During the 2014 Legislative session, House Bill 319 repealed what was formerly known as the Business Corporation Law for the state, and created the Louisiana Business Corporation Act (“LBCA”). The LBCA is based off the Model Business Corporation Act, which was developed through the American Bar Association, and which is designed to provide uniformity through the States regarding the laws governing corporations.
Some of the pertinent changes that Louisiana adopted, and which could impact your corporation are:
1. Annual Report—the annual report must now be filed within ninety (90) days of the anniversary of the date that the corporation was incorporated. If you fail to file your Annual Report within the ninety (90) day window, your corporate charter will be revoked. Under the old laws, a corporation had a three year grace period for this filing.
2. Simple Majority—the new default rule is that a simple majority can approve some major business decisions, which previously had required a two-thirds (2/3) vote to pass. One such example is the amendment of the articles of incorporation. Of course, the default voting requirements provided by the LBCA can be altered in your corporate bylaws.
3. Minority Shareholder Buyout—the new law provides minority shareholders greater rights. Specifically, if a minority shareholder feels they are being oppressed by the majority shareholder(s), they can now file a lawsuit requesting that the court compel the majority shareholder(s) to purchase their shares at fair market value. Prior to this change, one of the only remedies available to an oppressed minority shareholder was an action to dissolve the company.
4. Universal Demand for Derivative Actions—any shareholder who wishes to file a derivative action must, without exception, make written demand on the corporation requesting the board of directors take action, prior to the shareholder filing suit. Previously, if a shareholder thought written demand was futile or pointless, the law permitted them to skip this step.
5. Unanimous Governance Agreements—the new law now provides for “unanimous governance agreements” which allow shareholders to govern the corporate powers or management of the company, including, but not limited to, eliminating the Board of Directors, if all shareholders approve of such change in writing.
6. Validation of Director’s “Inside” Transactions—the new provisions now provide a means of validating transactions between a corporation and one or more of its directors, provided certain requirements of disclosure and approval are satisfied.
These are just a few examples of the extensive changes recently made Louisiana’s corporate laws. Should you have any questions about these modifications, or anything related to your business, please contact our office.