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This
article is published with the permission of Alex
Modelski to provide information to
entrepreneurs. It is intended to be
informational and does not constitute legal
advice regarding any specific situation. It may
be reprinted without the express permission of
Alex Modelski so long as it is reprinted in its
entirety including this title page. If you have
any questions or would like additional
information, contact Alex using the contact
information provided below.
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CORPORATE LAW IN CYBERSPACE Copyright ã 2001 Alex Modelski |
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As of June 2000, the Washington Business Corporation Act (WBCA) was amended to make life easier for all Washington corporations! |
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The WBCA spells out many requirements for maintaining corporate formalities. Regarding shareholder and director meetings, the law spells out notice requirements, record dates, rules regarding quorums, consents of directors and shareholders and proxies. It also sets requirements for amendment of Articles of Incorporation and Bylaws. Virtually all Articles of Incorporation and Bylaws of Washington corporations adopt some of the standard rules of the WBCA and modify others. However, until this year, there was no provision for the use of electronic transmissions, such as email, in complying with these requirements.
As a result, entrepreneurs very often fail to meet the requirements of the WBCA and of their own Articles and Bylaws. They are too busy trying to run a business. If the business succeeds, they often rationalize, they can hire a lawyer to clean up the formalities later. Sometimes that works. Sometimes it doesn’t. If the young company is sued while out of compliance, the principal shareholders risk losing their shield from liability and may be sued individually.
To make it easier to comply in these times of electronic communications, the Washington State Legislature has amended the WBCA to provide that many of the formalities may be effected by "electronic transmission". That term is defined as follows:
"Electronic transmission" or "electronically transmitted" means any process of electronic communication not directly involving the physical transfer of paper that is suitable for the retention, retrieval, and reproduction of the transmitted information by the recipient. However, such an electronic transmission must either set forth or be submitted with information from which it can be determined
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The amending legislation specifically allows for electronic transmissions to be used in: providing notice of shareholder and directors meetings; voting at shareholder and directors meetings; authorizing proxy voting; voting on mergers, consolidations, dispositions of assets and dissolution; and amendment of Articles of Incorporation and Bylaws. Further, a corporation and its officers, that in good faith, accept or reject an electronic transmission authorizing a vote, consent, waiver or proxy appointment are not liable to the shareholders for the consequences of the acceptance or rejection and corporate actions based upon the acceptance or rejection are presumed valid.
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Of course, the WBCA is still rather technical and the amendments speak of things like "security controls" and periods for retention of the electronic transmission. The amendments related to proxies go into some detail regarding what constitutes a "signature". Also, most Washington Corporations’ Articles and Bylaws don’t permit the use of the electronic transmissions. So, as usual, you will likely have to consult with an attorney in order to take advantage of the Legislature’s beneficence.
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By the way, next time you see Representative Luke Esser of Bellevue, thank him for co-sponsoring this much needed legislation.
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©2008
Alex Modelski, Business & Technology Law | |
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