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The Committee on Corporate Laws of the ABA section of Business Law (Committee) develops, and from time to time proposes changes in, the Model Business Corporation Act (the Act).
The Committee has approved the changes described in this Report on second reading and invites comments from interested persons. Comments should be addressed to E. Norman Veasey, Chair, Committee on Corporate Laws, 1201 N. Market Street, 14th Floor, Wilmington, Delaware 19801, or sent to him by e-mail at [email protected]. Comments should be received by October 31, 2006 in order to be considered by the Committee before adoption of the amendments on third reading.
The proposed amendments result from the Committee's review of the disclosure provisions of the Act. The Committee is proposing an addition to the Official Comment to section 8.30 of the Act to recognize that some courts have found a duty of disclosure owed by directors to shareholders in some circumstances. section 8.30 deals generally with the standard of conduct for directors and identifies a duty of disclosure to other directors. Rather than codifying a duty of disclosure to shareholders in the Act, the Committee believes that any such duty should be left to be developed by the courts on a case by case basis.
The Committee also is proposing that the specific financial disclosures now required to be given under section 13.24 to shareholders who can assert appraisal rights at the time payment is made also be required under section 13.20 at the earlier time notice of appraisal rights is given because it is then that shareholders have to decide whether to preserve their ability to assert appraisal rights. The description of the required financial information has been revised to tie it more closely to the annual financial information required to be furnished to shareholders under section 16.20 and to clarify that quarterly financial statements are the required interim financials statements. Also, sections 13.20 and 13.24 as proposed recognize that a corporation may not have available the required financial statements and permit substitute information to be provided to satisfy those requirements.
The proposed amendments are set forth in the following order: (i) the addition to the Official Comment to section 8.30(c); (ii) the additions to section 13.20 and the related Official Comment; and...