MISSISSIPPI LEGISLATURE
2006 Regular Session
To: Judiciary, Division A
By: Senator(s) Ross
AN ACT TO AMEND SECTION 79-4-1.40, MISSISSIPPI CODE OF 1972, TO ENACT A DEFINITION OF "PUBLIC CORPORATION"; TO CREATE NEW SECTION 79-4-1.43, MISSISSIPPI CODE OF 1972, TO ENACT A DEFINITION FOR "QUALIFIED DIRECTOR"; TO AMEND SECTION 79-4-7.32, MISSISSIPPI CODE OF 1972, TO CLARIFY PROVISIONS CONCERNING AGREEMENTS AMONG SHAREHOLDERS OF A CORPORATION THAT GOES PUBLIC; TO AMEND SECTION 79-4-7.44, MISSISSIPPI CODE OF 1972, TO REVISE PROVISIONS RELATING TO DISMISSAL OF A DERIVATIVE ACTION UPON MOTION OF A CORPORATION; TO AMEND SECTION 79-4-8.50, MISSISSIPPI CODE OF 1972, TO REVISE DEFINITIONS DEALING WITH INDEMNIFICATION; TO AMEND SECTION 79-4-8.53, MISSISSIPPI CODE OF 1972, TO REVISE THE ADVANCEMENT OF EXPENSES IN INDEMNIFICATION; TO AMEND SECTION 79-4-8.55, MISSISSIPPI CODE OF 1972, TO REVISE THE DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION; TO AMEND SECTION 79-4-8.60, MISSISSIPPI CODE OF 1972, TO REVISE DEFINITIONS DEALING WITH A DIRECTOR'S CONFLICTS OF INTEREST; TO AMEND SECTION 79-4-8.61, MISSISSIPPI CODE OF 1972, TO CLARIFY WHEN A DIRECTOR'S ACTIONS ARE NOT SANCTIONABLE; TO AMEND SECTION 79-4-8.62, MISSISSIPPI CODE OF 1972, TO CLARIFY DISCLOSURE REQUIRED OF A DIRECTOR CONCERNING A CONFLICTING INTEREST; TO AMEND SECTION 79-4-8.63, MISSISSIPPI CODE OF 1972, TO REVISE REQUIREMENTS NECESSARY FOR SHAREHOLDER APPROVAL OF A DIRECTOR'S CONFLICTING INTEREST TRANSACTION; TO CREATE NEW SECTION 79-4-8.70, MISSISSIPPI CODE OF 1972, TO SPECIFY EQUITABLE RELIEF AVAILABLE TO A CORPORATION FOR A DIRECTOR'S UTILIZATION OF A BUSINESS OPPORTUNITY; TO AMEND SECTIONS 79-4-14.31 AND 79-4-14.34, MISSISSIPPI CODE OF 1972, TO CLARIFY THE PROCEDURE FOR DISSOLUTION OF A NONPUBLIC CORPORATION; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 79-4-1.40, Mississippi Code of 1972, is amended as follows:
79-4-1.40. In Section 79-4-1.01 et seq.:
(1) "Articles of incorporation" include amended and restated articles of incorporation and articles of merger.
(2) "Authorized shares" means the shares of all classes a domestic or foreign corporation is authorized to issue.
(3) "Conspicuous" means so written that a reasonable person against whom the writing is to operate should have noticed it. For example, printing in italics or boldface or contrasting color, or typing in capitals or underlined, is conspicuous.
(4) "Corporation" or "domestic corporation" means a corporation for profit, which is not a foreign corporation, incorporated under or subject to the provisions of Section 79-4-1.01 et seq.
(5) "Deliver" or "delivery" means any method of delivery used in conventional commercial practice, including delivery by hand, mail, commercial delivery and electronic transmission.
(6) "Distribution" means a direct or indirect transfer of money or other property (except its own shares) or incurrence of indebtedness by a corporation to or for the benefit of its shareholders in respect of any of its shares. A distribution may be in the form of a declaration or payment of a dividend; a purchase, redemption or other acquisition of shares; a distribution of indebtedness; or otherwise.
(7) "Effective date of notice" is defined in Section 79-4-1.41.
(8) "Electronic transmission" or "electronically transmitted" means any process of communication not directly involving the physical transfer of paper that is suitable for the retention, retrieval and reproduction of information by the recipient.
(9) "Employee" includes an officer but not a director. A director may accept duties that make him also an employee.
(10) "Entity" includes corporation and foreign corporation; not-for-profit corporation; profit and not-for-profit unincorporated association; business trust, estate, partnership, trust and two (2) or more persons having a joint or common economic interest; and state, United States and foreign government.
(11) "Facts objectively ascertainable" outside of a filed document or plan is defined in Section 79-4-1.20(k).
(12) "Filing entity" means an other entity that is of a type that is created by filing a public organic document.
(13) "Foreign corporation" means a corporation for profit incorporated under a law other than the law of this state.
(14) "Governmental subdivision" includes authority, county, district and municipality.
(15) "Includes" denotes a partial definition.
(16) "Individual" includes the estate of an incompetent or deceased individual.
(17) "Means" denotes an exhaustive definition.
(18) "Notice" is defined in Section 79-4-1.41.
(19) "Person" includes individual and entity.
(20) "Principal office" means the office (in or out of this state) so designated in the annual report where the principal executive offices of a domestic or foreign corporation are located.
(21) "Proceeding" includes civil suit and criminal, administrative and investigatory action.
(22) "Public corporation" means a corporation that has shares listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association.
(23) "Record date" means the date established under Article 6 or 7 on which a corporation determines the identity of its shareholders and their shareholdings for purposes of Section 79-4-1.01 et seq. The determinations shall be made as of the close of business on the record date unless another time for doing so is specified when the record date is fixed.
(24) "Secretary" means the corporate officer to whom the board of directors has delegated responsibility under Section 79-4-8.40(c) for custody of the minutes of the meetings of the board of directors and of the shareholders and for authenticating records of the corporation.
(25) "Shares" means the unit into which the proprietary interests in a corporation are divided.
(26) "Shareholder" means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.
(27) "Sign" or "signature" includes any manual, facsimile, conformed or electronic signature.
(28) "State," when referring to a part of the United States, includes a state and commonwealth (and their agencies and governmental subdivisions) and a territory, and insular possession (and their agencies and governmental subdivisions) of the United States.
(29) "Subscriber" means a person who subscribes for shares in a corporation, whether before or after incorporation.
(30) "United States" includes district, authority, bureau, commission, department and any other agency of the United States.
(31) "Voting group" means all shares of one or more classes or series that under the articles of incorporation or Section 79-4-1.01 et seq. are entitled to vote and be counted together collectively on a matter at a meeting of shareholders. All shares entitled by the articles of incorporation or Section 79-4-1.01 et seq. to vote generally on the matter are for that purpose a single voting group.
(32) "Voting power" means the current power to vote in the election of directors.
SECTION 2. The following shall be codified as Section 79-4-1.43, Mississippi Code of 1972:
79-4-1.43. Qualified director. (a) A "qualified director" is a director who, at the time action is to be taken under:
(1) Section 79-4-7.44, does not have (i) a material interest in the outcome of the proceeding, or (ii) a material relationship with a person who has such an interest;
(2) Section 79-4-8.53 or 79-4-8.55, (i) is not a party to the proceeding, (ii) is not a director as to whom a transaction is a director's conflicting interest transaction or who sought a disclaimer of the corporation's interest in a business opportunity under Section 8.70, which transaction or disclaimer is challenged in the proceeding, and (iii) does not have a material relationship with a director described in either clause (i) or clause (ii) of this subsection (a)(2);
(3) Section 79-4-8.62, is not a director (i) as to whom the transaction is a director's conflicting interest transaction, or (ii) who has a material relationship with another director as to whom the transaction is a director's conflicting interest transaction; or
(4) Section 79-4-8.70, would be a qualified director under subsection (a)(3) if the business opportunity were a director's conflicting interest transaction.
(b) For purposes of this section:
(1) "Material relationship" means a familial, financial, professional, employment or other relationship that would reasonably be expected to impair the objectivity of the director's judgment when participating in the action to be taken; and
(2) "Material interest" means an actual or potential benefit or detriment (other than one which would devolve on the corporation or the shareholders generally) that would reasonably be expected to impair the objectivity of the director's judgment when participating in the action to be taken.
(c) The presence of one or more of the following circumstances shall not automatically prevent a director from being a qualified director:
(1) Nomination or election of the director to the current board by any director who is not a qualified director with respect to the matter (or by any person that has a material relationship with that director), acting alone or participating with others;
(2) Service as a director of another corporation of which a director who is not a qualified director with respect to the matter (or any individual who has a material relationship with that director), is or was also a director; or
(3) With respect to action to be taken under Section 79-4-7.44, status as a named defendant, as a director against whom action is demanded, or as a director who approved the conduct being challenged.
SECTION 3. Section 79-4-7.32, Mississippi Code of 1972, is amended as follows:
79-4-7.32. (a) An agreement among the shareholders of a corporation that complies with this section is effective among the shareholders and the corporation even though it is inconsistent with one or more other provisions of this chapter in that it:
(1) Eliminates the board of directors or restricts the discretion or powers of the board of directors;
(2) Governs the authorization or making of distributions whether or not in proportion to ownership of shares, subject to the limitations in Section 79-4-6.40;
(3) Establishes who shall be directors or officers of the corporation, or their terms of office or manner of selection or removal;
(4) Governs, in general or in regard to specific matters, the exercise or division of voting power by or between the shareholders and directors or by or among any of them, including use of weighted voting rights or director proxies;
(5) Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer or employee of the corporation or among any of them;
(6) Transfers to one or more shareholders or other persons all or part of the authority to exercise the corporate powers or to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or shareholders;
(7) Requires dissolution of the corporation at the request of one or more of the shareholders or upon the occurrence of a specified event or contingency; or
(8) Otherwise governs the exercise of the corporate powers or the management of the business and affairs of the corporation or the relationship among the shareholders, the directors and the corporation, or among any of them, and is not contrary to public policy.
(b) An agreement authorized by this section shall be:
(1) Set forth (A) in the articles of incorporation or bylaws and approved by all persons who are shareholders at the time of the agreement, or (B) in a written agreement that is signed by all persons who are shareholders at the time of the agreement and is made known to the corporation;
(2) Subject to amendment only by all persons who are shareholders at the time of the amendment, unless the agreement provides otherwise; and
(3) Valid for ten (10) years, unless the agreement provides otherwise.
(c) The existence of an agreement authorized by this section shall be noted conspicuously on the front or back of each certificate for outstanding shares or on the information statement required by Section 79-4-6.26(b). If at the time of the agreement the corporation has shares outstanding represented by certificates, the corporation shall recall the outstanding certificates and issue substitute certificates that comply with this subsection. The failure to note the existence of the agreement on the certificate or information statement shall not affect the validity of the agreement or any action taken pursuant to it. Any purchaser of shares who, at the time of purchase, did not have knowledge of the existence of the agreement shall be entitled to rescission of the purchase. A purchaser shall be deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate or information statement for the shares in compliance with this subsection (c) and, if the shares are not represented by a certificate, the information statement is delivered to the purchaser at or prior to the time of purchase of the shares. An action to enforce the right of rescission authorized by this subsection (c) must be commenced within the earlier of ninety (90) days after discovery of the existence of the agreement or two (2) years after the time of purchase of the shares.
(d) An agreement authorized by this section shall cease to be effective when * * * the corporation becomes a public corporation. If the agreement ceases to be effective for any reason, the board of directors may, if the agreement is contained or referred to in the corporation's articles of incorporation or bylaws, adopt an amendment to the articles of incorporation or bylaws, without shareholder action, to delete the agreement and any references to it.
(e) An agreement authorized by this section that limits the discretion or powers of the board of directors shall relieve the directors of, and impose upon the person or persons in whom such discretion or powers are vested, liability for acts or omissions imposed by law on directors to the extent that the discretion or powers of the directors are limited by the agreement.
(f) The existence or performance of an agreement authorized by this section shall not be a ground for imposing personal liability on any shareholder for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.
(g) Incorporators or subscribers for shares may act as shareholders with respect to an agreement authorized by this section if no shares have been issued when the agreement is made.
SECTION 4. Section 79-4-7.44, Mississippi Code of 1972, is amended as follows:
79-4-7.44. (a) A derivative proceeding shall be dismissed by the court on motion by the corporation if one of the groups specified in subsection (b) or (e) * * * has determined in good faith, after conducting a reasonable inquiry upon which its conclusions are based, that the maintenance of the derivative proceeding is not in the best interests of the corporation.
(b) Unless a panel is appointed pursuant to subsection (e), the determination in subsection (a) shall be made by:
(1) A majority vote of qualified directors present at a meeting of the board of directors if the qualified directors constitute a quorum; or
(2) A majority vote of a committee consisting of two (2) or more qualified directors appointed by majority vote of qualified directors present at a meeting of the board of directors, regardless of whether * * * such qualified directors constitute a quorum.
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(c) If a derivative proceeding is commenced after a determination has been made rejecting a demand by a shareholder, the complaint shall allege with particularity facts establishing either (1) that a majority of the board of directors did not consist of qualified directors at the time the determination was made or (2) that the requirements of subsection (a) have not been met.
(d) If a majority of the board of directors consisted of qualified directors at the time the determination * * *was made, the plaintiff shall have the burden of proving that the requirements of subsection (a) have not been met; if not, the corporation shall have the burden of proving that the requirements of subsection (a) have been met.
(e) Upon motion by the corporation, the court may appoint a panel of one or more individuals * * * to make a determination whether the maintenance of the derivative proceeding is in the best interests of the corporation. In such case, the plaintiff shall have the burden of proving that the requirements of subsection (a) have not been met.
SECTION 5. Section 79-4-8.50, Mississippi Code of 1972, is amended as follows:
79-4-8.50. In this subarticle:
(1) "Corporation" includes any domestic or foreign predecessor entity of a corporation in a merger.
(2) "Director" or "officer" means an individual who is or was a director or officer, respectively, of a corporation or who, while a director or officer of the corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan or other entity. A director or officer is considered to be serving an employee benefit plan at the corporation's request if the individual's duties to the corporation also impose duties on, or otherwise involve services by, the individual to the plan or to participants in or beneficiaries of the plan. "Director" or "officer" includes, unless the context requires otherwise, the estate or personal representative of a director or officer.
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(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses incurred with respect to a proceeding.
(5) "Official capacity" means: (i) when used with respect to a director, the office of director in a corporation; and (ii) when used with respect to an officer, as contemplated in Section 79-4-8.56, the office in a corporation held by the officer. "Official capacity" does not include service for any other domestic or foreign corporation or any partnership, joint venture, trust, employee benefit plan or other entity.
(6) "Party" means an individual who was, is, or is threatened to be made a defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative and whether formal or informal.
SECTION 6. Section 79-4-8.53, Mississippi Code of 1972, is amended as follows:
79-4-8.53. (a) A corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse the reasonable expenses incurred in connection with the proceeding by an individual who is a party to the proceeding because that individual is a member of the board of directors if the director delivers to the corporation:
(1) A written affirmation of the director's good faith belief that * * * the relevant standard of conduct described in Section 79-4-8.51 has been met by the director or that the proceeding involves conduct for which liability has been eliminated under a provision of the articles of incorporation as authorized by Section 79-4-2.02(b)(4); and
(2) A written undertaking of the director to repay any funds advanced if the director is not entitled to mandatory indemnification under Section 79-4-8.52 and it is ultimately determined under Section 79-4-8.54 or Section 79-4-8.55 that the director has not met the relevant standard of conduct described in Section 79-4-8.51.
(b) The undertaking required by subsection (a)(2) must be an unlimited general obligation of the director but need not be secured and may be accepted without reference to the financial ability of the director to make repayment.
(c) Authorizations under this section shall be made * * *:
(1) By the board of directors:
(i) If there are two (2) or more qualified directors, by a majority vote of all the qualified directors (a majority of whom shall for such purpose constitute a quorum) or by a majority of the members of a committee of two (2) or more qualified directors appointed by such a vote; or
(ii) If there are fewer than two (2) qualified directors, by the vote necessary for action by the board in accordance with Section 79-4-8.24(c), in which authorization directors who are not qualified directors may participate; or
(2) By the shareholders, but shares owned by or voted under the control of a director who at the time is not * * * a qualified director may not be voted on the authorization.
SECTION 7. Section 79-4-8.55, Mississippi Code of 1972, is amended as follows:
79-4-8.55. (a) A corporation may not indemnify a director under Section 79-4-8.51 unless authorized for a specific proceeding after a determination has been made that indemnification * * * is permissible because the director has met the relevant standard of conduct set forth in Section 79-4-8.51.
(b) The determination shall be made:
(1) If there are two (2) or more qualified directors, by the board of directors by a majority vote of all the qualified directors (a majority of whom shall for such purpose constitute a quorum), or by a majority of the members of a committee of two (2) or more qualified directors appointed by such a vote;
(2) By special legal counsel:
(i) Selected in the manner prescribed in subdivision (1); or
(ii) If there are fewer than two (2) qualified directors, selected by the board of directors (in which selection directors who are not qualified directors may participate); or
(3) By the shareholders, but shares owned by or voted under the control of a director who at the time is not * * * a qualified director may not be voted on the determination.
(c) Authorization of indemnification shall be made in the same manner as the determination that indemnification is permissible, except that if there are fewer than two (2) qualified directors, or if the determination is made by special legal counsel, authorization of indemnification shall be made by those entitled * * * to select special legal counsel under subsection (b)(2)(ii).
SECTION 8. Section 79-4-8.60, Mississippi Code of 1972, is amended as follows:
79-4-8.60. In Sections 79-4-8.60 through 79-4-8.63 and Section 79-4-8.70:
(1) "Director's conflicting interest transaction" * * * means * * * a transaction effected or proposed to be effected by the corporation (or by an entity controlled by the corporation) * * *:
(i) * * * To which, at the relevant time, the director is a party; or
(ii) * * * Respecting which, at the relevant time, the director had knowledge and a material financial interest known to the director; or
(iii) Respecting which, at the relevant time, the director knew that a related person was a party or had a material financial interest.
(2) "Control" (including the term "controlled by") means (i) having the power, directly or indirectly, to elect or remove a majority of the members of the board of directors or other governing body of an entity, whether through the ownership of voting shares or interests, by contract, or otherwise, or (ii) being subject to a majority of the risk of loss from the entity's activities or entitled to receive a majority of the entity's residual returns.
(3) "Relevant time" means (i) the time at which directors' actions respecting the transaction is taken in compliance with Section 79-4-8.62, or (ii) if the transaction is not brought before the board of directors of the corporation (or its committee) for action under Section 79-4-8.62, at the time the corporation (or an entity controlled by the corporation) becomes legally obligated to consummate the transaction.
(4) "Material financial interest" means a financial interest in a transaction that * * * would reasonably be expected toimpair the objectivity of the director's judgment when participating in action on the authorization of the transaction.
(5) "Related person" * * * means:
(i) The director's spouse * * *;
(ii) A child, stepchild, grandchild, parent, stepparent, grandparent, sibling, * * * (or spouse of any thereof) of the director or of the director's spouse;
(iii) An individual living in the same home as the director; * * *
(iv) An entity (other than the corporation or an entity controlled by the corporation) controlled by the director or any person specified in this paragraph (5);
(v) A domestic or foreign (A) business or nonprofit corporation (other than the corporation or an entity controlled by the corporation) of which the director is a director, (B) unincorporated entity of which the director is a general partner or a member of the governing body, or (C) individual, trust or estate for whom or of which the director is a trustee, guardian, personal representative or like fiduciary; or
(vi) A person that is, or an entity that is controlled by, an employer of the director.
(6) "Fair to the corporation" means, for purposes of Section 79-4-8.61(b)(3), that the transaction as a whole was beneficial to the corporation, taking into appropriate account whether it was (i) fair in terms of the director's dealings with the corporation, and (ii) comparable to what might have been obtainable in an arms' length transaction, given the consideration paid or received by the corporation.
(7) "Required disclosure" means disclosure * * * of (i) the existence and nature of the director's conflicting interest, and (ii) all facts known to the director respecting the subject matter of the transaction that a director free of such conflicting interest would reasonably believe to be material in deciding whether * * * to proceed with the transaction.
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SECTION 9. Section 79-4-8.61, Mississippi Code of 1972, is amended as follows:
79-4-8.61. (a) A transaction effected or proposed to be effected by the corporation or by an * * * entity controlled by the corporation * * * may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director of the corporation, in a proceeding by a shareholder or by or in the right of the corporation, on the ground that the director * * * has an interest respecting the transaction, if it is not a director's conflicting interest transaction.
(b) A director's conflicting interest transaction may not be the subject of equitable relief, * * * or give rise to an award of damages or other sanctions against a director of the corporation, in a proceeding by a shareholder or by or in the right of the corporation on the ground that the director * * * has an interest respecting the transaction, if:
(1) Directors' action respecting the transaction was * * * taken in compliance with Section 79-4-8.62 at any time; or
(2) Shareholders' action respecting the transaction was * * * taken in compliance with Section 79-4-8.63 at any time; or
(3) The transaction, judged according to the circumstances at the relevant time * * *, is established to have been fair to the corporation.
SECTION 10. Section 79-4-8.62, Mississippi Code of 1972, is amended as follows:
79-4-8.62. (a) Directors' action respecting a director's conflicting interest transaction is effective for purposes of Section 79-4-8.61(b)(1) if the transaction has been authorized by the affirmative vote of a majority (but no fewer than two (2)) of the qualified directors * * * who voted on the transaction, after * * * required disclosure by the conflicted director of information * * * not already known by such qualified directors or after modified disclosure in compliance with subsection (b), provided that: * * *
(1) * * * The qualified directors have deliberated and voted outside the presence of and without the participation by any other director; and
(2) Where the action has been taken by a committee, all members of the committee were qualified directors, and either (i) the committee was composed of all the qualified directors on the board of directors, or (ii) the members of the committee were appointed by the affirmative vote of a majority of the qualified directors on the board.
(b) Notwithstanding subsection (a), when a transaction is a director's conflicting interesttransaction only because a related person described in Section 79-4-8.60(5)(v) or (vi) is a party to or has material financial interest in the transaction, the conflicted director is not obligated to make required disclosure to the extent that the director reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule, provided that the conflicted director discloses to the qualified directors voting on the transaction:
(1) All information required to be disclosed that is not so violative;
(2) The existence and nature of the director's conflicting interest * * *; and
(3) The nature of the conflicted director's duty not to disclose the confidential information.
(c) A majority (but no fewer than two (2)) of all the qualified directors on the board of directors, or on the committee, constitutes a quorum for purposes of action that complies with this section. * * *
(d) Where directors' action under this section does not satisfy a quorum or voting requirement applicable to the authorization of the transaction by reason of the articles of incorporation, the bylaws, or provision of law, independent action to satisfy those authorization requirements must be taken by the board of directors or a committee, in which action directors who are not qualified directors may participate.
SECTION 11. Section 79-4-8.63, Mississippi Code of 1972, is amended as follows:
79-4-8.63. (a) Shareholders' action respecting a director's conflicting interest transaction is effective for purposes of Section 79-4-8.61(b)(2) if a majority of the votes * * * cast by the holders of all qualified shares are in favor of the transaction after (1) notice to shareholders describing the action to be taken respecting the transaction, (2) provision to the corporation of the information referred to in subsection (b), and (3) communication to the shareholders entitled to vote on the transaction of the information that is the subject of required disclosure, to the extent the information is not known by them.
(b) A director who has a conflicting interest respecting the transaction shall, before the shareholders' vote, inform the secretary or other officer or agent of the corporation authorized to tabulate votes, in writing, of the number of shares that the director knows are not qualified shares under subsection (c), and the identity of the holders of those shares.
(c) For purposes of this section, (1) "holder" means, and "held by" refers to shares held by, both a record shareholder (as defined in Section 79-4-13.01(7)) and a beneficial shareholder (as defined in Section 79-4-13.01(2)); and (2) "qualified shares" means all shares entitled to be voted with respect to the * * * transaction except for shares that * * * the secretary (or other officer or agent of the corporation authorized to tabulate votes) either knows, or under subsection (b) is notified, are held by (A) a director who has a conflicting interest respecting the transaction, or (B) a related person of the director (excluding a person described in Section 79-4-8.60(5)(vi)).
(d) A majority of the votes entitled to be cast by the holders of all qualified shares constitutes a quorum for purposes of compliance with this section. Subject to the provisions of subsection * * * (e), shareholders' action that otherwise complies with this section is not affected by the presence of holders, or by the voting, of shares that are not qualified shares.
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(e) If a shareholders' vote does not comply with subsection (a) solely because of a * * * director's failure to comply with subsection (b), and if the director establishes that the failure * * * was not intended * * * to influence and did not in fact determine the outcome of the vote, the court may * * * take such action respecting the transaction and the director, and may give such effect, if any, to the shareholders' vote, as the court considers appropriate in the circumstances.
(f) Where shareholders' action under this section does not satisfy a quorum or voting requirement applicable to the authorization of the transaction by reason of the articles of incorporation, the bylaws or a provision of law, independent action to satisfy those authorization requirements must be taken by the shareholders, in which action shares that are not qualified shares may participate.
SECTION 12. The following shall be codified as Section 79-4-8.70, Mississippi Code of 1972:
79-4-8.70. Business opportunities. (a) A director's taking advantage, directly or indirectly, of a business opportunity may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against the director, in a proceeding by or in the right of the corporation on the ground that such opportunity should have first been offered to the corporation, if before becoming legally obligated respecting the opportunity the director brings it to the attention of the corporation and:
(1) Action by qualified directors disclaiming the corporation's interest in the opportunity is taken in compliance with the procedures set forth in Section 79-4-8.62, as if the decision being made concerned a director's conflicting interest transaction; or
(2) Shareholders' action disclaiming the corporation's interest in the opportunity is taken in compliance with the procedures set forth in Section 79-4-8.63, as if the decision being made concerned a director's conflicting interest transaction;
except that, rather than making "required disclosure" as defined in Section 79-4-8.60, in each case the director shall have made prior disclosure to those acting on behalf of the corporation of all material facts concerning the business opportunity that are then known to the director.
(b) In any proceeding seeking equitable relief or other remedies based upon an alleged improper taking advantage of a business opportunity by a director, the fact that the director did not employ the procedure described in subsection (a) before taking advantage of the opportunity shall not create an inference that the opportunity should have been first presented to the corporation or alter the burden of proof otherwise applicable to establish that the director breached a duty to the corporation in the circumstances.
SECTION 13. Section 79-4-14.31, Mississippi Code of 1972, is amended as follows:
79-4-14.31. (a) Venue for a proceeding brought by any party named in Section 79-4-14.30 lies in the county where a corporation's principal office (or, if none in this state, its registered office) is or was last located.
(b) It is not necessary to make shareholders parties to a proceeding to dissolve a corporation unless relief is sought against them individually.
(c) A court in a proceeding brought to dissolve a corporation may issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs, take other action required to preserve the corporate assets wherever located, and carry on the business of the corporation until a full hearing can be held.
(d) Within ten (10) days of the commencement of a proceeding under Section 79-4-14.30(2) to dissolve a corporation that is not a public corporation, the corporation shall send to all shareholders, other than the petitioner, a notice stating that the shareholders are entitled to avoid the dissolution of the corporation by electing to purchase the petitioner's shares under Section 79-4-14.34 and accompanied by a copy of Section 79-4-14.34.
SECTION 14. Section 79-4-14.34, Mississippi Code of 1972, is amended as follows:
79-4-14.34. (a) In a proceeding under Section 79-4-14.30(2) to dissolve a corporation thatis not a public corporation, the corporation may elect or, if it fails to elect, one or more shareholders may elect to purchase all shares owned by the petitioning shareholder at the fair value of the shares. An election pursuant to this section shall be irrevocable unless the court determines that it is equitable to set aside or modify the election.
(b) An election to purchase pursuant to this section may be filed with the court at any time within ninety (90) days after the filing of the petition under Section 79-4-14.30(2) or at such later time as the court in its discretion may allow. If the election to purchase is filed by one or more shareholders, the corporation shall, within ten (10) days thereafter, give written notice to all shareholders, other than the petitioner. The notice must state the name and number of shares owned by the petitioner and the name and number of shares owned by each electing shareholder and must advise the recipients of their right to join in the election to purchase shares in accordance with this section. Shareholders who wish to participate must file notice of their intention to join in the purchase no later than thirty (30) days after the effective date of the notice to them. All shareholders who have filed an election or notice of their intention to participate in the election to purchase thereby become parties to the proceeding and shall participate in the purchase in proportion to their ownership of shares as of the date the first election was filed, unless they otherwise agree or the court otherwise directs. After an election has been filed by the corporation or one or more shareholders, the proceeding under Section 79-4-14.30(2) may not be discontinued or settled, nor may the petitioning shareholder sell or otherwise dispose of his shares, unless the court determines that it would be equitable to the corporation and the shareholders, other than the petitioner, to permit such discontinuance, settlement, sale or other disposition.
(c) If, within sixty (60) days of the filing of the first election, the parties reach agreement as to the fair value and terms of purchase of the petitioner's shares, the court shall enter an order directing the purchase of petitioner's shares upon the terms and conditions agreed to by the parties.
(d) If the parties are unable to reach an agreement as provided for in subsection (c), the court, upon application of any party, shall stay the Section 79-4-14.30(2) proceedings and determine the fair value of the petitioner's shares as of the day before the date on which the petition under Section 79-4-14.30(2) was filed or as of such other date as the court deems appropriate under the circumstances.
(e) Upon determining the fair value of the shares, the court shall enter an order directing the purchase upon such terms and conditions as the court deems appropriate, which may include payment of the purchase price in installments, where necessary in the interests of equity, provision for security to assure payment of the purchase price and any additional costs, fees and expenses as may have been awarded, and, if the shares are to be purchased by shareholders, the allocation of shares among them. In allocating petitioner's shares among holders of different classes of shares, the court should attempt to preserve the existing distribution of voting rights among holders of different classes insofar as practicable and may direct that holders of a specific class or classes shall not participate in the purchase. Interest may be allowed at the rate and from the date determined by the court to be equitable, but if the court finds that the refusal of the petitioning shareholder to accept an offer of payment was arbitrary or otherwise not in good faith, no interest shall be allowed. If the court finds that the petitioning shareholder had probable grounds for relief under * * * Section 79-4-14.30(2)(ii) or (iv), it may award to the petitioning shareholder reasonable fees and expenses of counsel and of any experts employed by him.
(f) Upon entry of an order under subsection (c) or (e), the court shall dismiss the petition to dissolve the corporation under Section 79-4-14.30, and the petitioning shareholder shall no longer have any rights or status as a shareholder of the corporation, except the right to receive the amounts awarded to him by the order of the court which shall be enforceable in the same manner as any other judgment.
(g) The purchase ordered pursuant to subsection (e) shall be made within ten (10) days after the date the order becomes final unless before that time the corporation files with the court a notice of its intention to adopt articles of dissolution pursuant to Sections 79-4-14.02 and 79-4-14.03, which articles must then be adopted and filed within fifty (50) days thereafter. Upon filing of such articles of dissolution, the corporation shall be dissolved in accordance with the provisions of Sections 79-4-14.05 through 79-4-14.07 and the order entered pursuant to subsection (e) shall no longer be of any force or effect, except that the court may award the petitioning shareholder reasonable fees and expenses in accordance with the provisions of the last sentence of subsection (e) and the petitioner may continue to pursue any claims previously asserted on behalf of the corporation.
(h) Any payment by the corporation pursuant to an order under subsection (c) or (e), other than an award of fees and expenses pursuant to subsection (e), is subject to the provisions of Section 79-4-6.40.
(i) Nothing contained in this section shall diminish the inherent equity powers of the court to fashion alternative remedies to judicial dissolution.
SECTION 15. This act shall take effect and be in force from and after July 1, 2006.