Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 41 (2017GS)

Sponsor

Rep. Peterson, V.

Final action

Governor Signed 3/28/2017

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• amends the provision addressing general standards of conduct for directors and officers;
• enacts provisions related to business combinations; and
• makes technical changes.

Every vote on this bill

Bill text

UTAH REVISED BUSINESS CORPORATION ACT
MODIFICATIONS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Val L. Peterson
Senate Sponsor: 
Curtis S. Bramble
LONG TITLE
General Description:
This bill modifies provisions regulating business corporations.
Highlighted Provisions:
This bill:
▸ amends the provision addressing general standards of conduct for directors and
officers;
▸ enacts provisions related to business combinations; and
▸ makes technical changes.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
16-10a-840
, as last amended by Laws of Utah 1993, Chapter 266
ENACTS:
16-10a-1801
, Utah Code Annotated 1953
16-10a-1802
, Utah Code Annotated 1953
16-10a-1803
, Utah Code Annotated 1953
16-10a-1804
, Utah Code Annotated 1953
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
16-10a-840
 is amended to read:
16-10a-840.
General standards of conduct for directors and officers.
(1) Each director shall discharge [
his
] 
the director's
 duties as a director, including
duties as a member of a committee, and each officer with discretionary authority shall
discharge [
his
] 
the officer's
 duties under that authority:
(a) in good faith;
(b) with the care an ordinarily prudent person in a like position would exercise under
similar circumstances; and
(c) in a manner the director or officer reasonably believes to be in the best interests of
the corporation.
(2) In discharging [
his
] 
the director's or officer's
 duties, a director or officer is entitled
to rely on information, opinions, reports, or statements, including financial statements and
other financial data, if prepared or presented by:
(a) one or more officers or employees of the corporation
, or of any other corporation of
which at least 50% of the outstanding shares of stock entitling the holder of the shares to vote
in the election of directors is owned directly or indirectly by the corporation,
 whom the director
or officer reasonably believes to be reliable and competent in the matters presented;
(b) legal counsel, public accountants, or other persons as to matters the director or
officer reasonably believes are within the person's professional or expert competence; or
(c) in the case of a director, a committee of the board of directors of which [
he
] 
the
director
 is not a member[
,
]
:
(i) if the committee is designated in accordance with the articles of incorporation or the
bylaws;
(ii) if the information, opinion, report, or statement is within the committee's
designated authority;
(iii)
 if the director reasonably believes the committee merits confidence[
.
]
; and
(iv) subject to Subsection (3), so long as in so relying the director is acting in good
faith with the degree of care contemplated by Subsection (1)(b).
(3) A director or officer is not acting in good faith if [
he
] 
the director or officer
 has
knowledge concerning the matter in question that makes reliance otherwise permitted by
Subsection (2) unwarranted.
(4) A director or officer is not liable to the corporation, its shareholders, or any
conservator or receiver, or any assignee or successor-in-interest thereof, for any action taken, or
any failure to take any action, as an officer or director, as the case may be, unless:
(a) the director or officer has breached or failed to perform the duties of the office in
compliance with this section; and
(b) the breach or failure to perform constitutes gross negligence, willful misconduct, or
intentional infliction of harm on the corporation or the shareholders.
(5) (a) For purposes of this Subsection (5) and notwithstanding Section 
16-10a-102
,
"control" means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the corporation whether through the ownership of
voting stock, by contract, or otherwise.
(b) In taking action, including action that may involve or relate to a change or potential
change in the control of the corporation, the director is entitled to consider:
(i) both the long-term and the short-term interests of the corporation and the
corporation's shareholders; and
(ii) the effects that the corporation's actions may have in the long-term or short-term on
any of the following:
(A) the prospects for potential growth, development, productivity, and profitability of
the corporation;
(B) the corporation's current employees;
(C) the corporation's retired employees and other beneficiaries receiving or entitled to
receive retirement, welfare, or similar benefits from or pursuant to any plan sponsored, or
agreement entered into, by the corporation;
(D) the corporation's customers and creditors; and
(E) the ability of the corporation to provide, as a going concern, goods, services,
employment opportunities, employment benefits, and otherwise contribute to the communities
in which the corporation does business.
(c) This Subsection (5) does not create any duty owed by a director to any person to
consider or afford any particular weight to any factor listed in Subsection (5)(b) or abrogate any
duty of the director, either statutory or recognized by common law or court decisions.
Section 2. Section 
16-10a-1801
 is enacted to read:
Part 18. Business Combinations
 16-10a-1801.
Title.
This part is known as "Business Combinations."
Section 3. Section 
16-10a-1802
 is enacted to read:
 16-10a-1802.
Definitions.
As used in this part:
(1) "Affiliate" means the same as that term is defined in Section 
16-10a-102
.
(2) "Announcement date," when used in reference to a business combination, means
the date of the first public announcement of the final, definitive proposal for the business
combination.
(3) "Associate," when used to indicate a relationship with a person, means:
(a) a corporation or organization of which the person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of voting stock;
(b) a 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; and
(c) a relative or spouse of the person, or any relative of the spouse, who has the same
home as the person.
(4) "Beneficial owner," when used with respect to stock, means a person:
(a) that, individually or with or through any of its affiliates or associates, beneficially
owns the stock, directly or indirectly;
(b) that, individually or with or through any of its affiliates or associates, has:
(i) the right to acquire the stock:
(A) whether the right is exercisable immediately or only after the passage of time,
pursuant to an agreement, arrangement, or understanding, whether or not in writing; or
(B) upon the exercise of conversion rights, exchange rights, warrants, or options, or
otherwise, except that a person may not be considered the beneficial owner of stock tendered
pursuant to a tender or exchange offer made by the person or an affiliate or associate of the
person until the tendered stock is accepted for purchase or exchange; or
(ii) the right to vote the stock pursuant to an agreement, arrangement, or understanding,
whether or not in writing, except that a person may not be considered the beneficial owner of
any stock under this Subsection (4)(b)(ii) if the agreement, arrangement, or understanding to
vote the stock arises solely from a revocable proxy or consent given in response to a proxy or
consent solicitation made in accordance with the applicable regulations under the Exchange
Act and is not then reportable on a Schedule 13D under the Exchange Act, or any comparable
or successor report; or
(c) that has an agreement, arrangement, or understanding, whether or not in writing, for
the purpose of acquiring, holding, voting, except voting pursuant to a revocable proxy or
consent as described in Subsection (4)(b)(ii), or disposing of the stock with any other person
that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly,
the stock.
(5) "Business combination," when used in reference to any domestic corporation and
an interested shareholder of the corporation, means:
(a) a merger or consolidation of the corporation or any subsidiary of the corporation
with:
(i) the interested shareholder; or
(ii) any other corporation, whether or not that corporation is an interested shareholder
of the corporation, that is, or after the merger or consolidation would be, an affiliate or
associate of the interested shareholder;
(b) 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 corporation or any subsidiary of the
corporation:
(i) having an aggregate market value equal to 10% or more of the aggregate market
value of all the assets, determined on a consolidated basis, of the corporation;
(ii) having an aggregate market value equal to 10% or more of the aggregate market
value of all the outstanding stock of the corporation; or
(iii) representing 10% or more of the earning power or net income, determined on a
consolidated basis, of the corporation;
(c) the issuance or transfer by the corporation or any subsidiary of the corporation, in
one transaction or a series of transactions, of any stock of the corporation or any subsidiary of
the corporation that has an aggregate market value equal to 5% or more of the aggregate market
value of all the outstanding stock of the corporation to the interested shareholder or any
affiliate or associate of the interested shareholder except pursuant to the exercise of warrants or
rights to purchase stock offered, or a dividend or distribution paid or made, pro rata to all
shareholders of the corporation;
(d) the adoption of any plan or proposal for the liquidation or dissolution of the
corporation proposed by, or pursuant to any agreement, arrangement, or understanding,
whether or not in writing, with, the interested shareholder or any affiliate or associate of the
interested shareholder;
(e) any reclassification of securities, including a stock split, stock dividend, or other
distribution of stock in respect of stock, or any reverse stock split, or recapitalization of the
corporation, or any merger or consolidation of the corporation with any subsidiary of the
corporation, or any other transaction, whether or not with, into, or otherwise involving the
interested shareholder:
(i) proposed by, or pursuant to any agreement, arrangement, or understanding, whether
or not in writing, with, the interested shareholder or any affiliate or associate of the interested
shareholder; and
(ii) that has the effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class or series of voting stock or securities convertible into voting
stock of the corporation or any subsidiary of the 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
(f) a receipt by the interested shareholder or an affiliate or associate of the interested
shareholder of the benefit, directly or indirectly, except proportionately as a shareholder of the
corporation, of a loan, advance, guarantee, pledge, or other financial assistance or any tax credit
or other tax advantage provided by or through the corporation.
(6) "Common stock" means stock other than preferred stock.
(7) "Consummation date," with respect to a business combination, means:
(a) the date of consummation of the business combination; or
(b) 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) 20 days before the date of consummation of the business combination.
(8) (a) "Control," including the terms "controlling," "controlled by," and "under
common control with," means the same as that term is defined in Section 
16-10a-102
.
(b) A person's beneficial ownership of 10% or more of a corporation's outstanding
voting stock creates a presumption that the person has control of the corporation.
(c) Notwithstanding the other provisions of this Subsection (8), a person may not be
considered to have control of a corporation if the person holds voting stock, in good faith and
not for the purpose of circumventing this part, as an agent, bank, broker, nominee, custodian, or
trustee for one or more beneficial owners that do not individually or as a group have control of
the corporation.
(9) "Exchange Act" means the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78a et
seq. as amended.
(10) (a) "Interested shareholder," when used in reference to a domestic corporation,
means a person, other than the corporation or a subsidiary of the corporation, that:
(i) is the beneficial owner, directly or indirectly, of 20% or more of the outstanding
voting stock of the corporation; or
(ii) is an affiliate or associate of the corporation and at any time within the five-year
period immediately before the date in question was the beneficial owner, directly or indirectly,
of 20% or more of the then outstanding voting stock of the corporation.
(b) For the purpose of determining whether a person is an interested shareholder, the
number of shares of voting stock of the corporation considered to be outstanding shall include
shares considered to be beneficially owned by the person through application of Subsection (4),
but may not include any other unissued shares of voting stock of the corporation that may be
issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of
conversion rights, warrants, or options, or otherwise.
(11) "Market value," when used in reference to stock or property of a domestic
corporation, means:
(a) in the case of stock:
(i) the highest closing sale price during the 30-day period immediately preceding the
date in question of a share of the stock on the composite tape for New York stock
exchange-listed stocks;
(ii) if the stock is not quoted on the composite tape or listed on the exchange described
in Subsection (11)(a)(i), the highest closing sale price during the 30-day period immediately
preceding the date in question on the principal United States securities exchange registered
under the Exchange Act on which the stock is listed; or
(iii) if no quotation is available under Subsection (11)(a)(i) or (ii), the fair market value
on the date in question of a share of the stock as determined by the board of directors of the
corporation in good faith; and
(b) in the case of property other than cash or stock, the fair market value of the property
on the date in question as determined by the board of directors of the corporation in good faith.
(12) "Preferred stock" means a class or series of stock of a domestic corporation that
under the bylaws or articles of incorporation of the corporation:
(a) is entitled to receive payment of dividends before any payment of dividends on
some other class or series of stock; or
(b) is entitled in the event of a voluntary liquidation, dissolution, or winding up of the
corporation to receive payment or distribution of a preferential amount before a payment or
distribution is received by some other class or series of stock.
(13) "Stock" means:
(a) a stock or similar security, a certificate of interest, any participation in a profit
sharing agreement, a voting trust certificate, or a certificate of deposit for stock;
(b) a security convertible, with or without consideration, into stock;
(c) a warrant, call, or other option or privilege of buying stock without being bound to
do so; or
(d) any other security carrying a right to acquire, subscribe to, or purchase stock.
(14) "Stock acquisition date," with respect to a person and a domestic corporation,
means the date that the person first becomes an interested shareholder of the corporation.
(15) "Subsidiary" of a person means any other corporation of which a majority of the
voting stock is owned, directly or indirectly, by the person.
(16) "Voting stock" means shares of capital stock of a corporation entitled to vote
generally in the election of directors.
Section 4. Section 
16-10a-1803
 is enacted to read:
 16-10a-1803.
Business combinations.
(1) Notwithstanding anything to the contrary in this chapter, except Section
16-10a-1804
, a domestic corporation may not engage in a business combination with an
interested shareholder of the corporation for a period of five years following the interested
shareholder's stock acquisition date unless the business combination or the purchase of stock
made by the interested shareholder on the interested shareholder's stock acquisition date is
approved by the board of directors of the corporation before the interested shareholder's stock
acquisition date.
(2) (a) If a good faith proposal is made in writing to the board of directors of the
corporation regarding a business combination, the board of directors shall respond in writing,
within 30 days or such shorter period, if any, as may be required by the Exchange Act, setting
forth the board of directors' reasons for the board of directors' decision regarding the proposal.
(b) If a good faith proposal to purchase stock is made in writing to the board of
directors of the corporation, unless the board of directors responds affirmatively in writing
within 30 days or such shorter period, if any, as may be required by the Exchange Act, the
board of directors is considered to have disapproved the proposal.
(3) Notwithstanding anything to the contrary in this chapter, except Subsection (2) and
Section 
16-10a-1804
, a domestic corporation may not engage at any time in any business
combination with an interested shareholder of the corporation other than a business
combination specified in Subsection (4), (5), or (6).
(4) A domestic corporation may engage in a business combination with an interested
shareholder of the corporation if:
(a) the business combination is approved by the board of directors of the corporation
before the interested shareholder's stock acquisition date; or
(b) the purchase of stock made by the interested shareholder on the interested
shareholder's stock acquisition date is approved by the board of directors of the corporation
before the interested shareholder's stock acquisition date.
(5) A domestic corporation may engage in a business combination with an interested
shareholder of the corporation if the business combination is approved by the affirmative vote
of the holders of a majority of the outstanding voting stock not beneficially owned by the
interested shareholder or an affiliate or associate of the interested shareholder at a meeting
called for that purpose no earlier than five years after the interested shareholder's stock
acquisition date.
(6) A domestic corporation may engage in a business combination with an interested
shareholder of the corporation if the business combination meets all of the following
conditions:
(a) 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
common stock of the corporation in the business combination, is at least equal to the higher of
the following:
(i) the sum of:
(A) the highest per share price paid by the interested shareholder at a time when the
interested shareholder was the beneficial owner, directly or indirectly, of 5% or more of the
outstanding voting stock of the corporation, for any shares of common stock of the same class
or series acquired by the interested shareholder within the five-year period immediately before
the announcement date with respect to the business combination, or within the five-year period
immediately before, or in, the transaction in which the interested shareholder became an
interested shareholder, whichever is higher; and
(B) 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
common stock since the earliest date, up to the amount of the interest; and
(ii) the sum of:
(A) the higher of the market value per share of common stock on the announcement
date with respect to the business combination or on the interested shareholder's stock
acquisition date; and
(B) interest compounded annually from the acquisition 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 common stock since the acquisition date, up to the amount of
the interest;
(b) 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 stock, other than common stock, 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 the class or series of stock:
(i) the sum of:
(A) the higher of the highest per share price paid by the interested shareholder at a time
when the interested shareholder was the beneficial owner, directly or indirectly, of 5% or more
of the outstanding voting stock of the corporation, for any shares of the class or series of stock
acquired by the interested shareholder within the five-year period immediately before the
announcement date with respect to the business combination, or within the five-year period
immediately before, or in, the transaction in which the interested shareholder became an
interested shareholder, whichever is higher; and
(B) 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 the
class or series of stock since the earliest date, up to the amount of the interest;
(ii) the sum of:
(A) the highest preferential amount per share to which the holders of shares of the class
or series of stock are entitled in the event of a voluntary liquidation, dissolution, or winding up
of the corporation; and
(B) the aggregate amount of any dividends declared or due as to which the holders are
entitled before payment of dividends on some other class or series of stock, unless the
aggregate amount of the dividends is included in the preferential amount; and
(iii) the sum of:
(A) the market value per share of the class or series of stock on the announcement date
with respect to the business combination or on the interested shareholder's stock acquisition
date, whichever is higher; and
(B) interest compounded annually from the acquisition 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 the class or series of stock since the acquisition date, up to the
amount of the interest;
(c) the consideration to be received by holders of a particular class or series of
outstanding stock, including common stock 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 the class or series of stock previously acquired by the interested shareholder, and
the consideration shall be distributed promptly;
(d) the holders of all outstanding shares of stock of the corporation not beneficially
owned by the interested shareholder immediately before the consummation of the business
combination are entitled to receive in the business combination cash or other consideration for
the shares in compliance with Subsections (6)(a), (b), and (c); and
(e) after the interested shareholder's stock acquisition date and before the
consummation date with respect to the business combination, the interested shareholder has not
become the beneficial owner of any additional shares of voting stock of the corporation except:
(i) as part of the transaction that resulted in the interested shareholder becoming an
interested shareholder;
(ii) by virtue of proportionate stock splits, stock dividends, or other distributions of
stock in respect of stock not constituting a business combination under Subsection
16-10a-1802
(5)(e);
(iii) through a business combination meeting the conditions of Subsection (5); or
(iv) through purchase by the interested shareholder at any price that, if the price is paid
in an otherwise permissible business combination the announcement date and consummation
date of which were the date of the purchase, would have satisfied the requirements of
Subsections (4) and (5) and this Subsection (6).
Section 5. Section 
16-10a-1804
 is enacted to read:
 16-10a-1804.
Scope of part.
This part does not apply to:
(1) a business combination of a domestic corporation that does not have a class of
voting stock registered with the Securities and Exchange Commission pursuant to Exchange
Act, Sec. 12, 15 U.S.C. Sec. 78l, unless the articles of incorporation provide otherwise;
(2) a business combination of a domestic corporation whose articles of incorporation
are amended to provide that the domestic corporation is subject to this part that:
(a) did not have a class of voting stock registered with the Securities and Exchange
Commission pursuant to Exchange Act, Sec. 12, 15 U.S.C. Sec. 78l, on the effective date of the
amendment; and
(b) is a business combination with an interested shareholder whose stock acquisition
date is before the effective date of the amendment;
(3) a business combination of a domestic corporation:
(a) the original articles of incorporation of which contain a provision expressly electing
not to be governed by this part;
(b) that adopts an amendment to the corporation's bylaws before December 31, 2017,
expressly electing not to be governed by this part; or
(c) that adopts an amendment to the corporation's bylaws, approved by the affirmative
vote of a majority of votes of the outstanding voting stock of the corporation, excluding the
voting stock of interested shareholders and the interested shareholders' affiliates and associates,
expressly electing not to be governed by this part, provided that the amendment to the bylaws:
(i) may not be effective until 18 months after the vote of the corporation's shareholders;
and
(ii) may not apply to a business combination of the corporation with an interested
shareholder whose stock acquisition date is on or before the effective date of the amendment;
(4) a domestic corporation in the mineral extractive industry, including exploration,
development, sand and gravel, mining, smelting, or refining of mineral properties;
(5) any business combination of a domestic corporation with an interested shareholder
of the corporation that became an interested shareholder inadvertently, if the interested
shareholder:
(a) as soon as practicable, divests itself of a sufficient amount of the voting stock of the
corporation so that it no longer is the beneficial owner, directly or indirectly, of 20% or more of
the outstanding voting stock of the corporation; and
(b) would not at any time within the five-year period preceding the announcement date
with respect to the business combination have been an interested shareholder but for the
inadvertent acquisition; or
(6) any business combination with an interested shareholder who was the beneficial
owner, directly or indirectly, of 5% or more of the outstanding voting stock of the corporation
on May 9, 2017, and remained so to the interested shareholder's stock acquisition date.