such petition, which time shall be not less than thirty days from the date of filing such petition, and which order shall also contain a description of such tract, a statement as to the nature of the order sought by said petition, a reference to said petition on file with the clerk of said court for further particulars, and a statement that any person interested may appear at said hearing and be heard as to whether such petition is to be granted. Notice of such hearing shall be given by publication of such order in a legal newspaper published in said county once each week for three successive weeks prior to said hearing. Any number of such tracts, if meeting the requirements of § 47-29-15, may be included in such a petition, whether or not such tracts are contiguous.
Source: SDC 1939, § 11.1906 as added by SL 1955, ch 16.
47-29-17. Order granting or denying petition--Order as conclusive absent appeal.
At the hearing required by § 47-29-16, and after receipt of evidence offered in support of such petition and evidence, if any, offered in opposition thereto, the circuit court shall grant such petition if satisfied that the evidence sustains the same, and if not, such petition shall be dismissed. If such court grants such petition, judgment shall be entered accordingly and, subject only to right of appeal, shall conclusively establish the right of the cemetery corporation or association to make such sale and such conveyance.
Source: SDC 1939, § 11.1906 as added by SL 1955, ch 16.
47-29-18. Judgment as vacating plat or survey--Replatting.
Judgment granting a petition filed under § 47-29-16 shall have the effect of vacating any plat or survey theretofore made of such tract, whether or not such plat or survey has been recorded, and the cemetery corporation or association shall thereupon be authorized to cause to be made, as provided by law, a new plat of said tract or any part thereof and to cause such plat to be recorded.
Source: SDC 1939, § 11.1906 as added by SL 1955, ch 16.
47-29-19. Extension of cemetery boundaries--Purchase of lands--Condemnation of lands--Condemnation laws applicable.
Whenever the officers of a cemetery association incorporated under and controlled by the laws of this state find it necessary to extend the boundaries of such cemetery in order to provide for the burial of the dead, they shall first locate and describe clearly the location and extent of the adjoining land desired. They shall then seek to secure the same by offer of purchase. If, however, the owner or owners of such tract or tracts adjoining the cemetery already established shall refuse to sell the lands described for proper and just compensation and by exorbitant price shall make it impracticable for such officers to purchase the same, such officers may proceed to have the land located and described by them condemned as provided in the statutes and rules of court for condemnation of private property for public use.
Source: SDC 1939, § 11.1907.
47-29-20. Improvements on cemetery lands--Prohibited uses.
A cemetery corporation shall have power to inclose, improve, and embellish its grounds, avenues and walks, and to erect buildings or vaults for its use and to prescribe in its bylaws rules for the sale, inclosure, or ornamentation of lots and for erecting monuments or gravestones thereon; and to prohibit any use, division, improvement, or ornamentation of any lot which the corporation may deem improper; and to make other bylaws and acts to the end that all the appliances, conveniences, and benefits of the public and private cemetery may be obtained and secured.
Source: SDC 1939, § 11.1908.
47-29-21. Authorization to hold personal property.
A cemetery corporation may hold such personal property as the legitimate and necessary purposes of the corporation may require.
Source: SDC 1939, § 11.1906; SL 1949, ch 24; SL 1955, ch 16.
47-29-22. Authorization to establish perpetual fund--Donations--Election of trustees--Bond and accounting of trustees.
A cemetery corporation also has power:
(1) To establish a perpetual fund to be used in purchasing and maintaining mowing equipment, hiring maintenance staff, caring for, ornamenting, beautifying, and improving its grounds;
(2) To receive donations, devises, and legacies for such purpose; and
(3) To elect three trustees to care for and invest such trust fund in such manner and under such restrictions and for such term or terms as may be prescribed by its articles of incorporation or bylaws.
The directors of any such corporation have power to require bonds from such trustees, from time to time, conditioned for the faithful discharge of their duties in such amounts as such board may deem necessary for the safety and proper security of such fund; and such trustees shall account at least once each year for all income arising from such perpetual fund and to make a full and detailed report of the condition of the fund if required by the board of directors.
Source: SDC 1939, § 11.1909; SL 2012, ch 225, § 1; SL 2013, ch 232, § 1.
47-29-23. Distribution of proceeds from sale of cemetery lots--Use in care of cemetery--Expenses--Profit prohibited.
The proceeds arising from the sale or resale by a cemetery corporation of lots, after deducting expenses of purchasing, inclosing, laying out, and improving the ground and of erecting buildings, shall be exclusively applied, appropriated, and used in protecting, preserving, improving, and embellishing the cemetery and its appurtenances; in the preservation, care, and marking of abandoned or neglected graves and in the repairing of monuments or gravestones thereon; and paying the necessary expenses of the corporation; and must not be appropriated to any purpose of profit to the corporation or its members.
Source: SDC 1939, § 11.1910.
47-29-24. Percentage of proceeds used to pay debts.
At least fifty percent of the gross proceeds of sales of lots or graves must be applied as often as every six months to the payment of the debts and obligations of the cemetery corporation.
Source: SDC 1939, § 11.1910.
47-29-25. Cemetery property as exempt from taxation and local assessments--Appropriation for state highway purposes of unused lands.
All the property of every cemetery corporation and the lots sold by it to individual proprietors shall be exempt from taxation, assessment, lien, attachment, and from levy and sale upon execution and all such real property shall be exempt from appropriation for streets, roads, or any other public uses or purposes, except that the State Department of Transportation may appropriate real property necessary for highway construction from real property owned by cemetery corporations no portion of which has at the time of the commencement of the condemnation action been used for burial purposes.
Source: SDC 1939, § 11.1911; SL 1963, ch 32, § 1; SL 1964, ch 19, § 1.
47-29-26. Validation of previous cemetery lot deeds.
All instruments of conveyance of real property, lots, or parts of lots made by any cemetery corporation prior to January 1, 1994, are, notwithstanding any omission, irregularity, or defect in such instruments and the proceedings, resolutions, and other actions had and taken by such cemetery corporation to sell, exchange, transfer, and convey the same, hereby validated, legalized, and cured to the extent that such conveyance shall operate to convey and transfer title to the person or persons named as grantee or grantees in such instruments of conveyance all the right, title, and interest of said cemetery corporation in and to such real property, lots, or parts of lots.
Source: SL 1957, ch 507; SDC Supp 1960, § 65.0339; SL 1994, ch 348, § 2.
47-30-1
Fraudulent subscription agreement--Misdemeanor.
47-30-2
Fraudulent deception of public officer in connection with issuance of stock--Felony.
47-30-3
Fraudulent prospectus or report--Felony.
47-30-4
Receipt of corporate property without proper accounting entry as theft.
47-30-5
Fraudulent corporate insolvency--Participating directors--Misdemeanor.
47-30-6
Fraudulent mutilation or falsification of corporate books as felony.
47-30-7
Refusal to permit stockholder access to books--Misdemeanor.
47-30-8
Unauthorized use of another's name in corporate publications--Misdemeanor.
47-30-9
Participation in false report or refusing to make report as misdemeanor.
47-30-10
Director's liability for failure to perform duties--Misdemeanor.
47-30-11
Director deemed to possess knowledge.
47-30-12
Presence of director at meeting as concurrence--Written dissent--Procedure.
47-30-13
Definition of director.
47-30-14
Foreign incorporation no defense.
47-30-1. Fraudulent subscription agreement--Misdemeanor.
Any person:
(1) Who signs the name of a fictitious person to a subscription for, or agreement to take stock in a corporation, existing or proposed; or
(2) Who procures another to sign such subscription or agreement:
(a) Knowing that the other person does not have the means or does not intend in good faith to comply with all the terms thereof; or
(b) Under an understanding or agreement that the terms of the subscription or agreement will not be complied with or enforced;
is guilty of a Class 2 misdemeanor.
Source: SDC 1939, § 13.4307; SL 1983, ch 15, § 47.
47-30-2. Fraudulent deception of public officer in connection with issuance of stock--Felony.
Every officer, agent, or clerk of any corporation, or of any persons proposing to organize a corporation or to increase the capital stock of any corporation, who knowingly exhibits any false, forged, or altered book, paper, voucher, security, or other instrument of evidence to any public officer or board authorized by law to examine the organization of such corporation, or to investigate its affairs, or to allow an increase of its capital, with intent to deceive such officer or board in respect thereto, is guilty of a Class 4 felony.
Source: SDC 1939, § 13.4306; SL 1991, ch 186, § 54.
47-30-3. Fraudulent prospectus or report--Felony.
Any officer of a corporation existing under the laws of this state or transacting business here, or any person holding himself out as such an officer, who, knowingly and with intent to defraud any person or the public generally, subscribes, endorses, verifies, or otherwise assents to the issuing or publishing of any report, prospectus, or statement concerning the condition, business, or prospects of the corporation, calculated to give to the shares of stock of such corporation either a greater or less apparent value than they really possess, is guilty of a Class 6 felony.
Source: SDC 1939, § 13.4308; SL 1983, ch 15, § 48.
47-30-4. Receipt of corporate property without proper accounting entry as theft.
Any director, officer, or agent of a corporation, who knowingly receives or possesses property of the corporation, otherwise than in payment of a just demand, and who, with intent to defraud, omits to make or cause to be made a full and true entry thereof in the books or accounts of the corporation, is guilty of a theft.
Source: SDC 1939, § 13.4311; SL 1983, ch 15, § 49.
47-30-5. Fraudulent corporate insolvency--Participating directors--Misdemeanor.
Every insolvency of a corporation is deemed fraudulent unless its affairs appear, upon investigation, to have been administered fairly and legally, and generally with the same care and diligence that agents receiving a compensation for their services are bound by law to observe. In every case of a fraudulent insolvency of a corporation, every director thereof who participated in such fraud, if no other punishment is prescribed therefor, is guilty of a Class 2 misdemeanor.
Source: SDC 1939, § 13.4314; SL 1983, ch 15, § 50.
47-30-6. Fraudulent mutilation or falsification of corporate books as felony.
Any director, officer, agent, or member of a corporation, who, with intent to defraud, destroys, alters, mutilates, or falsifies any of the books, papers, writings, or securities belonging to the corporation, or makes or concurs in making any false entry, or omits or concurs in omitting to make any material entry in a book of accounts, or other record or document kept by the corporation, is guilty of a Class 4 felony.
Source: SDC 1939, § 13.4312; SL 1983, ch 15, § 51.
47-30-7. Refusal to permit stockholder access to books--Misdemeanor.
Any officer or agent of a corporation having or keeping an office within this state, who has in his custody or control any book, paper, or document of the corporation, and who refuses to give to a stockholder or member of the corporation, lawfully demanding, during office hours, to inspect or take a copy of the same, or any part thereof, a reasonable opportunity so to do, is guilty of a Class 2 misdemeanor.
Source: SDC 1939, § 13.4313; SL 1983, ch 15, § 52.
47-30-8. Unauthorized use of another's name in corporate publications--Misdemeanor.
Any person who, without being authorized so to do, subscribes the name of another to, or inserts the name of another in, a prospectus, circular, or other advertisement or announcement of a corporation or joint stock association, existing or intended to be formed, with intent to permit it to be published, and thereby to lead persons to believe that the person whose name is so subscribed is an officer, agent, member, or promoter of the corporation or association, is guilty of a Class 2 misdemeanor.
Source: SDC 1939, § 13.4310; SL 1983, ch 15, § 53.
47-30-9. Participation in false report or refusing to make report as misdemeanor.
Except as otherwise specially provided, any director, officer, or agent of a corporation who knowingly concurs in making or publishing a written report, exhibit, or statement of its affairs or pecuniary condition, containing a material statement which is false, or who intentionally refuses or neglects to make or deliver a written report, exhibit, or statement required by law, is guilty of a Class 2 misdemeanor.
Source: SDC 1939, § 13.4309; SL 1983, ch 15, § 54.
47-30-10. Director's liability for failure to perform duties--Misdemeanor.
Any director of a corporation who intentionally does an act, as director, which is expressly forbidden by law, or intentionally omits to perform a duty expressly imposed upon him as director, by law, the punishment for which act or omission is not otherwise prescribed, is guilty of a Class 2 misdemeanor.
Source: SDC 1939, § 13.4315; SL 1983, ch 15, § 55.
47-30-11. Director deemed to possess knowledge.
Every director of a corporation is deemed to possess such a knowledge of the affairs of his corporation as to enable him to determine whether any act, proceeding, or omission of its directors, is a violation of this chapter.
Source: SDC 1939, § 13.4316.
47-30-12. Presence of director at meeting as concurrence--Written dissent--Procedure.
Every director of a corporation, who is present at a meeting of the directors at which any act, proceeding, or omission of such directors in violation of this chapter occurs, is deemed to have concurred therein, unless he at the time causes, or in writing requires, his dissent therefrom to be entered in the minutes of the directors, or if absent from such meeting and the record of such violation appears on the record or minutes of the board of directors and he remains a director for six months thereafter without causing, or in writing requiring his dissent from such violation to be entered in the minutes of the directors.
Source: SDC 1939, § 13.4316.
47-30-13. Definition of director.
The term "director," as used in this chapter, embraces any of the persons having by law the direction or management of the affairs of a corporation, by whatever name such persons are described in its charter, or known by law.
Source: SDC 1939, § 13.4316.
47-30-14. Foreign incorporation no defense.
It is no defense to a prosecution for a violation of the provisions of this chapter that the corporation was one created by the laws of another state, government, or country, if it was one carrying on business, or keeping an officer therefor, within this state.
Source: SDC 1939, § 13.4305.
47-31A-101 to 47-31A-420. Repealed.
47-31B-101
Short title.
47-31B-102
Definitions.
47-31B-103
References to federal statutes.
47-31B-104
References to federal agencies.
47-31B-105
Electronic records and signatures.
47-31B-101. Short title.
This chapter may be cited as the Uniform Securities Act of 2002.
Source: SL 2004, ch 278, § 1.
47-31B-102. Definitions.
In this chapter, unless the context otherwise requires:
(1) "Director," the director of insurance;
(2) "Agent," an individual, other than a broker-dealer, who represents a broker-dealer in effecting or attempting to effect purchases or sales of securities or represents an issuer in effecting or attempting to effect purchases or sales of the issuer's securities. But a partner, officer, or director of a broker-dealer or issuer, or an individual having a similar status or performing similar functions is an agent only if the individual otherwise comes within the term. The term does not include an individual excluded by rule adopted or order issued under this chapter;
(3) "Bank,":
(A) A banking institution organized under the laws of the United States;
(B) A member bank of the Federal Reserve System;
(C) Any other banking institution, whether incorporated or not, doing business under the laws of a state or of the United States, a substantial portion of the business of which consists of receiving deposits or exercising fiduciary powers similar to those permitted to be exercised by national banks under the authority of the comptroller of the currency pursuant to Section 1 of Public Law 87-722 (12 U.S.C. § 92a), and which is supervised and examined by a state or federal agency having supervision over banks, and which is not operated for the purpose of evading this chapter; and
(D) A receiver, conservator, or other liquidating agent of any institution or firm included in subparagraph (A), (B), or (C);
(4) "Broker-dealer," a person engaged in the business of effecting transactions in securities for the account of others or for the person's own account. The term does not include:
(A) An agent;
(B) An issuer;
(C) A bank or savings institution if its activities as broker-dealer are limited to those specified in subsection 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. § 78c(a)(4) and (5)), or a bank that satisfies the conditions specified in Section 3(a)(4)(E) of the Securities Exchange Act of 1934 (15 U.S.C. § 78c(a)(4));
(D) An international banking institution; or
(E) A person excluded by rule adopted or order issued under this chapter;
(5) "Depository institution,":
(A) A bank; or
(B) A savings institution, trust company, credit union, or similar institution that is organized or chartered under the laws of a state or of the United States, authorized to receive deposits, and supervised and examined by an official or agency of a state or the United States if its deposits or share accounts are insured to the maximum amount authorized by statute by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or a successor authorized by federal law. The term does not include:
(i) An insurance company or other organization primarily engaged in the business of insurance;
(ii) A Morris Plan bank; or
(iii) An industrial loan company;
(6) "Federal covered investment adviser," a person registered under the Investment Advisers Act of 1940;
(7) "Federal covered security," a security that is, or upon completion of a transaction will be, a covered security under Section 18(b) of the Securities Act of 1933 (15 U.S.C. § 77r(b)) or rules or regulations adopted pursuant to that provision;
(8) "Filing," the receipt under this chapter of a record by the director or a designee of the director;
(9) "Fraud," "deceit," and " defraud," are not limited to common law deceit;
(10) "Guaranteed," guaranteed as to payment of all principal and all interest;
(11) "Institutional investor," any of the following, whether acting for itself or for others in a fiduciary capacity:
(A) A depository institution or international banking institution;
(B) An insurance company;
(C) A separate account of an insurance company;
(D) An investment company as defined in the Investment Company Act of 1940;
(E) A broker-dealer registered under the Securities Exchange Act of 1934;
(F) An employee pension, profit-sharing, or benefit plan if the plan has total assets in excess of ten million dollars or its investment decisions are made by a named fiduciary, as defined in the Employee Retirement Income Security Act of 1974, that is a broker-dealer registered under the Securities Exchange Act of 1934, an investment adviser registered or exempt from registration under the Investment Advisers Act of 1940, an investment adviser registered under this chapter, a depository institution, or an insurance company;
(G) A plan established and maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or a political subdivision of a state for the benefit of its employees, if the plan has total assets in excess of ten million dollars or its investment decisions are made by a duly designated public official or by a named fiduciary, as defined in the Employee Retirement Income Security Act of 1974, that is a broker-dealer registered under the Securities Exchange Act of 1934, an investment adviser registered or exempt from registration under the Investment Advisers Act of 1940, an investment adviser registered under this chapter, a depository institution, or an insurance company;
(H) A trust, if it has total assets in excess of ten million dollars, its trustee is a depository institution, and its participants are exclusively plans of the types identified in subparagraph (F) or (G), regardless of the size of their assets, except a trust that includes as participants self-directed individual retirement accounts or similar self-directed plans;
(I) An organization described in Section 501(c)(3) of the Internal Revenue Code (26 U.S.C. § 501(c)(3)), corporation, Massachusetts trust or similar business trust, limited liability company, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of ten million dollars;
(J) A small business investment company licensed by the Small Business Administration under Section 301(c) of the Small Business Investment Act of 1958 (15 U.S.C. § 681(c)) with total assets in excess of ten million dollars;
(K) A private business development company as defined in Section 202(a) (22) of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-2(a)(22)) with total assets in excess of ten million dollars;
(L) A federal covered investment adviser acting for its own account;
(M) A qualified institutional buyer as defined in Rule 144A(a)(1), other than Rule 144A(a)(1)(i)(H), adopted under the Securities Act of 1933 (17 C.F.R. 230.144A);
(N) A major United State institutional investor as defined in Rule 15a-6(b)(4)(i) adopted under the Securities Exchange Act of 1934 (17 C.F.R. 240.15a-6);
(O) Any other person, other than an individual, of institutional character with total assets in excess of ten million dollars not organized for the specific purpose of evading this chapter; or
(P) Any other person specified by rule adopted or order issued under this chapter;
(12) "Insurance company," a company organized as an insurance company whose primary business is writing insurance or reinsuring risks underwritten by insurance companies and which is subject to supervision by the insurance commissioner or a similar official or agency of a state;
(13) "Insured," insured as to payment of all principal and all interest;
(14) "International banking institution," an international financial institution of which the United States is a member and whose securities are exempt from registration under the Securities Act of 1933;
(15) "Investment adviser," a person that, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities. The term includes a financial planner or other person that, as an integral component of other financially related services, provides investment advice to others for compensation as part of a business or that holds itself out as providing investment advice to others for compensation. The term does not include:
(A) An investment adviser representative;
(B) A lawyer, accountant, engineer, or teacher whose performance of investment advice is solely incidental to the practice of the person's profession;
(C) A broker-dealer or its agents whose performance of investment advice is solely incidental to the conduct of business as a broker-dealer and that does not receive special compensation for the investment advice;
(D) A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation;
(E) A federal covered investment adviser;
(F) A bank or savings institution;
(G) Any other person that is excluded by the Investment Advisers Act of 1940 from the definition of investment adviser; or
(H) Any other person excluded by rule adopted or order issued under this chapter;
(16) "Investment adviser representative," an individual employed by or associated with an investment adviser or federal covered investment adviser and who makes any recommendations or otherwise gives investment advice regarding securities, manages accounts or portfolios of clients, determines which recommendation or advice regarding securities should be given, provides investment advice or holds herself or himself out as providing investment advice, receives compensation to solicit, offer, or negotiate for the sale of or for selling investment advice, or supervises employees who perform any of the foregoing. The term does not include an individual who:
(A) Performs only clerical or ministerial acts;
(B) Is an agent whose performance of investment advice is solely incidental to the individual acting as an agent and who does not receive special compensation for investment advisory services;
(C) Is employed by or associated with a federal covered investment adviser, unless the individual has a place of business in this state as that term is defined by rule adopted under Section 203A of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-3a) and is:
(i) An investment adviser representative as that term is defined by rule adopted under Section 203A of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-3a); or
(ii) Not a supervised person as that term is defined in Section 202(a)(25) of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-2(a)(25)); or
(D) Is excluded by rule adopted or order issued under this chapter;
(17) "Issuer," a person that issues or proposes to issue a security, subject to the following:
(A) The issuer of a voting trust certificate, collateral trust certificate, certificate of deposit for a security, or share in an investment company without a board of directors or individuals performing similar functions is the person performing the acts and assuming the duties of depositor or manager pursuant to the trust or other agreement or instrument under which the security is issued;
(B) The issuer of an equipment trust certificate or similar security serving the same purpose is the person by which the property is or will be used or to which the property or equipment is or will be leased or conditionally sold or that is otherwise contractually responsible for assuring payment of the certificate;
(C) The issuer of a fractional undivided interest in an oil, gas, or other mineral lease or in payments out of production under a lease, right, or royalty is the owner of an interest in the lease or in payments out of production under a lease, right, or royalty, whether whole or fractional, that creates fractional interests for the purpose of sale;
(18) "Nonissuer transaction" or "nonissuer distribution," a transaction or distribution not directly or indirectly for the benefit of the issuer;
(19) "Offer to purchase," an attempt or offer to obtain, or solicitation of an offer to sell, a security or interest in a security for value. The term does not include a tender offer that is subject to Section 14(d) of the Securities Exchange Act of 1934 (15 U.S.C. § 78n(d));
(20) "Person," an individual; corporation; business trust; estate; trust; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity;
(21) "Place of business," of a broker-dealer, an investment adviser, or a federal covered investment adviser means:
(A) An office at which the broker-dealer, investment adviser, or federal covered investment adviser regularly provides brokerage or investment advice or solicits, meets with, or otherwise communicates with customers or clients; or
(B) Any other location that is held out to the general public as a location at which the broker-dealer, investment adviser, or federal covered investment adviser provides brokerage or investment advice or solicits, meets with, or otherwise communicates with customers or clients;
(22) "Predecessor act," chapter 47-31A;
(23) "Price amendment," the amendment to a registration statement filed under the Securities Act of 1933 or, if an amendment is not filed, the prospectus or prospectus supplement filed under the Securities Act of 1933 that includes a statement of the offering price, underwriting and selling discounts or commissions, amount of proceeds, conversion rates, call prices, and other matters dependent upon the offering price;
(24) "Principal place of business," of a broker-dealer or an investment adviser means the executive office of the broker-dealer or investment adviser from which the officers, partners, or managers of the broker-dealer or investment adviser direct, control, and coordinate the activities of the broker-dealer or investment adviser;
(25) "Record," except in the phrases "of record," "official record," and "public record," information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
(26) "Sale," includes every contract of sale, contract to sell, or disposition of, a security or interest in a security for value, and offer to sell includes every attempt or offer to dispose of, or solicitation of an offer to purchase, a security or interest in a security for value. Both terms include:
(A) A security given or delivered with, or as a bonus on account of, a purchase of securities or any other thing constituting part of the subject of the purchase and having been offered and sold for value;
(B) A gift of assessable stock involving an offer and sale; and
(C) A sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer and a sale or offer of a security that gives the holder a present or future right or privilege to convert the security into another security of the same or another issuer, including an offer of the other security;
(27) "Securities and Exchange Commission," the United States Securities and Exchange Commission;
(28) "Security," a note; stock; treasury stock; security future; bond; debenture; evidence of indebtedness; certificate of interest or participation in a profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; voting trust certificate; certificate of deposit for a security; fractional undivided interest in oil, gas, or other mineral rights; put, call, straddle, option, or privilege on a security, certificate of deposit, or group or index of securities, including an interest therein or based on the value thereof; put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; or, in general, an interest or instrument commonly known as a security; or a certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. The term:
(A) Includes both a certificated and an uncertificated security;
(B) Does not include an insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed sum of money either in a lump sum or periodically for life or other specified period;
(C) Does not include an interest in a contributory or noncontributory pension or welfare plan subject to the Employee Retirement Income Security Act of 1974;
(D) Includes as an investment contract an investment in a common enterprise with the expectation of profits to be derived primarily from the efforts of a person other than the investor and a common enterprise means an enterprise in which the fortunes of the investor are interwoven with those of either the person offering the investment, a third party, or other investors; and
(E) Includes as an investment contract, among other contracts, an interest in a limited partnership and a limited liability company and an investment in a viatical settlement or similar agreement;
(29) "Self-regulatory organization," a national securities exchange registered under the Securities Exchange Act of 1934, a national securities association of broker-dealers registered under the Securities Exchange Act of 1934, a clearing agency registered under the Securities Exchange Act of 1934, or the Municipal Securities Rule-making Board established under the Securities Exchange Act of 1934;
(30) "Sign," with present intent to authenticate or adopt a record:
(A) To execute or adopt a tangible symbol; or
(B) To attach or logically associate with the record an electronic symbol, sound, or process;
(31) "State," a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
Source: SL 2004, ch 278, § 2; SL 2018, ch 278, § 4.
47-31B-103. References to federal statutes.
Securities Act of 1933 (15 U.S.C. § 77a et seq.), Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.), Public Utility Holding Company Act of 1935 (15 U.S.C. § 79 et seq.), Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.), Investment Advisers Act of 1940 (15 U.S.C. § 80b-1 et seq.), Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1001 et seq.), National Housing Act (12 U.S.C. § 1701 et seq.), Commodity Exchange Act (7 U.S.C. § 1 et seq.), Internal Revenue Code (26 U.S.C. § 1 et seq. ), Securities Investor Protection Act of 1970 (15 U.S.C. § 78aaa et seq.), Securities Litigation Uniform Standards Act of 1998 (112 Stat. 3227), Small Business Investment Act of 1958 (15 U.S.C. § 661 et seq.), and Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7001 et seq.) mean those statutes and the rules and regulations adopted under those statutes, as in effect July 1, 2004, or as later amended.
Source: SL 2004, ch 278, § 3.
47-31B-104. References to federal agencies.
A reference in this chapter to an agency or department of the United States is also a reference to a successor agency or department.
Source: SL 2004, ch 278, § 4.
47-31B-105. Electronic records and signatures.
This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, but does not modify, limit, or supersede Section 101(c) of that act (15 U.S.C. § 7001(c)) or authorize electronic delivery of any of the notices described in Section 103(b) of that act (15 U.S.C. § 7003(b)). This chapter authorizes the filing of records and signatures, when specified by provisions of this chapter or by a rule adopted or order issued under this chapter, in a manner consistent with Section 104(a) of that act (15 U.S.C. § 7004(a)).
Source: SL 2004, ch 278, § 5.
47-31B-201. Exempt securities.
The following securities are exempt from the requirements of §§ 47-31B-301 through 47-31B-306 and 47-31B-504:
(1) A security, including a revenue obligation or a separate security as defined in Rule 131 (17 C.F.R. 230.131) adopted under the Securities Act of 1933, issued, insured, or guaranteed by the United States; by a state; by a political subdivision of a state; by a public authority, agency, or instrumentality of one or more states; by a political subdivision of one or more states; or by a person controlled or supervised by and acting as an instrumentality of the United States under authority granted by the Congress; or a certificate of deposit for any of the foregoing;
(2) A security issued, insured, or guaranteed by a foreign government with which the United States maintains diplomatic relations, or any of its political subdivisions, if the security is recognized as a valid obligation by the issuer, insurer, or guarantor;
(3) A security issued by and representing or that will represent an interest in or a direct obligation of, or be guaranteed by:
(A) An international banking institution;
(B) A banking institution organized under the laws of the United States; a member bank of the Federal Reserve System; or a depository institution a substantial portion of the business of which consists or will consist of receiving deposits or share accounts that are insured to the maximum amount authorized by statute by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or a successor authorized by federal law or exercising fiduciary powers that are similar to those permitted for national banks under the authority of the Comptroller of Currency pursuant to Section 1 of Public Law 87-722 (12 U.S.C. § 92a); or
(C) Any other depository institution, unless by rule or order the director proceeds under § 47-31B-204;
(4) A security issued by and representing an interest in, or a debt of, or insured or guaranteed by, an insurance company authorized to do business in this state;
(5) A security issued or guaranteed by a railroad, other common carrier, public utility, or public utility holding company that is:
(A) Regulated in respect to its rates and charges by the United States or a state;
(B) Regulated in respect to the issuance or guarantee of the security by the United States, a state, Canada, or a Canadian province or territory; or
(C) A public utility holding company registered under the Public Utility Holding Company Act of 1935 or a subsidiary of such a registered holding company within the meaning of that act;
(6) A federal covered security specified in Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. § 77r(b)(1)) or by rule adopted under that provision or a security listed or approved for listing on another securities market specified by rule under this chapter; a put or a call option contract; a warrant; a subscription right on or with respect to such securities; or an option or similar derivative security on a security or an index of securities or foreign currencies issued by a clearing agency registered under the Securities Exchange Act of 1934 and listed or designated for trading on a national securities exchange, a facility of a national securities exchange, or a facility of a national securities association registered under the Securities Exchange Act of 1934 or an offer or sale, of the underlying security in connection with the offer, sale, or exercise of an option or other security that was exempt when the option or other security was written or issued; or an option or a derivative security designated by the Securities and Exchange Commission under Section 9(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78i(b));
(7) A security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, social, athletic, or reformatory purposes, or as a chamber of commerce, and not for pecuniary profit, no part of the net earnings of which inures to the benefit of a private stockholder or other person, or a security of a company that is excluded from the definition of an investment company under Section 3(c)(10)(B) of the Investment Company Act of 1940 (15 U.S.C. § 80a-3(c)(10)(B)); except that with respect to the offer or sale of a note, bond, debenture, or other evidence of indebtedness issued by such a person, a rule may be adopted under this chapter limiting the availability of this exemption by classifying securities, persons, and transactions, imposing different requirements for different classes, specifying with respect to paragraph (B) the scope of the exemption and the grounds for denial or suspension, and requiring an issuer:
(A) To file a notice specifying the material terms of the proposed offer or sale and copies of any proposed sales and advertising literature to be used and provide that the exemption becomes effective if the director does not disallow the exemption within the period established by the rule;
(B) To file a request for exemption authorization for which a rule under this chapter may specify the scope of the exemption, the requirement of an offering statement, the filing of sales and advertising literature, the filing of consent to service of process complying with § 47-31B-611, and grounds for denial or suspension of the exemption; or
(C) To register under § 47-31B-304;
(8) Any securities of any cooperative corporation organized in good faith and qualified to do business as a cooperative under chapter 47-15 or chapter 47-21 and sold only to members of such cooperative corporations for the purpose of conducting under the cooperative plan among its stockholders any or all of the following businesses:
(A) Any agricultural, dairy, livestock, or produce business;
(B) The business of selling, marketing, or otherwise handling any agricultural, dairy, or livestock products, or other produce raised or produced by the stockholders of such corporation or by any cooperative corporation;
(C) The manufacture of any products from handling any agricultural, dairy, or livestock products, or other produce by the members of such corporations;
(D) The funding of economic development projects in South Dakota;
(E) The operation of a rural telephone among its stockholders;
(F) Any business incidental to any of the above purposes; and
(G) A member's or owner's interest in, or a retention certificate or like security given in lieu of a cash patronage dividend issued by, a cooperative organized and operated as a nonprofit membership cooperative under the cooperative laws of a state, but not a member's or owner's interest, retention certificate, or like security sold to persons other than bona fide members of the cooperative; and
(9) An equipment trust certificate with respect to equipment leased or conditionally sold to a person, if any security issued by the person would be exempt under this section or would be a federal covered security under Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. § 77r(b)(1)).
Source: SL 2004, ch 278, § 6.
47-31B-202. Exempt transactions.
The following transactions are exempt from the requirements of §§ 47-31B-301 through 47-31B-306 and 47-31B-504:
(1) An isolated nonissuer transaction, whether effected by or through a broker-dealer or not;
(2) A nonissuer transaction by or through a broker-dealer registered, or exempt from registration under this chapter, and a resale transaction by a sponsor of a unit investment trust registered under the Investment Company Act of 1940, in a security of a class that has been outstanding in the hands of the public for at least ninety days, if, at the date of the transaction:
(A) The issuer of the security is engaged in business, the issuer is not in the organizational stage or in bankruptcy or receivership, and the issuer is not a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person;
(B) The security is sold at a price reasonably related to its current market price;
(C) The security does not constitute the whole or part of an unsold allotment to, or a subscription or participation by, the broker-dealer as an underwriter of the security or a redistribution;
(D) A nationally recognized securities manual or its electronic equivalent designated by rule adopted or order issued under this chapter or a record filed with the Securities and Exchange Commission that is publicly available contains:
(i) A description of the business and operations of the issuer;
(ii) The names of the issuer's executive officers and the names of the issuer's directors, if any;
(iii) An audited balance sheet of the issuer as of a date within eighteen months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had an audited balance sheet, a pro forma balance sheet for the combined organization; and
(iv) An audited income statement for each of the issuer's two immediately previous fiscal years or for the period of existence of the issuer, whichever is shorter, or, in the case of a reorganization or merger when each party to the reorganization or merger had audited income statements, a pro forma income statement; and
(E) Any one of the following requirements is met:
(i) The issuer of the security has a class of equity securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934 or designated for trading on the National Association of Securities Dealers Automated Quotation System;
(ii) The issuer of the security is a unit investment trust registered under the Investment Company Act of 1940;
(iii) The issuer of the security, including its predecessors, has been engaged in continuous business for at least three years; or
(iv) The issuer of the security has total assets of at least two million dollars based on an audited balance sheet as of a date within eighteen months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had such an audited balance sheet, a pro forma balance sheet for the combined organization;
(3) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security of a foreign issuer that is a margin security defined in regulations or rules adopted by the Board of Governors of the Federal Reserve System;
(4) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in an outstanding security if the guarantor of the security files reports with the Securities and Exchange Commission under the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. § 78m or 78o(d));
(5) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security that:
(A) Is rated at the time of the transaction by a nationally recognized statistical rating organization in one of its four highest rating categories; or
(B) Has a fixed maturity or a fixed interest or dividend, if:
(i) A default has not occurred during the current fiscal year or within the three previous fiscal years or during the existence of the issuer and any predecessor if less than three fiscal years, in the payment of principal, interest, or dividends on the security; and
(ii) The issuer is engaged in business, is not in the organizational stage or in bankruptcy or receivership, and is not and has not been within the previous twelve months a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person;
(6) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter effecting an unsolicited order or offer to purchase;
(7) A nonissuer transaction executed by a bona fide pledgee without the purpose of evading this chapter;
(8) A nonissuer transaction by a federal covered investment adviser with investments under management in excess of one hundred million dollars acting in the exercise of discretionary authority in a signed record for the account of others;
(9) A transaction in a security, whether or not the security or transaction is otherwise exempt, in exchange for one or more bona fide outstanding securities, claims, or property interests, or partly in such exchange and partly for cash, if the terms and conditions of the issuance and exchange or the delivery and exchange and the fairness of the terms and conditions have been approved by the director after a hearing;
(10) A transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters;
(11) A transaction in a note, bond, debenture, or other evidence of indebtedness secured by a mortgage or other security agreement if:
(A) The note, bond, debenture, or other evidence of indebtedness is offered and sold with the mortgage or other security agreement as a unit;
(B) A general solicitation or general advertisement of the transaction is not made; and
(C) A commission or other remuneration is not paid or given, directly or indirectly, to a person not registered under this chapter as a broker-dealer or as an agent;
(12) A transaction by an executor, administrator of an estate, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator;
(13) A sale or offer to sell to:
(A) An institutional investor;
(B) A federal covered investment adviser; or
(C) Any other person exempted by rule adopted or order issued under this chapter;
(14) A sale or an offer to sell securities of an issuer, if the transaction is part of a single issue in which:
(A) Not more than twenty-five purchasers are present in this state during any twelve consecutive months, other than those designated in paragraph (13);
(B) A general solicitation or general advertising is not made in connection with the offer to sell or sale of the securities;
(C) A commission or other remuneration is not paid or given, directly or indirectly, to a person other than a broker-dealer registered under this chapter or an agent registered under this chapter for soliciting a prospective purchaser in this state; and
(D) The issuer reasonably believes that all the purchasers in this state, other than those designated in paragraph (13), are purchasing for investment;
(15) A transaction under an offer to existing security holders of the issuer, including persons that at the date of the transaction are holders of convertible securities, options, or warrants, if a commission or other remuneration, other than a standby commission, is not paid or given, directly or indirectly, for soliciting a security holder in this state;
(16) An offer to sell, but not a sale, of a security not exempt from registration under the Securities Act of 1933 if:
(A) A registration or offering statement or similar record as required under the Securities Act of 1933 has been filed, but is not effective, or the offer is made in compliance with Rule 165 adopted under the Securities Act of 1933 (17 C.F.R. 230.165); and
(B) A stop order of which the offeror is aware has not been issued against the offeror by the director or the Securities and Exchange Commission, and an audit, inspection, or proceeding that is public and that may culminate in a stop order is not known by the offeror to be pending;
(17) An offer to sell, but not a sale, of a security exempt from registration under the Securities Act of 1933 if:
(A) A registration statement has been filed under this chapter, but is not effective;
(B) A solicitation of interest is provided in a record to offerees in compliance with a rule adopted by the director under this chapter; and
(C) A stop order of which the offeror is aware has not been issued by the director under this chapter and an audit, inspection, or proceeding that may culminate in a stop order is not known by the offeror to be pending;
(18) A transaction involving the distribution of the securities of an issuer to the security holders of another person in connection with a merger, consolidation, exchange of securities, sale of assets, or other reorganization to which the issuer, or its parent or subsidiary and the other person, or its parent or subsidiary, are parties;
(19) A rescission offer, sale, or purchase under § 47-31B-510;
(20) An offer or sale of a security to a person not a resident of this state and not present in this state if the offer or sale does not constitute a violation of the laws of the state or foreign jurisdiction in which the offeree or purchaser is present and is not part of an unlawful plan or scheme to evade this chapter;
(21) Employees' stock purchase, savings, option, profit-sharing, pension, or similar employees' benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majority-owned subsidiaries, or the majority-owned subsidiaries of the issuer's parent for the participation of their employees including offers or sales of such securities to:
(A) Directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisors;
(B) Family members who acquire such securities from those persons through gifts or domestic relations orders;
(C) Former employees, directors, general partners, trustees, officers, consultants, and advisors if those individuals were employed by or providing services to the issuer when the securities were offered; and
(D) Insurance agents who are exclusive insurance agents of the issuer, or the issuer's subsidiaries or parents, or who derive more than fifty percent of their annual income from those organizations;
(22) A transaction involving:
(A) A stock dividend or equivalent equity distribution, whether the corporation or other business organization distributing the dividend or equivalent equity distribution is the issuer or not, if nothing of value is given by stockholders or other equity holders for the dividend or equivalent equity distribution other than the surrender of a right to a cash or property dividend if each stockholder or other equity holder may elect to take the dividend or equivalent equity distribution in cash, property, or stock;
(B) An act incident to a judicially approved reorganization in which a security issued in exchange for one or more outstanding securities, claims, or property interests, or partly in such exchange and partly for cash; or
(C) The solicitation of tenders of securities by an offeror in a tender offer in compliance with Rule 162 adopted under the Securities Act of 1933 (17 C.F.R. 230.162); or
(23) A nonissuer transaction in an outstanding security by or through a broker-dealer registered or exempt from registration under this chapter, if the issuer is a reporting issuer in a foreign jurisdiction designated by this paragraph or by rule adopted or order issued under this chapter; has been subject to continuous reporting requirements in the foreign jurisdiction for not less than one hundred eighty days before the transaction; and the security is listed on the foreign jurisdiction's securities exchange that has been designated by this paragraph or by rule adopted or order issued under this chapter, or is a security of the same issuer that is of senior or substantially equal rank to the listed security or is a warrant or right to purchase or subscribe to any of the foregoing. For purposes of this paragraph, Canada, together with its provinces and territories, is a designated foreign jurisdiction and The Toronto Stock Exchange, Inc., is a designated securities exchange. After an administrative hearing in compliance with chapter 1-26, the director, by rule adopted or order issued under this chapter, may revoke the designation of a securities exchange under this paragraph, if the director finds that revocation is necessary or appropriate in the public interest and for the protection of investors.
Source: SL 2004, ch 278, § 7.
47-31B-203. Additional exemptions and waivers.
A rule adopted or order issued under this chapter may exempt a security, transaction, or offer; a rule under this chapter may exempt a class of securities, transactions, or offers from any or all of the requirements of §§ 47-31B-301 through 47-31B-306 and 47-31B-504; and an order under this chapter may waive, in whole or in part, any or all of the conditions for an exemption or offer under §§ 47-31B-201 and 47-31B-202. A filing required by rules adopted pursuant to this section shall include a fee of two hundred dollars, unless a fee is otherwise identified in this chapter.
Source: SL 2004, ch 278, § 8.
47-31B-204. Denial, suspension, revocation, condition, or limitation of exemptions.
(a) Enforcement related powers. Except with respect to a federal covered security or a transaction involving a federal covered security, an order under this chapter may deny, suspend application of, condition, limit, or revoke an exemption created under § 47-31B-201(3)(C), (7), or (8) or 47-31B-202 or an exemption or waiver created under § 47-31B-203 with respect to a specific security, transaction, or offer. An order under this section may be issued only pursuant to the procedures in § 47-31B-306(d) or 47-31B-604 and only prospectively.
(b) Knowledge of order required. A person does not violate § 47-31B-301, 47-31B-303 through 47-31B-306, 47-31B-504, or 47-31B-510 by an offer to sell, offer to purchase, sale, or purchase effected after the entry of an order issued under this section if the person did not know, and in the exercise of reasonable care could not have known, of the order.
Source: SL 2004, ch 278, § 9.
47-31B-301. Securities registration requirement.
It is unlawful for a person to offer or sell a security in this state unless:
(1) The security is a federal covered security;
(2) The security, transaction, or offer is exempted from registration under §§ 47-31B-201 through 47-31B-203; or
(3) The security is registered under this chapter.
Source: SL 2004, ch 278, § 10.
47-31B-302. Notice filing.
(a) Required filing of records. With respect to a federal covered security, as defined in Section 18(b)(2) of the Securities Act of 1933 (15 U.S.C. § 77r(b)(2)), that is not otherwise exempt under §§ 47-31B-201 through 47-31B-203, a rule adopted or order issued under this chapter may require the filing of any or all of the following records:
(1) Before the initial offer of a federal covered security in this state, all records that are part of a federal registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933 and a consent to service of process complying with § 47-31B-611 signed by the issuer and the payment of a filing fee of one thousand dollars for open-end management companies with total net assets of less than two hundred fifty million dollars, or a filing fee of two thousand dollars for open-end management companies with total net assets equal to or greater than two hundred fifty million dollars; two hundred fifty dollars for any closed end management company; or a filing fee of one hundred fifty dollars for any unit investment trust. A renewal filing is required annually, including those documents that the director by rule or order may require and a fee as provided in this subparagraph a(1). An initial or renewal filing includes a separate fee for each portfolio, series, class, or other designation. An initial or renewal filing shall include the most recent financial statement showing the nets assets of each portfolio, series, class, or other designation, unless the maximum fee of two thousand dollars is paid.
(2) After the initial offer of the federal covered security in this state, all records that are part of an amendment to a federal registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933. Any amendment that includes a name change to any filing, including any portfolio, series, class, or other designation, must include a fifty dollar filing fee for each name change of each portfolio, series, class, or other designation.
(b) Notice filing effectiveness and renewal. A notice filing under subsection (a) is effective for one year commencing on the later of the notice filing or the effectiveness of the offering filed with the Securities and Exchange Commission. On or before expiration, the issuer may renew a notice filing by filing a copy of those records filed by the issuer with the Securities and Exchange Commission that are required by rule or order under this chapter to be filed and by paying a renewal fee as set forth in subsection a(1). A previously filed consent to service of process complying with § 47-31B-611 may be incorporated by reference in a renewal. A renewed notice filing becomes effective upon the expiration of the filing being renewed.
(c) Notice filings for federal covered securities under Section 18(b)(4)(E). With respect to a security that is a federal covered security under Section 18(b)(4)(E) of the Securities Act of 1933 (15 U.S.C. § 77r(b)(4)(E)), a rule under this chapter may require a notice filing by or on behalf of an issuer to include a copy of Form D, including the Appendix, as promulgated by the Securities and Exchange Commission, and a consent to service of process complying with § 47-31B-611 signed by the issuer not later than fifteen days after the first sale of the federal covered security in this state and the payment of a fee of two hundred fifty dollars; and the payment of a fee of two hundred seventy-five dollars for any late filing.
(d) Stop orders. Except with respect to a federal security under Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. § 77r(b)(1)), if the director finds that there is a failure to comply with a notice or fee requirement of this section, the director may issue a stop order suspending the offer and sale of a federal covered security in this state. If the deficiency is corrected, the stop order is void as of the time of its issuance and no penalty may be imposed by the director.
(e) Notice filings for other federal covered securities. Unless the director provides otherwise by rule, any other federal covered security may be offered and sold in this state in reliance on it being a federal covered security without the filing of a notice or the payment of a fee. A rule adopted under this chapter may require a notice filing with respect to other federal covered securities by or on behalf of an issuer and the payment of a fee of two hundred fifty dollars and the payment of a fee of two hundred seventy-five dollars for any late filing.
Source: SL 2004, ch 278, § 11; SL 2016, ch 222, § 1; SL 2017, ch 195, § 1.
47-31B-303. Securities registration by coordination.
(a) Registration permitted. A security for which a registration statement has been filed under the Securities Act of 1933 in connection with the same offering may be registered by coordination under this section.
(b) Required records. A registration statement and accompanying records under this section must contain or be accompanied by the following records in addition to the information specified in § 47-31B-305 and a consent to service of process complying with § 47-31B-611:
(1) A copy of the latest form of prospectus filed under the Securities Act of 1933;
(2) A copy of the articles of incorporation and bylaws or their substantial equivalents currently in effect; a copy of any agreement with or among underwriters; a copy of any indenture or other instrument governing the issuance of the security to be registered; and a specimen, copy, or description of the security that is required by rule adopted or order issued under this chapter;
(3) Copies of any other information or any other records filed by the issuer under the Securities Act of 1933 requested by the director; and
(4) An undertaking to forward each amendment to the federal prospectus, other than an amendment that delays the effective date of the registration statement, promptly after it is filed with the Securities and Exchange Commission.
(c) Conditions for effectiveness of registration statement. A registration statement under this section becomes effective simultaneously with or subsequent to the federal registration statement when all the following conditions are satisfied:
(1) A stop order under subsection (d) or § 47-31B-306 or issued by the Securities and Exchange Commission is not in effect and a proceeding is not pending against the issuer under § 47-31B-306; and
(2) The registration statement has been on file for at least twenty days or a shorter period provided by rule adopted or order issued under this chapter.
(d) Notice of federal registration statement effectiveness. The registrant shall promptly notify the director in a record of the date when the federal registration statement becomes effective and the content of any price amendment and shall promptly file a record containing the price amendment. If the notice is not timely received, the director may issue a stop order, without prior notice or hearing, retroactively denying effectiveness to the registration statement or suspending its effectiveness until compliance with this section. The director shall promptly notify the registrant of an order by telegram, telephone, or electronic means and promptly confirm this notice by a record. If the registrant subsequently complies with the notice requirements of this section, the stop order is void as of the date of its issuance.
(e) Effectiveness of registration statement. If the federal registration statement becomes effective before each of the conditions in this section is satisfied or is waived by the director, the registration statement is automatically effective under this chapter when all the conditions are satisfied or waived. If the registrant notifies the director of the date when the federal registration statement is expected to become effective, the director shall promptly notify the registrant by telegram, telephone, or electronic means and promptly confirm this notice by a record, indicating whether all the conditions are satisfied or waived and whether the director intends the institution of a proceeding under § 47-31B-306. The notice by the director does not preclude the institution of such a proceeding.
Source: SL 2004, ch 278, § 12.
47-31B-304. Securities registration by qualification.
(a) Registration permitted. A security may be registered by qualification under this section.
(b) Required records. A registration statement under this section must contain the information or records specified in § 47-31B-305, a consent to service of process complying with § 47-31B-611, and, if required by rule adopted under this chapter, the following information or records:
(1) With respect to the issuer and any significant subsidiary, its name, address, and form of organization; the state or foreign jurisdiction and date of its organization; the general character and location of its business; a description of its physical properties and equipment; and a statement of the general competitive conditions in the industry or business in which it is or will be engaged;
(2) With respect to each director and officer of the issuer, and other person having a similar status or performing similar functions, the person's name, address, and principal occupation for the previous five years; the amount of securities of the issuer held by the person as of the thirtieth day before the filing of the registration statement; the amount of the securities covered by the registration statement to which the person has indicated an intention to subscribe; and a description of any material interest of the person in any material transaction with the issuer or a significant subsidiary effected within the previous three years or proposed to be effected;
(3) With respect to persons covered by paragraph (2), the aggregate sum of the remuneration paid to those persons during the previous twelve months and estimated to be paid during the next twelve months, directly or indirectly, by the issuer, and all predecessors, parents, subsidiaries, and affiliates of the issuer;
(4) With respect to a person owning of record or owning beneficially, if known, ten percent or more of the outstanding shares of any class of equity security of the issuer, the information specified in paragraph (2) other than the person's occupation;
(5) With respect to a promoter, if the issuer was organized within the previous three years, the information or records specified in paragraph (2), any amount paid to the promoter within that period or intended to be paid to the promoter, and the consideration for the payment;
(6) With respect to a person on whose behalf any part of the offering is to be made in a nonissuer distribution, the person's name and address; the amount of securities of the issuer held by the person as of the date of the filing of the registration statement; a description of any material interest of the person in any material transaction with the issuer or any significant subsidiary effected within the previous three years or proposed to be effected; and a statement of the reasons for making the offering;
(7) The capitalization and long term debt, on both a current and pro forma basis, of the issuer and any significant subsidiary, including a description of each security outstanding or being registered or otherwise offered, and a statement of the amount and kind of consideration, whether in the form of cash, physical assets, services, patents, goodwill, or anything else of value, for which the issuer or any subsidiary has issued its securities within the previous two years or is obligated to issue its securities;
(8) The kind and amount of securities to be offered; the proposed offering price or the method by which it is to be computed; any variation at which a proportion of the offering is to be made to a person or class of persons other than the underwriters, with a specification of the person or class; the basis on which the offering is to be made if otherwise than for cash; the estimated aggregate underwriting and selling discounts or commissions and finders' fees, including separately cash, securities, contracts, or anything else of value to accrue to the underwriters or finders in connection with the offering or, if the selling discounts or commissions are variable, the basis of determining them and their maximum and minimum amounts; the estimated amounts of other selling expenses, including legal, engineering, and accounting charges; the name and address of each underwriter and each recipient of a finder's fee; a copy of any underwriting or selling group agreement under which the distribution is to be made or the proposed form of any such agreement whose terms have not yet been determined; and a description of the plan of distribution of any securities that are to be offered otherwise than through an underwriter;
(9) The estimated monetary proceeds to be received by the issuer from the offering; the purposes for which the proceeds are to be used by the issuer; the estimated amount to be used for each purpose; the order or priority in which the proceeds will be used for the purposes stated; the amounts of any funds to be raised from other sources to achieve the purposes stated; the sources of the funds; and, if a part of the proceeds is to be used to acquire property, including goodwill, otherwise than in the ordinary course of business, the names and addresses of the vendors, the purchase price, the names of any persons that have received commissions in connection with the acquisition, and the amounts of the commissions and other expenses in connection with the acquisition, including the cost of borrowing money to finance the acquisition;
(10) A description of any stock options or other security options outstanding, or to be created in connection with the offering, and the amount of those options held or to be held by each person required to be named in paragraph (2), (4), (5), (6), or (8) and by any person that holds or will hold ten percent or more in the aggregate of those options;
(11) The dates of, parties to, and general effect concisely stated of each managerial or other material contract made or to be made otherwise than in the ordinary course of business to be performed in whole or in part at or after the filing of the registration statement or that was made within the previous two years, and a copy of the contract;
(12) A description of any pending litigation, action, or proceeding to which the issuer is a party and that materially affects its business or assets, and any litigation, action, or proceeding known to be contemplated by governmental authorities;
(13) A copy of any prospectus, pamphlet, circular, form letter, advertisement, or other sales literature intended as of the effective date to be used in connection with the offering and any solicitation of interest used in compliance with § 47-31B-202(17)(B);
(14) A specimen or copy of the security being registered, unless the security is uncertificated; a copy of the issuer's articles of incorporation and bylaws or their substantial equivalents, in effect; and a copy of any indenture or other instrument covering the security to be registered;
(15) A signed or conformed copy of an opinion of counsel concerning the legality of the security being registered, with an English translation if it is in a language other than English, which states whether the security when sold will be validly issued, fully paid, and nonassessable and, if a debt security, a binding obligation of the issuer;
(16) A signed or conformed copy of a consent of any accountant, engineer, appraiser, or other person whose profession gives authority for a statement made by the person, if the person is named as having prepared or certified a report or valuation, other than an official record, that is public, which is used in connection with the registration statement;
(17) A balance sheet of the issuer as of a date within four months before the filing of the registration statement; a statement of income and a statement of cash flows for each of the three fiscal years preceding the date of the balance sheet and for any period between the close of the immediately previous fiscal year and the date of the balance sheet, or for the period of the issuer's and any predecessor's existence if less than three years; and, if any part of the proceeds of the offering is to be applied to the purchase of a business, the financial statements that would be required if that business were the registrant; and
(18) Any additional information or records required by rule adopted or order issued under this chapter.
(c) Conditions for effectiveness of registration statement. A registration statement under this section becomes effective thirty days, or any shorter period provided by rule adopted or order issued under this chapter, after the date the registration statement or the last amendment other than a price amendment is filed, if:
(1) A stop order is not in effect and a proceeding is not pending under § 47-31B-306;
(2) The director has not issued an order under § 47-31B-306 delaying effectiveness; and
(3) The applicant or registrant has not requested that effectiveness be delayed.
(d) Delay of effectiveness of registration statement. The director may delay effectiveness once for not more than ninety days if the director determines the registration statement is not complete in all material respects and promptly notifies the applicant or registrant of that determination. The director may also delay effectiveness for a further period of not more than thirty days if the director determines that the delay is necessary or appropriate.
(e) Prospectus distribution may be required. A rule adopted or order issued under this chapter may require as a condition of registration under this section that a prospectus containing a specified part of the information or record specified in subsection (b) be sent or given to each person to which an offer is made, before or concurrently, with the earliest of:
(1) The first offer made in a record to the person otherwise than by means of a public advertisement, by or for the account of the issuer or another person on whose behalf the offering is being made or by an underwriter or broker-dealer that is offering part of an unsold allotment or subscription taken by the person as a participant in the distribution;
(2) The confirmation of a sale made by or for the account of the person;
(3) Payment pursuant to such a sale; or
(4) Delivery of the security pursuant to such a sale.
Source: SL 2004, ch 278, § 13.
47-31B-305. Securities registration filings.
(a) Who may file. A registration statement may be filed by the issuer, a person on whose behalf the offering is to be made, or a broker-dealer registered under this chapter.
(b) Filing fee. A person filing a registration statement shall pay a filing fee as follows: On the first five hundred thousand dollars of the total proposed sale price of the securities covered by such registration, the sum of one dollar per thousand dollars. All registrations over five hundred thousand dollars, the sum of five hundred dollars, plus seventy-five cents per thousand dollars of excess over five hundred thousand dollars. The minimum fee is one hundred dollars. The maximum fee is two thousand dollars. If a registration statement is withdrawn before the effective date or a pre-effective stop order is issued under § 47-31B-306, the director shall retain the minimum fee of one hundred dollars.
(c) Status of offering. A registration statement filed under § 47-31B-303 or 47-31B-304 must specify:
(1) The amount of securities to be offered in this state;
(2) The states in which a registration statement or similar record in connection with the offering has been or is to be filed; and
(3) Any adverse order, judgment, or decree issued in connection with the offering by a state securities regulator, the Securities and Exchange Commission, or a court.
(d) Incorporation by reference. A record filed under this chapter or the predecessor act within five years preceding the filing of a registration statement may be incorporated by reference in the registration statement to the extent that the record is currently accurate.
(e) Nonissuer distribution. In the case of a nonissuer distribution, information or a record may not be required under subsection (h) or § 47-31B-304, unless it is known to the person filing the registration statement or to the person on whose behalf the distribution is to be made or unless it can be furnished by those persons without unreasonable effort or expense.
(f) Form of subscription. A rule adopted or order issued under this chapter may require as a condition of registration that a security registered under this chapter be sold only on a specified form of subscription or sale contract and that a signed or conformed copy of each contract be filed under this chapter or preserved for a period specified by the rule or order, which may not be longer than five years.
(g) Effective period. Except while a stop order is in effect under § 47-31B-306, a registration statement is effective for one year after its effective date, or for any longer period designated in an order under this chapter during which the security is being offered or distributed in a nonexempted transaction by or for the account of the issuer or other person on whose behalf the offering is being made or by an underwriter or broker- dealer that is still offering part of an unsold allotment or subscription taken as a participant in the distribution. For the purposes of a nonissuer transaction, all outstanding securities of the same class identified in the registration statement as a security registered under this chapter are considered to be registered while the registration statement is effective. If any securities of the same class are outstanding, a registration statement may not be withdrawn until one year after its effective date. A registration statement may be withdrawn only with the approval of the director. A fee of one hundred dollars is required for any extension of registration.
(h) Periodic reports. While a registration statement is effective, a rule adopted or order issued under this chapter may require the person that filed the registration statement to file reports, not more often than quarterly, to keep the information or other record in the registration statement reasonably current and to disclose the progress of the offering. The only fee required for filing a report under this subsection (h) is for the annual report. The annual report fee is twenty-five dollars.
(i) Post-effective amendments. A registration statement may be amended after its effective date. The post-effective amendment becomes effective when the director so orders. If a post- effective amendment is made to increase the number of securities specified to be offered or sold, the person filing the amendment shall pay a late registration fee of twenty five dollars and a filing fee, calculated in the manner specified in subsection (b). A post-effective amendment relates back to the date of the offering of the additional securities being registered if, within one year after the date of the sale, the amendment is filed and the additional registration fee is paid.
Source: SL 2004, ch 278, § 14.
47-31B-306. Denial, suspension, and revocation of securities registration.
(a) Stop orders. The director may issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of, a registration statement if the director finds that the order is in the public interest and that:
(1) The registration statement as of its effective date or before the effective date in the case of an order denying effectiveness, an amendment under § 47-31B-305(i) as of its effective date, or a report under § 47-31B-305(h), is incomplete in a material respect or contains a statement that, in the light of the circumstances under which it was made, was false or misleading with respect to a material fact;
(2) This chapter or a rule adopted or order issued under this chapter or a condition imposed under this chapter has been willfully violated, in connection with the offering, by the person filing the registration statement; by the issuer, a partner, officer, or director of the issuer or a person having a similar status or performing a similar function; a promoter of the issuer; or a person directly or indirectly controlling or controlled by the issuer; but only if the person filing the registration statement is directly or indirectly controlled by or acting for the issuer; or by an underwriter;
(3) The security registered or sought to be registered is the subject of a permanent or temporary injunction of a court of competent jurisdiction or an administrative stop order or similar order issued under any federal, foreign, or state law other than this chapter applicable to the offering, but the director may not institute a proceeding against an effective registration statement under this paragraph more than one year after the date of the order or injunction on which it is based, and the director may not issue an order under this paragraph on the basis of an order or injunction issued under the securities act of another state unless the order or injunction was based on conduct that would constitute, as of the date of the order, a ground for a stop order under this section;
(4) The issuer's enterprise or method of business includes or would include activities that are unlawful where performed;
(5) With respect to a security sought to be registered under § 47-31B-303, there has been a failure to comply with the undertaking required by § 47-31B-303(b)(4); or
(6) The applicant or registrant has not paid the filing fee, but the director shall void the order if the deficiency is corrected.
(b) Institution of stop order. The director may not institute a stop order proceeding against an effective registration statement on the basis of conduct or a transaction known to the director when the registration statement became effective unless the proceeding is instituted within thirty days after the registration statement became effective.
(c) Summary process. The director may summarily revoke, deny, postpone, or suspend the effectiveness of a registration statement pending final determination of an administrative proceeding. Upon the issuance of the order, the director shall promptly notify each person specified in subsection (d) that the order has been issued, the reasons for the revocation, denial, postponement, or suspension, and that within fifteen days after the receipt of a request in a record from the person the matter will be scheduled for a hearing. If a hearing is not requested and none is ordered by the director, within thirty days after the date of service of the order, the order becomes final. If a hearing is requested or ordered, the director, after notice of and opportunity for hearing for each person subject to the order, may modify or vacate the order or extend the order until final determination.
(d) Procedural requirements for stop order. A stop order may not be issued under this section without:
(1) Appropriate notice to the applicant or registrant, the issuer, and the person on whose behalf the securities are to be or have been offered;
(2) An opportunity for hearing; and
(3) Findings of fact and conclusions of law in a record in accordance with chapter 1-26.
(e) Modification or vacation of stop order. The director may modify or vacate a stop order issued under this section if the director finds that the conditions that caused its issuance have changed or that it is necessary or appropriate in the public interest or for the protection of investors.
Source: SL 2004, ch 278, § 15.
47-31B-307. Waiver and modification.
The director may waive or modify, in whole or in part, any or all of the requirements of §§ 47-31B-302, 47-31B-303, and 47-31B-304(b) or the requirement of any information or record in a registration statement or in a periodic report filed pursuant to § 47-31B-305(h).
Source: SL 2004, ch 278, § 16.
47-31B-401. Broker-dealer registration requirement and exemptions.
(a) Registration requirement. It is unlawful for a person to transact business in this state as a broker-dealer unless the person is registered under this chapter as a broker-dealer or is exempt from registration as a broker-dealer under subsection (b) or (d).
(b) Exemptions from registration. The following persons are exempt from the registration requirement of subsection (a):
(1) A broker-dealer without a place of business in this state if its only transactions effected in this state are with:
(A) The issuer of the securities involved in the transactions;
(B) A broker-dealer registered as a broker-dealer under this chapter or not required to be registered as a broker-dealer under this chapter;
(C) An institutional investor;
(D) A nonaffiliated federal covered investment adviser with investments under management in excess of one hundred million dollars acting for the account of others pursuant to discretionary authority in a signed record;
(E) A bona fide preexisting customer whose principal place of residence is not in this state and the person is registered as a broker-dealer under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the state in which the customer maintains a principal place of residence;
(F) A bona fide preexisting customer whose principal place of residence is in this state but was not present in this state when the customer relationship was established, if:
(i) The broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities laws of the state in which the customer relationship was established and where the customer had maintained a principal place of residence; and
(ii) Within forty-five days after the customer's first transaction in this state, the person files an application for registration as a broker-dealer in this state and a further transaction is not effected more than seventy-five days after the date on which the application is filed, or, if earlier, the date on which the director notifies the person that the director has denied the application for registration or has stayed the pendency of the application for good cause;
(G) Not more than three customers in this state during the previous twelve months, in addition to those customers specified in subparagraphs (A) through (F) and under subparagraph (H), if the broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the state in which the broker-dealer has its principal place of business; and
(H) Any other person exempted by rule adopted or order issued under this chapter; and
(2) A person that deals solely in United States government securities and is supervised as a dealer in government securities by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the Office of Thrift Supervision.
(c) Limits on employment or association. It is unlawful for a broker- dealer, or for an issuer engaged in offering, offering to purchase, purchasing, or selling securities in this state, directly or indirectly, to employ or associate with an individual to engage in an activity related to securities transactions in this state if the registration of the individual is suspended or revoked or the individual is barred from employment or association with a broker-dealer, an issuer, an investment adviser, or a federal covered investment adviser by an order of the director under this chapter, the Securities and Exchange Commission, or a self-regulatory organization. A broker-dealer or issuer does not violate this subsection if the broker-dealer or issuer did not know and in the exercise of reasonable care could not have known, of the suspension, revocation, or bar. Upon request from a broker-dealer or issuer and for good cause, an order under this chapter may modify or waive, in whole or in part, the application of the prohibitions of this subsection to the broker-dealer.
(d) Foreign transactions. A rule adopted or order issued under this chapter may permit:
(1) A broker-dealer that is registered in Canada or other foreign jurisdiction and that does not have a place of business in this state to effect transactions in securities with or for, or attempt to effect the purchase or sale of any securities by:
(A) An individual from Canada or other foreign jurisdiction who is temporarily present in this state and with whom the broker-dealer had a bona fide customer relationship before the individual entered the United States;
(B) An individual from Canada or other foreign jurisdiction who is present in this state and whose transactions are in a self-directed tax advantaged retirement plan of which the individual is the holder or contributor in that foreign jurisdiction; or
(C) An individual who is present in this state, with whom the broker- dealer customer relationship arose while the individual was temporarily or permanently a resident in Canada or the other foreign jurisdiction; and
(2) An agent who represents a broker-dealer that is exempt under this subsection to effect transactions in securities or attempt to effect the purchase or sale of securities in this state as permitted for a broker-dealer described in paragraph (1).
Source: SL 2004, ch 278, § 17.
47-31B-402. Agent registration requirement and exemptions.
(a) Registration requirement. It is unlawful for an individual to transact business in this state as an agent unless the individual is registered under this chapter as an agent or is exempt from registration as an agent under subsection (b).
(b) Exemptions from registration. The following individuals are exempt from the registration requirement of subsection (a):
(1) An individual who represents a broker-dealer in effecting transactions in this state limited to those described in Section 15(h)(2) of the Securities Exchange Act of 1934 (15 U.S.C. § 78(o)(2));
(2) An individual who represents a broker-dealer that is exempt under § 47-31B-401(b) or (d);
(3) An individual who represents an issuer with respect to an offer or sale of the issuer's own securities or those of the issuer's parent or any of the issuer's subsidiaries, and who is not compensated in connection with the individual's participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities;
(4) An individual who represents an issuer and who effects transactions in the issuer's securities exempted by § 47-31B-202, other than § 47-31B-202(11) and (14);
(5) An individual who represents an issuer that effects transactions solely in federal covered securities of the issuer, but an individual who effects transactions in a federal covered security under Section 18(b)(3) or 18(b)(4)(D) of the Securities Act of 1933 (15 U.S.C. § 77r(b)(3) or 77r(b)(4)(D)) is not exempt if the individual is compensated in connection with the agent's participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities;
(6) An individual who represents a broker-dealer registered in this state under § 47-31B-401(a) or exempt from registration under § 47-31B-401(b) in the offer and sale of securities for an account of a nonaffiliated federal covered investment adviser with investments under management in excess of one hundred million dollars acting for the account of others pursuant to discretionary authority in a signed record;
(7) An individual who represents an issuer in connection with the purchase of the issuer's own securities;
(8) An individual who represents an issuer and who restricts participation to performing clerical or ministerial acts; or
(9) Any other individual exempted by rule adopted or order issued under this chapter.
(c) Registration effective only while employed or associated. The registration of an agent is effective only while the agent is employed by or associated with a broker-dealer registered under this chapter or an issuer that is offering, selling, or purchasing its securities in this state.
(d) Limit on employment or association. It is unlawful for a broker- dealer, or an issuer engaged in offering, selling, or purchasing securities in this state, to employ or associate with an agent who transacts business in this state on behalf of broker-dealers or issuers unless the agent is registered under subsection (a) or exempt from registration under subsection (b).
(e) Limit on affiliations. An individual may not act as an agent for more than one broker-dealer or one issuer at a time, unless the broker-dealer or the issuer for which the agent acts are affiliated by direct or indirect common control or are authorized by rule or order under this chapter.
Source: SL 2004, ch 278, § 18.
47-31B-403. Investment adviser registration and exemptions.
(a) Registration requirement. It is unlawful for a person to transact business in this state as an investment adviser unless the person is registered under this chapter as an investment adviser or is exempt from registration as an investment adviser under subsection (b).
(b) Exemptions from registration. The following persons are exempt from the registration requirement of subsection (a):
(1) A person without a place of business in this state that is registered under the securities act of the state in which the person has its principal place of business if its only clients in this state are:
(A) Federal covered investment advisers, investment advisers registered under this chapter, or broker-dealers registered under this chapter;
(B) Institutional investors;
(C) Bona fide preexisting clients whose principal places of residence are not in this state if the investment adviser is registered under the securities act of the state in which the clients maintain principal places of residence; or
(D) Any other client exempted by rule adopted or order issued under this chapter;
(2) A person without a place of business in this state if the person has had, during the preceding twelve months, not more than five clients that are resident in this state in addition to those specified under paragraph (1); or
(3) Any other person exempted by rule adopted or order issued under this chapter.
(c) Limits on employment or association. It is unlawful for an investment adviser, directly or indirectly, to employ or associate with an individual to engage in an activity related to investment advice in this state if the registration of the individual is suspended or revoked or the individual is barred from employment or association with an investment adviser, federal covered investment adviser, or broker-dealer by an order under this chapter, the Securities and Exchange Commission, or a self-regulatory organization, unless the investment adviser did not know, and in the exercise of reasonable care could not have known, of the suspension, revocation, or bar. Upon request from the investment adviser and for good cause, the director, by order, may waive, in whole or in part, the application of the prohibitions of this subsection to the investment adviser.
(d) Investment adviser representative registration required. It is unlawful for an investment adviser to employ or associate with an individual required to be registered under this chapter as an investment adviser representative who transacts business in this state on behalf of the investment adviser unless the individual is registered under § 47-31B-404(a) or is exempt from registration under § 47-31B-404(b).
Source: SL 2004, ch 278, § 19.
47-31B-404. Investment adviser representative registration requirement and exemptions.
(a) Registration requirement. It is unlawful for an individual to transact business in this state as an investment adviser representative unless the individual is registered under this chapter as an investment adviser representative or is exempt from registration as an investment adviser representative under subsection (b).
(b) Exemptions from registration. The following individuals are exempt from the registration requirement of subsection (a):
(1) An individual who is employed by or associated with an investment adviser that is exempt from registration under § 47-31B-403(b) or a federal covered investment adviser that is excluded from the notice filing requirements of § 47-31B-405; and
(2) Any other individual exempted by rule adopted or order issued under this chapter.
(c) Registration effective only while employed or associated. The registration of an investment adviser representative is not effective while the investment adviser representative is not employed by or associated with an investment adviser registered under this chapter or a federal covered investment adviser that has made or is required to make a notice filing under § 47-31B-405.
(d) Limit on affiliations. An individual may transact business as an investment adviser representative for more than one investment adviser or federal covered investment adviser unless a rule adopted or order issued under this chapter prohibits or limits an individual from acting as an investment adviser representative for more than one investment adviser or federal covered investment adviser.
(e) Limits on employment or association. It is unlawful for an individual acting as an investment adviser representative, directly or indirectly, to conduct business in this state on behalf of an investment adviser or a federal covered investment adviser if the registration of the individual as an investment adviser representative is suspended or revoked or the individual is barred from employment or association with an investment adviser or a federal covered investment adviser by an order under this chapter, the Securities and Exchange Commission, or a self-regulatory organization. Upon request from a federal covered investment adviser and for good cause, the director, by order issued, may waive, in whole or in part, the application of the requirements of this subsection to the federal covered investment adviser.
(f) Referral fees. An investment adviser registered under this chapter, a federal covered investment adviser that has filed a notice under § 47-31B-405, or a broker-dealer registered under this chapter is not required to employ or associate with an individual as an investment adviser representative if the only compensation paid to the individual for a referral of investment advisory clients is paid to an investment adviser registered under this chapter, a federal covered investment adviser who has filed a notice under § 47-31B-405, or a broker-dealer registered under this chapter with which the individual is employed or associated as an investment adviser representative.
Source: SL 2004, ch 278, § 20.
47-31B-405. Federal covered investment adviser notice filing requirement.
(a) Notice filing requirement. Except with respect to a federal covered investment adviser described in subsection (b), it is unlawful for a federal covered investment adviser to transact business in this state as a federal covered investment adviser unless the federal covered investment adviser complies with subsection (c).
(b) Notice filing requirement not required. The following federal covered investment advisers are not required to comply with subsection (c):
(1) A federal covered investment adviser without a place of business in this state if its only clients in this state are:
(A) Federal covered investment advisers, investment advisers registered under this chapter, and broker-dealers registered under this chapter;
(B) Institutional investors;
(C) Bona fide preexisting clients whose principal places of residence are not in this state; or
(D) Other clients specified by rule adopted or order issued under this chapter;
(2) A federal covered investment adviser without a place of business in this state if the person has had, during the preceding twelve months, not more than five clients that are resident in this state in addition to those specified under paragraph (1); and
(3) Any other person excluded by rule adopted or order issued under this chapter.
(c) Notice filing procedure. A person acting as a federal covered investment adviser, not excluded under subsection (b), shall file a notice, a consent to service of process complying with § 47-31B-611, and such records as have been filed with the Securities and Exchange Commission under the Investment Advisers Act of 1940 required by rule adopted or order issued under this chapter and pay the fees specified in § 47-31B-410(e).
(d) Effectiveness of filing. The notice under subsection (c) becomes effective upon its filing.
Source: SL 2004, ch 278, § 21.
47-31B-406. Registration by broker-dealer, agent, investment adviser, and investment adviser representative.
(a) Application for initial registration. A person shall register as a broker-dealer, agent, investment adviser, or investment adviser representative by filing an application and a consent to service of process complying with § 47-31B-611, and paying the fee specified in § 47-31B-410 and any reasonable fees charged by the designee of the director for processing the filing. The application must contain:
(1) The information or record required for the filing of a uniform application; and
(2) Upon request by the director, any other financial or other information or record that the director determines is appropriate.
(b) Amendment. If the information or record contained in an application filed under subsection (a) is or becomes inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting amendment.
(c) Effectiveness of registration. If an order is not in effect and a proceeding is not pending under § 47-31B-412, registration becomes effective at noon on the forty-fifth day after a completed application is filed, unless the registration is denied. A rule adopted or order issued under this chapter may set an earlier effective date or may defer the effective date until noon on the forty-fifth day after the filing of any amendment completing the application.
(d) Registration renewal. A registration is effective until midnight on December thirty-first of the year for which the application for registration is filed. Unless an order is in effect under § 47-31B-412, a registration may be automatically renewed each year by filing such records as are required by rule adopted or order issued under this chapter, by paying the fee specified in § 47-31B-410, and by paying costs charged by the designee of the director for processing the filings.
(e) Additional conditions or waivers. A rule adopted or order issued under this chapter may impose such other conditions, not inconsistent with the National Securities Markets Improvement Act of 1996. An order issued under this chapter may waive, in whole or in part, specific requirements in connection with registration as are in the public interest and for the protection of investors.
Source: SL 2004, ch 278, § 22.
47-31B-407. Succession and change in registration of broker-dealer or investment advisor.
(a) Succession. A broker-dealer or investment adviser may succeed to the current registration of another broker-dealer or investment adviser or a notice filing of a federal covered investment adviser, and a federal covered investment adviser may succeed to the current registration of an investment adviser or notice filing of another federal covered investment adviser, by filing as a successor an application for registration pursuant to § 47-31B-401 or 47-31B-403 or a notice pursuant to § 47-31B-405 for the unexpired portion of the current registration or notice filing.
(b) Organizational change. A broker-dealer or investment adviser that changes its form of organization or state of incorporation or organization may continue its registration by filing an amendment to its registration if the change does not involve a material change in its financial condition or management. The amendment becomes effective when filed or on a date designated by the registrant in its filing. The new organization is a successor to the original registrant for the purposes of this chapter. If there is a material change in financial condition or management, the broker-dealer or investment adviser shall file a new application for registration. A predecessor registered under this chapter shall stop conducting its securities business other than winding down transactions and shall file for withdrawal of broker-dealer or investment adviser registration within forty-five days after filing its amendment to effect succession.
(c) Name change. A broker-dealer or investment adviser that changes its name may continue its registration by filing an amendment to its registration. The amendment becomes effective when filed or on a date designated by the registrant.
(d) Change of control. A change of control of a broker-dealer or investment adviser may be made in accordance with a rule adopted or order issued under this chapter.
Source: SL 2004, ch 278, § 23.
47-31B-408. Termination of employment or association of agent and investment adviser representative--Transfer of employment or association.
(a) Notice of termination. If an agent registered under this chapter terminates employment by or association with a broker-dealer or issuer, or if an investment adviser representative registered under this chapter terminates employment by or association with an investment adviser or federal covered investment adviser, or if either registrant terminates activities that require registration as an agent or investment adviser representative, the broker- dealer, issuer, investment adviser, or federal covered investment adviser shall promptly file a notice of termination. If the registrant learns that the broker-dealer, issuer, investment adviser, or federal covered investment adviser has not filed the notice, the registrant may do so.
(b) Transfer of employment or association. If an agent registered under this chapter terminates employment by or association with a broker-dealer registered under this chapter and begins employment by or association with another broker-dealer registered under this chapter; or if an investment adviser representative registered under this chapter terminates employment by or association with an investment adviser registered under this chapter or a federal covered investment adviser that has filed a notice under § 47-31B-405 and begins employment by or association with another investment adviser registered under this chapter or a federal covered investment adviser that has filed a notice under § 47-31B-405; then upon the filing by or on behalf of the registrant, within thirty days after the termination, of an application for registration that complies with the requirement of § 47-31B-406(a) and payment of the filing fee required under § 47-31B-410, the registration of the agent or investment adviser representative is:
(1) Immediately effective as of the date of the completed filing, if the agent's Central Registration Depository record or successor record or the investment adviser representative's Investment Adviser Registration Depository record or successor record does not contain a new or amended disciplinary disclosure within the previous twelve months; or
(2) Temporarily effective as of the date of the completed filing, if the agent's Central Registration Depository record or successor record or the investment adviser representative's Investment Adviser Registration Depository record or successor record contains a new or amended disciplinary disclosure within the preceding twelve months.
(c) Withdrawal of temporary registration. The director may withdraw a temporary registration if there are or were grounds for discipline as specified in § 47-31B-412 and the director does so within thirty days after the filing of the application. If the director does not withdraw the temporary registration within the thirty-day period, registration becomes automatically effective on the thirty-first day after filing.
(d) Power to prevent registration. The director may prevent the effectiveness of a transfer of an agent or investment adviser representative under subsection (b)(1) or (2) based on the public interest and the protection of investors.
(e) Termination of registration or application for registration. If the director determines that a registrant or applicant for registration is no longer in existence or has ceased to act as a broker-dealer, agent, investment adviser, or investment adviser representative, or is the subject of an adjudication of incapacity or is subject to the control of a committee, conservator, or guardian, or cannot reasonably be located, a rule adopted or order issued under this chapter may require the registration be canceled or terminated or the application denied. The director may reinstate a canceled or terminated registration, with or without hearing, and may make the registration retroactive.
Source: SL 2004, ch 278, § 24.
47-31B-409. Withdrawal of registration of broker-dealer, agent, investment adviser, and investment adviser representative.
Withdrawal of registration by a broker-dealer, agent, investment adviser, or investment adviser representative becomes effective sixty days after the filing of the application to withdraw or within any shorter period as provided by rule adopted or order issued under this chapter unless a revocation or suspension proceeding is pending when the application is filed. If a proceeding is pending, withdrawal becomes effective when and upon such conditions as required by rule adopted or order issued under this chapter. The director may institute a revocation or suspension proceeding under § 47-31B-412 within one year after the withdrawal became effective automatically and issue a revocation or suspension order as of the last date on which registration was effective if a proceeding is not pending.
Source: SL 2004, ch 278, § 25.
47-31B-410. Filing fees.
(a) Broker-dealers. A person shall pay a fee of one hundred fifty dollars when initially filing an application for registration as a broker-dealer and a fee of one hundred fifty dollars when filing a renewal of registration as a broker-dealer. If the filing results in a denial or withdrawal, the director shall retain the fee.
(b) Agents. The fee for an individual is one hundred twenty five dollars when filing an application for registration as an agent, a fee of one hundred twenty five dollars when filing a renewal of registration as an agent, and a fee of one hundred twenty five dollars when filing for a change of registration as an agent. If the filing results in a denial or withdrawal, the director shall retain the fee.
(c) Investment advisers. A person shall pay a fee of one hundred dollars when filing an application for registration as an investment adviser and a fee of one hundred dollars when filing a renewal of registration as an investment adviser. If the filing results in a denial or withdrawal, the director shall retain the fee.
(d) Investment adviser representatives. The fee for an individual is fifty dollars when filing an application for registration as an investment adviser representative, a fee of fifty dollars when filing a renewal of registration as an investment adviser representative, and a fee of fifty dollars when filing a change of registration as an investment adviser representative. If the filing results in a denial or withdrawal, the director shall retain the fee.
(e) Federal covered investment advisers. A federal covered investment adviser required to file a notice under § 47-31B-405 shall pay an initial fee of two hundred dollars and an annual notice fee of two hundred dollars.
(f) Payment. A person required to pay a filing or notice fee under this section may transmit the fee through or to a designee as a rule or order provides under this chapter.
Source: SL 2004, ch 278, § 26.
47-31B-411. Postregistration requirements.
(a) Financial requirements. Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. § 78o(h) ) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-22), a rule adopted or order issued under this chapter may establish minimum financial requirements for broker-dealers registered or required to be registered under this chapter and investment advisers registered or required to be registered under this chapter.
(b) Financial reports. Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. § 78o(h)) or Section 222(b) of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-22), a broker-dealer registered or required to be registered under this chapter and an investment adviser registered or required to be registered under this chapter shall file such financial reports as are required by a rule adopted or order issued under this chapter. If the information contained in a record filed under this subsection is or becomes inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting amendment.
(c) Record keeping. Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. § 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-22):
(1) A broker-dealer registered or required to be registered under this chapter and an investment adviser registered or required to be registered under this chapter shall make and maintain the accounts, correspondence, memoranda, papers, books, and other records required by rule adopted or order issued under this chapter;
(2) Broker-dealer records required to be maintained under paragraph (1) may be maintained in any form of data storage acceptable under Section 17(a) of the Securities Exchange Act of 1934 (15 U.S.C. § 78q(a)) if they are readily accessible to the director; and
(3) Investment adviser records required to be maintained under paragraph (1) may be maintained in any form of data storage required by rule adopted or order issued under this chapter.
(d) Audits or inspections. The records of a broker-dealer registered or required to be registered under this chapter and of an investment adviser registered or required to be registered under this chapter are subject to such reasonable periodic, special, or other audits or inspections by a representative of the director, within or without this state, as the director considers necessary or appropriate in the public interest and for the protection of investors. An audit or inspection may be made at any time and without prior notice. The director may copy, and remove for audit or inspection copies of, all records the director reasonably considers necessary or appropriate to conduct the audit or inspection. The director may assess a reasonable charge for conducting an audit or inspection under this subsection.
(e) Custody and discretionary authority bond or insurance. Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. § 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-22), a rule adopted or order issued under this chapter may require a broker-dealer or investment adviser that has custody of or discretionary authority over funds or securities of a customer or client to obtain insurance or post a bond or other satisfactory form of security in an amount not to exceed fifty thousand dollars. The director may determine the requirements of the insurance, bond, or other satisfactory form of security. Insurance or a bond or other satisfactory form of security may not be required of a broker-dealer registered under this chapter whose net capital exceeds, or of an investment adviser registered under this chapter whose minimum financial requirements exceed, the amounts required by rule or order under this chapter. The insurance, bond, or other satisfactory form of security must permit an action by a person to enforce any liability on the insurance, bond, or other satisfactory form of security if instituted within the time limitations in § 47-31B-509(j)(2).
(f) Requirements for custody. Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. § 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-22), an agent may not have custody of funds or securities of a customer except under the supervision of a broker-dealer and an investment adviser representative may not have custody of funds or securities of a client except under the supervision of an investment adviser or a federal covered investment adviser. A rule adopted or order issued under this chapter may prohibit, limit, or impose conditions on a broker-dealer regarding custody of funds or securities of a customer and on an investment adviser regarding custody of securities or funds of a client.
(g) Investment adviser brochure rule. With respect to an investment adviser registered or required to be registered under this chapter, a rule adopted or order issued under this chapter may require that information or other record be furnished or disseminated to clients or prospective clients in this state as necessary or appropriate in the public interest and for the protection of investors and advisory clients.
(h) Continuing education. A rule adopted or order issued under this chapter may require an individual registered under § 47-31B-402 or 47-31B-404 to participate in a continuing education program approved by the Securities and Exchange Commission and administered by a self-regulatory organization or, in the absence of such a program, a rule adopted or order issued under this chapter may require continuing education for an individual registered under § 47-31B-404.
Source: SL 2004, ch 278, § 27.
47-31B-412. Denial, revocation, suspension, withdrawal, restriction, condition, or limitation of registration.
(a) Disciplinary conditions--applicants. If the director finds that the order is in the public interest and subsection (d) authorizes the action, an order issued under this chapter may deny an application, or may condition or limit registration of an applicant to be a broker-dealer, agent, investment adviser, or investment adviser representative, and, if the applicant is a broker-dealer or investment adviser, of a partner, officer, director, or person having a similar status or performing similar functions, or a person directly or indirectly in control, of the broker-dealer or investment adviser.
(b) Disciplinary conditions--registrants. If the director finds that the order is in the public interest and subsection (d) authorizes the action, an order issued under this chapter may revoke, suspend, condition, or limit the registration of a registrant and, if the registrant is a broker-dealer or investment adviser, of a partner, officer, director, or person having a similar status or performing similar functions, or a person directly or indirectly in control, of the broker-dealer or investment adviser. However, the director may not:
(1) Institute a revocation or suspension proceeding under this subsection based on an order issued under a law of another state that is reported to the director or a designee of the director more than one year after the date of the order on which it is based; or
(2) Under subsection (d)(5)(A) or (B), issue an order on the basis of an order issued under the securities act of another state unless the other order was based on conduct for which subsection (d) would authorize the action had the conduct occurred in this state.
(c) Disciplinary penalties--registrants. If the director finds that the order is in the public interest and subsection (d)(1) through (6), (8), (9), (10), or (12) and (13) authorizes the action, an order under this chapter may censure, impose a bar, or impose a civil penalty in an amount not to exceed a maximum of ten thousand dollars per violation, on a registrant, and, if the registrant is a broker-dealer or investment adviser, a partner, officer, director, or person having a similar status or performing similar functions, or a person directly or indirectly in control, of the broker-dealer or investment adviser.
(d) Grounds for discipline. A person may be disciplined under subsections (a) through (c) if the person:
(1) Has filed an application for registration in this state under this chapter or the predecessor act within the previous ten years, which, as of the effective date of registration or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained a statement that, in light of the circumstances under which it was made, was false or misleading with respect to a material fact;
(2) Willfully violated or willfully failed to comply with this chapter or the predecessor act or a rule adopted or order issued under this chapter or the predecessor act within the previous ten years;
(3) Has been convicted of a felony or within the previous ten years has been convicted of a misdemeanor involving a security, a commodity future or option contract, or an aspect of a business involving securities, commodities, investments, franchises, insurance, banking, or finance;
(4) Is enjoined or restrained by a court of competent jurisdiction in an action instituted by the director under this chapter or the predecessor act, a state, the Securities and Exchange Commission, or the United States from engaging in or continuing an act, practice, or course of business involving an aspect of a business involving securities, commodities, investments, franchises, insurance, banking, or finance;
(5) Is the subject of an order, issued after notice and opportunity for hearing by:
(A) The securities, depository institution, insurance, or other financial services regulator of a state or by the Securities and Exchange Commission or other federal agency denying, revoking, barring, or suspending registration as a broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative;
(B) The securities regulator of a state or the Securities and Exchange Commission against a broker-dealer, agent, investment adviser, investment adviser representative, or federal covered investment adviser;
(C) The Securities and Exchange Commission or a self-regulatory organization suspending or expelling the registrant from membership in the self-regulatory organization;
(D) A court adjudicating a United States Postal Service fraud order;
(E) The insurance regulator of a state denying, suspending, or revoking registration as an insurance agent; or
(F) A depository institution regulator suspending or barring the person from the depository institution business;
(6) Is the subject of an adjudication or determination, after notice and opportunity for hearing, by the Securities and Exchange Commission, the Commodity Futures Trading Commission; the Federal Trade Commission; a federal depository institution regulator, or a depository institution, insurance, or other financial services regulator of a state that the person willfully violated the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, or the Commodity Exchange Act, the securities or commodities law of a state, or a federal or state law under which a business involving investments, franchises, insurance, banking, or finance is regulated;
(7) Is insolvent, either because the person's liabilities exceed the person's assets or because the person cannot meet the person's obligations as they mature, but the director may not enter an order against an applicant or registrant under this paragraph without a finding of insolvency as to the applicant or registrant;
(8) Refuses to allow or otherwise impedes the director from conducting an audit or inspection under § 47-31B-411(d) or refuses access to a registrant's office to conduct an audit or inspection under § 47-31B-411(d);
(9) Has failed to reasonably supervise an agent, investment adviser representative, or other individual, if the agent, investment adviser representative, or other individual was subject to the person's supervision and committed a violation of this chapter or the predecessor act or a rule adopted or order issued under this chapter or the predecessor act within the previous ten years;
(10) Has not paid the proper filing fee within thirty days after having been notified by the director of a deficiency, but the director shall vacate an order under this paragraph when the deficiency is corrected;
(11) After notice and opportunity for a hearing, has been found within the previous ten years:
(A) By a court of competent jurisdiction to have willfully violated the laws of a foreign jurisdiction under which the business of securities, commodities, investment, franchises, insurance, banking, or finance is regulated;
(B) To have been the subject of an order of a securities regulator of a foreign jurisdiction denying, revoking, or suspending the right to engage in the business of securities as a broker-dealer, agent, investment adviser, investment adviser representative, or similar person; or
(C) To have been suspended or expelled from membership by or participation in a securities exchange or securities association operating under the securities laws of a foreign jurisdiction;
(12) Is the subject of a cease and desist order issued by the Securities and Exchange Commission or issued under the securities, commodities, investment, franchise, banking, finance, or insurance laws of a state;
(13) Has engaged in dishonest or unethical practices in the securities, commodities, investment, franchise, banking, finance, or insurance business within the previous ten years; or
(14) Is not qualified on the basis of factors such as training, experience, and knowledge of the securities business. However, in the case of an application by an agent for a broker-dealer that is a member of a self-regulatory organization or by an individual for registration as an investment adviser representative, a denial order may not be based on this paragraph if the individual has successfully completed all examinations required by subsection (e). The director may require an applicant for registration under § 47-31B-402 or 47-31B-404 who has not been registered in a state within the two years preceding the filing of an application in this state to successfully complete an examination.
(e) Examinations. A rule adopted or order issued under this chapter may require that an examination, including an examination developed or approved by an organization of securities regulators, be successfully completed by a class of individuals or all individuals. An order issued under this chapter may waive, in whole or in part, an examination as to an individual and a rule adopted under this chapter may waive, in whole or in part, an examination as to a class of individuals if the director determines that the examination is not necessary or appropriate in the public interest and for the protection of investors.
(f) Summary process. The director may suspend or deny an application summarily; restrict, condition, limit, or suspend a registration; or censure, bar, or impose a civil penalty on a registrant before final determination of an administrative proceeding. Upon the issuance of an order, the director shall promptly notify each person subject to the order that the order has been issued, the reasons for the action, and that within fifteen days after the receipt of a request in a record from the person the matter will be scheduled for a hearing. If a hearing is not requested and none is ordered by the director within thirty days after the date of service of the order, the order becomes final by operation of law. If a hearing is requested or ordered, the director, after notice of and opportunity for hearing to each person subject to the order, may modify or vacate the order or extend the order until final determination.
(g) Procedural requirements. An order issued may not be issued under this section, except under subsection (f), without:
(1) Appropriate notice to the applicant or registrant;
(2) Opportunity for hearing; and
(3) Findings of fact and conclusions of law in a record in accordance with chapter 1-26.
(h) Control person liability. A person that controls, directly or indirectly, a person not in compliance with this section may be disciplined by order of the director under subsections (a) through (c) to the same extent as the noncomplying person, unless the controlling person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct that is a ground for discipline under this section.
(i) Limit on investigation or proceeding. The director may not institute a proceeding under subsection(a), (b), or (c) based solely on material facts actually known by the director unless an investigation or the proceeding is instituted within one year after the director actually acquires knowledge of the material facts.
Source: SL 2004, ch 278, § 28.
47-31B-501. General fraud.
It is unlawful for a person, in connection with the offer, sale, or purchase of a security, directly or indirectly:
(1) To employ a device, scheme, or artifice to defraud;
(2) To make an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
(3) To engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.
Source: SL 2004, ch 278, § 29.
47-31B-502. Prohibited conduct in providing investment advice.
(a) Fraud in providing investment advice. It is unlawful for a person that advises others for compensation, either directly or indirectly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation and as part of a regular business, issues or promulgates analyses or reports relating to securities:
(1) To employ a device, scheme, or artifice to defraud another person; or
(2) To engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.
(b) Rules defining fraud. A rule adopted under this chapter may define an act, practice, or course of business of an investment adviser or an investment adviser representative, other than a supervised person of a federal covered investment adviser, as fraudulent, deceptive, or manipulative, and prescribe means reasonably designed to prevent investment advisers and investment adviser representatives, other than supervised persons of a federal covered investment adviser, from engaging in acts, practices, and courses of business defined as fraudulent, deceptive, or manipulative.
(c) Rules specifying contents of advisory contract. A rule adopted under this chapter may specify the contents of an investment advisory contract entered into, extended, or renewed by an investment adviser.
Source: SL 2004, ch 278, § 30.
47-31B-503. Evidentiary burden.
(a) Civil. In a civil action or administrative proceeding under this chapter, a person claiming an exemption, exception, preemption, or exclusion has the burden to prove the applicability of the claim.
(b) Criminal. In a criminal proceeding under this chapter, a person claiming an exemption, exception, preemption, or exclusion has the burden of going forward with evidence of the claim.
Source: SL 2004, ch 278, § 31.
47-31B-504. Filing of sales and advertising literature.
(a) Filing requirement. Except as otherwise provided in subsection (b), a rule adopted or order issued under this chapter may require the filing of a prospectus, pamphlet, circular, form letter, advertisement, sales literature, or other advertising record relating to a security or investment advice, addressed or intended for distribution to prospective investors, including clients or prospective clients of a person registered or required to be registered as an investment adviser under this chapter.
(b) Excluded communications. This section does not apply to sales and advertising literature specified in subsection (a) which relates to a federal covered security, a federal covered investment adviser, or a security or transaction exempted by § 47-31B-201, 47-31B-202, or 47-31B-203 except as required pursuant to § 47-31B-201(7).
Source: SL 2004, ch 278, § 32.
47-31B-505. Misleading filings.
It is unlawful for a person to make or cause to be made, in a record that is used in an action or proceeding or filed under this chapter, a statement that, at the time and in the light of the circumstances under which it is made, is false or misleading in a material respect, or, in connection with the statement, to omit to state a material fact necessary to make the statement made, in the light of the circumstances under which it was made, not false or misleading.
Source: SL 2004, ch 278, § 33.
47-31B-506. Misrepresentations concerning registration or exemption.
The filing of an application for registration, a registration statement, a notice filing under this chapter, the registration of a person, the notice filing by a person, or the registration of a security under this chapter does not constitute a finding by the director that a record filed under this chapter is true, complete, and not misleading. The filing or registration or the availability of an exemption, exception, preemption, or exclusion for a security or a transaction does not mean that the director has passed upon the merits or qualifications of, or recommended or given approval to, a person, security, or transaction. It is unlawful to make, or cause to be made, to a purchaser, customer, client, or prospective customer or client a representation inconsistent with this section.
Source: SL 2004, ch 278, § 34.
47-31B-507. Qualified immunity.
A broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative is not liable to another broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative for defamation relating to a statement that is contained in a record required by the director, or designee of the director, the Securities and Exchange Commission, or a self-regulatory organization, unless the person knew, or should have known at the time that the statement was made, that it was false in a material respect or the person acted in reckless disregard of the statement's truth or falsity.
Source: SL 2004, ch 278, § 35.
47-31B-508. Criminal penalties.
(a) Criminal penalties. It is a Class 4 felony for any person that willfully violates this chapter, or a rule adopted or order issued under this chapter, except § 47-31B-504 or the notice filing requirements of § 47-31B-302 or 47-31B-405, or that willfully violates § 47-31B-505 knowing the statement made to be false or misleading in a material respect. An individual convicted of violating a rule or order under this chapter may be fined, but may not be imprisoned, if the individual did not have knowledge of the rule or order. A subsequent violation is a Class 3 felony.
(b) Criminal reference not required. The Attorney General or the proper prosecuting attorney with or without a reference from the director, may institute criminal proceedings under this chapter.
(c) No limitation on other criminal enforcement. This chapter does not limit the power of this state to punish a person for conduct that constitutes a crime under other laws of this state.
Source: SL 2004, ch 278, § 36; SL 2006, ch 130, § 17.
47-31B-509. Civil liability.
(a) Securities Litigation Uniform Standards Act. Enforcement of civil liability under this section is subject to the Securities Litigation Uniform Standards Act of 1998.
(b) Liability of seller to purchaser. A person is liable to the purchaser if the person sells a security in violation of § 47-31B-301 or, by means of an untrue statement of a material fact or an omission to state a material fact necessary in order to make the statement made, in light of the circumstances under which it is made, not misleading, the purchaser not knowing the untruth or omission and the seller not sustaining the burden of proof that the seller did not know and, in the exercise of reasonable care, could not have known of the untruth or omission. An action under this subsection is governed by the following:
(1) The purchaser may maintain an action to recover the consideration paid for the security, less the amount of any income received on the security, and interest at Category D, § 54-3-16 from the date of the purchase, costs, and reasonable attorneys' fees determined by the court, upon the tender of the security, or for actual damages as provided in paragraph (3).
(2) The tender referred to in paragraph (1) may be made any time before entry of judgment. Tender requires only notice in a record of ownership of the security and willingness to exchange the security for the amount specified. A purchaser that no longer owns the security may recover actual damages as provided in paragraph (3).
(3) Actual damages in an action arising under this subsection are the amount that would be recoverable upon a tender less the value of the security when the purchaser disposed of it, and interest at Category D § 54-3-16 from the date of the purchase, costs, and reasonable attorneys' fees determined by the court.
(c) Liability of purchaser to seller. A person is liable to the seller if the person buys a security by means of an untrue statement of a material fact or omission to state a material fact necessary in order to make the statement made, in light of the circumstances under which it is made, not misleading, the seller not knowing of the untruth or omission, and the purchaser not sustaining the burden of proof that the purchaser did not know, and in the exercise of reasonable care, could not have known of the untruth or omission. An action under this subsection is governed by the following:
(1) The seller may maintain an action to recover the security, and any income received on the security, costs, and reasonable attorneys' fees determined by the court, upon the tender of the purchase price, or for actual damages as provided in paragraph (3).
(2) The tender referred to in paragraph (1) may be made any time before entry of judgment. Tender requires only notice in a record of the present ability to pay the amount tendered and willingness to take delivery of the security for the amount specified. If the purchaser no longer owns the security, the seller may recover actual damages as provided in paragraph (3).
(3) Actual damages in an action arising under this subsection are the difference between the price at which the security was sold and the value the security would have had at the time of the sale in the absence of the purchaser's conduct causing liability, and interest at Category D § 54-3-16 from the date of the sale of the security, costs, and reasonable attorneys' fees determined by the court.
(d) Liability of unregistered broker-dealer and agent. A person acting as a broker-dealer or agent that sells or buys a security in violation of § 47-31B-401(a), 47-31B-402(a), or 47-31B-506 is liable to the customer. The customer, if a purchaser, may maintain an action for recovery of actual damages as specified in subsections (b)(1) through (3), or, if a seller, for a remedy as specified in subsections (c)(1) through (3).
(e) Liability of unregistered investment adviser and investment adviser representative. A person acting as an investment adviser or investment adviser representative that provides investment advice for compensation in violation of § 47-31B-403(a), 47-31B-404(a), or 47-31B-506 is liable to the client. The client may maintain an action to recover the consideration paid for the advice, interest at Category D § 54-3-16 from the date of payment, costs, and reasonable attorneys' fees determined by the court.
(f) Liability for investment advice. A person that receives directly or indirectly any consideration for providing investment advice to another person and that employs a device, scheme, or artifice to defraud the other person or engages in an act, practice, or course of business that operates or would operate as a fraud or deceit on the other person, is liable to the other person. An action under this subsection is governed by the following:
(1) The person defrauded may maintain an action to recover the consideration paid for the advice and the amount of any actual damages caused by the fraudulent conduct, interest at Category D § 54-3-16 from the date of the fraudulent conduct, costs, and reasonable attorneys' fees determined by the court, less the amount of any income received as a result of the fraudulent conduct.
(2) This subsection does not apply to a broker-dealer or its agents if the investment advice provided is solely incidental to transacting business as a broker-dealer and no special compensation is received for the investment advice.
(g) Joint and several liability. The following persons are liable jointly and severally with and to the same extent as persons liable under subsections (b) through (f):
(1) A person that directly or indirectly controls a person liable under subsections (b) through (f), unless the controlling person sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist;
(2) An individual who is a managing partner, executive officer, or director of a person liable under subsections (b) through (f), including an individual having a similar status or performing similar functions, unless the individual sustains the burden of proof that the individual did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist;
(3) An individual who is an employee of or associated with a person liable under subsections (b) through (f) and who materially aids the conduct giving rise to the liability, unless the individual sustains the burden of proof that the individual did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist; and
(4) A person that is a broker-dealer, agent, investment adviser, or investment adviser representative that materially aids the conduct giving rise to the liability under subsections (b) through (f), unless the person sustains the burden of proof that the person did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which liability is alleged to exist.
(h) Right of contribution. A person liable under this section has a right of contribution as in cases of contract against any other person liable under this section for the same conduct.
(i) Survival of cause of action. A cause of action under this section survives the death of an individual who might have been a plaintiff or defendant.
(j) Statute of limitations. A person may not obtain relief:
(1) Under subsection (b) for violation of § 47-31B-301, or under subsection (d) or (e), unless the action is instituted within one year after the violation occurred; or
(2) Under subsection (b), other than for violation of § 47-31B-301, or under subsection (c) or (f), unless the action is instituted within the earlier of two years after discovery of the facts constituting the violation or five years after the violation.
(k) No enforcement of violative contract. A person that has made, or has engaged in the performance of, a contract in violation of this chapter or a rule adopted or order issued under this chapter, or that has acquired a purported right under the contract with knowledge of conduct by reason of which its making or performance was in violation of this chapter, may not base an action on the contract.
(l) No contractual waiver. A condition, stipulation, or provision binding a person purchasing or selling a security or receiving investment advice to waive compliance with this chapter or a rule adopted or order issued under this chapter is void.
(m) Survival of other rights or remedies. The rights and remedies provided by this chapter are in addition to any other rights or remedies that may exist, but this chapter does not create a cause of action not specified in this section or § 47-31B-411(e).
Source: SL 2004, ch 278, § 37.
47-31B-510. Rescission offers.
A purchaser, seller, or recipient of investment advice may not maintain an action under § 47-31B-509 if:
(1) The purchaser, seller, or recipient of investment advice receives in a record, before the action is instituted:
(A) An offer stating the respect in which liability under § 47-31B-509 may have arisen and fairly advising the purchaser, seller, or recipient of investment advice of that person's rights in connection with the offer, and any financial or other information necessary to correct all material misrepresentations or omissions in the information that was required by this chapter to be furnished to that person at the time of the purchase, sale, or investment advice;
(B) If the basis for relief under this section may have been a violation of § 47-31B-509(b), an offer to repurchase the security for cash, payable on delivery of the security, equal to the consideration paid, and interest at Category D § 54-3-16 from the date of the purchase, less the amount of any income received on the security, or, if the purchaser no longer owns the security, an offer to pay the purchaser upon acceptance of the offer damages in an amount that would be recoverable upon a tender, less the value of the security when the purchaser disposed of it, and interest at Category D § 54-3-16 from the date of the purchase in cash equal to the damages computed in the manner provided in this subsection;
(C) If the basis for relief under this section may have been a violation of § 47-31B-509(c), an offer to tender the security, on payment by the seller of an amount equal to the purchase price paid, less income received on the security by the purchaser and interest at Category D § 54-3-16 from the date of the sale; or if the purchaser no longer owns the security, an offer to pay the seller upon acceptance of the offer, in cash, damages in the amount of the difference between the price at which the security was purchased and the value the security would have had at the time of the purchase in the absence of the purchaser's conduct that may have caused liability and interest at Category D § 54-3-16 from the date of the sale;
(D) If the basis for relief under this section may have been a violation of § 47-31B-509(d); and if the customer is a purchaser, an offer to pay as specified in subparagraph (B); or, if the customer is a seller, an offer to tender or to pay as specified in subparagraph (C);
(E) If the basis for relief under this section may have been a violation of § 47-31B-509(e), an offer to reimburse in cash the consideration paid for the advice and interest at Category D § 54-3-16 from the date of payment; or
(F) If the basis for relief under this section may have been a violation of § 47-31B-509(f), an offer to reimburse in cash the consideration paid for the advice, the amount of any actual damages that may have been caused by the conduct, and interest at Category D § 54-3-16 from the date of the violation causing the loss;
(2) The offer under paragraph (1) states that it must be accepted by the purchaser, seller, or recipient of investment advice within thirty days after the date of its receipt by the purchaser, seller, or recipient of investment advice or any shorter period, of not less than three days, that the director, by order, specifies;
(3) The offeror has the present ability to pay the amount offered or to tender the security under paragraph (1);
(4) The offer under paragraph (1) is delivered to the purchaser, seller, or recipient of investment advice, or sent in a manner that ensures receipt by the purchaser, seller, or recipient of investment advice; and
(5) The purchaser, seller, or recipient of investment advice that accepts the offer under paragraph (1) in a record within the period specified under paragraph (2) is paid in accordance with the terms of the offer.
Source: SL 2004, ch 278, § 38.
47-31B-601. Administration.
(a) Administration. This chapter shall be administered by the director.
(b) The director shall designate one of the director's employees to administer the provisions of this chapter in the event of the director's absence or disability.
(c) This chapter shall be administered under the direction and supervision of the Department of Labor and Regulation and the secretary thereof, but shall retain the quasi-judicial, quasi-legislative, advisory, and other nonadministrative functions, as defined in § 1-32-1, otherwise vested in it and shall exercise those functions independently of the secretary of the Department of Labor and Regulation.
(d) The director shall be appointed by the secretary of the Department of Labor and Regulation and may be removed at the pleasure of the secretary. The appointment and removal of the director shall be subject to approval by the Governor.
(e) The director shall receive travel expenses, in accordance with the rules of the Board of Finance, incurred in the discharge of official duties.
(f) The director shall employ, from time to time, such clerks and employees as are necessary for the administration of this chapter, and they shall perform such duties as the director shall assign.
(g) The director may be included in the state's employees' blanket bond pursuant to § 3-5-5.1.
(h) The director may use the seal with the words, Director of Insurance, South Dakota, with a design the director prescribes engraved on the seal to authenticate the director's signature and proceedings.
(i) Unlawful use of records or information. It is unlawful for the director or an officer, employee, or designee of the director to use for personal benefit or the benefit of others records or other information obtained by or filed with the director that are not public under § 47-31B-607(b). This chapter does not authorize the director or an officer, employee, or designee of the director to disclose the record or information, except in accordance with § 47-31B-602, 47-31B-607(c), or 47-31B-608.
(j) No privilege or exemption created or diminished. This chapter does not create or diminish a privilege or exemption that exists at common law, by statute or rule, or otherwise.
(k) Investor education. The director may develop and implement investor education initiatives to inform the public about investing in securities, with particular emphasis on the prevention and detection of securities fraud. In developing and implementing these initiatives, the director may collaborate with public and nonprofit organizations with an interest in investor education. The director may accept a grant or donation from a person that is not affiliated with the securities industry or from a nonprofit organization, regardless of whether the organization is affiliated with the securities industry, to develop and implement investor education initiatives. This subsection does not authorize the director to require participation or monetary contributions of a registrant in an investor education program.
Source: SL 2004, ch 278, § 39; SL 2011, ch 1 (Ex. Ord. 11-1), § 162, eff. Apr. 12, 2011; SL 2018, ch 278, § 5.
47-31B-602. Investigations and subpoenas.
(a) Authority to investigate. The director may:
(1) Conduct public or private investigations within or outside of this state which the director considers necessary or appropriate to determine whether a person has violated, is violating, or is about to violate this chapter or a rule adopted or order issued under this chapter, or to aid in the enforcement of this chapter or in the adoption of rules and forms under this chapter;
(2) Require or permit a person to testify, file a statement, or produce a record, under oath or otherwise as the director determines, as to all the facts and circumstances concerning a matter to be investigated or about which an action or proceeding is to be instituted; and
(3) Publish a record concerning an action, proceeding, or an investigation under, or a violation of, this chapter or a rule adopted or order issued under this chapter if the director determines it is necessary or appropriate in the public interest and for the protection of investors.
(b) Director powers to investigate. For the purpose of an investigation under this chapter, the director or its designated officer may administer oaths and affirmations, subpoena witnesses, seek compulsion of attendance, take evidence, require the filing of statements, and require the production of any records that the director considers relevant or material to the investigation.
(c) Procedure and remedies for noncompliance. If a person does not appear or refuses to testify, file a statement, produce records, or otherwise does not obey a subpoena as required by the director under this chapter, the director, or any officer designated by him, may apply to the circuit court to enforce compliance, or may refer the matter to the Attorney General or the proper attorney, who may apply to the circuit court or a court of another state to enforce compliance. The court may:
(1) Hold the person in contempt;
(2) Order the person to appear before the director;
(3) Order the person to testify about the matter under investigation or in question;
(4) Order the production of records;
(5) Grant injunctive relief, including restricting or prohibiting the offer or sale of securities or the providing of investment advice;
(6) Impose a civil penalty of not more than ten thousand dollars per violation; and
(7) Grant any other necessary or appropriate relief.
(d) Application for relief. This section does not preclude a person from applying to the circuit court or a court of another state for relief from a request to appear, testify, file a statement, produce records, or obey a subpoena.
(e) Use immunity procedure. An individual is not excused from attending, testifying, filing a statement, producing a record or other evidence, or obeying a subpoena of the director under this chapter or in an action or proceeding instituted by the director under this chapter on the ground that the required testimony, statement, record, or other evidence, directly or indirectly, may tend to incriminate the individual or subject the individual to a criminal fine, penalty, or forfeiture. If the individual refuses to testify, file a statement, or produce a record or other evidence on the basis of the individual's privilege against self-incrimination, the director may apply to the circuit court to compel the testimony, the filing of the statement, the production of the record, or the giving of other evidence. The testimony, record, or other evidence compelled under such an order may not be used, directly or indirectly, against the individual in a criminal case, except in a prosecution for perjury or contempt or otherwise failing to comply with the order.
(f) Assistance to securities regulator of another jurisdiction. At the request of the securities regulator of another state or a foreign jurisdiction, the director may provide assistance if the requesting regulator states that it is conducting an investigation to determine whether a person has violated, is violating, or is about to violate a law or rule of the other state or foreign jurisdiction relating to securities matters that the requesting regulator administers or enforces. The director may provide the assistance by using the authority to investigate and the powers conferred by this section as the director determines is necessary or appropriate. The assistance may be provided without regard to whether the conduct described in the request would also constitute a violation of this chapter or other law of this state if occurring in this state. In deciding whether to provide the assistance, the director may consider whether the requesting regulator is permitted and has agreed to provide assistance reciprocally within its state or foreign jurisdiction to the director on securities matters when requested; whether compliance with the request would violate or prejudice the public policy of this state; and the availability of resources and employees of the director to carry out the request for assistance.
Source: SL 2004, ch 278, § 40.
47-31B-603. Civil enforcement.
(a) Civil action instituted by director. If the director believes that a person has engaged, is engaging, or is about to engage in an act, practice, or course of business constituting a violation of this chapter or a rule adopted or order issued under this chapter or that a person has, is, or is about to engage in an act, practice, or course of business that materially aids a violation of this chapter or a rule adopted or order issued under this chapter, the director may maintain an action in the circuit court to enjoin the act, practice, or course of business and to enforce compliance with this chapter or a rule adopted or order issued under this chapter.
(b) Relief available. In an action under this section and on a proper showing, the court may:
(1) Issue a permanent or temporary injunction, restraining order, or declaratory judgment;
(2) Order other appropriate or ancillary relief, which may include:
(A) An asset freeze, accounting, writ of attachment, writ of general or specific execution, and appointment of a receiver or conservator, that may be the director for the defendant or the defendant's assets;
(B) Ordering the director to take charge and control of a defendant's property, including investment accounts and accounts in a depository institution, rents, and profits; to collect debts; and to acquire and dispose of property;
(C) Imposing a civil penalty up to ten thousand dollars for each violation; an order of rescission, restitution, or disgorgement directed to a person that has engaged in an act, practice, or course of business constituting a violation of this chapter or the predecessor act or a rule adopted or order issued under this chapter or the predecessor act; and
(D) Ordering the payment of prejudgment and postjudgment interest; or
(3) Order such other relief as the court considers appropriate.
(c) No bond required. The director may not be required to post a bond in an action or proceeding under this chapter.
Source: SL 2004, ch 278, § 41.
47-31B-604. Administrative enforcement.
(a) Issuance of an order or notice. If the director determines that a person has engaged, is engaging, or is about to engage in an act, practice, or course of business constituting a violation of this chapter or a rule adopted or order issued under this chapter or that a person has materially aided, is materially aiding, or is about to materially aid an act, practice, or course of business constituting a violation of this chapter or a rule adopted or order issued under this chapter, the director may:
(1) Issue an order directing the person to cease and desist from engaging in the act, practice, or course of business or to take other action necessary or appropriate to comply with this chapter;
(2) Issue an order denying, suspending, revoking, or conditioning the exemptions for a broker-dealer under § 47-31B-401(b)(1)(D) or (F) or an investment adviser under § 47-31B-403(b)(1)(C); or
(3) Issue an order under § 47-31B-204.
(b) Summary process. An order under subsection (a) is effective on the date of issuance. Upon issuance of the order, the director shall promptly serve each person subject to the order with a copy of the order and a notice that the order has been entered. The order must include a statement whether the director will seek a civil penalty or costs of the investigation, a statement of the reasons for the order, and notice that, within fifteen days after receipt of a request in a record from the person, the matter will be scheduled for a hearing. If a person subject to the order does not request a hearing and none is ordered by the director within thirty days after the date of service of the order, the order, which may include a civil penalty or costs of the investigation if a civil penalty or costs were sought in the statement accompanying the order, becomes final as to that person by operation of law. If a hearing is requested or ordered, the director, after notice of and opportunity for hearing to each person subject to the order, may modify or vacate the order or extend it until final determination.
(c) Procedure for final order. If a hearing is requested or ordered pursuant to subsection (b), a hearing must be held pursuant to chapter 1-26. A final order may not be issued unless the director makes findings of fact and conclusions of law in a record pursuant to chapter 1-26. The final order may make final, vacate, or modify the order issued under subsection (a).
(d) Civil penalty. In a final order under subsection (c), the director may impose a civil penalty up to ten thousand dollars for each violation.
(e) Costs. In a final order, the director may charge the actual cost of an investigation or proceeding for a violation of this chapter or a rule adopted or order issued under this chapter.
(f) Filing of certified final order with court; effect of filing. If a petition for judicial review of a final order is not filed in accordance with § 47-31B-609, the director may file a certified copy of the final order with the clerk of a court of competent jurisdiction. The order so filed has the same effect as a judgment of the court and may be recorded, enforced, or satisfied in the same manner as a judgment of the court.
(g) Enforcement by court; further civil penalty. If a person does not comply with an order under this section, the director may petition a court of competent jurisdiction to enforce the order. The court may not require the director to post a bond in an action or proceeding under this section. If the court finds, after service and opportunity for hearing, that the person was not in compliance with the order, the court may adjudge the person in civil contempt of the order. The court may impose a further civil penalty against the person for contempt in an amount not more than ten thousand dollars, for each violation and may grant any other relief the court determines is just and proper in the circumstances.
Source: SL 2004, ch 278, § 42.
47-31B-605. Rules, forms, orders, interpretive opinions, and hearings.
(a) Issuance and adoption of forms, orders, and rules. The director may:
(1) Issue forms and orders and, after notice and comment, may adopt and amend rules necessary or appropriate to carry out this chapter and may repeal rules, including rules and forms governing registration statements, applications, notice filings, reports, and other records;
(2) By rule, define terms, whether or not used in this chapter, but those definitions may not be inconsistent with this chapter; and
(3) By rule, classify securities, persons, and transactions and adopt different requirements for different classes.
(b) Findings and cooperation. Under this chapter, a rule or form may not be adopted or amended, or an order issued or amended, unless the director finds that the rule, form, order, or amendment is necessary or appropriate in the public interest or for the protection of investors and is consistent with the purposes intended by this chapter. In adopting, amending, and repealing rules and forms, § 47-31B-608 applies in order to achieve uniformity among the states and coordination with federal laws in the form and content of registration statements, applications, reports, and other records, including the adoption of uniform rules, forms, and procedures.
(c) Financial statements. Subject to Section 15(h) of the Securities Exchange Act and Section 222 of the Investment Advisers Act of 1940, the director may require that a financial statement filed under this chapter be prepared in accordance with generally accepted accounting principles in the United States and comply with other requirements specified by rule adopted or order issued under this chapter. A rule adopted or order issued under this chapter may establish:
(1) Subject to Section 15(h) of the Securities Exchange Act and Section 222 of the Investment Advisors Act of 1940, the form and content of financial statements required under this chapter;
(2) Whether unconsolidated financial statements must be filed; and
(3) Whether required financial statements must be audited by an independent certified public accountant.
(d) Interpretative opinions. The director may provide interpretative opinions or issue determinations that the director will not institute a proceeding or an action under this chapter against a specified person for engaging in a specified act, practice, or course of business if the determination is consistent with this chapter. A fifty dollar fee is required for interpretative opinions and no action letters.
(e) Effect of compliance. A penalty under this chapter may not be imposed for, and liability does not arise from conduct that is engaged in or omitted in good faith believing it conforms to a rule, form, or order of the director under this chapter.
(f) Presumption for public hearings. A hearing in an administrative proceeding under this chapter must be conducted in public unless the director for good cause consistent with this chapter determines that the hearing will not be so conducted.
Source: SL 2004, ch 278, § 43.
47-31B-606. Administrative files and opinions.
(a) Public register of filings. The director shall maintain, or designate a person to maintain, a register of applications for registration of securities; registration statements; notice filings; applications for registration of broker-dealers, agents, investment advisers, and investment adviser representatives; notice filings by federal covered investment advisers that are or have been effective under this chapter or the predecessor act; notices of claims of exemption from registration or notice filing requirements contained in a record; orders issued under this chapter or the predecessor act; and interpretative opinions or no action determinations issued under this chapter.
(b) Public availability. The director shall make all rules, forms, interpretative opinions, and orders available to the public.
(c) Copies of public records. The director shall furnish a copy of a record that is a public record or a certification that the public record does not exist to a person that so requests. A rule adopted under this chapter may establish a reasonable charge for furnishing the record or certification. A copy of the record certified or a certificate by the director of a record's nonexistence is prima facie evidence of a record or its nonexistence.
Source: SL 2004, ch 278, § 44.
47-31B-607. Public records--Confidentiality.
(a) Presumption of public records. Except as otherwise provided in subsection (b), records obtained by the director or filed under this chapter, including a record contained in or filed with a registration statement, application, notice filing, or report, are public records and are available for public examination.
(b) Nonpublic records. The following records are not public records and are not available for public examination under subsection (a):
(1) A record obtained by the director in connection with an audit or inspection under § 47-31B-411(d) or an investigation under § 47-31B-602;
(2) A part of a record filed in connection with a registration statement under §§ 47-31B-301 and 47-31B-303 through 47-31B-305 or a record under § 47-31B-411(d) that contains trade secrets or confidential information if the person filing the registration statement or report has asserted a claim of confidentiality or privilege that is authorized by law;
(3) A record that is not required to be provided to the director or filed under this chapter and is provided to the director only on the condition that the record will not be subject to public examination or disclosure;
(4) A nonpublic record received from a person specified in § 47-31B-608(a); and
(5) Any social security number, residential address unless used as a business address, and residential telephone number unless used as a business telephone number, contained in a record that is filed; and
(6) A record obtained by the director through a designee of the director or that a rule or order under this chapter determines has been:
(A) Expunged from the director's records by the designee; or
(B) Determined to be nonpublic or nondisclosable by that designee if the director finds the determination to be in the public interest and for the protection of investors.
(c) Director discretion to disclose. If disclosure is for the purpose of a civil, administrative, or criminal investigation, action, or proceeding or to a person specified in § 47-31B-608(a), the director may disclose a record obtained in connection with an audit or inspection under § 47-31B-411(d) or a record obtained in connection with an investigation under § 47-31B-602.
Source: SL 2004, ch 278, § 45.
47-31B-608. Uniformity and cooperation with other agencies.
(a) Objective of uniformity. The director shall, in its discretion, cooperate, coordinate, consult, and, subject to § 47-31B-607, share records and information with the securities regulator of another state, Canada, a Canadian province or territory, a foreign jurisdiction, the Securities and Exchange Commission, the United States Department of Justice, the Commodity Futures Trading Commission, the Federal Trade Commission, the Securities Investor Protection Corporation, a self-regulatory organization, a national or international organization of securities regulators, a federal or state banking and insurance regulator, and a governmental law enforcement agency to effectuate greater uniformity in securities matters among the federal government, self-regulatory organizations, states, and foreign governments.
(b) Policies to consider. In cooperating, coordinating, consulting, and sharing records and information under this section and in acting by rule, order, or waiver under this chapter, the director shall, in its discretion, take into consideration in carrying out the public interest the following general policies:
(1) Maximizing effectiveness of regulation for the protection of investors;
(2) Maximizing uniformity in federal and state regulatory standards; and
(3) Minimizing burdens on the business of capital formation, without adversely affecting essentials of investor protection.
(c) Subjects for cooperation. The cooperation, coordination, consultation, and sharing of records and information authorized by this section includes:
(1) Establishing or employing one or more designees as a central depository for registration and notice filings under this chapter and for records required or allowed to be maintained under this chapter;
(2) Developing and maintaining uniform forms;
(3) Conducting a joint examination or investigation;
(4) Holding a joint administrative hearing;
(5) Instituting and prosecuting a joint civil or administrative proceeding;
(6) Sharing and exchanging personnel;
(7) Coordinating registrations under §§ 47-31B-301 and 47-31B-401 through 47-31B-404 and exemptions under § 47-31B-203;
(8) Sharing and exchanging records, subject to § 47-31B-607;
(9) Formulating rules, statements of policy, guidelines, forms, and interpretative opinions and releases;
(10) Formulating common systems and procedures;
(11) Notifying the public of proposed rules, forms, statements of policy, and guidelines;
(12) Attending conferences and other meetings among securities regulators, which may include representatives of governmental and private sector organizations involved in capital formation, deemed necessary or appropriate to promote or achieve uniformity; and
(13) Developing and maintaining a uniform exemption from registration for small issuers, and taking other steps to reduce the burden of raising investment capital by small businesses.
Source: SL 2004, ch 278, § 46.
47-31B-609. Judicial review.
(a) Judicial review of orders. A final order issued by the director under this chapter is subject to judicial review in accordance with chapter 1-26.
(b) Judicial review of rules. A rule adopted under this chapter is subject to judicial review in accordance with chapter 1-26.
Source: SL 2004, ch 278, § 47.
47-31B-610. Jurisdiction.
(a) Sales and offers to sell. Sections 47-31B-301, 47-31B-302, 47-31B-401(a), 47-31B-402(a), 47-31B-403(a), 47-31B-404(a), 47-31B-501, 47-31B-506, 47-31B-509, and 47-31B-510 do not apply to a person that sells or offers to sell a security unless the offer to sell or the sale is made in this state or the offer to purchase or the purchase is made and accepted in this state.
(b) Purchases and offers to purchase. Sections 47-31B-401(a), 47-31B-402(a), 47-31B-403(a), 47-31B-404(a), 47-31B-501, 47-31B-506, 47-31B-509, and 47-31B-510 do not apply to a person that purchases or offers to purchase a security unless the offer to purchase or the purchase is made in this state or the offer to sell or the sale is made and accepted in this state.
(c) Offers in this state. For the purpose of this section, an offer to sell or to purchase a security is made in this State, whether or not either party is then present in this state, if the offer:
(1) Originates from within this state; or
(2) Is directed by the offeror to a place in this state and received at the place to which it is directed.
(d) Acceptances in this state. For the purpose of this section, an offer to purchase or to sell is accepted in this state, whether or not either party is then present in this state, if the acceptance:
(1) Is communicated to the offeror in this state and the offeree reasonably believes the offeror to be present in this state and the acceptance is received at the place in this state to which it is directed; and
(2) Has not previously been communicated to the offeror, orally or in a record, outside this state.
(e) Publications, radio, television, or electronic communications. An offer to sell or to purchase is not made in this state when a publisher circulates or there is circulated on the publisher's behalf in this state a bona fide newspaper or other publication of general, regular, and paid circulation that is not published in this state, or that is published in this state but has had more than two thirds of its circulation outside this state during the previous twelve months or when a radio or television program or other electronic communication originating outside this state is received in this state. A radio or television program, or other electronic communication is considered as having originated in this state if either the broadcast studio or the originating source of transmission is located in this state, unless:
(1) The program or communication is syndicated and distributed from outside this state for redistribution to the general public in this state;
(2) The program or communication is supplied by a radio, television, or other electronic network with the electronic signal originating from outside this state for redistribution to the general public in this state;
(3) The program or communication is an electronic communication that originates outside this state and is captured for redistribution to the general public in this state by a community antenna or cable, radio, cable television, or other electronic system; or
(4) The program or communication consists of an electronic communication that originates in this state, but which is not intended for distribution to the general public in this state.
(f) Investment advice and misrepresentations. Sections 47-31B-403(a), 47-31B-404(a), 47-31B-405(a), 47-31B-502, 47-31B-505, and 47-31B-506 apply to a person if the person engages in an act, practice, or course of business instrumental in effecting prohibited or actionable conduct in this state, whether or not either party is then present in this state.
Source: SL 2004, ch 278, § 48.
47-31B-611. Service of process.
(a) Signed consent to service of process. A consent to service of process complying with this section required by this chapter must be signed and filed in the form required by a rule or order under this chapter. A consent appointing the director the person's agent for service of process in a noncriminal action or proceeding against the person, or the person's successor or personal representative under this chapter or a rule adopted or order issued under this chapter after the consent is filed, has the same force and validity as if the service were made personally on the person filing the consent. A person that has filed a consent complying with this subsection in connection with a previous application for registration or notice filing need not file an additional consent.
(b) Conduct constituting appointment of agent for service. If a person, including a nonresident of this state, engages in an act, practice, or course of business prohibited or made actionable by this chapter or a rule adopted or order issued under this chapter and the person has not filed a consent to service of process under subsection (a), the act, practice, or course of business constitutes the appointment of the director as the person's agent for service of process in a noncriminal action or proceeding against the person or the person's successor or personal representative.
(c) Procedure for service of process. Service under subsection (a) or (b) may be made by providing a copy of the process to the office of the director, but it is not effective unless:
(1) The plaintiff, which may be the director, promptly sends notice of the service and a copy of the process, return receipt requested, to the defendant or respondent at the address set forth in the consent to service of process or, if a consent to service of process has not been filed, at the last known address, or takes other reasonable steps to give notice; and
(2) The plaintiff files an affidavit of compliance with this subsection in the action or proceeding on or before the return day of the process, if any, or within the time that the court, or the director in a proceeding before the director, allows.
(d) Service in administrative proceedings or civil actions by director. Service pursuant to subsection (c) may be used in a proceeding before the director or by the director in a civil action in which the director is the moving party.
(e) Opportunity to defend. If process is served under subsection (c), the court, or the director in a proceeding before the director, shall order continuances as are necessary or appropriate to afford the defendant or respondent reasonable opportunity to defend.
Source: SL 2004, ch 278, § 49.
47-31B-612. Severability clause.
If any provision of this chapter or its application to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.
Source: SL 2004, ch 278, § 50.
47-31B-703. Application of chapter to existing proceeding and existing rights and duties.
(a) Applicability of predecessor act to pending proceedings and existing rights. The predecessor act exclusively governs all actions or proceedings that are pending on July 1, 2004 or may be instituted on the basis of conduct occurring before July 1, 2004, but a civil action may not be maintained to enforce any liability under the predecessor act unless instituted within any period of limitation that applied when the cause of action accrued or within five years after July 1, 2004, whichever is earlier.
(b) Continued effectiveness under predecessor act. All effective registrations under the predecessor act, all administrative orders relating to the registrations, rules, statements of policy, interpretative opinions, declaratory rulings, no action determinations, and conditions imposed on the registrations under the predecessor act remain in effect while they would have remained in effect if this chapter had not been enacted. They are considered to have been filed, issued, or imposed under this chapter, but are exclusively governed by the predecessor act.
(c) Applicability of predecessor act to offers or sales. The predecessor act exclusively applies to an offer or sale made within one year after July 1, 2004 pursuant to an offering made in good faith before July 1, 2004 on the basis of an exemption available under the predecessor act.
Source: SL 2004, ch 278, § 53.
47-33-1
Citation of chapter.
47-33-2
Declaration of public policy.
47-33-3
Definition of terms.
47-33-4
Factors considered by board in discharging duties.
47-33-5
Creation of shares--Rights and options.
47-33-6
Right to sue.
47-33-7
Conflicting provisions of law.
47-33-8
Control share acquisition--Voting rights.
47-33-9
Information statement by control share acquisitioner--Controls.
47-33-10
Request for special meeting by acquiring person--Consideration of voting rights.
47-33-11
Notice of special shareholders meeting.
47-33-12
Voting rights of shares acquired in control share acquisition.
47-33-13
Redemption of shares in absence of information statement or negative vote by
shareholders.
47-33-14
Right to demand fair value of voting shares--Notice of right of demand.
47-33-15
Written demand for fair value of shares--Remittance by acquiring person--Court settlement
after sixty days--Court procedure--Costs.
47-33-16
Application of chapter to acquiring person--Application to non-public domestic
corporations.
47-33-17
Business combinations between corporation and interested shareholder.
47-33-18
Required conditions for business combination--Aggregate amount of cash and marked
value--Consideration--Beneficial owners.
47-33-19
Conditions making § 47-33-17 inapplicable--Effect of corporation changes after
acquisition date.
47-33-1. Citation of chapter.
This chapter shall be known and may be cited as the South Dakota Domestic Public Corporation Takeover Act.
Source: SL 1990, ch 369, § 101.
47-33-2. Declaration of public policy.
The Legislature hereby finds and declares the following to be the public policy of this state:
(1) This state has traditionally regulated the affairs of corporations organized in this state, including the regulation of mergers and other business combinations and the rights of shareholders. The United State Supreme Court has recently reaffirmed the power of states to regulate these affairs.
(2) Domestic public corporations encompass, represent and affect, through their ongoing business operations, a variety of constituencies, including South Dakota shareholders, employees, customers, creditors, suppliers of goods and services, and local communities and their economies whose welfare is vital to the state's interests.
(3) In order to promote such welfare, the regulation of the internal affairs of domestic public corporations as reflected in the laws of this state governing business corporations should allow for the stable, long-term growth of domestic public corporations.
(4) Takeovers of publicly held corporations frequently occur through acquisition techniques which in effect coerce shareholders to participate in the transaction.
(5) Takeovers of publicly held corporations are also frequently financed largely through debt to be repaid in the short term through changes in the operations of the target corporation, by the sale of substantial assets of the target corporation, and other means. In other states, such takeovers have impaired local employment conditions and disrupted local commercial activity. These takeovers involve a substantial risk of unfair business dealing, may prevent shareholders from realizing the full value of their holdings through forced mergers and other coercive devices, and may undermine the state's interest in promoting stable relationships involving the corporations that it charters. The threat of these takeovers also deprives shareholders of value by forcing the adoption of short-term business strategies as well as defensive tactics which may not be in the public interest.
(6) This chapter is not intended to prevent the use of any other lawful measure to challenge or defend against attempts to acquire control of a domestic public corporation, including, without limiting the generality of the foregoing, rights and options described in § 47-33-5.
Source: SL 1990, ch 369, § 102.
47-33-3. Definition of terms.
(1) Terms used in this chapter mean:
(a) "Acquiring person," a person that makes or proposes to make a control share acquisition. If two or more persons act as a partnership, limited partnership, syndicate or other group pursuant to any written or unwritten agreement, arrangement, relationship, understanding or otherwise, for the purposes of acquiring, owning or voting shares of a domestic public corporation, all members of the partnership, syndicate or other group constitute a "person." "Acquiring person" does not include:
(i) A licensed broker/dealer or licensed underwriter who
(A) Purchases shares of a domestic public corporation solely for the purposes of resale to the public; and
(B) Is not acting in concert with an acquiring person; or
(ii) A person who becomes entitled to exercise or direct the exercise of a new range of voting power within any of the ranges specified in subdivision 47-33-9(4) solely as a result of a repurchase of shares by, or recapitalization of, the domestic public corporation or similar action unless:
(A) The repurchase, recapitalization or similar action was proposed by or on behalf of, or pursuant to any written or unwritten agreement, arrangement, relationship, understanding, or otherwise with, the person or any affiliate or associate of the person; or
(B) The person thereafter acquires beneficial ownership, directly or indirectly, of outstanding voting shares of the domestic public corporation and, immediately after the acquisition, is entitled to exercise or direct the exercise of the same or a higher range of voting power under subdivision 47-33-9(4) as the person became entitled to exercise as a result of the repurchase, recapitalization, or similar action;
(b) "Affiliate," a person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a specified person;
(c) "Announcement date," if used in reference to any business combination, means the date of the first public announcement of the final, definitive proposal for the business combination;
(d) "Articles," the original or restated articles of incorporation and all amendments thereto;
(e) "Associate," if used to indicate a relationship with any person, means any of the following:
(i) Any corporation or organization of which the person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent or more of any class or series of its equity securities;
(ii) Any trust or other estate in which the person has a substantial beneficial interest or as to which the person serves as trustee or in a similar fiduciary capacity;
(iii) Any relative or spouse of the person, or any relative of the spouse residing in the home of the person;
(f) "Beneficial owner," if used with respect to any equity security, means a person:
(i) That, individually or with or through any of its affiliates or associates, beneficially owns an equity security, directly or indirectly;
(ii) That, individually with or through any of its affiliates or associates has:
(A) The right to acquire an equity security, whether that right is exercisable immediately or only after the passage of time, pursuant to any agreement, arrangement, relationship or understanding, whether written or unwritten, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise. However, a person may not be deemed the beneficial owner of shares tendered pursuant to a tender or exchange offer made by that person or any of that person's affiliates or associates until those tendered shares are accepted for purchase or exchange; or
(B) The right to vote an equity security pursuant to any agreement, arrangement, relationship or understanding, whether written or unwritten. However, a person may not be deemed the beneficial owner of any shares under this subparagraph if the agreement, arrangement, relationship or understanding to vote the shares (1) arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made in accordance with the applicable rules and regulations under the Exchange Act, and (2) is not then reportable on a Schedule 13D under the Exchange Act or any comparable or successor report; or
(iii) That has any agreement, arrangement, relationship or understanding, whether written or unwritten, for the purpose of acquiring, holding, voting (except voting under a revocable proxy or consent described in subparagraph (ii)(B) of this subsection), or disposing of an equity security with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, the equity security;
(g) "Board," the board of directors of a corporation;
(h) "Business combination," if used in reference to a domestic public corporation and any interested shareholder of the domestic public corporation, means any of the following:
(i) Any merger or consolidation of the domestic public corporation or any subsidiary of the domestic public corporation with:
(A) The interested shareholder; or
(B) Any other foreign or domestic corporation (whether or not itself an interested shareholder of the domestic public corporation) that is, or after the merger or consolidation would be, an affiliate or associate of the interested shareholder, but excluding (1) the merger of a wholly-owned subsidiary of the domestic public corporation into the domestic public corporation, (2) the merger of two or more wholly-owned subsidiaries of the domestic public corporation, or (3) the merger of a domestic or foreign corporation, other than an interested shareholder or an affiliate or associate of an interested shareholder, with a wholly-owned subsidiary of the domestic public corporation pursuant to which the surviving corporation, immediately after the merger, becomes a wholly-owned subsidiary of the domestic public corporation;
(ii) Any exchange, pursuant to a plan of exchange under the laws of this state or a comparable statute of any other state or jurisdiction, of shares of the domestic public corporation or any subsidiary of the domestic public corporation for equity securities of either (i) the interested shareholder; or (ii) any other domestic or foreign corporation, whether or not itself an interested shareholder of the domestic public corporation, that is, or after the exchange would be, an affiliate or associate of the interested shareholder;
(iii) Any sale, lease, exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, to or with the interested shareholder or any affiliate or associate of the interested shareholder, of assets of the domestic public corporation or any subsidiary of the domestic public corporation to which any of the following applies;
(A) Having an aggregate market value equal to ten percent or more of the aggregate market value of all the assets, determined on a consolidated basis, of the domestic public corporation;
(B) Having an aggregate market value equal to ten percent or more of the aggregate market value of all the outstanding shares of the domestic public corporation; or
(C) Representing ten percent or more of the earning power or net income, determined on a consolidated basis, of the domestic public corporation;
(iv) The issuance or transfer by the domestic public corporation or any subsidiary of the domestic public corporation, in one transaction or a series of transactions, of any shares of the domestic public corporation or any subsidiary of the domestic public corporation that have an aggregate market value equal to five percent or more of the aggregate market value of all the outstanding shares of the domestic public corporation to the interested shareholder or any affiliate or associate of the interested shareholder, except pursuant to the exercise of rights or options to purchase shares offered, or a dividend or distribution paid or made, pro rata to all shareholders of the domestic public corporation other than for the purpose, directly or indirectly, of facilitating or effecting a subsequent transaction that would have been a business combination if the dividend or distribution had not been made;
(v) The adoption of any plan or proposal for the liquidation or dissolution of the domestic public corporation, or any reincorporation of the domestic public corporation in another state or jurisdiction, proposed by or on behalf of, or pursuant to any written or unwritten agreement, arrangement, relationship, understanding or otherwise with, the interested shareholder or any affiliate or associate of the interested shareholder;
(vi) Any reclassification of securities, including any share dividend or split, reverse share split, or other distribution of shares in respect of shares, any recapitalization of the domestic public corporation, any merger or consolidation of the domestic public corporation with any subsidiary of the domestic public corporation, or any other transaction, whether or not with or into or otherwise involving the interested shareholder, proposed by, on behalf of, or pursuant to any written or unwritten agreement, arrangement, relationship, understanding or otherwise with, the interested shareholder or any affiliate or associate of the interested shareholder, that has the effect, directly or indirectly, of increasing the proportionate amount of the outstanding voting shares of any class or series, or securities that are exchangeable for or convertible into, or carry the right to acquire voting shares, of the domestic public corporation or any subsidiary of the domestic public corporation that is, directly or indirectly, owned by the interested shareholder or any affiliate or associate of the interested shareholder, except as a result of immaterial changes due to fractional share adjustments; or
(vii) Any receipt by the interested shareholder or any affiliate or associate of the interested shareholder of the benefit, directly or indirectly, except proportionately as a shareholder of the domestic public corporation, of any loans, advances, guarantees, pledges or other financial assistance, or any tax credits or other tax advantages provided by or through the domestic public corporation. However, the term "business combination" may not be deemed to include the receipt of any of the foregoing benefits by that domestic public corporation or any of that corporation's subsidiaries arising from transactions, such as intercompany loans or tax sharing arrangements, between that domestic public corporation and its subsidiaries in the ordinary course of business;
(i) "Common shares," any shares other than preferred shares;
(j) "Consummation date," with respect to any business combination, the date of consummation of the business combination or, in the case of a business combination as to which a shareholder vote is taken, the later of:
(i) The business day before the vote; or
(ii) Twenty days before the date of consummation of business combination;
(k) "Control," including the terms "controlling," "controlled by," and "under common control with," means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise. A person's beneficial ownership of ten percent or more of the voting power of a corporation's outstanding voting shares creates a presumption that the person has control of the corporation. Notwithstanding the foregoing, a person is not considered to have control of a corporation if the person holds voting shares, in good faith and not for the purpose of circumventing this chapter, as an agent, bank, broker, nominee, custodian or trustee for one or more beneficial owners who do not individually or as a group have control of the corporation;
(l) "Control share acquisition," an acquisition, directly or indirectly, by an acquiring person of beneficial ownership of shares of a domestic public corporation that, except for § 47-33-8, would, if added to all other shares of the domestic public corporation beneficially owned by the acquiring person, entitle the acquiring person, immediately after the acquisition, to exercise or direct the exercise of a new range of voting power within any of the ranges specified in subdivision 47-33-9(4) but does not include any of the following:
(i) An acquisition before, or pursuant to a contract entered into before, February 21, 1990;
(ii) An acquisition by a donee pursuant to an inter vivos gift not made to avoid this chapter or by any person who acquires the shares of a decedent from the representative of the decedent's estate other than as a creditor or purchaser; or
(iii) An acquisition pursuant to the satisfaction of a pledge or other security interest created in good faith and not for the purpose of circumventing this chapter;
(iv) An acquisition pursuant to a merger, consolidation or share exchange effected under §§ 47-1A-1101 to 47-1A-1108, inclusive, if the domestic public corporation is a party to the transaction;
(v) An acquisition for the benefit of others by a person acting in good faith and not made to avoid this chapter, to the extent that the person may not exercise or direct the exercise of the voting power or disposition of the shares except upon the instruction of others;
(vi) The acquisition of shares of a domestic public corporation, in good faith, and not for the purpose of circumventing this chapter, by or from any person whose voting rights had previously been authorized by shareholders in compliance with this chapter, or any person whose previous acquisition of shares of a domestic public corporation would have constituted a control share acquisition but for one or more of the exceptions stated in subparagraphs (i) through (v) of this definition, unless the acquisition entitles the acquiring person, directly or indirectly, alone or as part of a group, to exercise or direct the exercise of voting power of the domestic public corporation in the election of directors in excess of the range of voting power previously authorized by the shareholders pursuant to § 47-33-12.
All shares the beneficial ownership of which is acquired within a ninety- day period, and all shares the beneficial ownership of which is acquired pursuant to a plan to make a control share acquisition, shall be deemed to have been acquired in the same acquisition;
(m) "Corporation" and "domestic corporation," a corporation for profit incorporated under the laws of this state;
(n) "Domestic public corporation," a corporation organized under the laws of this state that is a publicly held corporation, has more than fifty shareholders, and which:
(i) Has either its principal place of business or its principal executive office located in this state, and owns or controls assets located in this state having a fair market value of at least one million dollars and has more than one hundred employees in this state; or
(ii) Has more than five percent of its shareholders resident in this state, has more than five percent of its shares owned by residents in this state, or has more than two hundred fifty shareholders resident in this state.
For the purpose of subparagraph (ii) of this subsection, the residence of each shareholder is the address of the shareholder which appears on the records of the domestic public corporation;
(o) "Equity security,":
(i) Any share or similar security, any certificate of interest, any participation in any profit sharing agreement, any voting trust certificate, or any certificate of deposit for an equity security; and
(ii) Any security convertible, with or without consideration, into an equity security, or any warrant, call or other option or privilege of buying an equity security without being bound to do so, or any other security carrying any right to acquire, subscribe to, or purchase an equity security;
(p) "Exchange Act," the Securities Exchange Act of 1934, (48 Stat. 881, 15 U.S.C. § 78a et seq.) as amended;
(q) "Interested shareholder," if used in reference to any domestic public corporation, any person, other than the domestic public corporation or any subsidiary of the domestic public corporation, that is either:
(i) The beneficial owner, directly or indirectly, of ten percent or more of the outstanding voting shares of the domestic public corporation; or
(ii) Is an affiliate or associate of the domestic public corporation and at any time within the four-year period immediately before the date in question was the beneficial owner, directly or indirectly, of ten percent or more of the then outstanding voting shares of the domestic public corporation;
For the purposes of determining whether a person is an interested shareholder, the number of voting shares of the domestic public corporation considered to be outstanding includes shares considered to be beneficially owned by the person through the application of subsection (f) of this section, but does not include any other unissued voting shares of the domestic public corporation which may be issuable pursuant to any agreement, arrangement, or understanding, or upon the exercise of rights, options, conversion rights, or otherwise;
(r) "Interested shares," the shares of a domestic public corporation owned by any of the following persons:
(1) The acquiring person or its affiliates or associates;
(2) Any officer of the domestic public corporation; or
(3) Any employee of the domestic public corporation who is also a director of the domestic public corporation;
(s) "Market value," if used in reference to shares or property of any domestic public corporation, the following:
(i) In the case of shares, the highest closing sale price of a share during the thirty-day period immediately preceding the date in question on the composite tape for New York Stock Exchange listed shares, or, if the shares are not quoted on the composite tape or not listed on the New York Stock Exchange, on the principal United States securities exchange registered under the Exchange Act on which the shares are listed, or, if the shares are not listed on any such exchange, the highest closing bid quotation with respect to a share during the thirty-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share as determined by the board of the domestic public corporation in good faith; and
(ii) In the case of property other than cash or shares, the fair market value of the property on the date in question as determined in good faith by the board of the domestic public corporation;
(t) "Person," an individual, corporation, limited liability company, partnership, unincorporated association, organization or other entity;
(u) "Preferred shares," any class or series of shares of a domestic public corporation that under the bylaws or articles of incorporation of the domestic public corporation:
(i) Is entitled to receive payment of dividends before any payment of dividends on some other class or series of shares; or
(ii) Is entitled in the event of any voluntary liquidation, dissolution or winding up of the corporation to receive payment or distribution of a preferential amount before any payments or distributions are received by some other class or series of shares;
(v) "Publicly held corporation," a corporation that has a class of equity securities registered pursuant to § 12 of the Exchange Act, or subject to § 15(d) of the Exchange Act;
(w) "Share," one of the units, however designated, into which the shareholders' proprietary interests in the corporation are divided;
(x) "Share acquisition date," with respect to any person and any domestic public corporation, the date that the person first becomes an interested shareholder of the domestic public corporation;
(y) "Shareholder," one who is a holder of record of shares in a corporation;
(z) "Subsidiary," of a specified corporation, any other corporation of which a majority of the outstanding voting shares entitled to be cast is owned, directly or indirectly, by the specified corporation;
(aa) "Voting shares," shares of a corporation entitled to vote generally in the election of directors;
(2) Terms in this chapter mean:
(a) "Board," the board of directors of a corporation;
(b) "Class," if used with reference to shares, means a category of shares that differs in designation or one or more rights or preferences from another category of shares of the corporation;
(c) "Director," a member of the board;
(d) "Good faith," honesty in fact in the conduct of the act or transaction concerned;
(e) "Intentionally," that the person referred to either has a purpose to do or fail to do the act or cause the result specified or believes that the act or failure to act, if successful, will cause that result. A person intentionally violates a statute if the person intentionally does the act or causes the result prohibited by the statute, or if the person intentionally fails to do the act or cause the result required by the statutes, even though the person may not know of the existence or constitutionality of the statute or the scope or meaning of the term used in the statute;
(f) "Knows," or has "knowledge," has actual knowledge of it. A person does not know of a fact merely because the person has reason to know of the fact;
(g) "Notice," is given by a corporation to a person when mailed to the person at the last known address of the person, when communicated to the person orally, when handed to the person, when left at the office of the person with a clerk or other person in charge of the office, or if there is no one in charge, when left in a conspicuous place in the office, or if the office is closed or the person to be notified has no office, or when left at the dwelling house or usual place of abode of the person with some person of suitable age and discretion then residing therein. Notice is given to a corporation when mailed or delivered to it at its registered office. Notice by mail is given when deposited in the United States mail with sufficient postage affixed;
(h) "Officer," a person elected, appointed, authorized, or otherwise designated as an officer by the board, and any other person considered elected as an officer;
(i) "Organization," a domestic or foreign corporation partnership, limited partnership, joint venture, association, business trust, estate, trust, enterprise and any other legal or commercial entity;
(j) "Outstanding shares," all shares duly issued and not reacquired by a corporation;
(k) "Series," a category of shares, within a class of shares authorized or issued by a corporation by or pursuant to its articles, that have some of the same rights and preferences as other shares within the same class, but that differ in designation or one or more rights and preferences from another category of shares within that class.
Source: SL 1990, ch 369, § 103; SL 1994, ch 351, § 128; SL 2005, ch 202, § 7.
47-33-4. Factors considered by board in discharging duties.
(1) In discharging the duties of their respective positions in taking action which may involve or relate to a change or potential change in the control of a domestic public corporation, and in determining what they reasonably believe to be in the best interest of the corporation, the board and individual directors may, in addition to considering the effects of any such action on the shareholders, consider any of the following:
(a) The long-term as well as the short-term interests of the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation;
(b) The effects of the action on the corporation's employees, customers, creditors and suppliers of goods and services;
(c) The effects of the action upon any community in which an office or other facility of the corporation is located; and
(d) The economy of this state and the nation. The consideration of those factors shall not constitute a violation of the director's fiduciary duty to the corporation or its shareholders, including, without limiting the generality of the foregoing, a director's duty of loyalty.
(2) If on the basis of the factors described in subdivision (1), the board determines that a change or potential change in the control of the domestic public corporation is not in the best interest of the corporation, it may reject a proposal or offer made to effect the change or potential change in the control of the corporation. If the board determines to reject any such proposal or offer, the board shall have no obligation to facilitate, remove any barriers to, or refrain from impeding the proposal or offer. Without limiting the generality of the foregoing, in the event the board determines that a change or potential change in the control of the domestic public corporation is not in the best interest of the corporation, the board shall have no obligation to redeem or to render inapplicable any rights or options described in § 47-33-5.
Source: SL 1990, ch 369, § 104.
47-33-5. Creation of shares--Rights and options.
Subject to any provisions contained in its articles, which shall be applicable only to rights or options created or issued thereafter, a domestic public corporation may create and issue, by way of distributions to shareholders, as dividends or otherwise, rights or options entitling the holders thereof to purchase from the corporation shares of any class or series. Such rights or options shall be evidenced in such manner as the board shall approve and shall set forth the terms upon which, the time within which, and the price at which such shares may be purchased from the corporation upon the exercise of any such right or option. The terms and conditions of such rights or options may include, without limitation, provisions which adjust the option price or number of shares issuable under such rights or options in the event of an acquisition of shares or a reorganization, merger, consolidation, sale of assets or other occurrence involving the domestic public corporation, and restrictions or conditions that preclude or limit the entitlement, exercise or transfer of such rights or options by any person or persons who, after the date of the creation or issuance of such rights or options, acquires, obtains the right to acquire or offers to acquire, directly or indirectly, beneficial ownership of a specified number or percentage of the domestic public corporation's outstanding voting shares or other shares of the corporation, or that invalidate or void such rights or options held by any such person or persons. This section applies to rights or options created or issued before, on or after February 21, 1990.
Source: SL 1990, ch 369, § 105.
47-33-6. Right to sue.
An acquiring person, an interested shareholder, a domestic public corporation and shareholders of a domestic public corporation may sue at law or in equity to enforce the provisions of this chapter.
Source: SL 1990, ch 369, § 106.
47-33-7. Conflicting provisions of law.
(1) The requirements of this chapter are in addition to the requirements of other applicable law and any requirements contained in either the articles or bylaws of a domestic public corporation. For the purpose of applying this chapter, if any other provision of law is inconsistent with, in conflict with or contrary to this chapter, that provision does not apply to the extent that it is inconsistent with, in conflict with or contrary to this chapter and the provisions of this chapter shall prevail over that other provision.
(2) Notwithstanding subdivision (1), any provision of this chapter which is inconsistent with, in conflict with or contrary to § 49-33-14.2 or 49-33-31 shall not apply to a domestic public corporation organized under chapter 49-33.
Source: SL 1990, ch 369, § 107.
47-33-8. Control share acquisition--Voting rights.
Unless the corporation's articles expressly provide, before the control share acquisition, that §§ 47-33-8 to 47-33-16, inclusive, do not apply to control share acquisitions of shares of the corporation, the shares of a domestic public corporation acquired by an acquiring person in a control share acquisition that exceed the threshold of voting power of any of the ranges specified in subdivision 47-33-9(4) shall have only the voting rights as shall be accorded to them pursuant to § 47-33-12.
Source: SL 1990, ch 369, § 201.
47-33-9. Information statement by control share acquisitioner--Controls.
Any person who proposes to make or has made a control share acquisition may at the person's election deliver an information statement to the domestic public corporation at the domestic public corporation's principal office. The information statement shall set forth all of the following:
(1) The identity of the acquiring person, including the identity of each member of any limited liability company, partnership, limited partnership, syndicate, or other group constituting the acquiring person, and the identity of each affiliate and associate of the acquiring person, including the identity of each affiliate and associate of each member of such partnership, syndicate, or other group. However, with respect to a limited partnership, the information need only be given with respect to a partner who is denominated or functions as the general partner and each affiliate and associate of the general partner;
(2) A statement that the information statement is made under this section;
(3) The number and class or series of shares of the domestic public corporation beneficially owned, directly or indirectly, before the control share acquisition by each of the persons identified pursuant to subsection (1);
(4) The number and class or series of shares of the domestic public corporation acquired or proposed to be acquired pursuant to the control share acquisition by each of the persons identified pursuant to subsection (1) and specification of which of the following ranges of voting power in the election of directors that, except for this section, resulted or would result from consummation of the control share acquisition:
(a) At least twenty percent but less than thirty-three and one-third percent;
(b) At least thirty-three and one-third percent but less than or equal to fifty percent;
(c) Over fifty percent; and
(5) The terms of the control share acquisition or proposed control share acquisition, including, without limiting the generality of the foregoing, the source of funds or other consideration and the material terms of the financial arrangements for the control share acquisition; plans or proposals of the acquiring person, including plans or proposals under consideration, to (a) liquidate or dissolve the domestic public corporation, (b) sell all or a substantial part of its assets, or merge it or exchange its shares with any other person, (c) change the location of its principal place of business or its principal executive office or of a material portion of its business activities, (d) change materially its management or policies of employment, (e) change materially its charitable or community contributions or its policies, programs, or practices relating thereto, (f) change materially its relationship with its suppliers of goods or services or customers or the communities in which it operates, or (g) make any other material change in its business, corporate structure, management, or personnel; and other objective facts as would be substantially likely to affect the decision of a shareholder with respect to voting on the control share acquisition.
If any material change occurs in the facts set forth in the information statement, including, but not limited to, any material increase or decrease in the number of shares of the domestic public corporation acquired or proposed to be acquired by the persons identified pursuant to subsection (1), the acquiring person shall promptly deliver to the domestic public corporation at its principal executive office an amendment to the information statement containing information relating to the material change. An increase or decrease or proposed increase or decrease equal, in the aggregate, for all persons identified pursuant to subsection (1) of one percent or more of the total number of outstanding shares of any class or series of the domestic public corporation shall be deemed "material" for the purpose of this section; an increase or decrease or proposed increase or decrease of less than this amount may be material, depending upon the facts and circumstances.
Source: SL 1990, ch 369, § 202; SL 1994, ch 351, § 129.
47-33-10. Request for special meeting by acquiring person--Consideration of voting rights.
(1) If the acquiring person so requests in writing at the time of delivery of an information statement pursuant to § 47-33-9, and has made, or has made a bona fide written offer to make, a control share acquisition and gives a written undertaking to pay or reimburse the domestic public corporation's expenses of a special meeting, except the expenses of the domestic public corporation in opposing according voting rights with respect to shares acquired or to be acquired in the control share acquisition, within ten days after receipt by the domestic public corporation of the information statement, a special meeting of the shareholders of the domestic public corporation shall be called for the sole purpose of considering the voting rights to be accorded shares referred to in § 47-33-8 acquired or to be acquired pursuant to the control share acquisition.
(2) The special meeting shall be held no later than fifty days after receipt of the information statement, unless the acquiring person agrees to a later date. If the acquiring person so requests in writing at the time of delivery of the information statement, the special meeting shall not be held sooner than thirty days after receipt by the domestic public corporation of the information statement.
(3) If no request for a special meeting is made, consideration of the voting rights to be accorded shares referred to in § 47-33-8 acquired or to be acquired pursuant to the control share acquisition shall be presented to the next special or annual meeting of the shareholders, unless prior thereto the matter of the voting rights becomes moot.
Source: SL 1990, ch 369, § 203.
47-33-11. Notice of special shareholders meeting.
The notice of the meeting shall be given to all shareholders of record as of the record date set for the meeting, whether or not entitled to vote at the meeting. The notice shall at a minimum be accompanied by a copy of the information statement, and a copy of any amendment to the information statement previously delivered to the domestic public corporation, and a statement disclosing that the board of the domestic public corporation recommends approval of, expresses no opinion and is remaining neutral toward, recommends rejection of, or is taking no position or making no recommendation with respect to according voting rights to the shares referred to in § 47-33-8 acquired or to be acquired in the control share acquisition. Any amendments to the information statement received after mailing the notice of and prior to the meeting shall be mailed promptly to the shareholders by the domestic public corporation.
Source: SL 1990, ch 369, § 204.
47-33-12. Voting rights of shares acquired in control share acquisition.
(1) Shares referred to in § 47-33-8 acquired in a control share acquisition shall have the same voting rights as other shares of the same class or series only if approved by a resolution of shareholders of the domestic public corporation at a special or annual meeting of shareholders pursuant to § 47-33-10.
(2) The resolution of shareholders must be approved by:
(a) The affirmative vote of the holders of the majority of the voting power of all outstanding shares entitled to vote including all shares held by the acquiring person; and
(b) The affirmative vote of the holders of the majority of the voting power of all outstanding shares entitled to vote excluding all interested shares.
A class or series of shares of the domestic public corporation is entitled to vote separately as a class or series if any provision of the control share acquisition would, if contained in a proposed amendment to the articles, entitle the class or series to vote separately as a class or series.
(3) To have the voting rights accorded by approval of a resolution of shareholders, any proposed control share acquisition not consummated prior to the time of the shareholder approval must be consummated within one hundred eighty days after the shareholder approval.
(4) Any shares referred to in § 47-33-8 acquired in a control share acquisition that do not have voting rights accorded to them by approval of a resolution of shareholders shall regain their voting rights upon transfer to a person other than the acquiring person or any affiliate or associate of the acquiring person unless the acquisition of the shares by the other person constitutes a control share acquisition, in which case the voting rights of the shares are subject to the provisions of this article.
Source: SL 1990, ch 369, § 205.
47-33-13. Redemption of shares in absence of information statement or negative vote by shareholders.
Unless otherwise expressly provided in the articles of a domestic public corporation before a control share acquisition has occurred, the domestic public corporation shall have the option to call for redemption of all but not less than all shares referred to in § 47-33-8 acquired in a control share acquisition, at a redemption price equal to the market value of the shares at the time of the call for redemption, in the event:
(1) An information statement has not been delivered to the domestic public corporation by the acquiring person by the tenth day after the control share acquisition; or
(2) An information statement has been delivered but the shareholders have voted not to accord voting rights to such shares pursuant to § 47-33-12.
The call for redemption shall be given by the domestic public corporation within thirty days after the domestic public corporation has knowledge of the event giving the domestic public corporation the option to call the shares for redemption and the shares shall be redeemed within sixty days after the call is given.
Source: SL 1990, ch 369, § 206.
47-33-14. Right to demand fair value of voting shares--Notice of right of demand.
(1) Unless otherwise provided in the articles of the domestic public corporation before the control share acquisition has occurred, in the event control shares acquired in the control share acquisition are accorded voting rights pursuant to § 47-33-12 and the acquiring person beneficially owns a majority or more of all voting shares, all shareholders of the domestic public corporation who did not vote to approve the resolution pursuant to § 47-33-12 shall have the right to make written demand on the acquiring person for payment of the fair value of the voting shares of the corporation held by the shareholder and the acquiring person shall be required to pay the fair value, plus interest, to the shareholder in cash pursuant to the procedures herein specified. Interest shall be payable on the fair value of the shares at the Category C rate of interest provided in § 54-3-16 from and after the date the control shares acquired in the control share acquisition are accorded full voting rights pursuant to § 47-33-12.
(2) As used in this section, "fair value" includes an increment representing a proportion of any value payable for acquisition of control of the corporation and, in no event, shall be less than the highest price paid per share by the acquiring person in the control share acquisition for other shares of the same class or series.
(3) As soon as practicable after such events have occurred, the acquiring person shall cause a notice to be delivered to all shareholders of the domestic public corporation:
(a) Advising them that all shareholders who did not vote to accord voting rights to the control shares pursuant to § 47-33-12 are entitled to demand that they be paid the fair value of their shares;
(b) Advising them that the minimum value any such shareholder can receive under this section is the highest price paid per share by the acquiring person in the control share acquisition for other shares of the same class or series and stating that value, plus interest;
(c) Stating the acquiring person's opinion of the fair value of the shares, explaining the basis upon which that value was determined, and offering to pay each shareholder that amount in cash for each share, plus interest, upon receiving the shareholder's agreement to accept it; however, in no event shall the amount offered by the acquiring person be less than the minimum value the shareholder can receive under this section;
(d) Advising them that any such shareholder may elect to employ the procedure set forth in § 47-33-15 for a determination of the fair value of his shares if the shareholder believes the fair value of his shares is higher than the amount offered by the acquiring person; and
(e) Stating the address to which such shareholders may send their demands to be paid the fair value of their shares and the time within which the shareholders must submit their demands, which shall not be less than thirty days from the date of mailing of the notice by the acquiring person to the shareholders.
The notice shall also include copies of this section and § 47-33-15 and a form which may be used by the shareholder for demanding payment pursuant to § 47-33-15.
(4) The provisions of this section shall not preclude an acquiring person from purchasing voting shares of the corporation at a price other than the fair value of those shares and does not preclude any shareholder from agreeing to sell his voting shares at that or any other price to any person.
Source: SL 1990, ch 369, § 207.
47-33-15. Written demand for fair value of shares--Remittance by acquiring person--Court settlement after sixty days--Court procedure--Costs.
(1) Any shareholder of the domestic public corporation who receives the notice required by § 47-33-14 and who is entitled to and desires to receive fair value for his shares from the acquiring person, may make written demand on the acquiring person for payment of the fair value of his shares. The written demand shall be sent by the shareholder to the acquiring person to the address and within the time period specified in the notice. The demand of the shareholder shall state the number and class or series, if any, of the shares owned by him with respect to which the demand is made and shall also state the amount the shareholder is willing to accept in payment for those shares from the acquiring person. Any shareholder who does not make such written demand within such time period shall have no further right to receive payment from the acquiring person required by § 47-33-14 for the shares owned by him with respect to which no written demand was made.
(2) Immediately upon receipt of a demand for payment from a shareholder pursuant to this section, the acquiring person shall remit to the shareholder either the amount demanded by the shareholder or the amount offered by the acquiring person in the notice required by § 47-33-14, together with interest to the date of payment. If the remittance made by the acquiring person is less than the amount demanded by the shareholder, the remittance shall be accompanied by a notice from the acquiring person of the shareholder's right to demand supplemental payment, accompanied by copies of this section and § 47-33-14. Upon receipt of the remittance from the acquiring person pursuant to this subsection, the shareholder shall immediately transmit to the acquiring person the certificates for the certificated shares with respect to which the payment was made, duly endorsed for transfer to the acquiring person, and shall execute such documents provided by the acquiring person as are reasonably necessary to transfer any uncertificated shares to the acquiring person. Prior to receipt of the remittance from the acquiring person pursuant to this subsection, the shareholder shall retain the right to vote those shares and receive dividends and other distributions thereon and, thereafter, the acquiring person shall be entitled to vote such shares and receive dividends and other distributions thereon. The fair value of the dividends and other distributions received by the shareholder subsequent to the date the control shares were accorded voting rights pursuant to § 47-33-12 shall be subtracted from any amount owing to the shareholder by the acquiring person under § 47-33-14.
(3) If within sixty days after the acquiring person gives the notice pursuant to § 47-33-14, any of the demands for payment made by shareholders pursuant to subdivision (1) remain unsettled, the acquiring person shall file an action in the circuit court of the county of this state where the registered office of the domestic public corporation is located requesting that the fair value of such shares be determined by the court. All shareholders, wherever residing, whose demands have not been settled, shall be made parties to the proceeding. A copy of the petition shall be served on each such shareholder. The jurisdiction of the court shall be plenary and exclusive.
(4) The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value of the shares. The appraiser shall have such power and authority as shall be specified in the order of their appointment or in any amendment thereof. The parties to the proceeding shall be entitled to discovery in the same manner as in other civil actions. All shareholders who are made parties to such action shall be entitled, after a hearing without a jury, to judgment against the acquiring person for the amount by which the fair value of their shares is found to exceed the amount previously remitted by the acquiring person to the shareholder, with interest. If the acquiring shareholder fails to file an action as provided in this section, each shareholder who has made a timely demand and who has not already settled his claim against the acquiring person shall be paid by the acquiring person the amount demanded by the shareholder pursuant to subdivision (1), with interest, and may sue therefor in an appropriate court.
(5) The costs and expenses of any action under this section, including the reasonable compensation and expense of appraisers appointed by the court, shall be determined by the court and assessed against the acquiring person, except that any part of the costs and expenses may be apportioned and assessed as the court considers equitable against some or all of the shareholders who are parties and whose demand for payment in excess of the amount remitted by the acquiring person the court finds to be arbitrary, vexatious or not in good faith. Fees and expenses of counsel and of experts for the parties to the proceeding may be assessed as the court considers equitable against the acquiring person and in favor of any or all shareholders who are parties to the action if the acquiring person fails to comply substantially with the requirements of this section, and may be assessed against either the acquiring person or a shareholder in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this section and § 47-33-14. If the court finds that services of counsel for any shareholder were of substantial benefit to other shareholders similarly situated and should not be assessed against the acquiring person, it may award such counsel reasonable fees to be paid out of the amount awarded to the other shareholders who were benefited.
(6) Upon full payment by the acquiring person of all amounts required by this section, the shareholder shall cease to have any interest in the shares purchased by the acquiring person under this section.
Source: SL 1990, ch 369, § 208.
47-33-16. Application of chapter to acquiring person--Application to non-public domestic corporations.
(1) If a corporation is a domestic public corporation as of the acquiring person's share acquisition date, this chapter shall continue to apply to such corporation with respect to such acquiring person and its affiliates and associates, regardless of changes in the corporation which occur on or after that date which would otherwise result in the corporation ceasing to be a domestic public corporation, if such changes result, directly or indirectly, from action taken or proposed by or on behalf of, or pursuant to any written or unwritten agreement, arrangement, relationship, understanding, or otherwise with, the acquiring person or any affiliate or associate of the acquiring person, or from the transactions by which the person became an acquiring person or an interested shareholder.
(2) In addition to domestic public corporations, §§ 47-33-8 to 47-33-16, inclusive, shall also apply to a control share acquisition of shares of other domestic corporations that meet the requirements of a domestic public corporation except that the corporation is not a publicly-held corporation, if an express provision electing to be subject to §§ 47-33-8 to 47-33-16, inclusive, is contained in the articles of such corporation and the control share acquisition occurs after the effective date of the provision, in which event the term "domestic public corporation" as used in §§ 47-33-1 to 47-33-7, inclusive, and §§ 47-33-8 to 47-33-16, inclusive, shall be deemed to include such electing domestic corporation.
Source: SL 1990, ch 369, § 209.
47-33-17. Business combinations between corporation and interested shareholder.
Except as provided in § 47-33-19 relating to the application and effect of this section, a domestic public corporation shall not engage at any time in any business combination with any interested shareholder of the corporation other than:
(1) A business combination approved by the board of directors of the domestic public corporation prior to the interested shareholder's share acquisition date, or where the purchase of shares made by the interested shareholder on the interested shareholder's share acquisition date has been approved by the board of directors of the domestic public corporation prior to the interested shareholder's share acquisition date.
(2) A business combination approved:
(a) By the affirmative vote of the holders of a majority of the outstanding voting shares, not including any voting shares beneficially owned by the interested shareholder or any affiliate or associate of such interested shareholder, at a meeting called for such purpose no earlier than three months after the interested shareholder became, and if at the time of the meeting the interested shareholder is, the beneficial owner, directly or indirectly, of at least eighty percent of the voting shares, if the business combination also satisfies all the conditions of § 47-33-18; or
(b) By the affirmative vote of all of the holders of all of the outstanding voting shares.
(3) A business combination approved by the affirmative vote of the holders of a majority of the outstanding voting shares, not including any voting shares beneficially owned by the interested shareholder or any affiliate or associate of the interested shareholder, at a meeting called for such purpose no earlier than four years after the interested shareholder's share acquisition date.
(4) A business combination approved by a majority of the outstanding voting shares at a shareholder's meeting called for such purpose no earlier than four years after the interested shareholder's share acquisition date, if the business combination also satisfies all of the conditions of § 47-33-18.
Source: SL 1990, ch 369, § 301.
47-33-18. Required conditions for business combination--Aggregate amount of cash and marked value--Consideration--Beneficial owners.
A business combination conforming to subsection 47-33-17(2)(a) and subdivision 47-33-17(4) shall also meet all of the following conditions:
(1) The aggregate amount of the cash and the market value as of the consummation date of consideration other than cash to be received per share by holders of outstanding common shares of such domestic public corporation in the business combination is at least equal to the higher of the following:
(a) The highest per share price, including any brokerage commissions, transfer taxes and soliciting dealer's fees, paid by the interested shareholder for any common shares of the same class or series acquired by it: (i) within the three-year period immediately prior to the announcement date with respect to such business combination, or (ii) within the three-year period immediately prior to, or in, the transaction in which the interested shareholder became an interested shareholder, whichever is higher; plus, in either case, interest compounded annually from the earliest date on which the highest per-share acquisition price was paid through the consummation date at the rate for one year United States Treasury obligations from time to time in effect; less the aggregate amount of any cash dividends paid, and the market value of any dividends paid other than in cash, per common share since such earliest date, up to the amount of the interest.
(b) The market value per common share on the announcement date with respect to the business combination or on the interested shareholder's share acquisition date, whichever is higher; plus interest compounded annually from such date through the consummation date at the rate for one-year United States Treasury obligations from time to time in effect; less the aggregate amount of any cash dividends paid, and the market value of any dividends paid other than in cash, per common share since such date, up to the amount of the interest.
(2) The aggregate amount of the cash and the market value as of the consummation date of consideration other than cash to be received per share by holders of outstanding shares of any class or series of shares, other than common shares, of the corporation is at least equal to the highest of the following, whether or not the interested shareholder has previously acquired any shares of such class or series of shares:
(a) The highest per-share price, including any brokerage commissions, transfer taxes and soliciting dealer's fees, paid by the interested shareholder for any shares of such class or series of shares acquired by it: (i) within the three-year period immediately prior to the announcement date with respect to the business combination, or (ii) within the three-year period immediately prior to, or in, the transaction in which the interested shareholder became an interested shareholder, whichever is higher; plus, in either case, interest compounded annually from the earliest date on which the highest per-share acquisition price was paid through the consummation date at the rate for one-year United States Treasury obligations from time to time in effect; less the aggregate amount of any cash dividends paid, and the market value of any dividends paid other than in cash, per share of such class or series of shares since such earliest date, up to the amount of the interest.
(b) The highest preferential amount per share to which the holders of shares of such class or series of shares are entitled in the event of any voluntary liquidation, dissolution or winding up of the corporation, plus the aggregate amount of any dividends declared or due as to which such holders are entitled prior to payment of dividends on some other class or series of shares, unless the aggregate amount of the dividends is included in such preferential amount.
(c) The market value per share of such class or series of shares on the announcement date with respect to the business combination or on the interested shareholder's share acquisition date, whichever is higher; plus interest compounded annually from such date through the consummation date at the rate for one-year United States Treasury obligations from time to time in effect; less the aggregate amount of any cash dividends paid and the market value of any dividends paid other than in cash, per share of such class or series of shares since such date, up to the amount of the interest.
(3) The consideration to be received by holders of a particular class or series of outstanding shares, including common shares, of the corporation in the business combination is in cash or in the same form as the interested shareholder has used to acquire the largest number of shares of such class or series of shares previously acquired by it, and the consideration shall be distributed promptly.
(4) The holders of all outstanding shares of the corporation not beneficially owned by the interested shareholder immediately prior to the consummation of the business combination are entitled to receive in the business combination cash or other consideration for such shares in compliance with subsections (1), (2), and (3) of this section.
(5) After the interested shareholder's share acquisition date and prior to the consummation date with respect to the business combination, the interested shareholder has not become the beneficial owner of any additional voting shares of such corporation except:
(a) As part of the transaction which resulted in such interested shareholder becoming an interested shareholder;
(b) By virtue of proportionate splits of shares, share dividends, or other distributions of shares in respect of shares not constituting a business combination;
(c) Through a business combination meeting all of the conditions of subsection 47-33-17(1), (2), (3), or (4);
(d) Through purchase by the interested shareholder at any price which, if the price had been paid in an otherwise permissible business combination the announcement date and consummation date of which were the date of such purchase, would have satisfied the requirements of subsection (1), (2), and (3) of this section; or
(e) Through purchase required by and pursuant to the provisions of, and at no less than the fair value including interest to the date of payment as determined by the court under § 47-33-15 relating to valuation procedures or, if such fair value was not then so determined, then at a price that would satisfy the conditions in subparagraph (d) of this subsection.
Source: SL 1990, ch 369, § 302.
47-33-19. Conditions making § 47-33-17 inapplicable--Effect of corporation changes after acquisition date.
(1) Section 47-33-17 shall not apply to any business combination of a domestic public corporation:
(a) If the articles of the domestic public corporation provide that this article shall not be applicable to the domestic public corporation:
(i) By a provision included in the original articles expressly electing not to be subject to § 47-33-17; or
(ii) By an article amendment approved by the holders of two-thirds of its outstanding voting shares, excluding the voting shares of interested shareholders and their affiliates and associates, expressly electing not to be subject to § 47-33-17, and the amendment provides that it is not to be effective until eighteen months after the vote of the shareholders and provides that it does not apply to any business combination of the domestic public corporation with an interested shareholder whose share acquisition date is on or before the effective date of the amendment.
(b) If the business combination was consummated before, or if a binding agreement for the business combination was entered into before, February 21, 1990.
(c) With an interested shareholder which became an interested shareholder inadvertently, if such interested shareholder, (i) as soon as practicable, divests itself of a sufficient amount of the voting shares of such domestic public corporations so that it is no longer the beneficial owner, directly or indirectly, of ten percent or more of the outstanding voting shares of such domestic public corporation, and (ii) would not at any time within the three-year period preceding the announcement date with respect to such business combination have been an interested shareholder but for such inadvertent acquisition.
(d) With an interested shareholder who was an interested shareholder on February 21, 1990, and remains so continuously thereafter, unless subsequent to that date the interested shareholder increased its beneficial ownership of the outstanding voting shares of the domestic public corporation to a proportion in excess of the voting shares that the interested shareholder beneficially owned on February 21, 1990, excluding an increase approved by the board of the domestic public corporation before the increase occurred.
(e) With an interested shareholder who was an interested shareholder on February 21, 1990, and subsequent to that date inadvertently increased its beneficial ownership of the outstanding voting shares of the domestic public corporation to a proportion in excess of the proportion of voting shares that the interested shareholder beneficially owned immediately before that date, if the interested shareholder divests itself of a sufficient amount of voting shares so that the interested shareholder is no longer the beneficial owner of a proportion of the outstanding voting shares in excess of the proportion of the outstanding voting shares that the interested shareholder beneficially owned on February 21, 1990.
(2) If a corporation is a domestic public corporation as of the interested shareholder's share acquisition date, this chapter shall continue to apply to such corporation with respect to such interested shareholder and its affiliates and associates, regardless of any changes in the corporation which occur on or after that date which would otherwise result in the corporation ceasing to be a domestic public corporation, if such changes result, directly or indirectly, from action taken or proposed by or on behalf of, or pursuant to any written or unwritten agreement, arrangement, relationship, understanding or otherwise with, the interested shareholder or any affiliate or associate of the interested shareholder or from the transactions by which the person became an interested shareholder.
(3) In addition to domestic public corporations, §§ 47-33-17 to 47-33-19, inclusive, shall apply to any business combination of other domestic corporations that meet the requirements of a domestic public corporation except that the corporation is not a publicly held corporation, if an express provision electing to be subject to §§ 47-33-17 to 47-33-19, inclusive, is contained in the articles of such domestic corporation, in which event the term "domestic public corporation" as used in §§ 47-33-1 to 47-33-7, inclusive, and §§ 47-33-17 to 47-33-19, inclusive, shall be deemed to include such electing domestic corporation.
Source: SL 1990, ch 369, § 303.
47-34-1 to 47-34-59.
Repealed.
CHAPTER 47-34A
UNIFORM LIMITED LIABILITY COMPANY ACT
ARTICLE I. GENERAL PROVISIONS.
47-34A-101 Definitions.
47-34A-102 47-34A-102. Reserved
47-34A-103 Operating agreement--Scope--Limitations.
47-34A-103.1 Effect of records that conflict with § 47-34A-103 or operating agreement.
47-34A-104 Supplemental principles of law.
47-34A-105 Name.
47-34A-106 Reserved name.
47-34A-107 Registration of name--Procedure.
47-34A-108 47-34A-108 to 47-34A-111. Repealed by SL 2008, ch 275, § 74.
47-34A-112 Nature of business and powers.
47-34A-113 Governing Law.
47-34A-114 Freedom of contract.
ARTICLE II. ORGANIZATION.
47-34A-201 Limited liability company as legal entity.
47-34A-202.1 Organization.
47-34A-202.2 Certificate of organization.
47-34A-203 Articles of organization.
47-34A-204 Amendment or restatement of articles of organization.
47-34A-205 Signing of records.
47-34A-206 Filing in Office of Secretary of State.
47-34A-207 Correcting filed record.
47-34A-208 Certificate of existence or authorization.
47-34A-209 47-34A-209. Reserved
47-34A-210 Failure or refusal to sign record.
47-34A-211 Annual report for secretary of state.
47-34A-212 Fees.
ARTICLE III. RELATIONS OF MEMBERS AND MANAGERS TO PERSONS DEALING WITH LIMITED LIABILITY COMPANY.
47-34A-301 Agency of members and managers.
47-34A-302 Limited liability company liable for member's or manager's actionable conduct.
47-34A-303 Liability of members and managers.
ARTICLE IV. RELATIONS OF MEMBERS TO EACH OTHER AND TO LIMITED LIABILITY COMPANY.
47-34A-401 Becoming a member.
47-34A-401.1 Form of contribution.
47-34A-402 Liability for contributions.
47-34A-403 Member's and manager's rights to payments and reimbursement.
47-34A-404.1 Management of limited liability company.
47-34A-404.2 Classes and voting.
47-34A-405 Sharing of and right to distributions.
47-34A-406 Limitations on distributions.
47-34A-407 Liability for improper distributions.
47-34A-408 Members' and managers' right to information.
47-34A-409 General standards of member's and manager's conduct.
47-34A-410 Actions by members.
47-34A-411 Good faith reliance upon information.
ARTICLE V. TRANSFEREES AND CREDITORS OF MEMBER.
47-34A-501 Member's distributional interest.
47-34A-502 Transfer of distributional interest.
47-34A-503 Rights of a transferee.
47-34A-504 Rights of creditor.
ARTICLE VI. MEMBER'S DISSOCIATION.
47-34A-601 Events causing a member's dissociation.
47-34A-602 Member's power to dissociate; wrongful dissociation.
47-34A-603 Effect of a member's dissociation.
47-34A-604 Dissociated member's power to bind limited liability company.
47-34A-605 State of dissociation.
ARTICLE VII. SERIES LIMITED LIABILITY COMPANIES.
47-34A-701 Series of members, managers, or limited liability company interests permitted.
47-34A-702 Liability of series for debts of limited liability company or other series.
47-34A-703 Name of series.
47-34A-704 Formation of series—Amendment to certificate of designation—Dissolution of series—Registered agent and office.
47-34A-705 Rights, powers, and duties relating to series governed by operating agreement.
47-34A-706 Activities of series in foreign jurisdiction--Registration of series authorized in foreign jurisdiction.
47-34A-707 Requirements for application for certificate of designation.
ARTICLE VIII. WINDING UP COMPANY'S BUSINESS.
47-34A-801 Events causing dissolution and winding up of company's business.
47-34A-802 Limited liability company continues after dissolution.
47-34A-803 Right to wind up the limited liability company's business.
47-34A-804 Member's or manager's power and liability as agent after dissolution.
47-34A-805 Articles of termination.
47-34A-806 Distribution of assets in winding up the limited liability company's business.
47-34A-807 Known claims against dissolved limited liability company.
47-34A-808 Notice--Other claims against dissolved limited liability company.
47-34A-809 Grounds for administrative dissolution.
47-34A-810 Procedure for and effect of administrative dissolution.
47-34A-811 Reinstatement following administrative dissolution.
47-34A-812 Appeal from denial of reinstatement.
ARTICLE IX. MERGER, CONVERSION, AND DOMESTICATION.
47-34A-901 Definitions.
47-34A-902 Merger.
47-34A-903 Action on plan of merger by constituent limited liability company.
47-34A-904 Filings required for merger--Effective date.
47-34A-905 Effect of merger.
47-34A-906 Conversion.
47-34A-907 Action on plan of conversion by converting limited liability company.
47-34A-908 Filings required for conversion--Effective date.
47-34A-909 Effect of conversion.
47-34A-910 Domestication.
47-34A-911 Action on plan of domestication by domesticating limited liability company.
47-34A-912 Filings required for domestication--Effective date.
47-34A-913 Effect of domestication.
47-34A-914 Restrictions on approval of mergers, conversions, and domestications.
47-34A-915 Article not exclusive.
ARTICLE X. FOREIGN LIMITED LIABILITY COMPANIES.
47-34A-1001 Law governing foreign limited liability companies.
47-34A-1002 Application for certificate of authority.
47-34A-1003 Activities not constituting transacting business.
47-34A-1004 Filing of certificate of authority.
47-34A-1005 Noncomplying name of foreign limited liability company.
47-34A-1006 Revocation of certificate of authority.
47-34A-1007 Cancellation of certificate of authority.
47-34A-1008 Effect of failure to obtain certificate of authority.
47-34A-1009 Action by attorney general.
47-34A-1010 Repealed.
47-34A-1011 Repealed.
47-34A-1012 Repealed.
47-34A-1013 Repealed.
47-34A-1014 Repealed.
47-34A-1015 Repealed.
47-34A-1016 Repealed.
ARTICLE XI. DERIVATIVE ACTIONS.
47-34A-1101 Direct action by member.
47-34A-1102 Derivative action.
47-34A-1103 Proper plaintiff.
47-34A-1104 Pleading.
47-34A-1105 Special litigation committee.
47-34A-1106 Proceeds and expenses.
ARTICLE XII. MISCELLANEOUS PROVISIONS.
47-34A-1201 Uniformity of application and construction.
47-34A-1202 Short title.
47-34A-1203 47-34A-1203, 47-34A-1204. Reserved.
47-34A-1205 Limited liability company--Organization--Effective date.
47-34A-1206 Fees.
47-34A-1206.1 Filing of documents with secretary of state.
47-34A-1207 Savings clause.
47-34A-101. Definitions.
Terms used in this chapter:
(1) "Articles of organization" means initial, amended, and restated articles of organization and articles of merger. In the case of a foreign limited liability company, the term includes all records serving a similar function required to be filed in the Office of the Secretary of State or other official having custody of company records in the state or country under whose law it is organized;
(2) "Business" includes every trade, occupation, profession, and other lawful purpose, whether or not carried on for profit;
(3) "Contribution" means any benefit provided by a person to a limited liability company:
(A) In order to become a member upon formation of the company and in accordance with an agreement between or among the persons that have agreed to become the initial members of the company;
(B) In order to become a member after the formation of the company and in accordance with an agreement between the person and the company; or
(C) In the person's capacity as a member and in accordance with the operating agreement or an agreement between the member and the company;
(4) "Debtor in bankruptcy" means a person who is the subject of an order for relief under Title 11 of the United States Code or a comparable order under a successor statute of general application or a comparable order under federal, state, or foreign law governing insolvency;
(5) "Distribution" means a transfer of money, property, or other benefit from a limited liability company to a member in the member's capacity as a member or to a transferee of the member's distributional interest;
(6) "Distributional interest" means all of a member's interest in distributions by the limited liability company;
(7) "Entity" means a person other than an individual;
(8) "Foreign limited liability company" means an unincorporated entity formed under the law of a jurisdiction other than this state and denominated by that law as a limited liability company;
(9) "Limited liability company" except in the phrase "foreign limited liability company" means an entity formed under this chapter;
(10) "Manager" means a person, whether or not a member of a manager-managed company, who is vested with authority under section 301;
(11) "Manager-managed company" means a limited liability company which is so designated in its articles of organization;
(12) "Member" means a person that:
(A) Prior to formation of the limited liability company, becomes a member as agreed by that person and the organizer of the limited liability company;
(B) After formation of the limited liability company, becomes a member:
(1) As provided in the operating agreement;
(2) As a result of a transaction effective under Article IX;
(3) With the consent of all the members; and
(C) After having become a member, has not dissociated under Article VI;
(13) "Member-managed company" means a limited liability company other than a manager-managed company;
(14) "Operating agreement" means any valid agreement, either written or oral, under § 47-34A-103 concerning the relations among the members, managers, and limited liability company; however, an integration clause contained in a written operating agreement may be given effect under other law. The term includes amendments to and restatements of the operating agreement. The operating agreement of a limited liability company having only one member shall not be unenforceable by reason of there being only one person who is a party to the operating agreement;
(15) "Person" means an individual, corporation, business trust, cooperative corporation, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity;
(16) "Principal office" means the office, whether or not in this state, where the principal executive office of a domestic or foreign limited liability company is located;
(17) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
(18) "Sign" means, with the present intent to authenticate or adopt a record by any means including an electronic signature:
(A) To execute or adopt a tangible symbol; or
(B) To attach to or logically associate with a record an electronic symbol, sound, or process;
(19) "State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States;
(20) "Transfer" includes an assignment, conveyance, deed, bill of sale, lease, mortgage, security interest, encumbrance, gift, and transfer by operation of law;
(21) "Transferee" means a person to which all or part of a distributional interest has been transferred, whether or not the transferor is a member.
Source: SL 1998, ch 272, § 101; SL 2013, ch 233, § 1.
47-34A-103. Operating agreement--Scope--Limitations.
(a) Except as otherwise provided in subsection (b), all members of a limited liability company may enter into an operating agreement, which need not be in writing, to regulate the affairs of the company and the conduct of its business, and to govern relations among the members, managers, and company. A person that becomes a member of a limited liability company is deemed to assent to the operating agreement. To the extent the operating agreement does not otherwise provide, this chapter governs relations among the members, managers, and company.
(b) The operating agreement may not:
(1) Eliminate the duty of loyalty under § 47-34A-409(b) or § 47-34A-603(b)(3), but the agreement may, if not manifestly unreasonable:
(i) Identify specific types or categories of activities that do not violate the duty of loyalty; and
(ii) Specify the number or percentage of members or disinterested managers that may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty;
(2) Eliminate the obligation of good faith and fair dealing under § 47-34A-409(d), but the operating agreement may determine the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable;
(3) Vary the right to expel a member in an event specified in § 47-34A-601(6);
(4) Vary the requirement to wind up the limited liability company's business in a case specified in § 47-34A-801(a)(3) or (4); or
(5) Restrict rights of a person, other than a manager, member, and transferee of a member's distributional interest, under this chapter.
(c) If not manifestly unreasonable, the operating agreement may:
(1) Restrict a right to information or access to records under § 47-34A-408;
(2) Reduce the duty of care under § 47-34A-409(c) or § 47-34A-603(b)(3);
(3) Alter any other fiduciary duty, including eliminating particular aspects of that duty.
(d) The court shall decide any claim under this section that a term of an operating agreement is manifestly unreasonable. The court:
(1) Shall make its determination as of the time the challenged term became part of the operating agreement and by considering only circumstances existing at that time; and
(2) May invalidate the term only if, in light of the purposes and activities of the limited liability company, it is readily apparent that:
(i) The objective of the term is unreasonable; or
(ii) The term is an unreasonable means to achieve the provision's objective.
Source: SL 1998, ch 272, § 103; SL 2013, ch 233, § 2.
47-34A-103.1. Effect of records that conflict with § 47-34A-103 or operating agreement.
(a) If a record that has been delivered by a limited liability company to the Office of the Secretary of State for filing and has become effective under this chapter, contains a provision that would be ineffective under § 47-34A-103 if contained in the operating agreement, the provision is likewise ineffective in the record.
(b) Subject to subsection (a) of this section, if a record that has been delivered by a limited liability company to the Office of the Secretary of State for filing, and which has become effective under this chapter, conflicts with a provision of the operating agreement:
(1) The operating agreement prevails as to members, dissociated members, transferees, and managers; and
(2) The record prevails as to other persons to the extent they reasonably rely on the record.
Source: SL 2013, ch 233, § 3.
47-34A-104. Supplemental principles of law.
(a) Unless displaced by particular provisions of this chapter the principles of law and equity supplement this chapter.
(b) If an obligation to pay interest arises under this chapter and the rate is not specified, the rate is that specified in subdivision 54-3-16(1).
Source: SL 1998, ch 272, § 104.
47-34A-105. Name.
(a) The name of a limited liability company must contain, limited liability company, or limited company, or the abbreviation, L.L.C., LLC, L.C., or LC. Limited may be abbreviated as Ltd. and company may be abbreviated as Co.
(b) Except as authorized by subsections (c) and (d), the name of a limited liability company must be distinguishable upon the records of the secretary of state from:
(1) The name of any corporation, limited partnership, or company incorporated, organized or authorized to transact business, in this state;
(2) A name reserved or registered under § 47-34A-106 or 47-34A-107;
(3) A fictitious name approved under § 47-34A-1005 for a foreign company authorized to transact business in this state because its real name is unavailable.
(c) A limited liability company may apply to the secretary of state for authorization to use a name that is not distinguishable upon the records of the secretary of state from one or more of the names described in subsection (b). The secretary of state shall authorize use of the name applied for if:
(1) The present user, registrant, or owner of a reserved name consents to the use in a record and submits an undertaking in form satisfactory to the secretary of state to change the name to a name that is distinguishable upon the records of the secretary of state from the name applied for; or
(2) The applicant delivers to the secretary of state a certified copy of the final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this state.
(d) A limited liability company may use the name, including a fictitious name, of another domestic or foreign company which is used in this state if the other company is organized or authorized to transact business in this state and the company proposing to use the name has:
(1) Merged with the other company;
(2) Been formed by reorganization with the other company; or
(3) Acquired substantially all of the assets, including the name, of the other company.
Source: SL 1998, ch 272, § 105.
47-34A-106. Reserved name.
The exclusive right to the use of a name may be reserved by:
(1) Any person intending to organize a limited liability company under this chapter and to adopt that name;
(2) Any domestic limited liability company or any foreign limited liability company registered in this state which, in either case, intends to adopt that name;
(3) Any foreign limited liability company intending to register in this state and adopt that name; and
(4) Any person intending to organize a foreign limited liability company and intending to have it registered in this state and adopt that name.
The reservation shall be made by filing with the secretary of state an application, executed by the applicant, to reserve a specified name. If the secretary of state finds that the name is available for use by a domestic or foreign limited liability company, the secretary of state shall reserve the name for the exclusive use of the applicant for a period of one hundred twenty days. Once having so reserved a name, the same applicant may not again reserve the same name until more than sixty days after the expiration of the last one hundred twenty-day period for which that applicant reserved that name. The right to the exclusive use of a reserved name may be transferred to any other person by filing in the Office of the Secretary of State a notice of the transfer, executed by the applicant for whom the name was reserved and specifying the name and address of the transferee.
Source: SL 1998, ch 272, § 106.
47-34A-107. Registration of name--Procedure.
(a) A foreign limited liability company may register its name subject to the requirements of § 47-34A-1005, if the name is distinguishable upon the records of the secretary of state from names that are not available under § 47-34A-105(b).
(b) A foreign limited liability company registers its name, or its name with any addition required by § 47-34A-1005, by delivering to the secretary of state for filing an application:
(1) Setting forth its name, or its name with any addition required by § 47-34A-1005, the state or country and date of its organization, and a brief description of the nature of the business in which it is engaged; and
(2) Accompanied by a certificate of existence, or a record of similar import, from the state or country of organization.
(c) A foreign limited liability company whose registration is effective may renew it for successive years by delivering for filing in the office of the secretary of state a renewal application complying with subsection (b) between October first and December thirty-first of the preceding year. The renewal application renews the registration for the following calendar year.
(d) A foreign limited liability company whose registration is effective may qualify as a foreign company under its name or consent in writing to the use of its name by a limited liability company later organized under this chapter or by another foreign company later authorized to transact business in this state. The registered name terminates when the limited liability company is organized or the foreign company qualifies or consents to the qualification of another foreign company under the registered name.
Source: SL 1998, ch 272, § 107.
47-34A-112. Nature of business and powers.
(a) A limited liability company may be organized under this chapter for any lawful purpose, subject to any law of this state governing or regulating business including regulation of professional service firms. Limited liability companies may not engage in activities proscribed by chapter 47-9A unless the ownership restrictions are met by the membership of the limited liability company by substitution of members for shareholders in that chapter.
(b) Unless its articles of organization provide otherwise, a limited liability company has the same powers as an individual to do all things necessary or convenient to carry on its business or affairs, including power to:
(1) Sue and be sued, and defend in its name;
(2) Purchase, receive, lease, or otherwise acquire, and own, hold, improve, use, and otherwise deal with real or personal property, or any legal or equitable interest in property, wherever located;
(3) Sell, convey, mortgage, grant a security interest in, lease, exchange, and otherwise encumber or dispose of all or any part of its property;
(4) Purchase, receive, subscribe for, or otherwise acquire, own, hold, vote, use, sell, mortgage, lend, grant a security interest in, or otherwise dispose of and deal in and with, shares or other interests in or obligations of any other entity;
(5) Make contracts and guarantees, incur liabilities, borrow money, issue its notes, bonds, and other obligations, which may be convertible into or include the option to purchase other securities of the limited liability company, and secure any of its obligations by a mortgage on or a security interest in any of its property, franchises, or income;
(6) Lend money, invest and reinvest its funds, and receive and hold real and personal property as security for repayment;
(7) Be a promoter, partner, member, associate, or manager of any partnership, joint venture, trust, or other entity including but not limited to limited partnerships and limited liability companies;
(8) Conduct its business, locate offices, and exercise the powers granted by this chapter within or without this state;
(9) Elect managers and appoint officers, employees, and agents of the limited liability company, define their duties, fix their compensation, and lend them money and credit, or otherwise assist its members;
(10) Pay pensions and establish pension plans, pension trusts, profit sharing plans, bonus plans, option plans, and benefit or incentive plans for any or all of its current or former members, managers, officers, employees, and agents;
(11) Make donations for the public welfare or for charitable, scientific, or educational purposes; and
(12) Make payments or donations, or do any other act, not inconsistent with law, that furthers the business of the limited liability company.
Source: SL 1998, ch 272, § 112.
47-34A-113. Governing Law.
The law of this state governs:
(1) The internal affairs of a limited liability company; and
(2) The liability of a member as member and a manager as manager for the debts, obligations, or other liabilities of a limited liability company.
Source: SL 2013, ch 233, § 4.
47-34A-114. Freedom of contract.
It is the policy of this chapter and this state to give maximum effect to the principles of freedom of contract and to the enforceability of operating agreements.
Source: SL 2013, ch 233, § 5.
47-34A-201. Limited liability company as legal entity.
A limited liability company is a legal entity distinct from its members. A member of a limited liability company is not a proper party to proceedings by or against a limited liability company.
Source: SL 1998, ch 272, § 201.
47-34A-202.1. Organization.
(a) One or more persons may organize a limited liability company, consisting of one or more members, by delivering articles of organization to the Office of the Secretary of State for filing.
(b) Unless a delayed effective date is specified in accordance with § 47-34A-206(d), the existence of a limited liability company begins when the articles of organization are filed.
(c) The original articles of organization shall be delivered to the secretary of state. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document. If the secretary of state finds that the articles of organization conform to law, the secretary of state shall, when all fees have been paid as prescribed:
(1) Endorse the original with the word, Filed, and the month, date, and year of the filing;
(2) File the original;
(3) Issue a certificate of organization and affix to the certificate, the exact or conforming copy.
The certificate of organization, together with the exact or conforming copy of the articles of organization affixed to it by the secretary of state, shall be returned to the principal office of the limited liability company or to its representative.
Source: SL 1998, ch 272, § 202.1; SL 2005, ch 241, § 1; SL 2012, ch 222, § 14.
47-34A-202.2. Certificate of organization.
Upon the issuance of the certificate of organization, the limited liability company shall be considered organized, and such certificate of organization shall be conclusive evidence that all conditions precedent required to be performed by the members have been complied with and that the limited liability company has been legally organized under this chapter, except as against this state in a proceeding to cancel or revoke the certificate of organization or for involuntary dissolution of the limited liability company.
No limited liability company may transact business or incur indebtedness, except that which is incidental to its organization, or except for obtaining subscriptions for or payment of contributions, until the secretary of state has issued a certificate of organization.
Source: SL 1998, ch 272, § 202.2.
47-34A-203. Articles of organization.
(a) Articles of organization of a limited liability company must set forth:
(1) The name of the company;
(2) The address of the initial designated office;
(3) The information required by § 59-11-6;
(4) The name and address of each organizer;
(5) The duration of the company if other than perpetual;
(6) Whether the company is to be manager-managed, and, if so, the name and address for each initial manager;
(7) Whether one or more of the members of the company are to be liable for its debts and obligations under § 47-34A-303(c);and
(8) Whether the limited liability company is authorized to establish one or more series and the matters required under § 47-34A-702.
(b) Articles of organization of a limited liability company may set forth:
(1) Provisions permitted to be set forth in an operating agreement; or
(2) Other matters not inconsistent with law.
(c) Articles of organization of a limited liability company may not vary the nonwaivable provisions of § 47-34A-103(b). As to all other matters, if any provision of an operating agreement is inconsistent with the articles of organization:
(1) The operating agreement controls as to managers, members, and members' transferees; and
(2) The articles of organization control as to persons, other than managers, members and their transferees, who reasonably rely on the articles to their detriment.
Source: SL 1998, ch 272, § 203; SL 2006, ch 228, § 8; SL 2008, ch 275, § 75; SL 2020, ch 200, § 8, eff. Nov. 15, 2020.
47-34A-204. Amendment or restatement of articles of organization.
(a) Articles of organization of a limited liability company may be amended at any time by delivering articles of amendment to the secretary of state for filing. The articles of amendment must set forth the:
(1) Name of the limited liability company;
(2) Date of filing of the articles of organization; and
(3) Amendment to the articles.
(b) A limited liability company may restate its articles of organization at any time. Restated articles of organization must be signed and filed in the same manner as articles of amendment. Restated articles of organization must be designated as such in the heading and state in the heading or in an introductory paragraph the limited liability company's present name and, if it has been changed, all of its former names and the date of the filing of its initial articles of organization.
Source: SL 1998, ch 272, § 204.
47-34A-205. Signing of records.
(a) Except as otherwise provided in this chapter a record to be filed by or on behalf of a limited liability company in the Office of the Secretary of State must be signed in the name of the company by a:
(1) Manager of a manager-managed company;
(2) Member of a member-managed company;
(3) Person organizing the company, if the company has not been formed; or
(4) Fiduciary, if the company is in the hands of a receiver, trustee, or other court-appointed fiduciary.
(b) A record signed under subsection (a) must state adjacent to the signature the name and capacity of the signer.
(c) Any person may sign a record to be filed under subsection (a) by an attorney-in-fact. Powers of attorney relating to the signing of records to be filed under subsection (a) by an attorney-in-fact need not be filed in the Office of the Secretary of State as evidence of authority by the person filing but must be retained by the company.
Source: SL 1998, ch 272, § 205.
47-34A-206. Filing in Office of Secretary of State.
(a) Articles of organization or any other record authorized to be filed under this chapter must be in a medium permitted by the secretary of state and must be delivered to the Office of the Secretary of State. Unless the secretary of state determines that a record fails to comply as to form with the filing requirements of this chapter, and if all filing fees have been paid, the secretary of state shall file the record and send a receipt for the record and the fees to the limited liability company or its representative.
(b) Upon request and payment of a fee, the secretary of state shall send to the requester a certified copy of the requested record.
(c) Except as otherwise provided in subsection (d), §§ 47-34A-202.1 and 47-34A-202.2, and § 47-34A-207(c), a record accepted for filing by the secretary of state is effective:
(1) At the time of filing on the date it is filed, as evidenced by the secretary of state's date and time endorsement on the original record; or
(2) At the time specified in the record as its effective time on the date it is filed.
(d) A record, including the articles of organization, may specify a delayed effective time and date, and if it does so the record becomes effective at the time and date specified subject to the other requirements of this chapter. If a delayed effective date but no time is specified, the record is effective at the close of business on that date. If a delayed effective date is later than the ninetieth day after the record is filed, the record is effective on the ninetieth day.
Source: SL 1998, ch 272, § 206.
47-34A-207. Correcting filed record.
(a) A limited liability company or foreign limited liability company may correct a record filed by the secretary of state if the record contains a false or erroneous statement or was defectively signed.
(b) A record is corrected:
(1) By preparing articles of correction that:
(i) Describe the record, including its filing date, or attach a copy of it to the articles of correction;
(ii) Specify the incorrect statement and the reason it is incorrect or the manner in which the signing was defective; and
(iii) Correct the incorrect statement or defective signing; and
(2) By delivering the corrected record to the secretary of state for filing.
(c) Articles of correction are effective retroactively on the effective date of the record they correct except as to persons relying on the uncorrected record and adversely affected by the correction. As to those persons, articles of correction are effective when filed.
Source: SL 1998, ch 272, § 207.
47-34A-208. Certificate of existence or authorization.
(a) Any person may request the secretary of state to furnish a certificate of existence for a limited liability company or a certificate of authorization for a foreign limited liability company.
(b) A certificate of existence for a limited liability company must set forth:
(1) The company's name;
(2) That it is duly organized under the laws of this state, the date of organization, whether its duration is at-will or for a specified term, and, if the latter, the period specified;
(3) If payment is reflected in the records of the secretary of state and if nonpayment affects the existence of the company, that all fees, taxes, and penalties owed to this state have been paid;
(4) Whether its most recent annual report required by § 47-34A-211 has been filed with the secretary of state;
(5) That articles of termination have not been filed; and
(6) Other facts of record in the Office of the Secretary of State which may be requested by the applicant.
(c) A certificate of authorization for a foreign limited liability company must set forth:
(1) The company's name used in this state;
(2) That it is authorized to transact business in this state;
(3) If payment is reflected in the records of the secretary of state and if nonpayment affects the authorization of the company, that all fees, taxes, and penalties owed to this state have been paid;
(4) Whether its most recent annual report required by § 47-34A-211 has been filed with the secretary of state;
(5) That a certificate of cancellation has not been filed; and
(6) Other facts of record in the Office of the Secretary of State which may be requested by the applicant.
(d) Subject to any qualification stated in the certificate, a certificate of existence or authorization issued by the secretary of state may be relied upon as conclusive evidence that the domestic or foreign limited liability company is in existence or is authorized to transact business in this state.
Source: SL 1998, ch 272, § 208.
47-34A-210. Failure or refusal to sign record.
If a person required by § 47-34A-205 to sign any record fails or refuses to do so, any other person who is adversely affected by the failure or refusal may petition the state circuit court to direct the signing of the record. If the court finds that it is proper for the record to be signed and that a person so designated has failed or refused to sign the record, it shall order the secretary of state to sign and file an appropriate record.
Source: SL 1998, ch 272, § 210.
47-34A-211. Annual report for secretary of state.
A limited liability company, and a foreign limited liability company authorized to transact business in this state, except a bank organized pursuant to § 51A-3-1.1, shall deliver to the secretary of state for filing an annual report pursuant to §§ 59-11-24 to 59-11-26, inclusive.
Source: SL 1998, ch 272, § 211; SL 2004, ch 289, § 5; SL 2005, ch 241, § 2; SL 2008, ch 275, § 76.
47-34A-212. Fees.
The secretary of state shall charge and collect for:
(a) Filing the articles of organization in the case of a domestic limited liability company, a filing fee of one hundred fifty dollars. Filing the articles of organization in the case of a foreign limited liability company, a filing fee of seven hundred fifty dollars;
(b) A reporting fee of fifty dollars, due and payable with the filing of each annual report. Each entity that does not file or refuses to file its annual report within the time prescribed is subject to a penalty of fifty dollars to be assessed by the secretary of state;
(c) Filing the articles of organization in the case of a domestic limited liability company, where the articles of organization contain a notice that the limited liability company is authorized to establish one or more series, a filing fee of two hundred dollars. Filing an application for a certificate of authority in the case of a foreign limited liability company authorized to establish a series under the laws of another state or jurisdiction, or series of such limited liability company on its own behalf, a filing fee of eight hundred dollars.
Source: SL 1998, ch 272, § 212; SL 1999, ch 221, § 1; SL 2003, ch 8, § 23; SL 2004, ch 279, § 2; SL 2005, ch 241, § 3; SL 2009, ch 4, § 18; SL 2016, ch 2, § 2; SL 2020, ch 200, § 9, eff. Nov. 15, 2020.
47-34A-301. Agency of members and managers.
(a) Subject to subsections (b) and (c):
(1) Each member is an agent of the limited liability company for the purpose of its business, and an act of a member, including the signing of an instrument in the company's name, for apparently carrying on in the ordinary course the company's business or business of the kind carried on by the company binds the company, unless the member had no authority to act for the company in the particular matter and the person with whom the member was dealing knew or had notice that the member lacked authority.
(2) An act of a member which is not apparently for carrying on in the ordinary course the company's business or business of the kind carried on by the company binds the company only if the act was authorized by the other members.
(b) Subject to subsection (c), in a manager-managed company:
(1) A member is not an agent of the company for the purpose of its business solely by reason of being a member. Each manager is an agent of the company for the purpose of its business, and an act of a manager, including the signing of an instrument in the company's name, for apparently carrying on in the ordinary course the company's business or business of the kind carried on by the company binds the company, unless the manager had no authority to act for the company in the particular matter and the person with whom the manager was dealing knew or had notice that the manager lacked authority.
(2) An act of a manager which is not apparently for carrying on in the ordinary course the company's business or business of the kind carried on by the company binds the company only if the act was authorized under § 47-34A-404.1.
(c) Unless the articles of organization limit their authority, any member of a member-managed company or manager of a manager-managed company may sign and deliver any instrument transferring or affecting the company's interest in real property. The instrument is conclusive in favor of a person who gives value without knowledge of the lack of the authority of the person signing and delivering the instrument.
Source: SL 1998, ch 272, § 301.
47-34A-302. Limited liability company liable for member's or manager's actionable conduct.
A limited liability company is liable for loss or injury caused to a person, or for a penalty incurred, as a result of a wrongful act or omission, or other actionable conduct, of a member or manager acting in the ordinary course of business of the company or with authority of the company.
Source: SL 1998, ch 272, § 302.
47-34A-303. Liability of members and managers.
(a) A debt, obligation, or other liability of a limited liability company is solely the debt, obligation, or other liability of the company. A member or manager is not personally liable, directly or indirectly, by way of contribution or otherwise, for a debt, obligation, or liability of the company solely by reason of being or acting as a member or manager. This subsection applies regardless of the dissolution of the company.
(b) The failure of a limited liability company to observe formalities relating to the exercise of its powers or management of its activities and affairs is not a ground for imposing liability on a member or manager for a debt, obligation, or other liability of the company.
Source: SL 1998, ch 272, § 303; SL 2020, ch 199, § 1.
47-34A-401. Becoming a member.
(a) If a limited liability company is to have only one member upon formation, the person becomes a member as agreed by that person and the organizer of the company. That person and the organizer may be, but need not be, different persons. If different, the organizer acts on behalf of the initial member.
(b) If a limited liability company is to have more than one member upon formation, those persons become members as agreed by the persons before the formation of the company. The organizer acts on behalf of the persons in forming the company and may be, but need not be, one of the persons.
(c) After formation of a limited liability company, a person becomes a member:
(1) As provided in the operating agreement;
(2) As the result of a transaction effective under Article 9;
(3) With the consent of all the members; or
(4) If, within 90 consecutive days after the company ceases to have any members:
(A) The last person to have been a member, or the legal representative of that person, designates a person to become a member; and
(B) The designated person consents to become a member.
(d) A person may become a member without acquiring a distributional interest and without making or being obligated to make a contribution to the limited liability company.
Source: SL 1998, ch 272, § 401; SL 2013, ch 233, § 6.
47-34A-401.1. Form of contribution.
A contribution of a member of a limited liability company may consist of tangible or intangible property or other benefit to a limited liability company, including money, promissory notes, services performed, other agreements to contribute money or property, or contracts for services to be performed.
Source: SL 2013, ch 233, § 7.
47-34A-402. Liability for contributions.
(a) A person's obligation to make a contribution to a limited liability company is not excused by the person's death, disability, or other inability to perform personally. If a person does not make the required contribution, the person or person's estate is obligated to contribute money equal to the value of that part of the contribution which has not been made at the option of the company.
(b) A creditor of a limited liability company which extends credit or otherwise acts in reliance on an obligation described in subsection (a), and without notice of any compromise under § 47-34A-404.1(c)(5), may enforce the obligation.
Source: SL 1998, ch 272, § 402; SL 2013, ch 233, § 8.
47-34A-403. Member's and manager's rights to payments and reimbursement.
(a) A limited liability company shall reimburse a member or manager for payments made and indemnify a member or manager for liabilities incurred by the member or manager in the ordinary course of the business of the company or for the preservation of its business or property.
(b) A limited liability company shall reimburse a member for an advance to the company beyond the amount of contribution the member agreed to make.
(c) A payment or advance made by a member which gives rise to an obligation of a limited liability company under subsection (a) or (b) constitutes a loan to the company upon which interest accrues from the date of the payment or advance.
(d) A member is not entitled to remuneration for services performed for a limited liability company, except for reasonable compensation for services rendered in winding up the business of the company.
(e) A limited liability company may purchase and maintain insurance on behalf of a member or manager of the limited liability company against liability asserted against or incurred by the member or manager in that capacity or arising from that status even if the operating agreement could not eliminate or limit the person's liability to the company for the conduct giving rise to the liability.
Source: SL 1998, ch 272, § 403; SL 2013, ch 233, § 9.
47-34A-404.1. Management of limited liability company.
(a) In a member-managed company:
(1) Each member has equal rights in the management and conduct of the company's business; and
(2) Except as otherwise provided in subsection (c), any matter relating to the business of the company may be decided by a majority of the members.
(b) In a manager-managed company:
(1) Each manager has equal rights in the management and conduct of the company's business;
(2) Except as otherwise provided in subsection (c), any matter relating to the business of the company may be exclusively decided by the manager or, if there is more than one manager, by a majority of the managers; and
(3) A manager:
(i) Must be designated, appointed, elected, removed, or replaced by a vote, approval, or consent of a majority of the members; and
(ii) Holds office until a successor has been elected and qualified, unless the manager sooner resigns or is removed.
(c) The only matters of a member-or manager-managed company's business requiring the consent of all of the members are:
(1) The amendment of the operating agreement under § 47-34A-103;
(2) The authorization or ratification of acts or transactions under § 47-34A-103(b)(2)(ii) which would otherwise violate the duty of loyalty;
(3) An amendment to the articles of organization under § 47-34A-204;
(4) The compromise of an obligation to make a contribution under § 47-34A-402(b);
(5) The compromise, as among members, of an obligation of a member to make a contribution or return money or other property paid or distributed in violation of this chapter;
(6) The making of interim distributions under § 47-34A-405(a), including the redemption of an interest;
(7) The admission of a new member;
(8) The use of the company's property to redeem an interest subject to a charging order;
(9) The consent to dissolve the company under § 47-34A-801(a)(2);
(10) A waiver of the right to have the company's business wound up and the company terminated under § 47-34A-802(b);
(11) The consent of members to merge with another entity under § 47-34A-904(c)(1); and
(12) The sale, lease, exchange, or other disposal of all, or substantially all, of the company's property with or without goodwill.
(d) Action requiring the consent of members or managers under this chapter may be taken without a meeting.
(e) A member or manager may appoint a proxy to vote or otherwise act for the member or manager by signing an appointment instrument, either personally or by the member's or manager's attorney-in-fact.
Source: SL 1998, ch 272, § 404.1.
47-34A-404.2. Classes and voting.
Nothing in this chapter prohibits the articles of organization from establishing classes or groups of one or more members having certain expressed relative rights, powers, or duties, including voting rights and the articles of organization may provide for the future creation, in the manner provided in the articles of organization, of additional classes or groups of members having certain relative rights, powers, or duties, including voting rights, expressed either in the regulations or at the time of creation. The rights, powers, or duties of a class or group may be senior to those of one or more existing classes or groups of members.
Source: SL 1998, ch 272, § 404.2.
47-34A-405. Sharing of and right to distributions.
(a) Any distributions made by a limited liability company before its dissolution and winding up must be in equal shares.
(b) A member has no right to receive, and may not be required to accept, a distribution in kind.
(c) If a member becomes entitled to receive a distribution, the member has the status of, and is entitled to all remedies available to, a creditor of the limited liability company with respect to the distribution.
Source: SL 1998, ch 272, § 405.
47-34A-406. Limitations on distributions.
(a) A distribution may not be made if, after the distribution is made:
(1) The limited liability company would not be able to pay its debts as they become due in the ordinary course of business; or
(2) The company's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the company were to be dissolved, wound up, and terminated at the time of the distribution, to satisfy the preferential rights upon dissolution, winding up, and termination of members whose preferential rights are superior to those receiving the distribution.
(b) A limited liability company may base a determination that a distribution is not prohibited under subsection (a) on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
(c) Except as otherwise provided in subsection (e), the effect of a distribution under subsection (a) is measured:
(1) In the case of distribution by purchase, redemption, or other acquisition of a distributional interest in a limited liability company, as of the date money or other property is transferred or debt incurred by the company; and
(2) In all other cases, as of the date the:
(i) Distribution is authorized if the payment occurs within one hundred twenty days after the date of authorization; or
(ii) Payment is made if it occurs more than one hundred twenty days after the date of authorization.
(d) A limited liability company's indebtedness to a member incurred by reason of a distribution made in accordance with this section is at parity with the company's indebtedness to its general, unsecured creditors.
(e) Indebtedness of a limited liability company, including indebtedness issued in connection with or as part of a distribution, is not considered a liability for purposes of determinations under subsection (a) if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to members could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is made.
(f) In subsection (a), "distribution" does not include amounts (i) constituting reasonable compensation for present or past services or (ii) reasonable payments made in the ordinary course of business under a bona fide retirement plan or other benefits program.
Source: SL 1998, ch 272, § 406; SL 2013, ch 233, § 10.
47-34A-407. Liability for improper distributions.
(a) Any member of a member-managed company, or a manager of a manager-managed company who votes for or assents to a distribution made in violation of § 47-34A-406, the articles of organization, or the operating agreement is personally liable to the company for the amount of the distribution which exceeds the amount that could have been distributed without violating § 47-34A-406, the articles of organization, or the operating agreement if it is established that the member or manager did not perform the member's or manager's duties in compliance with § 47-34A-409.
(b) To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of the authority and responsibility to consent to distributions and imposes that authority and responsibility on one or more other members, the liability stated in subsection (a) applies to the other members and not the member that the operating agreement relieves of authority and responsibility.
(c) A member of a manager-managed company who knew a distribution was made in violation of § 47-34A-406, the articles of organization, or the operating agreement is personally liable to the company, but only to the extent that the distribution received by the member exceeded the amount that could have been properly paid under § 47-34A-406.
(d) A member or manager against whom an action is brought under this section may implead in the action all:
(1) Other members or managers who voted for or assented to the distribution in violation of subsection (a) and may compel contribution from them; and
(2) Members who received a distribution in violation of subsection (b) and may compel contribution from the member in the amount received in violation of subsection (b).
(e) A proceeding under this section is barred unless it is commenced within two years after the distribution.
Source: SL 1998, ch 272, § 407; SL 2013, ch 233, § 11.
47-34A-408. Members' and managers' right to information.
(a) A limited liability company shall provide managers and members and the respective agents and attorneys of members access for proper purposes to its records, if any, at the company's principal office or other reasonable locations specified in the operating agreement. The company shall provide former members and their respective agents and attorneys access for proper purposes to records pertaining to the period during which they were members. The right of access provides the opportunity to inspect and copy records during ordinary business hours. The company may impose a reasonable charge, limited to the costs of labor and material, for copies of records furnished.
(b) A limited liability company shall furnish to a manager:
(1) Without demand, information concerning the company's business or affairs reasonably required for the proper exercise of the manager's performance of the manager's duties under the operating agreement or this chapter; and
(2) On demand, other information concerning the company's business or affairs, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.
(c) A limited liability company shall furnish to a member, and to the legal representative of a deceased member or member under legal disability:
(1) Without demand, information concerning the company's business or affairs reasonably required for the proper exercise of the member's rights and performance of the member's duties under the operating agreement or this chapter; and
(2) On demand, other information concerning the company's business or affairs, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.
(d) A member has the right upon written demand given to the limited liability company to obtain at the company's expense a copy of any written operating agreement.
Source: SL 1998, ch 272, § 408; SL 2010, ch 218, § 1.
47-34A-409. General standards of member's and manager's conduct.
(a) The only fiduciary duties a member owes to a member-managed company and, subject to § 47-34A-1101(b), its other members are the duty of loyalty and the duty of care imposed by subsections (b) and (c).
(b) A member's duty of loyalty to a member-managed company and its other members is limited to the following:
(1) To account to the company and to hold as trustee for it any property, profit, or benefit derived by the member in the conduct or winding up of the company's business or derived from a use by the member of the company's property, including the appropriation of a company's opportunity;
(2) To refrain from dealing with the company in the conduct or winding up of the company's business as or on behalf of a party having an interest adverse to the company; and
(3) To refrain from competing with the company in the conduct of the company's business before the dissolution of the company.
(c) A member's duty of care to a member-managed company and its other members in the conduct of and winding up of the company's business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
(d) A member shall discharge the duties to a member-managed company and its other members under this chapter or under the operating agreement and exercise any rights consistently with the obligation of good faith and fair dealing.
(e) A member of a member-managed company does not violate a duty or obligation under this chapter or under the operating agreement merely because the member's conduct furthers the member's own interest.
(f) A member of a member-managed company may lend money to and transact other business with the company. As to each loan or transaction, the rights and obligations of the member are the same as those of a person who is not a member, subject to other applicable law.
(g) This section applies to a person winding up the limited liability company's business as the personal or legal representative of the last surviving member as if the person were a member.
(h) In a manager-managed company:
(1) A member who is not also a manager owes no duties to the company or to the other members solely by reason of being a member;
(2) A manager is held to the same standards of conduct prescribed for members in subsections (b) through (f);
(3) A member who pursuant to the operating agreement exercises some or all of the rights of a manager in the management and conduct of the company's business is held to the standards of conduct in subsections (b) through (f) to the extent that the member exercises the managerial authority vested in a manager by this chapter; and
(4) A manager is relieved of liability imposed by law for violation of the standards prescribed by subsections (b) through (f) to the extent of the managerial authority delegated to the members by the operating agreement.
Source: SL 1998, ch 272, § 409; SL 2013, ch 233, § 12.
47-34A-410. Actions by members.
(a) A member may maintain an action against a limited liability company or another member for legal or equitable relief, with or without an accounting as to the company's business, to enforce:
(1) The member's rights under the operating agreement;
(2) The member's rights under this chapter; and
(3) The rights and otherwise protect the interests of the member, including rights and interests arising independently of the member's relationship to the company.
(b) The accrual, and any time limited for the assertion, of a right of action for a remedy under this section is governed by other law. A right to an accounting upon a dissolution and winding up does not revive a claim barred by law.
Source: SL 1998, ch 272, § 410.
47-34A-411. Good faith reliance upon information.
A member or manager of a limited liability company shall be fully protected in relying in good faith upon the records of the limited liability company and upon such information, opinions, reports, or statements presented to the limited liability company by any of its other managers, members, officers, employees, or committees of the limited liability company, or any other person, as to matters the member or manager reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the limited liability company, including information, opinions, reports, or statements as to the value and amount of the assets, liabilities, profits, or losses of the limited liability company or any other facts pertinent to the existence and amount of assets from which distributions to members might properly be paid.
Source: SL 2010, ch 218, § 14.
47-34A-501. Member's distributional interest.
(a) A member is not a co-owner of, and has no transferable interest in, property of a limited liability company.
(b) A distributional interest in a limited liability company is personal property and, subject to § 47-34A-502 and § 47-34A-503, may be transferred in whole or in part.
(c) An operating agreement may provide that a distributional interest may be evidenced by a certificate of the interest issued by the limited liability company and, subject to § 47-34A-503, may also provide for the transfer of any interest represented by the certificate.
Source: SL 1998, ch 272, § 501.
47-34A-502. Transfer of distributional interest.
A transfer of a distributional interest does not entitle the transferee to become or to exercise any rights of a member. A transfer entitles the transferee to receive, to the extent transferred, only the distributions to which the transferor would be entitled.
Source: SL 1998, ch 272, § 502.
47-34A-503. Rights of a transferee.
(a) A transferee of a distributional interest may become a member of a limited liability company if and to the extent that the transferor gives the transferee the right in accordance with authority described in the operating agreement or all other members consent.
(b) A transferee who has become a member, to the extent transferred, has the rights and powers, and is subject to the restrictions and liabilities, of a member under the operating agreement of a limited liability company and this chapter. A transferee who becomes a member also is liable for the transferor member's obligations to make contributions under § 47-34A-402 and for obligations under § 47-34A-407 to return unlawful distributions, but the transferee is not obligated for the transferor member's liabilities unknown to the transferee at the time the transferee becomes a member.
(c) Whether or not a transferee of a distributional interest becomes a member under subsection (a), the transferor is not released from liability to the limited liability company under the operating agreement or this chapter.
(d) A transferee who does not become a member is not entitled to participate in the management or conduct of the limited liability company's business, require access to information concerning the company's transactions, or inspect or copy any of the company's records.
(e) A transferee who does not become a member is entitled to:
(1) Receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled;
(2) Receive, upon dissolution and winding up of the limited liability company's business:
(i) In accordance with the transfer, the net amount otherwise distributable to the transferor;
(ii) A statement of account only from the date of the latest statement of account agreed to by all the members.
(f) A limited liability company need not give effect to a transfer until it has notice of the transfer.
Source: SL 1998, ch 272, § 503; SL 2009, ch 234, § 1.
47-34A-504. Rights of creditor.
(a) On application by a judgment creditor of a member of a limited liability company or of a member's transferee, and following notice to the limited liability company of such application, a court having jurisdiction may charge the distributional interest of the judgment debtor to satisfy the judgment.
(b) A charging order constitutes a lien on the judgment debtor's distributional interest.
(c) A distributional interest in a limited liability company which is charged may be redeemed:
(1) By the judgment debtor;
(2) With property other than the company's property, by one or more of the other members; or
(3) With the company's property, but only if permitted by the operating agreement.
(d) This chapter does not affect a member's right under exemption laws with respect to the member's distributional interest in a limited liability company.
(e) This section provides the exclusive remedy that a judgment creditor of a member's distributional interest or a member's assignee may use to satisfy a judgment out of the judgment debtor's interest in a limited liability company. No other remedy, including foreclosure on the member's distributional interest or a court order for directions, accounts, and inquiries that the debtor, member might have made, is available to the judgment creditor attempting to satisfy the judgment out of the judgment debtor's interest in the limited liability company.
(f) No creditor of a member or a member's assignee has any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the company.
(g) This section applies to single member limited liability companies in addition to limited liability companies with more than one member.
Source: SL 1998, ch 272, § 504; SL 2007, ch 262, § 1; SL 2009, ch 234, § 2; SL 2012, ch 226, § 1; SL 2013, ch 233, § 13.
47-34A-601. Events causing a member's dissociation.
A member is dissociated from a limited liability company upon the occurrence of any of the following events:
(1) The company's having notice of the member's express will to withdraw upon the date of notice or on a later date specified by the member;
(2) An event agreed to in the operating agreement as causing the member's dissociation;
(3) Upon transfer of all of a member's distributional interest, other than a transfer for security purposes or a court order charging the member's distributional interest which has not been foreclosed;
(4) The member's expulsion pursuant to the operating agreement;
(5) The member's expulsion by unanimous vote of the other members if:
(i) It is unlawful to carry on the company's business with the member;
(ii) There has been a transfer of substantially all of the member's distributional interest, other than a transfer for security purposes or a court order charging the member's distributional interest which has not been foreclosed;
(iii) Within ninety days after the company notifies a corporate member that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, the member fails to obtain a revocation of the certificate of dissolution or a reinstatement of its charter or its right to conduct business; or
(iv) A corporation, partnership, limited liability company, or other entity that is a member has been dissolved and its business is being wound up;
(6) On application by the company or another member, the member's expulsion by judicial determination because the member:
(i) Engaged in wrongful conduct that adversely and materially affected the company's business;
(ii) Willfully or persistently committed a material breach of the operating agreement or of a duty owed to the company or the other members under § 47-34A-409; or
(iii) Engaged in conduct relating to the company's business which makes it not reasonably practicable to carry on the business with the member;
(7) The member's:
(i) Becoming a debtor in bankruptcy;
(ii) Executing an assignment for the benefit of creditors;
(iii) Seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of the member or of all or substantially all of the member's property; or
(iv) Failing, within ninety days after the appointment, to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the member or of all or substantially all of the member's property obtained without the member's consent or acquiescence, or failing within ninety days after the expiration of a stay to have the appointment vacated;
(8) In the case of a member who is an individual:
(i) The member's death;
(ii) The appointment of a guardian or general conservator for the member; or
(iii) A judicial determination that the member has otherwise become incapable of performing the member's duties under the operating agreement;
(9) In the case of a member that is a trust or is acting as a member by virtue of being a trustee of a trust, distribution of the trust's entire rights to receive distributions from the company, but not merely by reason of the substitution of a successor trustee;
(10) In the case of a member that is an estate or is acting as a member by virtue of being a personal representative of an estate, distribution of the estate's entire rights to receive distributions from the company, but not merely the substitution of a successor personal representative; or
(11) Termination of the existence of a member if the member is not an individual, estate, or trust other than a business trust.
Source: SL 1998, ch 272, § 601; SL 2013, ch 233, § 14.
47-34A-602. Member's power to dissociate; wrongful dissociation.
(a) Unless otherwise provided in the operating agreement, a member has the power to dissociate from a limited liability company at any time, rightfully or wrongfully, by express will pursuant to § 47-34A-601(1).
(b) If the operating agreement has not eliminated a member's power to dissociate, the member's dissociation from a limited liability company is wrongful only if:
(1) It is in breach of an express provision of the agreement; or
(2) Before the expiration of the term specified in the articles of organization if any:
(i) The member withdraws by express will;
(ii) The member is expelled by judicial determination under § 47-34A-601(6);
(iii) The member is dissociated by becoming a debtor in bankruptcy; or
(iv) In the case of a member who is not an individual, trust other than a business trust, or estate, the member is expelled or otherwise dissociated because it willfully dissolved or terminated its existence.
(c) A member who wrongfully dissociates from a limited liability company is liable to the company and to the other members for damages caused by the dissociation. The liability is in addition to any other obligation of the member to the company or to the other members.
Source: SL 1998, ch 272, § 602.
47-34A-603. Effect of a member's dissociation.
(a) A limited liability company does not dissolve and wind up its business as result of a member's dissociation.
(b) Upon a member's dissociation from a limited liability company:
(1) The member's right to participate in the management and conduct of the company's business terminates, except as otherwise provided in § 47-34A-803, and the member ceases to be a member and is treated the same as a transferee of a member;
(2) The member's duty of loyalty under § 47-34A-409(b)(3) terminates; and
(3) The member's duty of loyalty under § 47-34A-409(b)(1) and (2) and duty of care under § 47-34A-409(c) continue only with regard to matters arising and events occurring before the member's dissociation.
Source: SL 1998, ch 272, § 603.
47-34A-604. Dissociated member's power to bind limited liability company.
For two years after a member dissociates without the dissociation resulting in a dissolution and winding up of a limited liability company's business, the company, including a surviving company under Article 9, is bound by an act of the dissociated member which would have bound the company under § 47-34A-301 before dissociation only if at the time of entering into the transaction the other party:
(1) Reasonably believed that the dissociated member was then a member;
(2) Did not have notice of the member's dissociation; and
(3) Is not deemed to have had notice under § 47-34A-605.
Source: SL 1998, ch 272, § 604.
47-34A-605. State of dissociation.
(a) A dissociated member or a limited liability company may file in the office of the secretary of state a statement of dissociation stating the name of the company and that the member is dissociated from the company. If the statement is filed by a dissociated member a copy of the statement must also be delivered to the company by the dissociated member.
(b) For the purposes of §§ 47-34A-301 and 47-34A-604, a person not a member is deemed to have notice of the dissociation ninety days after the statement of dissociation is filed.
Source: SL 1998, ch 272, § 605.
47-34A-701 . Series of members, managers, or limited liability company interests permitted.
An operating agreement may establish or provide for the establishment of a series of members, managers, or limited liability company interests having separate rights, powers, or duties with respect to specified property or obligations of the limited liability company or profits and losses associated with specified property or obligations. To the extent provided in the operating agreement, any such series may have a separate business purpose or investment objective.
Source: SL 2020, ch 200, § 1, eff. Nov. 15, 2020.
47-34A-702 . Liability of series for debts of limited liability company or other series.
(a) Notwithstanding any other provisions of law to the contrary, the debts, liabilities, and obligations incurred, contracted for, or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and not against the assets of the limited liability company generally or any other series thereof, if all of the following apply:
(1) The operating agreement creates one or more series;
(2) Separate and distinct records are maintained for or on behalf of any such series;
(3) The assets associated with any such series, whether held directly or indirectly, including through a nominee or otherwise, are accounted for separately from the other assets of the limited liability company or of any other series;
(4) The operating agreement provides for the limitations on liabilities of a series described in this subsection;
(5) Notice of the limitation on liabilities of a series described in this subsection is included in the limited liability company’s articles of organization; and
(6) A certificate of designation has been issued for each series that is to have limited liability under this section.
(b) A particular series shall be deemed to have possession, custody, and control only of the books, records, information, and documentation related to such series and not of the books, records, information, and documentation related to the limited liability company as a whole or any other series thereof.
(c) With respect to a particular series, unless otherwise provided in the operating agreement, none of the debts, liabilities, obligations, and expenses incurred, contracted for or otherwise existing with respect to a limited liability company generally, or any other series thereof, are enforceable against the assets of such series, subject to the provisions of subsection (a).
(d) Compliance with subdivisions (a)(5) and (a)(6) of this section shall constitute notice of such limitation of liability of a series.
(e) A series with limited liability shall be treated as a separate entity to the extent set forth in the articles of organization. Each series with limited liability may, in its own name, contract, hold title to assets, including real and personal property, whether tangible or intangible, grant security interests, sue and be sued, and otherwise conduct business and exercise the powers of a limited liability company under this chapter. The limited liability company and any of its series may elect to consolidate its operations as a single taxpayer to the extent permitted under applicable law, elect to work cooperatively, elect to contract jointly, or elect to be treated as a single business for the purposes of qualification or authorization to do business in this or any other state. Such elections do not affect the limitation of liability set forth in this section except to the extent that the series have specifically accepted joint liability by contract.
Source: SL 2020, ch 200, § 2, eff. Nov. 15, 2020.
47-34A-703 . Name of series.
Except in the case of a foreign limited liability company that has adopted a name that is not the name under which it is registered in its jurisdiction of organization, as permitted under § 47-34A-1005 , the name of the series with limited liability is required to contain the entire name of the limited liability company and be distinguishable from the names of the other series set forth in the articles of organization. In the case of a foreign limited liability company that has adopted a name that is not the name under which it is registered in its jurisdiction of organization, as permitted under § 47-34A-1005 , the name of the series with limited liability must contain the entire name under which the foreign limited liability company has been admitted to transact business in this state.
Source: SL 2020, ch 200, § 3, eff. Nov. 15, 2020.
47-34A-704. Formation of series—Amendment to certificate of designation—Dissolution of series—Registered agent and office.
(a)
(1) Upon issuance by the secretary of state of a certificate of designation setting forth the name of the series with limited liability, in compliance with § 47-34A-203 or amendments under § 47-34A-204, the series' existence shall begin;
(2) Each certificate of designation issued by the secretary of state shall be conclusive evidence that all required conditions have been met and that the series has been or shall be legally organized and formed under this section and is notice for all purposes of all other facts required to be set forth therein as of the filing date on the certificate;
(3) The name of a series with limited liability under this section may be changed by filing an application for a new certificate of designation with the secretary of state pursuant to § 47-34A-204, identifying the series whose name is being changed and the new name of such series. If the managers of a series are not the same as the managers of the limited liability company, the names of the managers of a manager-managed series may be changed by filing an application for a new certificate of designation with the secretary of state;
(4) A series with limited liability under this section may be dissolved (i) upon the occurrence of any of the events referenced in § 47-34A-801 with respect to the series or (ii) by the dissolution of the limited liability company as provided in § 47-34A-801. Except to the extent otherwise provided in the operating agreement, a series may be dissolved and its affairs wound up without causing the dissolution of the limited liability company or any other series. The dissolution of a series established in accordance with § 47-34A-702 does not affect the limitation on liabilities of such series provided by § 47-34A-702. A series will be terminated (i) upon the dissolution and winding up of the limited liability company and the filing of articles of termination pursuant to § 47-34A-805, or (ii) upon the dissolution and winding up of the series and filing of an application for a certificate of designation identifying the series being terminated;
(5) Articles of organization, articles of amendment, articles of termination, or applications for certificates of designation described under this subsection may be executed by the limited liability company or any manager, person, or entity designated in the operating agreement for the limited liability company.
(b) If different from the limited liability company, the application for the certificate of designation shall list the names of the managers if the series is manager-managed.
(c) A series of a limited liability company shall be deemed to be in good standing as long as the limited liability company is in good standing. A series of a limited liability company is administratively dissolved when the limited liability company is administratively dissolved, and the series will be reinstated if the limited liability company is reinstated.
(d) The registered agent and registered office for the limited liability company appointed under chapter 59-11 shall serve as the agent and office for service of process for each series in this state.
Source: SL 2020, ch 200, § 4, eff. Nov. 15, 2020.
47-34A-705 . Rights, powers, and duties relating to series governed by operating agreement.
(a) An operating agreement may provide for classes or groups of members or managers associated with a series having such relative rights, powers, and duties as an operating agreement may provide and may make provision for the future creation of additional classes or groups of members or managers associated with the series having such relative rights, powers, and duties as may be established, including rights, powers, and duties senior and subordinate to or different from existing classes and groups of members or managers associated with the series.
(b) A series may be managed either by the member or members associated with the series or by the manager or managers chosen by the members of such series, as provided in the operating agreement. Unless otherwise provided in an operating agreement, the management of a series shall be vested in the members associated with such series.
(c) An operating agreement may grant to all or certain identified members or managers, or to a specified class or group of the members or managers associated with a series, the right to vote separately or with all or any class or group of the members or managers associated with the series, on any matter. An operating agreement may provide that any member or class or group of members associated with a series shall have no voting rights or ability to otherwise participate in the management or governance of such series, but any such member or class or group of members are owners of the series.
(d) Except as modified in this section, the provisions of this chapter that are generally applicable to limited liability companies and their managers, members, and transferees shall be applicable to each particular series with respect to the operation of such series. Except as otherwise provided in an operating agreement, a manager of a manager-managed series owes the duties referenced in § 47-34A-409 only to the series for which the manager serves as a manager. A manager of a manager-managed series does not owe any duty (i) to any series for which the manager does not serve as a manager, (ii) to the members of another series for which the manager does not serve as a manager, in their capacity as members of another series, (iii) to the limited liability company, or (iv) to the members of the limited liability company, in their capacity as members of the limited liability company. Except as otherwise provided in an operating agreement, a member of a member-managed series owes the duties referenced in § 47-34A-409 only to the series of which the member is a member. A member of a member-managed series does not owe any duty (i) to any series of which the member is not a member, (ii) to the members of another series of which the member is not a member, in their capacity as members of another series, (iii) to the limited liability company, or (iv) to the members of the limited liability company, in their capacity as members of the limited liability company.
(e) Except as otherwise provided in an operating agreement, any event specified in this chapter or in an operating agreement that causes a manager to cease to be a manager with respect to a series does not, in itself, cause such manager to cease to be a manager of the limited liability company or with respect to any other series thereof.
(f) Except as otherwise provided in an operating agreement, any event specified in this chapter or in an operating agreement that causes a member to cease to be associated with a series does not, in itself, cause such member to cease to be associated with any other series, terminate the continued membership of a member in the limited liability company, or cause the termination of the series, regardless of whether such member was the last remaining member associated with such series.
(g) An operating agreement may impose restrictions, duties, and obligations on members of the limited liability company or any series thereof as a matter of internal governance, including, without limitation, those with regard to:
(1) Choice of law, forum selection, or consent to personal jurisdiction;
(2) Capital contributions;
(3) Restrictions on, or terms and conditions of, the transfer of membership interests;
(4) Restrictive covenants, including noncompetition, nonsolicitation, and confidentiality provisions;
(5) Fiduciary duties; and
(6) Restrictions, duties, or obligations to or for the benefit of the limited liability company, other series thereof, or their affiliates.
Source: SL 2020, ch 200, § 5, eff. Nov. 15, 2020.
47-34A-706 . Activities of series in foreign jurisdiction--Registration of series authorized in foreign jurisdiction.
(a) If a limited liability company with the ability to establish series does not register to do business in a foreign jurisdiction for itself and its series, a series of a limited liability company may itself register to do business as a limited liability company in the foreign jurisdiction in accordance with the laws of the foreign jurisdiction.
(b) If a foreign limited liability company, as permitted in the jurisdiction of its organization, has established a series having separate rights, powers, or duties and has limited the liabilities of such series so that the debts, liabilities, and obligations incurred, contracted for, or otherwise existing with respect to a particular series are enforceable against the assets of such series only, and not against the assets of the limited liability company generally or any other series thereof, or so that the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to the limited liability company generally or any other series thereof are not enforceable against the assets of such series, then the limited liability company, on behalf of itself or any of its series, or any of its series on its own behalf may register to do business in this state in accordance with this chapter. The limitation of liability shall also be stated on the application for registration. In addition to the requirements of § 47-34A-1002 , the registration application filed shall identify each series being registered to do business in the state by the limited liability company. Unless otherwise provided in the operating agreement, the debts, liabilities, and obligations incurred, contracted for, or otherwise existing with respect to a particular series of such a foreign limited liability company shall be enforceable against the assets of such series only and not against the assets of the foreign limited liability company generally or any other series thereof, and none of the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to such a foreign limited liability company generally or any other series thereof shall be enforceable against the assets of such series. Any series registering to do business in this state on its own behalf shall provide the information required in § 47-34A-1002 and pay the fees required by § 47-34A-212 and any other required fees.
Source: SL 2020, ch 200, § 6, eff. Nov. 15, 2020.
47-34A-707 . Requirements for application for certificate of designation.
An application for a certificate of designation shall exist in a medium prescribed by the secretary of state and shall set forth:
(1) The name of the limited liability company;
(2) The name of the series of the limited liability company;
(3) The principal office address for the series; and
(4) Whether the series is to be manager-managed, and, if so, the name and address for each initial manager, if different than the manager of the limited liability company in subsection (1).
Any amendment to the certificate of designation shall require a new application for a certificate of designation and payment of the applicable filing fee.
Source: SL 2020, ch 200, § 7, eff. Nov. 15, 2020.
Source: SL 2020, ch 200, § 7, eff. Nov. 15, 2020.
47-34A-801. Events causing dissolution and winding up of company's business.
(a) A limited liability company is dissolved, and its business must be wound up, upon the occurrence of any of the following events:
(1) An event specified in the operating agreement;
(2) Consent of the number or percentage of members specified in the operating agreement;
(3) An event that makes it unlawful for all or substantially all of the business of the company to be continued, but any cure of illegality within ninety days after notice to the company of the event is effective retroactively to the date of the event for purposes of this section;
(4) On application by a member or a dissociated member, upon entry of a judicial decree that:
(i) The economic purpose of the company is likely to be unreasonably frustrated;
(ii) Another member has engaged in conduct relating to the company's business that makes it not reasonably practicable to carry on the company's business with that member;
(iii) It is not otherwise reasonably practicable to carry on the company's business in conformity with the articles of organization and the operating agreement; or
(iv) The managers or members in control of the company have acted, are acting, or will act in a manner that is illegal or fraudulent.
Source: SL 1998, ch 272, § 801; SL 2009, ch 234, § 3.
47-34A-802. Limited liability company continues after dissolution.
(a) Subject to subsection (b), a limited liability company continues after dissolution only for the purpose of winding up its business.
(b) At any time after the dissolution of a limited liability company and before the winding up of its business is completed, the members may unanimously waive the right to have the company's business wound up and the company terminated. In that case:
(1) The limited liability company resumes carrying on its business as if dissolution had never occurred and any liability incurred by the company or a member after the dissolution and before the waiver is determined as if the dissolution had never occurred; and
(2) The rights of a third party accruing as a result of the dissolution, under § 47-34A-804(a), or arising out of conduct in reliance on the dissolution before the third party knew or received a notification of the waiver are not adversely affected.
Source: SL 1998, ch 272, § 802.
47-34A-803. Right to wind up the limited liability company's business.
(a) After dissolution, a member who has not wrongfully dissociated may participate in winding up a limited liability company's business, but on application of any member, member's legal representative, or transferee, the circuit court, for good cause shown, may order judicial supervision of the winding up.
(b) A legal representative of the last surviving member may wind up a limited liability company's business.
(c) A person winding up a limited liability company's business may preserve the company's business or property as a going concern for a reasonable time, prosecute and defend actions and proceedings, whether civil, criminal, or administrative, settle and close the company's business, dispose of and transfer the company's property, discharge the company's liabilities, distribute the assets of the company pursuant to § 47-34A-806, settle disputes by mediation or arbitration, and perform other necessary acts.
Source: SL 1998, ch 272, § 803.
47-34A-804. Member's or manager's power and liability as agent after dissolution.
(a) A limited liability company is bound by a member's or manager's act after dissolution that:
(1) Is appropriate for winding up the company's business; or
(2) Would have bound the company under § 47-34A-301 before dissolution, if the other party to the transaction did not have notice of the dissolution.
(b) A member or manager who, with knowledge of the dissolution, subjects a limited liability company to liability by an act that is not appropriate for winding up the company's business is liable to the company for any damage caused to the company arising from the liability.
Source: SL 1998, ch 272, § 804.
47-34A-805. Articles of termination.
(a) At any time after dissolution and winding up, a limited liability company may terminate its existence by filing with the secretary of state articles of termination stating:
(1) The name of the company;
(2) The date of the dissolution; and
(3) That the company's business has been wound up and the legal existence of the company has been terminated.
(b) The existence of a limited liability company is terminated upon the filing of the articles of termination, or upon a later effective date, if specified in the articles of termination.
(c) Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document.
Source: SL 1998, ch 272, § 805; SL 2012, ch 222, § 12.
47-34A-806. Distribution of assets in winding up the limited liability company's business.
(a) In winding up a limited liability company's business, the assets of the company must be applied to discharge its obligations to creditors, including members who are creditors. Any surplus must be applied to pay in money the net amount distributable to members in accordance with their right to distributions under subsection (b).
(b) Each member is entitled to a distribution upon the winding up of the limited liability company's business consisting of a return of all contributions which have not previously been returned and a distribution of any remainder in equal shares.
Source: SL 1998, ch 272, § 806.
47-34A-807. Known claims against dissolved limited liability company.
(a) A dissolved limited liability company may dispose of the known claims against it by following the procedure described in this section.
(b) A dissolved limited liability company shall notify its known claimants in writing of the dissolution. The notice must:
(1) Specify the information required to be included in a claim;
(2) Provide a mailing address where the claim is to be sent;
(3) State the deadline for receipt of the claim, which may not be less than one hundred twenty days after the date the written notice is received by the claimant; and
(4) State that the claim will be barred if not received by the deadline.
(c) A claim against a dissolved limited liability company is barred if the requirements of subsection (b) are met, and:
(1) The claim is not received by the specified deadline; or
(2) In the case of a claim that is timely received but rejected by the dissolved company, the claimant does not commence a proceeding to enforce the claim within ninety days after the receipt of the notice of the rejection.
(d) For purposes of this section, claim does not include a contingent liability or a claim based on an event occurring after the effective date of dissolution.
Source: SL 1998, ch 272, § 807.
47-34A-808. Notice--Other claims against dissolved limited liability company.
(a) A dissolved limited liability company may publish notice of its dissolution and request persons having claims against the company to present them in accordance with the notice.
(b) The notice must:
(1) Be published at least once in a newspaper of general circulation in the county in which the dissolved limited liability company's principal office is or was located or, if none in this state, in Hughes County;
(2) Describe the information required to be contained in a claim and provide a mailing address where the claim is to be sent; and
(3) State that a claim against the limited liability company is barred unless a proceeding to enforce the claim is commenced within five years after publication of the notice.
(c) If a dissolved limited liability company publishes a notice in accordance with subsection (b), the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved company within five years after the publication date of the notice:
(1) A claimant who did not receive written notice under § 47-34A-807;
(2) A claimant whose claim was timely sent to the dissolved company but not acted on; and
(3) A claimant whose claim is contingent or based on an event occurring after the effective date of dissolution.
(d) A claim not barred under this section may be enforced:
(1) Against the dissolved limited liability company, to the extent of its undistributed assets; or
(2) If the assets have been distributed in liquidation, against a member of the dissolved company to the extent of the member's proportionate share of the claim or the company's assets distributed to the member in liquidation, whichever is less, but a member's total liability for all claims under this section may not exceed the total amount of assets distributed to the member.
Source: SL 1998, ch 272, § 808; SL 2008, ch 275, § 77.
47-34A-809. Grounds for administrative dissolution.
The secretary of state may commence a proceeding to dissolve a limited liability company administratively if the company does not:
(1) Pay any fees, taxes, or penalties imposed by this chapter or other law within sixty days after they are due; or
(2) Deliver its annual report to the secretary of state within sixty days after it is due.
Source: SL 1998, ch 272, § 809.
47-34A-810. Procedure for and effect of administrative dissolution.
(a) If the secretary of state determines that a ground exists for administratively dissolving a limited liability company, the secretary of state shall enter a record of the determination and serve the company with a copy of the record.
(b) If the company does not correct each ground for dissolution or demonstrate to the reasonable satisfaction of the secretary of state that each ground determined by the secretary of state does not exist within sixty days after service of the notice, the secretary of state shall administratively dissolve the company by signing a certification of the dissolution that recites the ground for dissolution and its effective date. The secretary of state shall file the original of the certificate and serve the company with a copy of the certificate.
(c) A company administratively dissolved continues its existence but may carry on only business necessary to wind up and liquidate its business and affairs under § 47-34A-802 and to notify claimants under §§ 47-34A-807 and 47-34A-808.
(d) The administrative dissolution of a company does not terminate the authority of its agent for service of process.
Source: SL 1998, ch 272, § 810.
47-34A-811. Reinstatement following administrative dissolution.
(a) A limited liability company administratively dissolved may apply to the secretary of state for reinstatement after the effective date of dissolution. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document. The applicant shall submit with the application the appropriate filing fee. The secretary of state shall charge filing fees for any delinquent annual report and a fee for application of reinstatement in the amount of one hundred fifty dollars. The application must:
(1) Recite the name of the company and the effective date of its administrative dissolution;
(2) State that the ground for dissolution either did not exist or have been eliminated;
(3) State that the company's name satisfies the requirements of § 47-34A-105; and
(4) Contain a certificate from the appropriate state authority reciting that all taxes owed by the company have been paid.
(b) If the secretary of state determines that the application contains the information required by subsection (a) and that the information is correct, the secretary of state shall cancel the certificate of dissolution and prepare a certificate of reinstatement that recites this determination and the effective date of reinstatement, file the original of the certificate, and serve the company with a copy of the certificate.
(c) When reinstatement is effective, it relates back to and takes effect as of the effective date of the administrative dissolution and the company may resume its business as if the administrative dissolution had never occurred.
Source: SL 1998, ch 272, § 811; SL 2003, ch 8, § 24; SL 2005, ch 241, § 4; SL 2009, ch 4, § 19; SL 2012, ch 222, § 13.
47-34A-812. Appeal from denial of reinstatement.
(a) If the secretary of state denies a limited liability company's application for reinstatement following administrative dissolution, the secretary of state shall serve the company with a record that explains the reason or reasons for denial.
(b) The company may appeal the denial of reinstatement to the state circuit court within thirty days after service of the notice of denial is perfected. The company appeals by petitioning the court to set aside the dissolution and attaching to the petition copies of the secretary of state's certificate of dissolution, the company's application for reinstatement, and the secretary of state's notice of denial.
(c) The court may summarily order the secretary of state to reinstate the dissolved company or may take other action the court considers appropriate.
(d) The court's final decision may be appealed as in other civil proceedings.
Source: SL 1998, ch 272, § 812.
47-34A-901. Definitions.
Terms used in this article:
(1) "Constituent limited liability company" means a constituent organization that is a limited liability company;
(2) "Constituent organization" means an organization that is party to a merger;
(3) "Converted organization" means the organization into which a converting organization converts pursuant to §§ 47-34A-906 to 47-34A-909, inclusive;
(4) "Converting limited liability company" means a converting organization that is a limited liability company;
(5) "Converting organization" means an organization that converts into another organization pursuant to § 47-34A-906;
(6) "Domesticated company" means the company that exists after a domesticating foreign limited liability company or limited liability company effects a domestication pursuant to §§ 47-34A-910 to 47-34A-913, inclusive;
(7) "Domesticating company" means the company that effects a domestication pursuant to §§ 47-34A-910 to 47-34A-913, inclusive;
(8) "Governing statute" means the statute that governs an organization's internal affairs;
(9) "Organization" means a general partnership, including a limited liability partnership; limited partnership, including a limited liability limited partnership, limited liability company, business trust, corporation, or any other person having a governing statute. The term includes a domestic or foreign organization regardless of whether organized for profit;
(10) "Organizational documents" means:
(a) For a domestic or foreign general partnership, its partnership agreement;
(b) For a limited partnership or foreign limited partnership, its certificate of limited partnership and partnership agreement;
(c) For a domestic or foreign limited liability company, its certificate or articles of organization and operating agreement, or comparable records as provided in its governing statute;
(d) For a business trust, its agreement of trust and declaration of trust;
(e) For a domestic or foreign corporation for profit, its articles of incorporation, bylaws, and other agreements among its shareholders which are authorized by its governing statute, or comparable records as provided in its governing statute; and
(f) For any other organization, the basic records that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it;
(11) "Personal liability" means liability for a debt, obligation, or other liability of an organization which is imposed on a person that co-owns, has an interest in, or is a member of the organization:
(a) By the governing statute solely by reason of the person co-owning, having an interest in, or being a member of the organization; or
(b) By the organization's organizational documents under a provision of the governing statute authorizing those documents to make one or more specified persons liable for all or specified debts, obligations, or other liabilities of the organization solely by reason of the person or persons co-owning, having an interest in, or being a member of the organization;
(12) "Surviving organization" means an organization into which one or more other organizations are merged whether the organization preexisted the merger or was created by the merger.
Source: SL 1998, ch 272, § 901; SL 2013, ch 233, § 15.
47-34A-902. Merger.
(a) A limited liability company may merge with one or more other constituent organizations pursuant to this section, §§ 47-34A-903 to 47-34A-905, inclusive, and a plan of merger, if:
(1) The governing statute of each of the other organizations authorizes the merger;
(2) The merger is not prohibited by the law of a jurisdiction that enacted any of the governing statutes; and
(3) Each of the other organizations complies with its governing statute in effecting the merger.
(b) A plan of merger must be in a record and must include:
(1) The name and form of each constituent organization;
(2) The name and form of the surviving organization and, if the surviving organization is to be created by the merger, a statement to that effect;
(3) The terms and conditions of the merger, including the manner and basis for converting the interests in each constituent organization into any combination of money, interests in the surviving organization, and other consideration;
(4) If the surviving organization is to be created by the merger, the surviving organization's organizational documents that are proposed to be in a record; and
(5) If the surviving organization is not to be created by the merger, any amendments to be made by the merger to the surviving organization's organizational documents that are, or are proposed to be, in a record.
Source: SL 1998, ch 272, § 902; SL 2013, ch 233, § 16.
47-34A-903. Action on plan of merger by constituent limited liability company.
(a) Subject to § 47-34A-914, a plan of merger must be consented to by all the members of a constituent limited liability company.
(b) Subject to § 47-34A-914 and any contractual rights, after a merger is approved, and at any time before articles of merger are delivered to the secretary of state for filing under § 47-34A-904, a constituent limited liability company may amend the plan or abandon the merger:
(1) As provided in the plan; or
(2) Except as otherwise prohibited in the plan, with the same consent as was required to approve the plan.
Source: SL 1998, ch 272, § 903; SL 2013, ch 233, § 17.
47-34A-904. Filings required for merger--Effective date.
(a) After each constituent organization has approved a merger, articles of merger must be signed on behalf of:
(1) Each constituent limited liability company, as provided in § 47-34A-205; and
(2) Each other constituent organization, as provided in its governing statute.
(b) Articles of merger under this section must include:
(1) The name and form of each constituent organization and the jurisdiction of its governing statute;
(2) The name and form of the surviving organization, the jurisdiction of its governing statute, and, if the surviving organization is created by the merger, a statement to that effect;
(3) The date the merger is effective under the governing statute of the surviving organization;
(4) If the surviving organization is to be created by the merger:
(A) If it will be a limited liability company, the company's certificate of organization; or
(B) If it will be an organization other than a limited liability company, the organizational document that creates the organization that is in a public record;
(5) If the surviving organization preexists the merger, any amendments provided for in the plan of merger for the organizational document that created the organization that are in a public record;
(6) A statement as to each constituent organization that the merger was approved as required by the organization's governing statute;
(7) If the surviving organization is a foreign organization not authorized to transact business in this state, the street and mailing addresses of an office that the secretary of state may use for the purposes of § 47-34A-905(b); and
(8) Any additional information required by the governing statute of any constituent organization.
(c) Each constituent limited liability company shall deliver the articles of merger for filing in the Office of the Secretary of State.
(d) A merger becomes effective under this article:
(1) If the surviving organization is a limited liability company, upon the later of:
(A) Compliance with subsection (c); or
(B) Subject to § 47-34A-206, as specified in the articles of merger; or
(2) If the surviving organization is not a limited liability company, as provided by the governing statute of the surviving organization.
Source: SL 1998, ch 272, § 904; SL 2013, ch 233, § 18.
47-34A-905. Effect of merger.
(a) When a merger becomes effective:
(1) The surviving organization continues or comes into existence;
(2) Each constituent organization that merges into the surviving organization ceases to exist as a separate entity;
(3) All property owned by each constituent organization that ceases to exist vests in the surviving organization;
(4) All debts, obligations, or other liabilities of each constituent organization that ceases to exist continue as debts, obligations, or other liabilities of the surviving organization;
(5) An action or proceeding pending by or against any constituent organization that ceases to exist may be continued as if the merger had not occurred;
(6) Except as prohibited by other law, all of the rights, privileges, immunities, powers, and purposes of each constituent organization that ceases to exist vest in the surviving organization;
(7) Except as otherwise provided in the plan of merger, the terms and conditions of the plan of merger take effect;
(8) Except as otherwise agreed, if a constituent limited liability company ceases to exist, the merger does not dissolve the limited liability company for the purposes of §§ 47-34A-801 to 47-34A-812, inclusive;
(9) If the surviving organization is created by the merger:
(A) If it is a limited liability company, the certificate of organization becomes effective; or
(B) If it is an organization other than a limited liability company, the organizational document that creates the organization becomes effective; and
(10) If the surviving organization preexisted the merger, any amendments provided for in the articles of merger for the organizational document that created the organization become effective.
(b) A surviving organization that is a foreign organization consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability owed by a constituent organization, if before the merger the constituent organization was subject to suit in this state on the debt, obligation, or other liability. A surviving organization that is a foreign organization and not authorized to transact business in this state appoints the secretary of state as its agent for service of process for the purposes of enforcing a debt, obligation, or other liability under this subsection. Service on the secretary of state under this subsection must be made in the same manner as in § 47-34A-206.
Source: SL 1998, ch 272, § 905; SL 2013, ch 233, § 19.
47-34A-906. Conversion.
(a) An organization other than a limited liability company or a foreign limited liability company may convert to a limited liability company, and a limited liability company may convert to an organization other than a foreign limited liability company pursuant to §§ 47-34A-907 to 47-34A-909, inclusive, and a plan of conversion, if:
(1) The other organization's governing statute authorizes the conversion;
(2) The conversion is not prohibited by the law of the jurisdiction that enacted the other organization's governing statute; and
(3) The other organization complies with its governing statute in effecting the conversion.
(b) A plan of conversion must be in a record and must include:
(1) The name and form of the organization before conversion;
(2) The name and form of the organization after conversion;
(3) The terms and conditions of the conversion, including the manner and basis for converting interests in the converting organization into any combination of money, interests in the converted organization, and other consideration; and
(4) The organizational documents of the converted organization that are, or are proposed to be, in a record.
Source: SL 1998, ch 272, § 906; SL 2008, ch 275, § 78; SL 2013, ch 233, § 20.
47-34A-907. Action on plan of conversion by converting limited liability company.
(a) Subject to § 47-34A-914, a plan of conversion must be consented to by all the members of a converting limited liability company.
(b) Subject to § 47-34A-914 and any contractual rights, after a conversion is approved, and at any time before articles of conversion are delivered to the secretary of state for filing under § 47-34A-908, a converting limited liability company may amend the plan or abandon the conversion:
(1) As provided in the plan; or
(2) Except as otherwise prohibited in the plan, by the same consent as was required to approve the plan.
Source: SL 1998, ch 272, § 907; SL 2013, ch 233, § 21.
47-34A-908. Filings required for conversion--Effective date.
(a) After a plan of conversion is approved:
(1) A converting limited liability company shall deliver to the secretary of state for filing articles of conversion, which must be signed as provided in § 47-34A-205 and must include:
(A) A statement that the limited liability company has been converted into another organization;
(B) The name and form of the organization and the jurisdiction of its governing statute;
(C) The date the conversion is effective under the governing statute of the converted organization;
(D) A statement that the conversion was approved as required by this chapter;
(E) A statement that the conversion was approved as required by the governing statute of the converted organization; and
(F) If the converted organization is a foreign organization not authorized to transact business in this state, the street and mailing addresses of an office which the secretary of state may use for the purposes of § 47-34A-909(c); and
(2) If the converting organization is not a converting limited liability company, the converting organization shall deliver to the secretary of state for filing a certificate of organization, which must include, in addition to the information required by § 47-34A-203(a):
(A) A statement that the converted organization was converted from another organization;
(B) The name and form of that converting organization and the jurisdiction of its governing statute; and
(C) A statement that the conversion was approved in a manner that complied with the converting organization's governing statute.
(b) A conversion becomes effective:
(1) If the converted organization is a limited liability company, when the certificate of organization takes effect; and
(2) If the converted organization is not a limited liability company, as provided by the governing statute of the converted organization.
Source: SL 2010, ch 218, § 9; SL 2013, ch 233, § 22; SL 2021, ch 198, § 1.
47-34A-909. Effect of conversion.
(a) An organization that has been converted pursuant to this Article is for all purposes the same entity that existed before the conversion.
(b) When a conversion takes effect:
(1) All property owned by the converting organization remains vested in the converted organization;
(2) All debts, obligations, or other liabilities of the converting organization continue as debts, obligations, or other liabilities of the converted organization;
(3) An action or proceeding pending by or against the converting organization may be continued as if the conversion had not occurred;
(4) Except as prohibited by law other than this chapter, all of the rights, privileges, immunities, powers, and purposes of the converting organization remain vested in the converted organization;
(5) Except as otherwise provided in the plan of conversion, the terms and conditions of the plan of conversion take effect; and
(6) Except as otherwise agreed, the conversion does not dissolve a converting limited liability company for the purposes of §§ 47-34A-801 to 47-34A-812, inclusive.
(c) A converted organization that is a foreign organization consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability for which the converting limited liability company is liable if, before the conversion, the converting limited liability company was subject to suit in this state on the debt, obligation, or other liability. A converted organization that is a foreign organization and not authorized to transact business in this state appoints the secretary of state as its agent for service of process for purposes of enforcing a debt, obligation, or other liability under this subsection. Service on the secretary of state under this subsection must be made in the same manner and has the same consequences as set forth in this chapter.
Source: SL 2010, ch 218, § 10; SL 2013, ch 233, § 23.
47-34A-910. Domestication.
(a) A foreign limited liability company may become a limited liability company pursuant to §§ 47-34A-911 to 47-34A-913, inclusive, and a plan of domestication, if:
(1) The foreign limited liability company's governing statute authorizes the domestication;
(2) The domestication is not prohibited by the law of the jurisdiction that enacted the governing statute; and
(3) The foreign limited liability company complies with its governing statute in effecting the domestication.
(b) A limited liability company may become a foreign limited liability company pursuant to §§ 47-34A-911 to 47-34A-913, inclusive, and a plan of domestication, if:
(1) The foreign limited liability company's governing statute authorizes the domestication;
(2) The domestication is not prohibited by the law of the jurisdiction that enacted the governing statute; and
(3) The foreign limited liability company complies with its governing statute in effecting the domestication.
(c) A plan of domestication must be in a record and must include:
(1) The name of the domesticating company before domestication and the jurisdiction of its governing statute;
(2) The name of the domesticated company after domestication and the jurisdiction of its governing statute;
(3) The terms and conditions of the domestication, including the manner and basis for converting interests in the domesticating company into any combination of money, interests in the domesticated company, and other consideration; and
(4) The organizational documents of the domesticated company that are, or are proposed to be, in a record.
Source: SL 2010, ch 218, § 11; SL 2013, ch 233, § 24.
47-34A-911. Action on plan of domestication by domesticating limited liability company.
(a) A plan of domestication must be consented to:
(1) By all the members, subject to § 47-34A-912, if the domesticating company is a limited liability company; and
(2) As provided in the domesticating company's governing statute, if the company is a foreign limited liability company.
(b) Subject to any contractual rights, after a domestication is approved, and at any time before articles of domestication are delivered to the secretary of state for filing under § 47-34A-912, a domesticating limited liability company may amend the plan or abandon the domestication:
(1) As provided in the plan; or
(2) Except as otherwise prohibited in the plan, by the same consent as was required to approve the plan.
Source: SL 2010, ch 218, § 12; SL 2013, ch 233, § 25.
47-34A-912. Filings required for domestication--Effective date.
(a) After a plan of domestication is approved, a domesticating company shall deliver to the secretary of state for filing articles of domestication, which must include:
(1) A statement, as the case may be, that the company has been domesticated from or into another jurisdiction;
(2) The name of the domesticating company and the jurisdiction of its governing statute;
(3) The name of the domesticated company and the jurisdiction of its governing statute;
(4) The date the domestication is effective under the governing statute of the domesticated company;
(5) If the domesticating company was a limited liability company, a statement that the domestication was approved as required by this chapter;
(6) If the domesticating company was a foreign limited liability company, a statement that the domestication was approved as required by the governing statute of the other jurisdiction;
(7) If the domesticated company was a foreign limited liability company not authorized to transact business in this state, the street and mailing addresses of an office that the secretary of state may use for the purposes of § 47-34A-913(b); and
(8) If the domesticated company was a foreign limited liability company, articles of organization that comply with the requirements of § 47-34A-203.
(b) A domestication becomes effective:
(1) When the certificate of organization takes effect, if the domesticated company is a limited liability company; and
(2) According to the governing statute of the domesticated company, if the domesticated organization is a foreign limited liability company.
Source: SL 2010, ch 218, § 13; SL 2013, ch 233, § 26; SL 2022, ch 168, § 1.
47-34A-913. Effect of domestication.
(a) When a domestication takes effect:
(1) The domesticated company is for all purposes the company that existed before the domestication;
(2) All property owned by the domesticating company remains vested in the domesticated company;
(3) All debts, obligations, or other liabilities of the domesticating company continue as debts, obligations, or other liabilities of the domesticated company;
(4) An action or proceeding pending by or against a domesticating company may be continued as if the domestication had not occurred;
(5) Except as prohibited by other law, all of the rights, privileges, immunities, powers, and purposes of the domesticating company remain vested in the domesticated company;
(6) Except as otherwise provided in the plan of domestication, the terms and conditions of the plan of domestication take effect; and
(7) Except as otherwise agreed, the domestication does not dissolve a domesticating limited liability company for the purposes of §§ 47-34A-801 to 47-34A-812, inclusive.
(b) A domesticated company that is a foreign limited liability company consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability owed by the domesticating company, if, before the domestication, the domesticating company was subject to suit in this state on the debt, obligation, or other liability. A domesticated company that is a foreign limited liability company and not authorized to transact business in this state appoints the secretary of state as its agent for service of process for purposes of enforcing a debt, obligation, or other liability under this subsection. Service on the secretary of state under this subsection must be made in the same manner and has the same consequences as set forth in this chapter.
(c) If a limited liability company has adopted and approved a plan of domestication under § 47-34A-910 providing for the company to be domesticated in a foreign jurisdiction, a statement surrendering the company's certificate of organization must be delivered to the secretary of state for filing setting forth:
(1) The name of the company;
(2) A statement that the certificate of organization is being surrendered in connection with the domestication of the company in a foreign jurisdiction;
(3) A statement the domestication was approved as required by this chapter; and
(4) The jurisdiction of formation of the domesticated foreign limited liability company.
Source: SL 2013, ch 233, § 27.
47-34A-914. Restrictions on approval of mergers, conversions, and domestications.
(a) If a member of a constituent, converting, or domesticating limited liability company will have personal liability with respect to a surviving, converted, or domesticated organization, approval or amendment of a plan of merger, conversion, or domestication is ineffective without the consent of the member, unless:
(1) The company's operating agreement provides for approval of a merger, conversion, or domestication with the consent of fewer than all the members; and
(2) The member has consented to the provision of the operating agreement.
(b) A member does not give the consent required by subsection (a) merely by consenting to a provision of the operating agreement that permits the operating agreement to be amended with the consent of fewer than all the members.
Source: SL 2013, ch 233, § 28.
47-34A-915. Article not exclusive.
The proceedings authorized under §§ 47-34A-901 to 47-34A-914, inclusive, do not preclude an entity from being merged, converted, or domesticated under law other than these provisions.
Source: SL 2013, ch 233, § 29.
47-34A-1001. Law governing foreign limited liability companies.
(a) The law of the state or other jurisdiction under which a foreign limited liability company is formed governs:
(1) The internal affairs of the company; and
(2) The liability of a member as member and a manager as manager for the debts, obligations, or other liabilities of the company.
(b) A foreign limited liability company may not be denied a certificate of authority by reason of any difference between the law of the jurisdiction under which the company is formed and the law of this state.
(c) A certificate of authority does not authorize a foreign limited liability company to engage in any business or exercise any power that a limited liability company may not engage in or exercise in this state.
Source: SL 1998, ch 272, § 1001; SL 2013, ch 233, § 30.
47-34A-1002. Application for certificate of authority.
(a) A foreign limited liability company may not do business in this state until it obtains a certificate of authority from the secretary of state.
(b) A foreign limited liability company may apply for a certificate of authority to transact business in this state by delivering an application to the secretary of state for filing. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document. The application must state:
(1) The name of the company and, if the name does not comply with § 47-34A-105, an alternate name adopted pursuant to § 47-34A-105;
(2) The name of the state or other jurisdiction under whose law the company is formed;
(3) The street and mailing addresses of the company's principal office and if the law of the jurisdiction under which the company is formed requires the company to maintain an office in that jurisdiction, the street and mailing address of the required office;
(4) If the limited liability company is authorized to establish one or more series, the matters required under § 47-34A-702; and
(5) The name and street and mailing address of the company's initial agent for service of process in this state.
(c) A foreign limited liability company shall deliver with a completed application under subsection (a) a certificate of existence or a record of similar import signed by the secretary of state or other official having custody of the company's publicly filed records in the state or other jurisdiction under whose law the company is formed together with the fees required by § 47-34A-212, and all other fees.
Source: SL 1998, ch 272, § 1002; SL 2008, ch 275, § 79; SL 2012, ch 222, § 15; SL 2013, ch 233, § 31; SL 2020, ch 200, § 10, eff. Nov. 15, 2020.
47-34A-1003. Activities not constituting transacting business.
(a) Activities of a foreign limited liability company which do not constitute transacting business in this state within the meaning of this article include:
(1) Maintaining, defending, or settling an action or proceeding;
(2) Carrying on any activity concerning its internal affairs, including holding meetings of its members or managers;
(3) Maintaining accounts in financial institutions;
(4) Maintaining offices or agencies for the transfer, exchange, and registration of the company's own securities or maintaining trustees or depositories with respect to those securities;
(5) Selling through independent contractors;
(6) Soliciting or obtaining orders, whether by mail or electronic means or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts;
(7) Creating or acquiring indebtedness, mortgages, or security interests in real or personal property;
(8) Securing or collecting debts or enforcing mortgages or other security interests in property securing the debts and holding, protecting, or maintaining property so acquired;
(9) Conducting an isolated transaction that is completed within thirty days and is not in the course of similar transactions; and
(10) Transacting business in interstate commerce.
(b) For purposes of this article, the ownership in this state of income-producing real property or tangible personal property, other than property excluded under subsection (a), constitutes transacting business in this state.
(c) This section does not apply in determining the contacts or activities that may subject a foreign limited liability company to service of process, taxation, or regulation under any law of this state other than this chapter.
Source: SL 1998, ch 272, § 1003; SL 2013, ch 233, § 32.
47-34A-1004. Filing of certificate of authority.
Unless the secretary of state determines that an application for a certificate of authority does not comply with the filing requirements of this chapter, the secretary of state, upon payment of all filing fees, shall file the application of a foreign limited liability company, prepare, sign, and file a certificate of authority to transact business in this state, and send a copy of the filed certificate, together with a receipt for the fees to the company or its representative.
Source: SL 1998, ch 272, § 1004; SL 2013, ch 233, § 33.
47-34A-1005. Noncomplying name of foreign limited liability company.
(a) A foreign limited liability company whose name does not comply with § 47-34A-105 may not obtain a certificate of authority until it adopts, for the purpose of transacting business in this state, an alternate name that complies with § 47-34A-105. A foreign limited liability company that adopts an alternate name under this subsection and obtains a certificate of authority with the alternate name need not comply with chapter 37-11 or § 47-34A-105. After obtaining a certificate of authority with an alternate name, a foreign limited liability company shall transact business in this state under the alternate name unless the company is authorized under chapter 37-11 or § 47-34A-105 to transact business in this state under another name.
(b) If a foreign limited liability company authorized to transact business in this state changes its name to one that does not comply with § 47-34A-105, it may not thereafter transact business in this state until it complies with subsection (a) and obtains an amended certificate of authority.
Source: SL 1998, ch 272, § 1005; SL 2013, ch 233, § 34.
47-34A-1006. Revocation of certificate of authority.
(a) A certificate of authority of a foreign limited liability company to transact business in this state may be revoked by the secretary of state in the manner provided in subsections (b) and (c) if the company does not:
(1) Pay, within sixty days after the due date, any fee, tax, or penalty due to the secretary of state under this chapter or law other than this chapter;
(2) Deliver, within sixty days after the due date, its annual report required under § 47-34A-211;
(3) Appoint and maintain an agent for service of process as required by South Dakota law; or
(4) Deliver for filing a statement of a change within thirty days after a change has occurred in the name or address of the agent.
(b) To revoke a certificate of authority of a foreign limited liability company, the secretary of state must prepare, sign, and file a notice of revocation and send a copy to the company's agent for service of process in this state, or if the company does not appoint and maintain a proper agent in this state, to the company's designated office. The notice must state:
(1) The revocation's effective date, which must be at least sixty days after the date the secretary of state sends the copy; and
(2) The grounds for revocation under subsection (a).
(c) The authority of a foreign limited liability company to transact business in this state ceases on the effective date of the notice of revocation unless before that date the company cures each ground for revocation stated in the notice filed under subsection (b). If the company cures each ground, the secretary of state shall file a record so stating.
Source: SL 1998, ch 272, § 1006; SL 2008, ch 275, § 80; SL 2013, ch 233, § 35.
47-34A-1007. Cancellation of certificate of authority.
To cancel its certificate of authority to transact business in this state, a foreign limited liability company must deliver to the secretary of state for filing a notice of cancellation stating the name of the company and that the company desires to cancel its certificate of authority. The certificate of authority is cancelled when the notice becomes effective.
Source: SL 1998, ch 272, § 1007; SL 2012, ch 222, § 16; SL 2013, ch 233, § 36.
47-34A-1008. Effect of failure to obtain certificate of authority.
(a) A foreign limited liability company transacting business in this state may not maintain an action or proceeding in this state unless it has a certificate of authority to transact business in this state.
(b) The failure of a foreign limited liability company to have a certificate of authority to transact business in this state does not impair the validity of a contract or act of the company or prevent the foreign limited liability company from defending an action or proceeding in this state.
(c) A member or manager of a foreign limited liability company is not liable for the debt, obligations, or other liabilities of the company solely because the company transacted business in that state without a certificate of authority.
(d) If a foreign limited liability company transacts business in this state without a certificate of authority or cancels its certificate of authority, it appoints the secretary of state as its agent for service of process for rights of actions arising out of the transaction of business in this state.
Source: SL 1998, ch 272, § 1008; SL 2013, ch 233, § 37.
47-34A-1009. Action by attorney general.
The attorney general may maintain an action to enjoin a foreign limited liability company from transacting business in this state in violation of this article.
Source: SL 1998, ch 272, § 1009; SL 2013, ch 233, § 38.
47-34A-1101. Direct action by member.
(a) Subject to subsection (b), a member may maintain a direct action against another member, a manager, or the limited liability company to enforce the member's rights and otherwise protect the member's interests, including rights and interests under the operating agreement or this chapter or arising independently of the membership relationship.
(b) A member maintaining a direct action under this section must plead an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the limited liability company.
Source: SL 1998, ch 272, § 1101; SL 2013, ch 233, § 39.
47-34A-1102. Derivative action.
A member may maintain a derivative action to enforce a right of a limited liability company if:
(1) The member first makes a demand on the other members in a member-managed limited liability company, or the managers of a manager-managed limited liability company, requesting that they cause the company to bring an action to enforce the right, and the managers or other members do not bring the action within a reasonable time; or
(2) A demand under paragraph (1) would be futile.
Source: SL 1998, ch 272, § 1102; SL 2013, ch 233, § 40.
47-34A-1103. Proper plaintiff.
(a) Except as otherwise provided in subsection (b), a derivative action under § 47-34A-1102 may be maintained only by a person that is a member at the time the action is commenced and remains a member while the action continues.
(b) If the sole plaintiff in a derivative action dies while the action is pending, the court may permit another member of the limited liability company to be substituted as plaintiff.
Source: SL 1998, ch 272, § 1103; SL 2013, ch 233, § 41.
47-34A-1104. Pleading.
In a derivative action under § 47-34A-1102, the complaint must state with particularity:
(1) The date and content of the plaintiff's demand and the response to the demand by the managers or other members; or
(2) If a demand has not been made, the reasons a demand under § 47-34A-1102 would be futile.
Source: SL 1998, ch 272, § 1104; SL 2013, ch 233, § 42.
47-34A-1105. Special litigation committee.
(a) If a limited liability company is named as or made a party in a derivative proceeding, the company may appoint a special litigation committee to investigate the claims asserted in the proceeding and determine whether pursuing the action is in the best interests of the company. If the company appoints a special litigation committee on motion by the committee made in the name of the company, except for good cause shown, the court shall stay discovery for the time reasonably necessary to permit the committee to make an investigation. The provisions of this subsection do not prevent the court from enforcing a person's right to information under § 47-34A-408 or, for good cause shown, granting extraordinary relief in the form of a temporary restraining order or preliminary injunction.
(b) A special litigation committee may be composed of one or more disinterested and independent individuals, who may be members.
(c) A special litigation committee may be appointed:
(1) In a member-managed limited liability company:
(A) By the consent of a majority of the members not named as defendants or plaintiffs in the proceeding; and
(B) If all members are named as defendants or plaintiffs in the proceeding, by a majority of the members named as defendants; or
(2) In a manager-managed limited liability company:
(A) By a majority of the managers not named as defendants or plaintiffs in the proceeding; and
(B) If all managers are named as defendants or plaintiffs in the proceeding, by a majority of the managers named as defendants.
(d) After appropriate investigation, a special litigation committee may determine that it is in the best interests of the limited liability company that the proceeding:
(1) Continue under the control of the plaintiff;
(2) Continue under the control of the committee;
(3) Be settled on terms approved by the committee; or
(4) Be dismissed.
(e) After making a determination under subsection (d), a special litigation committee shall file with the court a statement of the committees determination and the committee's report supporting the determination, giving notice to the plaintiff. The court shall determine whether the members of the committee were disinterested and independent and whether the committee conducted its investigation and made the recommendation in good faith, independently, and with reasonable care, with the committee having the burden of proof. If the court finds that the members of the committee were disinterested and independent and that the committee acted in good faith, independently, and with reasonable care, the court shall enforce the determination of the committee. Otherwise, the court shall dissolve the stay of discovery entered under subsection (a) and allow the action to proceed under the direction of the plaintiff.
Source: SL 2013, ch 233, § 43.
47-34A-1106. Proceeds and expenses.
(a) Except as otherwise provided in subsection (b):
(1) Any proceeds or other benefits of a derivative action under § 47-34A-1102, whether by judgment, compromise, or settlement, belong to the limited liability company and not to the plaintiff; and
(2) If the plaintiff receives any proceeds, the plaintiff shall immediately remit the proceeds to the company.
(b) If a derivative action under § 47-34A-1102 is successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney's fees and costs, from the recovery of the limited liability company.
Source: SL 2013, ch 233, § 44.
47-34A-1201. Uniformity of application and construction.
This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.
Source: SL 1998, ch 272, § 1201.
47-34A-1202. Short title.
This chapter may be cited as the South Dakota Limited Liability Company Act.
Source: SL 1998, ch 272, § 1202.
47-34A-1205. Limited liability company--Organization--Effective date.
(a) Before January 1, 1999, this chapter governs only a limited liability company organized:
(1) After the effective date of this chapter, unless the company is continuing the business of a dissolved limited liability company.;
(2) Before the effective date of this chapter, which elects, as provided by subsection (b), to be governed by this chapter.
(b) Before January 1, 2004, a limited liability company existing before the effective date of this chapter may voluntarily elect, in the manner provided in its operating agreement or by law for amending the operating agreement, to be governed by this chapter.
(c) On and after January 1, 2004, this chapter governs all limited liability companies.
Source: SL 1998, ch 272, § 1205.
47-34A-1206. Fees.
The secretary of state may charge the following fees:
(a) For amending or restating the articles of organization in the case of a domestic limited liability company, a filing fee of sixty dollars. For amending the certificate of authority in the case of a foreign limited liability company, a filing fee of seven hundred fifty dollars;
(b) For filing articles of termination, ten dollars;
(c) For filing articles of merger, sixty dollars;
(d) For filing a statement of dissociation, ten dollars;
(e) For filing an application to reserve a name, twenty-five dollars;
(f) For issuing a certificate of existence, twenty dollars;
(g) For filing an application for registration of name, twenty-five dollars;
(h) For filing an annual renewal of registration, a limited liability company which has in effect a registration of its name, may renew such registration from year to year by annually filing an application for renewal setting forth the facts required to be set forth in an original application for registration and a certificate of good standing as required for the original registration and by paying a fee of fifteen dollars. A renewal application may be filed between the first day of October and the thirty-first day of December in each year and shall extend the registration for the following year. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document;
(i) For acting as agent for service of process the secretary of state shall charge and collect at the time of such service thirty dollars which may be recoverable as taxable costs by the party to the suit or action causing the service to be made if the party prevails in the suit or action;
(j) For filing articles of domestication, one hundred fifty dollars;
(k) For filing articles of organization surrender, one hundred fifty dollars;
(l) For filing a plan of conversion, one hundred fifty dollars;
(m) For amending or restating the articles of organization in the case of a domestic limited liability company or for filing an application to amend or restate the certificate of authority in the case of a foreign limited liability company, where the amendment contains a notice that the limited liability company is authorized to establish one or more series, a filing fee of one hundred ten dollars;
(n) For filing an application for a certificate of designation, fifty dollars.
Source: SL 1998, ch 272, § 1206; SL 2003, ch 8, § 25; SL 2004, ch 279, § 3; SL 2008, ch 275, § 88; SL 2009, ch 4, § 20; SL 2010, ch 218, § 15; SL 2012, ch 222, § 17; SL 2020, ch 200, § 11, eff. Nov. 15, 2020.
47-34A-1206.1. Filing of documents with secretary of state.
Delivery of documents may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document.
Source: SL 2013, ch 233, § 45.
47-34A-1207. Savings clause.
This chapter does not affect an action or proceeding commenced or right accrued before July 1, 1998.
Source: SL 1998, ch 272, § 1207.