Some major changes to the North Carolina Business Corporation Act (the “Corporations Law”) took effect on October 1 of this year. These changes touch many aspects of the Corporations Law, from providing a statutory method to ratify defective corporate actions to rewriting provisions covering director and officer liability. Some of these changes were the result of corresponding changes to the Model Business Corporation Act, upon which the Corporations Law is based. The following is a general overview of select changes to the Corporations Law:
Statutory Ratification of Defective Corporate Actions. From time to time, a corporation may undertake an action without first obtaining the requisite approvals—such as failing to ratify the election of an initial board of directors or failing to obtain requisite board or shareholder approval to issue a new class of stock. The new Corporations Law now includes a statutory process for obtaining such approvals after the fact. The exact process depends upon the circumstances. For instance, if the defective corporate action would have required filing an amendment to a corporation’s Articles of Incorporation, then the corporation must file the newly created Articles of Validationwith, and pay a filing fee of $150 to, the North Carolina Secretary of State. Such Articles of Validation would serve to amend the Articles of Incorporation to effect the defective corporate action. Please note that this statutory ratification is in addition to, rather than in lieu of, traditional common-law ratification methods.
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