2021 has been a busy legislative year for the United States as lawmakers returned to work after the easing of the restrictions brought on by COVID-19. Let’s review some of the most notable business entity-related bills from various U.S. states that were passed into law in 2021.
Senate Bill 601, approved on 28/03/2021, generally became effective on 01/09/2021. This bill created the Uniform Limited Liability Company Act and repealed the Small Business Entity Tax Pass-Through Act; the law previously regulating limited liability companies (LLC). The new Act includes some significant changes, including detailed, specific standards of conduct for members and managers including a fiduciary duty of loyalty.
SB602, approved and effective on 07/05/2021, changed corporate shareholders’ appraisal rights and amended the inspection rights provisions for limited liability company members.
Senate Bill 168, approved and effective on 27/04/2021, allows for remote annual and special shareholder meetings and includes specific requirements for these remote meetings.
House Bill 306, approved and effective on 29/04/2021, allows for remote nonprofit corporation member meetings.
Senate Bill 1730, approved on 30/07/2021, and effective on the 1st of January, 2022, states that a publicly held domestic or foreign corporation with its principal executive office located in Illinois must report the self-identified sexual orientation and self-identified gender identity of each member of its board of directors.
Senate Bill 116, approved on 06/08/2021, and effective on the 1st of January, 2022, among other changes, amends the benefit corporation law to recognise foreign benefit corporations in Illinois, expanding the definition of benefit corporation to include a foreign benefit corporation organised under the laws of another state, authorised to transact business in Illinois.
Other changes include that shareholders can participate in a meeting by means of remote communication (unless specifically prohibited by the articles of incorporation or bylaws). A repeal date for domestic corporate franchise taxes has been changed from the 31st of December, 2025, to the 31st of December, 2024. The Limited Liability Company Act has been amended to include revocation and reinstatement procedures.
Senate Bill 1795, approved 30/07/2021, and effective on the 1st of January, 2022, amends the provisions of the Limited Liability Company Act relating to general standards of member and manager conduct. The amendments clarify that the fiduciary duties set by statute do not limit any common law fiduciary duties.
The bill adds that the implied covenant of good faith and fair dealing applies to the operating agreement and members of a member-managed company in the same manner, and to the same extent, that it applies at law to other contracts and parties to the contracts. This replaces a provision relating to a member’s discharge of duties to the company and other members under the operating agreement or the Act, and exercise of rights, consistent with the obligation of good faith and fair dealing.
House Bill 115 approved 09/07/2021, and effective on the 1st of January, 2022, changes the Secretary of State publication methods of lists and other information for certain entities to open data from previously more onerous methods, such as mailing requests for information, etc. Open data means data that is expressed in a machine-readable form and that is made freely available to the public under an open licence, without registration requirement, and without any other restrictions that would impede its use or reuse. The bill provides that the public data made available for specified entities is only for informational purposes.
House Bill 1464, approved on 29/04/2021, and generally effective on 29/04/2021, includes that the name or assumed name of a domestic or foreign filing entity must not contain language that falsely indicates or implies that the domestic or foreign filing entity is, or is connected with, a government agency of Indiana, another state, or the United States. If the name or assumed name does contain the language, then the Secretary of State may remove the name or assumed name from the record.
The state has adopted a new business corporation act, effective on the 1st of January, 2022. For highlights, please see “Iowa Enacts a New Business Corporation Act”.
House Bill 2391, approved on 21/04/2021, and generally effective on 01/07/2021, includes, among other things, changes to annual report filing requirements for business entities, including corporations, limited liability companies, limited partnerships, and limited liability partnerships to biennial filing requirements.
House Bill (HP) 878 became law on 30/06/2021, with later implementation dates. The bill establishes gender parity requirements for certain corporate boards. Implementation is to begin by the 1st of June, 2023 with the inclusion of a minimum of one female director on the board.
House Bill 1210 became law on 30/05/2021, effective on 01/07/2022. The bill requires certain business entities to include diversity data in their annual reports.
Senate Bill 320, approved on 13/04/2021, and effective on the 1st of October, 2021, relates to the Maryland State Department of Assessments and Taxation serving as the resident agent of qualified foreign corporations.
Senate Bill 2626, was approved and took effect on 17/03/2021. Among other things, the bill gives corporations the option of holding annual and special shareholders meetings by electronic and/or remote communication, unless prohibited by the corporation’s bylaws.
Senate Bill 66, approved on 23/02/2021, and effective 01/10/2021, revises the Montana Business Corporations Act. Among other things, the bill revises annual and special meeting requirements for shareholders to include a remote meeting option.
Senate Bill 95, approved on the 2nd of June, 2021, and effective on the 1st of October, 2021, provides, among other things, that persons permitted by the corporation, in addition to stockholders, are now allowed to attend a stockholders’ meeting unless otherwise restricted by the articles of incorporation or bylaws, and also may participate remotely.
The bill also provides that the articles of organisation or the operating agreement of a limited liability company may set profit distributions. Previously only the operating agreement was listed as setting the distribution specifications.
A4918, approved and effective on 24/08/2021, permits corporations and certain financial entities to hold shareholder meetings by means of remote communication.
House Bill 320, approved and effective on the 20th of September, 2021, notes that a corporate board of directors can hold shareholder meetings by means of remote communication and includes guidance on shareholder electronic inspection of records.
Senate Bill 507, approved on 21/08/2021, generally became effective on 01/10/2021. The bill includes changes to corporate recordkeeping requirements, and among other things, permits a corporation’s board of directors to change the corporate name without shareholder approval, as long as the corporation has only one class of shares outstanding, and the articles of incorporation do not provide otherwise.
Senate Bill 2210, approved on 01/04/1021, and effective on 01/08/2021, among other things, makes changes to filing due dates for the first annual report of certain domestic entities, including limited liability companies, nonprofits, limited partnerships, and limited liability partnerships.
Senate Bill 276, approved on 07/01/2021, and effective 11/02/2022, enacts the Ohio Revised Limited Liability Company Act. Among its changes to current law, the Act has new provisions in determining LLC management authority. It also permits an LLC to create one or more series provided that the assets satisfy certain criteria, and also sets penalties, such as cancellation for not having or maintaining a registered agent.
Senate Bill 228, approved on 19/04/2021, and effective 01/11/2021, creates an Oklahoma public benefit LLC Act, amends provisions of the General Corporation Act relating to transmissions of electronic notices, and requires corporations to prepare shareholder lists, among other changes.
House Bill 5984, approved on 03/07/2021, and effective on the 1st of January, 2022 and its Senate version, RIS789 (Sub.A), includes a change to the annual report due dates for domestic and foreign corporations, limited liability companies, and nonprofit corporations to a new reporting period.
House Bill 106, approved and effective on 07/04/2021, allows corporations to permit shareholders and proxy holders to participate in regular or special meetings by remote communication, provided certain requirements are satisfied.
Senate Bill 518, approved 15/04/2021, and effective on 04/07/2021, includes an additional ground for administrative dissolution for limited liability companies, profit and nonprofit corporations, and limited partnerships, related to a misrepresentation of any material matter in any application, report, affidavit or other record submitted by any of these entities pursuant to law. The bill sets a period for reinstatement procedures after administrative dissolution and includes specific references to the procedures for appeal of reinstatement denial in the limited liability company and profit and nonprofit corporation statutes.
These are highlights of some of the many legislative changes in 2021. For more details on these bills, please refer to the full texts on each state’s legislative website.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.