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The New Jersey Business & Industry Association supports pro-business reforms advanced by a Senate committee today that are designed to make New Jersey’s corporate governance laws competitive with other states.
The six-bill package implements the recommendations of the New Jersey Corporate and Business Law Study Commission, which was tasked with reviewing all laws and court decisions related to business entities. The legislation, (Diegnan/Pinkin, D-18) which was unanimously approved by the Senate Commerce Committee, implements six commission proposals that had not already been enacted into law.
“This legislation would make New Jersey more business friendly and more competitive with states such as Delaware, Pennsylvania and New York, which have already incorporated changes regarding shareholder matters and other business reforms,” said Mary Beaumont, NJBIA’s Vice President for Health and Legal Affairs.
Although New Jersey had once been the preferred location for incorporating businesses, that changed in the 20th century when other states began enacting more business friendly corporate governance laws that left New Jersey behind. For example, Delaware is now the legal home of more than 66 percent of all publicly traded companies in the U.S., according to the Delaware Department of State’s website.
The six bills supported by NJBIA are:
- S-2236/A-2970 would revise parts of the NJ Business Corporation Act related to derivative proceedings and shareholder class-action suits. Under current New Jersey law, the derivative proceedings and shareholder class action provisions of the NJ Business Corporation Act apply only if a corporation deems them applicable in its certificate of incorporation. The legislation makes technical changes to the law to allow a corporation to vary the applicability of law’s provisions in its certificate of incorporation.
- S-2235 would clarify that corporate boards of directors may approve actions by electronic transmission without a formal meeting, if all members consent beforehand to do so. The commission had urged this change in recognition of changing technology.
- S-2234 would allow a corporation’s bylaws to include a “forum selection clause” stating that federal and state courts in New Jersey are the sole and exclusive forum for litigation related to derivative actions brought on behalf of the corporation or by shareholders making claims against the corporation or its officers.
- S-2237/A-2161 would allow shareholders to “force the vote” of a merger or consolidation plan that has been approved by the corporation’s board of directors, even if the board of directors later changes its mind and recommends that the shareholders vote against the plan. The change is modeled after Delaware’s Business Corporation Law.
- S-2238/A2975 would allow corporations to impose reasonable confidentiality conditions when releasing records financial books to shareholders.
- S-2239 would establish conditions and procedures for materials included in a corporation’s proxy solicitation materials.