New Bills Aimed At Improving New Jersey’s Corporate Governance Statutes
On September 15, 2008, the New Jersey Assembly and Economic Development Committee released a package of seven bills aimed at improving New Jersey’s corporate governance statutes. Since that date, all of the bills have been passed by the entire Assembly, and four of the proposed bills have been signed into law. The remaining bills, have been reported on favorably by the Senate Commerce Committee, but have not yet signed into law.
The bills are modeled on Delaware General Corporation Law, a historically corporation-friendly statute. Supporters of the bills believe that if and when these bills are passed into law, that New Jersey will become a more attractive state to incorporate in and do business. Among other things, the bills will make it easier for corporations to act quickly by using email and other progressive tools to conduct corporate business.
The new bills that have been signed into law:
- Allow corporate directors to provide the corporation with notice of resignation that would only be effective upon the occurrence of a particular event. This creates greater flexibility by allowing directors to submit resignations prior to the conclusion of an event. This bill was approved and signed by the Governor on January 27, 2009 and can be found at N.J.S. 14A:6-3.
- Permit a corporation to eliminate plurality voting for the election of directors in the bylaws of the corporation. Prior New Jersey law provided that a corporation may only eliminate plurality voting in its certificate of incorporation. The new bill gives corporations more freedom to adopt different voting methods for the election of directors after its incorporation. This bill was approved and signed by the Governor on January 27, 2009 and can be found at N.J.S. 14A:5-24.
- Update the definition of “foreign corporation” to mirror similar definitions used in the New Jersey Limited Liability Company Act and the Uniform Limited Partnership Law. The bill provides New Jersey corporations the option to merge with and acquire or consolidate with unincorporated entities, in addition to the limited liability companies and partnership previously permitted. In addition, the bill allows domestic corporations to create partnerships with foreign businesses. This bill was approved and signed by the Governor on November 20, 2009 and can be found at N.J.S. 14A:1-2.1.
- Provide that corporations may grant different types of equities from those traditionally used by corporations, thus recognizing the trend of granting more restricted stock grants in lieu of stock options. This bill was approved and signed by the Governor on November 20, 2009 and can be found at N.J.S. 14A:8-1.
The new bills that have not yet been signed into law but have been passed by the State Senate:
- Permit any corporate notice required under the New Jersey Business Corporations Act to be filed electronically. Electronic filing not only saves corporations time and money, but also grants more direct access to the corporation’s shareholders and directors. This bill was unanimously passed in the Senate on December 10, 2009.
- Improve the speed at which corporate transactions can take place by providing one- and two-hour services for expedited over the counter corporate service requests. Currently, the fastest filing service takes up to 8.5 hours from when the request is received. This bill was unanimously passed in the Senate on December 10, 2009.
- The passage of the proposed bills is the first step towards what Assemblyman Joseph Vas, a sponsor of these bills, desires “…a stimulation of economy, a boost in the private sector job growth, and help reverse the state’s reputation as being business unfriendly.”
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.