Amend Business Corporations Act.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
S 1
SENATE BILL 267

Short Title: Amend Business Corporations Act. (Public)
Sponsors: Senators Galey and Sawrey (Primary Sponsors).
Referred to: Rules and Operations of the Senate
March 12, 2025
*S267-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO AMEND THE NORTH CAROLINA BUSIN ESS CORPORATIONS ACT , AS 2
RECOMMENDED BY THE NORTH CAROLINA BAR ASSOCIATION. 3
The General Assembly of North Carolina enacts: 4
5
PART I. PROVIDE FOR OFFICER EXCULPATION 6
SECTION 1. G.S. 55-2-02 reads as rewritten: 7
"§ 55-2-02. Articles of incorporation. 8
… 9
(b) The articles of incorporation may set forth any provision that under this Chapter is 10
required or permitted to be set forth in the bylaws, and may also set forth any or all of the 11
following: 12
(1) The names and addresses of the individuals who are to serve as the initial 13
directors. 14
(2) Provisions not inconsistent with law regarding (i) the purpose or purposes for 15
which the corporation is organized; (ii) managing the business and regulating 16
the affairs of the corporation; (iii) defining, limiting, and regulating the powers 17
of the corporation, its board of directors, and shareholders; (iv) a par value for 18
authorized shares or classes of shares; (v) the imposition of personal liability 19
on shareholders for the debts of the corporation to a specified extent and upon 20
specified conditions; and (vi) any limitation on the duration of the corporation. 21
(3) A provision limiting or eliminating the personal liability of any director 22
arising out of an action whe ther by or in the right of the corporation or 23
otherwise for monetary damages for breach of any duty as a director. director 24
or limiting or eliminating the personal liability of any officer arising out of an 25
action for monetary damages for breach of any dut y as an officer. No such 26
provision shall be effective with respect to (i) acts or omissions that the 27
director or officer at the time of such the breach knew or believed were clearly 28
in conflict with the best interests of the corporation, (ii) in the case o f a 29
director, any liability under G.S. 55-8-33, (iii) any transaction from which the 30
director or officer derived an improper personal benefit, or (iv) acts or 31
omissions occurring prior to the date the provisions provision became 32
effective. effective, or (v) in the case of an officer, any claim by or in the right 33
of the corporation. As used herein, in this sub division, the term "improper 34
personal benefit" does not include a director's reasonable compensation or 35
other reasonable incidental benefit for or on account of his the director 's 36
General Assembly Of North Carolina Session 2025
Page 2 Senate Bill 267-First Edition
service as a director, officer, employee, independent contractor, attorney, or 1
consultant of the corporation. A provision permitted by this Chapter in the 2
articles of incorporation, bylaws, or a contract or resolution indemni fying or 3
agreeing to indemnify a director against personal liability shall be is fully 4
effective whether or not there is a provision in the articles of incorporation 5
limiting or eliminating personal liability. 6
(4) A provision limiting or eliminating any duty of a director, an officer, or any 7
other person, to offer the corporation the right to have or participate in one or 8
more specific classes or categories of business opportunities, prior to the 9
pursuit or taking of the opportunity by the director, officer, or other person. 10
(c) The articles of incorporation need not set forth any of the corporate powers 11
enumerated in this Chapter. 12
(d) Articles of incorporation filed to effect the conversion of another business entity 13
pursuant to Article 11A of this Chapte r shall also include the statements required by 14
G.S. 55-11A-03(a). 15
(e) For purposes of subdivision (b)(3) of this section, unless the articles of incorporation 16
otherwise provide, "officer" means an individual appointed in accordance with G.S. 55-8-40 as 17
(i) president, chief executive officer, chief operating officer, chief financial officer, chief legal 18
officer, secretary, controller, treasurer, or chief accounting officer of the corporation and (ii) any 19
officer of the corporation designated by resolution o f the board of directors as an officer for 20
purposes of subdivision (b)(3) of this section. The board of directors may from time to time by 21
resolution determine that one or more of the officers designated by resolution of the board in 22
accordance with this subsection is no longer an officer for purposes of subdivision (b)(3) of this 23
section, but no such resolution is effective as to an officer, or any act or omission of the officer, 24
prior to the adoption of that resolution." 25
26
PART II. CLARIFY PROVISIONS FOR EMERGENCY BYLAWS AND EMERGENCY 27
POWERS 28
SECTION 2.(a) G.S. 55-2-07 reads as rewritten: 29
"§ 55-2-07. Emergency bylaws. 30
(a) Unless the articles of incorporation provide otherwise, the board of directors of a 31
corporation may adopt bylaws to be bylaws may contain provisions that become effective only 32
in an emergency defined in subsection (d). during an emergency if the provisions are adopted in 33
advance of an emergency. The emergency bylaws, which are subject to amendment or repeal by 34
the shareholders, may make bylaws may contain all provisions necessary for managing the 35
corporation during the an emergency, including:including all of the following: 36
(1) Procedures for calling a meeting of the board of directors; directors. 37
(2) Quorum requirements for the meeting; andmeeting. 38
(3) Designation of additional or substitute directors. 39
(b) All provisions of the regular bylaws consistent with the emergency bylaws remain 40
effective during the emergency. The emergency bylaws are not effective after the emergency 41
ends. 42
(c) Corporate action taken in good faith in accordance with the emergency bylaws binds 43
the corporation and the fact that the action was taken by special procedures may shall not be used 44
to impose liability on a corporate director, officer, employee, or agent. 45
(d) An emergency exists for purposes of this section if a quorum of the corporation's 46
directors cannot readily be assembled because of some catastrophic event." 47
SECTION 2.(b) G.S. 55-3-03 reads as rewritten: 48
"§ 55-3-03. Emergency powers. 49
(a) In anticipation of or during an emergency defined in subsection (d), the board of 50
directors of a corporation may: 51
General Assembly Of North Carolina Session 2025
Senate Bill 267-First Edition Page 3
(1) Modify lines of succession to accommodate the incapacity of any direct or, 1
officer, employee, or agent; and 2
(2) Relocate the principal office, designate alternative principal offices or 3
regional offices, or authorize the officers to do so. 4
(b) During an emergency defined in subsection (d), emergency, unless emergency bylaws 5
provide otherwise:otherwise, both of the following apply: 6
(1) Notice of a meeting of the board of directors need be given only to those 7
directors whom it is practicable to reach and may be given in any practicable 8
manner, including by publication and radio; and radio. 9
(2) One or more officers of the corporation present at a meeting of the board of 10
directors may be deemed to be directors for the meeting, in order of rank and 11
within the same rank in order of seniority, as to the extent necessary to achieve 12
a quorum. 13
(b1) During an emergency, unless emergency bylaws provide otherwise, the board of 14
directors may postpone a meeting of shareholders for which notice has been given or authorize 15
shareholders to participate in a meeting by any means of remote com munication that conforms 16
with G.S. 55-7-09(b). The corporation shall give notice to shareholders, by such means and with 17
such shorter advance notice as are reasonable in the circumstances, of any postponement, 18
including any new date, time, or place, and shall describe any means of remote communication 19
to be used. 20
(c) Corporate action taken in good faith under this section during an emergency under 21
this section to further the ordinary business affairs of the corporation binds the corporation and 22
the fact that said the action is taken by special procedures may shall not be used to impose liability 23
on a corporate director, officer, employee, or agent.agent of the corporation. 24
(d) An emergency exists for purposes of subsection (b) of this section if a quorum of the 25
corporation's directors cannot readily be assembled because of some catastrophic event. An 26
emergency exists for purposes of subsection (b1) of this section if, because of some catastrophic 27
event, it is impracticable to convene a meeting of shareholders in accordance with this Chapter 28
or the bylaws or as specified in a notice previously given for the meeting." 29
30
PART III. CLARIFY PROVISIONS FOR SELECTION OF EXCLUSIVE FORUM 31
SECTION 3.(a) Article 2 of Chapter 55 of the General Statutes is amended by adding 32
a new section to read: 33
"§ 55-2-08. Forum selection provisions. 34
(a) The articles of incorporation or the bylaws may require that any or all internal 35
corporate claims shall be brought exclusively in any specified court or courts of this State and, if 36
so specified, in any additional courts in this State or in any other jurisdictions with which the 37
corporation has a reasonable relationship. 38
(b) A provision of the articles of incorporation or bylaws adopted under subsection (a) of 39
this section does not have the effect of conferring jurisdiction on any court or over any person or 40
claim and does not apply if none of the courts specified by the provision has the requisite personal 41
and subject matter jurisdiction. If the court or courts of this State specified in a provision adopted 42
under subsection (a) of this section do not have the requisite personal and subject matter 43
jurisdiction and another court of this State does have the requisite jurisdiction, then the internal 44
corporate claim may be brought in the other court of this State, notwithstanding that the other 45
court of this State is not specified in the provision. Additionally, the internal corporate claim may 46
be brought in any other court specified in the provision that has the requisite jurisdiction. 47
(c) No provision of the articles of incorporation or the bylaws may prohibit bringing an 48
internal corporate claim in the courts of this State or require the claims to be determined by 49
arbitration. 50
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(d) For the purposes of this section, "internal corporate claim " means any of the 1
following: 2
(1) A claim that is based on a violation of a duty under the laws of this State by a 3
current or former director, officer, or shareholder in such capacity. 4
(2) A derivative proceeding brought on behalf of the corporation. 5
(3) An action asserting a claim arising pursuant to any provision of this Chapter 6
or the articles of incorporation or bylaws. 7
(4) An action asserting a claim governed by the internal affairs doctrine that is not 8
otherwise included in subdivisions (1) through (3) of this subsection." 9
SECTION 3.(b) G.S. 55-7-50 is repealed. 10
11
PART IV. PROHIBITION AGAINST THE ISSUANCE OF SCRIP IN BEARER FORM 12
SECTION 4.(a) G.S. 55-6-04 reads as rewritten: 13
"§ 55-6-04. Fractional shares. 14
(a) A corporation may:may issue fractions of a share or, in lieu of doing so, may do any 15
of the following: 16
(1) Issue fractions of a share or pay in money Pay in cash the value of fractions 17
of a share;share. 18
(2) Arrange for disposition of fractional shares by the shareholders;Dispose of the 19
fractional shares and pay the proceeds to the holders of those shares. 20
(3) Issue scrip in registered or bearer certificated or uncertificated form entitling 21
the holder to receive a full share upon surrendering enough scrip to equal a 22
full share. 23
(b) Each certificate representing scrip must shall be conspicuously labeled "scrip" and 24
must shall contain the information required by G.S. 55-6-25(b). A corporation s hall not issue 25
scrip certificates in bearer form. Within a reasonable time after the issuanc e or transfer of scrip 26
without certificates, the corporation shall deliver to the scripholder a written statement of the 27
information required on certificates by G.S. 55-6-25(b) and the terms of the scrip. 28
(c) The holder of a fractional share is entitled to exercise the rights of a shareholder, 29
including the right rights to vote, to receive dividends, and to participate in the assets of the 30
corporation receive distributions upon liquidation. The holder of scrip is not entitled to any of 31
these rights unless the scrip provides for them. 32
(d) The board of directors may authorize the issuance of scrip subject to any condition 33
considered desirable, including:including the following: 34
(1) That the The scrip will become void if not exchanged for full shares before a 35
specified date; anddate. 36
(2) That the The shares for which the scrip is exchangeable may be sold and the 37
proceeds paid to the scripholders." 38
SECTION 4.(b) G.S. 55-6-25 reads as rewritten: 39
"§ 55-6-25. Form and content of certificates. 40
(a) Shares may may, but need not not, be represented by certificates. Share certificates 41
shall not be issued in bearer form. Unless this act Chapter or another statute expressly provides 42
otherwise, the rights and obligations of shareholders are identical regardless of whether or not 43
their shares are represented by certificates. 44
(b) At a minimum each share certificate must shall state all of the following on its face: 45
(1) The name of the issuing corporation and that it is organized under the law of 46
North Carolina;Carolina. 47
(2) The name of the person to whom issued; andissued. 48
(3) The number and class of shares and the designation of the series, if any, the 49
certificate represents. 50
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Senate Bill 267-First Edition Page 5
(c) If the issuing corporation is authorized to issue different classes of shares or different 1
series within a class, the designations, relative rights, preferences, and limitations applicable to 2
each class and the variations in rights, preferences, and limitations determined for each series 3
(and the authority of the board of directors to determine varia tions for future series) must shall 4
be summarized on the front or back of each certificate. Alternatively, each certificate may state 5
conspicuously on its front or back that the corporation will furnish the shareholder this 6
information on request in writing and without charge. 7
(d) Each share certificate (1) must (i) shall be signed (either manually or in facsimile) by 8
two officers designated in the bylaws or by the board of directors and (2) (ii) may bear the 9
corporate seal or its facsimile. 10
(e) If the pers on who signed in any capacity (either manually or in facsimile) a share 11
certificate no longer holds office when the certificate is issued, the certificate is nevertheless 12
valid." 13
14
PART V. CLARIFY AND REVISE DERIVATIVE PROCEEDING PROCEDURES 15
SECTION 5.(a) G.S. 55-7-40.1 reads as rewritten: 16
"§ 55-7-40.1. Definitions. 17
In this Part: 18
(1) "Derivative proceeding" means a civil suit in the right of a domestic 19
corporation or, to the extent provided in G.S. 55-7-47, in the right of a foreign 20
corporation.corporation, to recover for an injury to the corporation. 21
(2) "Shareholder" has the same meaning as in G.S. 55-1-40 and includes a 22
beneficial owner whose shares are held in a voting trust or held by a nominee 23
on the beneficial owner's behalf." 24
SECTION 5.(b) G.S. 55-7-42 reads as rewritten: 25
"§ 55-7-42. Demand. 26
No shareholder may commence a derivative proceeding until:until both of the following have 27
occurred: 28
(1) A written demand has been made upon delivered to the corporation to take 29
suitable action; andaction. The written demand shall describe in reasonable 30
detail the reasons for the demand and the action being requested and state that 31
the shareholder may commence a derivative proceeding if the action is not 32
taken. If the shareholder is a beneficial shareholder or an unrestricted voting 33
trust beneficial owner, the written demand shall be accompanied by evidence 34
of the beneficial ownership. 35
(2) 90 days have expired from the date the demand was made unless, prior to the 36
expiration of the 90 days, the shareholder w as notified that the corporation 37
rejected the demand, or unless irreparable injury to the corporation would 38
result by waiting for the expiration of the 90-day period." 39
SECTION 5.(c) G.S. 55-7-44 reads as rewritten: 40
"§ 55-7-44. Dismissal. 41
(a) The court sh all dismiss a derivative proceeding on motion of the corporation if a 42
determination is made, whether before or after the commencement of the derivative proceeding, 43
by one of the groups specified in subsection (b) or (f) of this section determines of this section in 44
good faith faith, after conducting a reasonable inquiry upon which its conclusions are based 45
based, that the maintenance of the derivative proceeding is not in the best interest of the 46
corporation. 47
(b) Unless a panel is appointed pursuant to subsection (f) of this section, the The inquiry 48
and determination in subsection (a) of this section shall be made by:by any of the following: 49
(1) A majority vote of independent directors present at a meeting of the b oard of 50
directors if the independent directors constitute a quorum; orquorum. 51
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(2) A majority vote of a committee consisting of two or more independent 1
directors appointed by majority vote of independent directors present at a 2
meeting of the board of direct ors, whether or not the independent directors 3
constituted a quorum. 4
(3) Upon motion by the corporation, by a panel of one or more individuals 5
appointed by the court. 6
(c) For purposes of this section, none of the following factors by itself shall cause a 7
director to be considered not independent: 8
(1) The nomination or election of the director by persons who are defendants any 9
person who is a defendant in the derivative proceeding or against whom action 10
is demanded;demanded. 11
(2) The naming of the director as a defendant in the derivative proceeding or as a 12
person against whom action is demanded; ordemanded. 13
(3) The approval by the director of the act being challenged in the derivative 14
proceeding or demand if the act resulted in no personal benefit to the director. 15
(d) If a derivative proceeding is commenced after a determination has been made 16
rejecting a demand by a shareholder, the complaint made by one of the groups specified in 17
subsection (b) of this section that maintaining the derivative proceeding is not in the best interest 18
of the co rporation, in order to contest the determination, the plaintiff shall allege with 19
particularity facts establishing that the requirements of subsection (a) of this section have not 20
been met. Defend ants may make a motion to dismiss a complaint under subsection (a) of this 21
section for failure to comply with this subsection. Prior to the court's ruling on such a the motion 22
to dismiss, the plaintiff shall be is entitled to discovery only with respect to the issues presented 23
by the motion and only if and to the extent that the plaintiff has alleged such the facts with 24
particularity. The preliminary discovery shall be limited solely to matters germane and necessary 25
to support the facts alleged with particularity relating solely to the requirements of subsection (a) 26
of this section. 27
(e) If a majority of the board of directors does not consist of independent directors at the 28
time the determination is made, The burden of proving whether the requirements of subsection 29
(a) of this section have been met is determined as follows: 30
(1) If the determination was made by one of the groups specified in subdivision 31
(b)(1) or (b)(2) of this section, then the plaintiff has the burden of proving that 32
the requirements of subsection (a) of this section have not been met unless the 33
plaintiff has alleged with particularity facts establishing that a majority of the 34
board of directors at the time the determination was made did not consist of 35
independent directors, in which case the corporation shall have has the burden 36
of proving that the requirements of subsection (a) of this section have been 37
met. 38
(2) If a majority of the board of directors consists of independent directors at the 39
time the determination is made, If the determination was made by a panel 40
appointed pursuant to subdivision (b)(3) of this section, then the plaintiff shall 41
have has the burden of proving that the requirements of subsection (a) of this 42
section have not been met. 43
(f) The court may appoint a panel of one or more independent persons up on motion of 44
the corporation to make a determination whether the maintenance of the derivative proceeding is 45
in the best interest of the corporation. The plaintiff shall have the burden of proving that the 46
requirements of subsection (a) of this section have not been met.The court on its own motion or 47
on the motion of any party may order that any motion to dismiss under subsection (a) of this 48
section be made within a specified reasonable time." 49
SECTION 5.(d) G.S. 55-7-46 reads as rewritten: 50
"§ 55-7-46. Payment of expenses. 51
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Senate Bill 267-First Edition Page 7
On termination of the derivative proceeding, the court may:may do any of the following: 1
(1) Order the corporation to pay the plaintiff's reasonable expenses, including 2
attorneys' fees, incurred in the derivative proceeding if it finds that the 3
derivative proceeding has resulted in a substantial benefit to the 4
corporation;corporation. 5
(2) Order the plaintiff to pay the corporation 's or any defendant's reasonable 6
expenses, including attorneys' fees, incurred in responding to the demand or 7
defending the derivative proceeding if it finds that the demand was made or 8
the derivative proceeding was commenced or maintained without reasonable 9
cause or for an improper purpose; orpurpose. 10
…." 11
12
PART VI. MAKE CLARIF YING AND TECHNICAL C HANGES REGARDING THE 13
AUTHORITY OF BOARD COMMITTEES 14
SECTION 6.(a) G.S. 55-8-25 reads as rewritten: 15
"§ 55-8-25. Committees. 16
… 17
(e) A committee shall not, however, do any of the following: 18
(1) Authorize or approve distributions, except according to a formula or method, 19
or within limits, prescribed by the board of directors. 20
(2) Approve or propose to shareholders action that this act Chapter requires be 21
approved by shareholders. 22
(3) Fill vacancies on the board of directors or on any of its committees. 23
(4) Amend articles of incorporation pursuant to G.S. 55-10-02. 24
(5) Adopt, amend, or repeal bylaws. 25
(6) Approve a plan of merger not requiring shareholder approval. 26
…." 27
SECTION 6.(b) This section is effective when it becomes law. 28
29
PART VII. CLARIFY PROVISIONS FOR MERGERS BETWEEN PARENT ENTITIES 30
AND SUBSIDIARY CORPORATIONS 31
SECTION 7.(a) G.S. 55-11-04(f) is repealed. 32
SECTION 7.(b) G.S. 55-11-12 reads as rewritten: 33
"§ 55-11-12. Merger between parent unincorporated entity and subsidiary corporation or 34
corporations. 35
(a) Subject to the other provisions of this section and Article 9 of this Chapter, a parent 36
unincorporated entity owning shares of a domestic subsidiary corporation that carry at least 37
ninety percent (90%) of the voting power of each class and series of the outstanding shares of the 38
subsidiary corporation and that have the power to vote in the election of directors at the time of 39
a merger under this section may merge the subsidiary corporation or corporations into itself, or 40
merge itself and one or more subsidiary corporations into another subsidiary corporation, without 41
approval of the board of directors or shareholders of the subsidiary corporation or corporations, 42
unless the articles of incorporation for of the subsidiary corporation or corporations require 43
approval of the shareholders of the subsidiary corporation or corporations, if both all of the 44
following requirements are met: 45
(1) The merger is permitted by the laws of the state or country governing the 46
organization and internal affairs of each merging business entity. 47
(2) Each merging business entity complies with the requirements of this section 48
and, to the extent applicable, the laws referred to in subdivision (1) of this 49
subsection. 50
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(3) The parent unincorporated entity approves, in the manner required by laws of 1
the state or country governing the organization and internal affairs of the 2
parent unincorporated entity, a written plan of merger containing all of the 3
provisions required by G.S. 55-11-10(c). 4
… 5
(d) The surviving business entity shall deliver articles of merger to the Secretary of State 6
for filing. The articles of merger shall set forth all of the following: 7
(1) For each merging business entity, its name, type of business entity, and the 8
state or country whose laws govern its organization and internal affairs. 9
(2) The terms and conditions of the merger. 10
(3) The manner and basis of converting the interests in each merging business 11
entity into interests, obligations, or securities of the surviving business entity, 12
or into cash or other property in whole or in part, or of cancelling the interests. 13
(4) The name of the merging business entity that shall survive the merger and, if 14
the surviving business entity is not authorized to transact business or conduct 15
affairs in this State, a designation of its mailing address and a commitment to 16
file with the Secretary of State a statement of any subsequent change in its 17
mailing address. 18
(5) If the surviving business entity is a domestic corporati on, any amendment to 19
its articles of incorporation as provided in a plan of merger or board 20
resolution.merger. 21
(6) A statement that the plan of merger has been approved by each merging 22
business entity in the manner required by law. 23
(e) The provisions of the articles of merger may be made dependent on facts objectively 24
ascertainable outside the articles of merger if the articles of merger set forth the manner in which 25
the facts will operate upon the affected provisions. The facts may include any of the following: 26
(1) Statistical or market indices, market prices of any security or group of 27
securities, interest rates, currency exchange rates, or similar economic or 28
financial data. 29
(2) A determination or action by the corporation or by any other person, group, 30
or body. 31
(3) The terms of, or actions taken under, an agreement to which the corporation 32
is a party, or any other agreement or document. G.S. 55-11-10(c1) and (c2) 33
apply to any merger described in this section. 34
(f) A merger takes effect when the articles of merger become effective." 35
36
PART VIII. EFFECTIVE DATE AND AUTHORIZATION TO PRINT COMMENTS 37
SECTION 8.(a) The Revisor of Statutes shall cause to be printed, as annotations to 38
Chapter 55 of the published General Statutes, all relevant portions of the Official Comments to 39
the Model Business Corporation Act and all explanatory comments of the drafters of this act as 40
the Revisor may deem appropriate. 41
SECTION 8.(b) Except as otherwise provided, this act is effective as of October 1, 42
2025. 43