On June 8, 2021, Iowa Governor Kim Reynolds signed into law House File 844, which contains a new Business Corporation Act (“the Act”), codified in Title 12, Subtitle 2 of the Iowa Code. It is the first major revision to Iowa’s business corporation law in over 30 years. The Act, which generally takes effect on January 1, 2022, adopts most of the 2016 version of the Model Business Corporation Act, with a few non-conforming provisions. Let’s look at some highlights of the new Act.
Formation of Benefit Corporations
Importantly, the new Act allows for the formation of benefit corporations and includes rules to define and govern them. Current Iowa law does not include provisions for benefit corporations. (Sections 490-1701 through 490-1706)
Changes to Conversion and Domestication of Entity Types
Current law allows for a business corporation to convert into certain other business entity types. Under the new Act, the conversion sections are renumbered, changed, and are more detailed. (Sections 490.930-490.935)
The new Act also allows for domestication, which is not allowed under the current law. (Sections 490.920 - 490.924)
Allows for Remote Shareholder Meetings
The new Act added a section permitting remote shareholder meetings. Under the new Act, shareholders of any class or series of shares may participate in meetings remotely, and shareholders may vote remotely, provided certain conditions are met.
The corporation must have implemented reasonable measures to verify a remote shareholder’s identity and provide the shareholder with a reasonable opportunity to participate and vote in the meeting. Unless the bylaws require the meeting to be held at a place, the board of directors may determine that the meeting be held solely by means of remote communication, so long as the corporation has implemented the required measures. (Section 490.709)
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Addition to Director Liability Protections
In addition to the existing director liability protections, the new Act includes protection for directors by allowing the Articles of Incorporation to include an optional provision limiting or eliminating any duty of a director to offer the corporation the right to have or participate in any business opportunities before the director or other person may take or pursue the opportunity. (Section 490.202)
Amendments to Officer Duties
The new Act amends the section on officer duties to include the obligation to inform a designated superior officer of information known to be material about the corporation. The officer must also inform the superior officer or other appropriate person within the corporation, board of directors, or board committee of any actual or probable material violation of the law involving the corporation or material breach of duty that the officer believes has occurred or is likely to occur. (Section 490.842)
A Modernization of Iowa Business Corporation Law
The new Act reflects significant changes that modernize Iowa’s business corporation laws. These highlights reflect some of the key changes in the new Act, but there are others that are also relevant to practitioners and businesses. For a comprehensive review of the new Act, see https://legiscan.com/IA/text/HF844/id/2395986/Iowa-2021-HF844-Enrolled.html
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.