louis

By Matthew C. Meiners

Effective January 1, 2015, the Louisiana Business Corporation Law was replaced in its entirety by the new Louisiana Business Corporation Act (LBCA).  Here are some of the highlights of the changes effected by the LBCA:

  • New Remedy for Oppressed Shareholders – Buyout. If a corporation engages in oppression of a shareholder, the shareholder may withdraw from the corporation and require the corporation to buy all of the shareholder’s shares at their fair value (without discounting for lack of marketability or minority status).
  • No Director or Officer Liability for Money Damages (default rule).  The default rule has been flipped, but the articles of incorporation may still modify the default rule.  Under the old law, the articles of incorporation of the corporation could eliminate or limit the personal liability of a director or officer to the corporation or its shareholders for monetary damages for breach of fiduciary duty, with certain exceptions.  Under the LBCA, no director or officer shall be liable to the corporation or its shareholders for money damages for any action taken, or any failure to take action, as a director or officer, with exceptions; however, the articles of incorporation can limit or reject this protection against liability.
  • Amendment to Articles of Incorporation – Required Approval.  An amendment to the articles of incorporation now requires a majority of the shareholder votes entitled to be cast on that amendment (unless the articles of incorporation require a greater vote).  Under the old law, an amendment to the articles of incorporation required the vote of at least 2/3 of the voting power present at a shareholders’ meeting (unless the articles of incorporation required a larger or smaller vote).
  • Corporate Records – New Inspection Right.  The old law’s 5% ownership requirement remains for shareholder inspection of “any and all of the records of the corporation,” but a new right of inspection of certain key records by any and all shareholders has been created.
  • Annual Meetings – Shareholder Right to Demand Calling.  Under the LBCA, a single shareholder still has the right to demand the calling of an annual shareholders’ meeting.  However, the LBCA now allows directors to be elected by written consent in lieu of an annual meeting, and a shareholder only has the right to demand the calling of an annual shareholders’ meeting if:  (1) no annual shareholders’ meeting is held for a period of eighteen months, and (2) directors are not elected by written consent in lieu of an annual meeting during that period.
  • Unanimous Governance Agreements Allowed.  The LBCA allows “unanimous governance agreements,” a new form of governance document which can eliminate the board of directors or restrict the discretion or powers of the board of directors, as well as provide for the management of the corporation by one or more shareholders or other persons.
  • Shares May Now Be Issued for Promissory Notes and for Contracts for Services to be Performed.  The LBCA permits the board of directors to authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation.  The old law did not permit issuance of shares for promissory notes or contracts of future performance.
  • Modification of Default Quorum Rule.  Under the LBCA, the default rule for the constitution of a quorum for purposes of a shareholders’ meeting (i.e., “a majority of the votes entitled to be cast on the matter”) can only be altered by the articles of incorporation, as opposed to the old law’s allowance of modification by the articles of incorporation or the bylaws.
  • Simplified Termination Option.  The LBCA allows corporations to terminate by simplified articles of termination if the corporation:  (1) does not owe any debts; (2) does not own any immovable property; and (3) has not issued shares or is not doing business.  Under the old law, “dissolution by affidavit” provided a similar option, but after dissolution, the shareholders became personally liable for any debts or claims, if any, against the corporation.   Under the LBCA’s simplified termination procedure, no such liability attaches to the shareholders.
  • Electronic Notices and Other Communications Now Permitted. A notice or other communication may be given or sent by any method of delivery, except that electronic transmissions must be in accordance with the statute.
  • Five Day Grace Period for Filing After Execution – Now Only for Original Articles of Incorporation.  Under the LBCA, a corporation’s original articles of incorporation become effective when signed if the articles are received for filing by the Secretary of State within five days, exclusive of legal holidays, after the date that the articles are signed.  This grace period no longer applies to any other filed document.
  • Grace Period for Filing Annual Reports Now 90 Days.  Under the LBCA, the grace period for the filing of annual reports has been reduced to 90 days (formerly 3 years), plus a 30 day notice period.