A.R.S. tit. 10 | Title 10 — Corporations and Associations

Chapter 1 General Provisions

Article 2 Filing Documents and Fees

§ 10-120 Filing requirements

A. In order to qualify for filing by the commission, a document shall satisfy the requirements of this section and any other section of chapters 1 through 17 of this title that adds to or varies these requirements.

B. Chapters 1 through 17 of this title require or permit filing of the document in the office of the commission.

C. The document shall contain the information required by chapters 1 through 17 of this title. It may contain other information.

D. The document shall be typewritten or printed and shall be legible and capable of microfilm or other process reduction and subsequent reproduction as determined by the commission.

E. The document and any exhibits to the document shall be in the English language or accompanied by an English translation certified as accurate by or on behalf of the person causing the document to be delivered for filing.

F. The document shall be executed either:

By the chairman of the board of directors of a domestic or foreign corporation, by its president or by another of its officers.
If directors have not been selected or the corporation has not been formed, by an incorporator.
If the corporation is in the hands of any receiver, trustee or other court appointed fiduciary, by that fiduciary.

G. The document shall state the name of each person who signs it and the capacity in which each person signs. The document may but need not contain:

The corporate seal.
An attestation by the secretary or an assistant secretary.
An acknowledgment, verification or proof.

H. If the commission has prescribed a mandatory form for the document under section 10-121, the document shall be in or on the prescribed form.

I. Except as provided in subsection J of this section and sections 10-503 and 10-1509, the document shall be delivered to the office of the commission for filing and shall be accompanied by the correct fee and any other payment or penalty required by chapters 1 through 17 of this title or other law.

J. Notwithstanding subsection I of this section:

A person may deliver by means of a fax or electronic transmission a document that is required or permitted by chapters 1 through 17 of this title to be delivered to the commission for filing. The person shall retain the original document for at least twelve months in the books and records of the corporation or of the person making the delivery for filing, if the delivery is not made on behalf of the corporation, and the person shall make the original document available for inspection and copying by the commission on reasonable notice.
A document that is reproduced at a fax machine or through an electronic transmission at the commission is deemed delivered to the commission:

(a) On the date of the reproduction if reproduced on or before 5:00 p.m. mountain standard time and if the day is a business day of the commission.

(b) On the next succeeding business day if reproduced after 5:00 p.m. mountain standard time or on a day that is not a business day of the commission.

On the request of the person transmitting the document, the commission shall confirm by fax or electronic transmission or other writing the receipt of the document.
A person shall pay and deliver to the commission any fee or penalty imposed by section 10-122 or by any other section of chapters 1 through 17 of this title with respect to delivery of a document to the commission for filing in the manner as the commission determines.
If the commission determines that the legality of the document reproduced by means of a fax or electronic transmission is not sufficient, the commission may require that either:

(a) The document be delivered to the commission by means of an additional fax or electronic transmission.

(b) An original document be delivered to the commission by means other than a fax or electronic transmission.

The commission shall not file a document if any required amount is not paid as provided in paragraph 4 of this subsection or if any required additional counterpart is not delivered as provided in paragraph 5 of this subsection.
A reproduced document delivered under this subsection is deemed to satisfy any requirement in chapters 1 through 17 of this title for delivery of an original and one or more copies of the document. A document subject to this paragraph is deemed to have been delivered on the date on which it was delivered as provided in paragraph 2 of this subsection only if the first reproduction at a minimum permits identification of the corporation to which the document pertains and of the general nature of the document and the commission subsequently determines that paragraphs 4 and 5 of this subsection and any other requirements of chapters 1 through 17 of this title regarding the document have been satisfied.
The commission may prescribe the format of an electronic document delivered to the commission pursuant to this subsection.

§ 10-121 Forms

A. Certificates, reports and statements required by section 10-202, subsection D and sections 10-1622 and 10-1623 to be delivered to and filed by the commission shall be made on the forms that are prescribed and furnished by the commission.

B. The commission may prescribe and furnish on request forms for other documents required or permitted to be filed by chapters 1 through 17 of this title, but their use is not mandatory.

§ 10-122 Filing, service and copying fees; expedited report filing and access; same day and next day services; posted wait times; advance monies; definition

A. The commission shall collect and deposit, pursuant to sections 35-146 and 35-147, the following nonrefundable fees when the documents described in this subsection are delivered to the commission:

Document Fee

Articles of incorporation $50
Application for use of indistinguishable name 10
Application for reserved name 10
Notice of transfer of reserved name 10
Application for registered name 10
Application for renewal of registered name 10
Agent's statement of resignation 10
Amendment of articles of incorporation 25
Restatement of articles of incorporation with

amendment of articles 25

Statement of merger, interest exchange,

conversion, domestication or division if the

entity responsible for filing the statement

is a corporation 100

Articles of dissolution 25
Articles of revocation of dissolution 25
Application for reinstatement following

administrative dissolution, in addition

to other fees and penalties due 100

Application for authority 150
Application for withdrawal 25
Annual report 45
Articles of correction 25
Application for certificate of good standing 10
Any other document required or permitted

to be filed by chapters 1 through 17

of this title 25

B. The commission shall collect a nonrefundable fee of twenty-five dollars each time process is served on it under chapters 1 through 17 of this title. The party to a proceeding causing service of process is entitled to recover this fee as costs if the party prevails in the proceeding.

C. The commission shall charge and collect a reasonable fee for copying documents on request, provided the fee does not exceed the cost of providing the service as determined by the commission. The commission shall also charge a reasonable fee for certifying the copy of a filed document, provided the fee does not exceed the cost of providing the service as determined by the commission.

D. A penalty of one hundred dollars payable in addition to other fees accrues and is payable if a foreign corporation fails to file an amendment, restated articles that include an amendment, or articles of merger within sixty days after the time of filing in the jurisdiction in which the corporation is domiciled. The penalty collected pursuant to this subsection shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund.

E. One-third of the fees for the annual report of domestic and foreign corporations paid pursuant to subsection A, paragraph 16 of this section shall be deposited in the Arizona arts trust fund established by section 41-983.01 and two-thirds of these fees shall be deposited, pursuant to sections 35-146 and 35-147, in the public access fund established by section 10-122.01.

F. The commission shall provide for and establish an expedited service for the filing of all documents and services provided pursuant to this title as follows:

The expedited filing shall be a priority service to be completed as soon as possible after the documents are delivered to the commission.
In addition to any other fees required by this section or any other law, the commission shall charge a nonrefundable fee for expedited services, including those requested by fax. The fee shall be determined by a supermajority vote of the commissioners.
The commission may provide for and establish same day and next day services for the filing of any documents and services provided pursuant to this title as follows:

(a) The commission shall suspend same day or next day service if the commission determines that it does not have the necessary resources to perform the service within the established time period.

(b) In addition to any other fees required by this section or any other law, the commissioners may charge a nonrefundable fee for the same day or next day service or both. The fee shall be determined by a supermajority vote of the commissioners.

The commission shall publicly post the current wait times for processing regular, expedited and same day and next day services.

G. The commission may charge persons who access the commission's data processing system that is maintained pursuant to section 10-122.01 from remote locations and persons requesting special computer generated printouts, reports and tapes a reasonable fee that does not exceed the cost of the time, equipment and personnel necessary to provide this service or product as determined by the commission.

H. Except as provided in section 10-122.01, subsection B, paragraph 3, in addition to any fee charged pursuant to this section, the commission may charge and collect the following nonrefundable fees to help defray the cost of the improved data processing system that is maintained pursuant to section 10-122.01:

Filing articles of incorporation of a domestic corporation, ten dollars.
Filing an application of a foreign corporation for authority to transact business in this state, twenty-five dollars.

I. All monies received pursuant to subsections F, G and H of this section shall be deposited, pursuant to sections 35-146 and 35-147, in the public access fund established by section 10-122.01.

J. Fees charged pursuant to this section are exempt from section 39-121.03, subsection A, paragraph 3.

K. The commission may allow any person to advance monies to the commission to pay fees required pursuant to this section for future filings and services. All monies received pursuant to this subsection shall be deposited, pursuant to sections 35-146 and 35-147, in the money on deposit account in the public access fund established by section 10-122.01.

L. In addition to any other fees prescribed by law, the commission may establish a fee for the filing of an annual benefit report delivered to the commission pursuant to section 10-2442. The fee shall be determined by a majority vote of the commissioners.

M. For the purposes of this section, "supermajority" means an affirmative vote of at least four commissioners.

§ 10-122.01 Public access fund; purpose; exemption; money on deposit account

A. The public access fund is established. The commission shall administer the fund. The fund consists of monies received pursuant to:

Section 10-122, subsections E, F, G, H and K.
Section 10-3122, subsections I and K.
Section 29-3213, subsections E and F.

B. Except as provided in subsection C of this section:

Monies in the fund are subject to legislative appropriation.
The commission shall spend monies in the fund for a part of the general administrative and legal expenses of the commission and to purchase, install and maintain an improved data processing system on the premises of the commission. The data processing system shall be designed to allow direct online access by any person at a remote location to all public records that are filed with the commission pursuant to this title and title 29 relating to limited liability companies.
When sufficient monies have been collected pursuant to section 10-122, subsections F, G and H and section 10-3122, subsection I to pay for the purchase and installation of the data processing system, the commission shall not charge and collect the fees prescribed in section 10-122, subsection H or section 10-3122, subsection H.
Monies in the fund are exempt from the provisions of section 35-190 relating to lapsing of appropriations, except that any unencumbered monies in excess of $200,000 at the end of each fiscal year revert to the state general fund.

C. The money on deposit account is established in the public access fund as a separate account consisting of monies received pursuant to section 10-122, subsection K, section 10-3122, subsection K, section 29-851, subsection F and section 29-3213, subsection F. Monies in the money on deposit account:

Are held in trust by the commission.
May be withdrawn by the commission only:

(a) To cover fees that are due pursuant to this title or title 29 relating to limited liability companies on delivery of documents for filing or on a request for services by a person who advanced monies to the commission pursuant to section 10-122, subsection K, section 10-3122, subsection K, section 29-851, subsection F or section 29-3213, subsection F.

(b) To refund the monies advanced in subdivision (a) of this paragraph if the person who requested services pursuant to subdivision (a) of this paragraph requests the refund.

Are not subject to either:

(a) Legislative appropriation.

(b) Reversion to the state general fund.

§ 10-123 Effective time and date of document

A. Except as provided in subsections B and C of this section, a document delivered to the commission for filing is effective when the document is delivered to the commission for filing.

B. A document may specify a delayed effective time or date, or both, and if so, the document is effective at the time and date specified. If a delayed effective date but no time is specified, the document is effective at 12:01 a.m. mountain standard time on that date. A delayed effective date for a document may not be later than the ninetieth day after the date it is delivered.

C. Subject to section 10-124, if the commission determines that the requirements of chapters 1 through 17 of this title for filing have not been met, the document shall not be filed and, except as provided in section 10-203, the delivery of the document is ineffective. If the commission determines that the requirements for filing have been met, the commission shall file the document as provided in section 10-125 and the filing is effective as of the date and time determined pursuant to subsection A or B of this section.

§ 10-124 Correcting filed document; articles of incorporation; authority to transact business

A. A domestic or foreign corporation may correct a document that has been filed by the commission pursuant to chapters 1 through 17 of this title if the document either:

Contains an incorrect statement and the correction does not materially alter a substantive provision.
Was defectively executed, attested, verified or acknowledged.

B. A document is corrected by both:

Preparing articles of correction that:

(a) Describe the document or attach a copy of it to the articles.

(b) Specify the date the document was delivered to the commission.

(d) Correct the incorrect statement or other defect.

Delivering the articles to the commission for filing.

C. Articles of correction are effective on the effective date of the document they correct except as to persons who rely on the incorrect statement or other defect and who are adversely affected by the correction. As to those persons, articles of correction are effective as provided in section 10-123.

D. If articles of incorporation, articles of domestication or an application for authority to transact business is rejected for filing by the commission, the articles or application may be resubmitted within thirty days after the date of rejection. If the resubmitted articles or application cures the defect that caused the rejection, the resubmitted articles or application shall be filed by the commission and is effective on the date that would have been the effective date of filing the articles or application if the articles or application had not been rejected.

§ 10-125 Filing duty of commission

A. At the time of delivery of a document to the commission, the commission shall stamp, endorse or attach the date and time of delivery of the document.

B. The commission shall file a document delivered to the commission for filing if both of the following apply:

The commission determines that the document satisfies the requirements of chapters 1 through 17 of this title.
The corporation filing the document or on whose behalf the document is being filed is in good standing within the meaning of section 10-128.

C. The commission may file a document delivered to the commission in which either the corporation has filed articles of dissolution or the corporation has filed a document that is required to bring the corporation into good standing. The commission shall provide notice of the filing to the domestic or foreign corporation or its representative.

D. If the commission refuses to file a document, it shall provide notice of the refusal to the domestic or foreign corporation or its representative within five days after the determination of refusal to file, together with a brief written explanation of the reason for the refusal.

E. The filing or refusing to file a document by the commission does not:

Affect the validity or invalidity of the document in whole or part, except to the extent that filing is required to make the document valid.
Relate to the correctness or incorrectness of information contained in the document.
Create a presumption that the document is valid or invalid or that information contained in the document is correct or incorrect.

§ 10-127 Evidentiary effect of copy of filed document

A stamp affixed to a copy of a document filed by the commission, bearing the signature of the executive director of the commission, which may be in facsimile or electronic form, and the seal of the commission, is conclusive evidence that the original document is on file with the commission.

§ 10-128 Certificate of good standing

A. A person may apply to the commission to furnish a certificate of good standing for a domestic or foreign corporation.

B. A certificate of good standing sets forth all of the following:

The domestic corporation's corporate name or the foreign corporation's corporate name used in this state.
That either:

(a) The domestic corporation is incorporated under the laws of this state and the date of its incorporation.

(b) The foreign corporation is authorized to transact business in this state.

That all affidavits and annual reports required before the date of the certificate have been filed with the commission.
That all annual filing fees due before the date of the certificate have been paid.
That, according to the records of the commission, the corporation is in good standing in this state.

C. Subject to any qualification stated in the certificate, a certificate of good standing issued by the commission may be relied on as conclusive evidence of the matters stated in the certificate.

Article 3 Arizona Corporation Commission

§ 10-130 Powers; duties; database

A. The commission has the power and authority reasonably necessary to enable it to administer this title efficiently and to perform the duties imposed on it by this title, including the power and authority to make rules for those purposes.

B. The commission shall establish and maintain a database for documents filed pursuant to sections 10-203, 10-1006, 10-1007, 10-1008, 10-1105, 10-1403, 10-1503, 10-1520, 10-2077, 10-2143, 10-3203, 10-11006, 10-11007, 10-11008, 10-11105, 10-11403, 10-11503, 10-11520, 29-633, 29-635, 29-754, 29-3201, 29-3202 and 29-4005. The database shall only include documents that are filed for a corporation with a known place of business that is located in a county with a population of more than eight hundred thousand persons and for a limited liability company whose statutory agent's street address is located in a county with a population of more than eight hundred thousand persons. The commission shall post the database on its website to allow the public to search for business information, including an entity's name, approval date and county of the known place of business. The information must be maintained in the database for at least ninety days. The commission may not charge a fee to any entity for information entered into the database pursuant to this subsection.

Article 4 Definitions, Notice and Shareholders

§ 10-140 Definitions

In chapters 1 through 17 of this title, unless the context otherwise requires:

"Acknowledged" or "acknowledgment" means either:

(a) An acknowledgment made by the person or persons signing an instrument and taken by a notarial officer pursuant to title 41, chapter 2, article 1.

(b) The signature, without more, of the person or persons signing the instrument, in which case the signature or signatures constitute the affirmation or acknowledgment of the signatory, under penalties of perjury, that the instrument is the act and deed of the signatory and that the facts stated in the instrument are true.

"Act of the board of directors" means either:

(a) An act of the majority of the directors present at a duly called meeting at which a quorum is present, unless the act of a greater number is required by chapters 1 through 17 of this title, the articles of incorporation or the bylaws.

(b) Action taken by written consent of the directors in accordance with chapters 1 through 17 of this title.

"Act of the shareholders" means either:

(a) An act adopted or rejected by a majority of the votes entitled to be cast by each class of shareholders entitled to vote on the act at a duly called meeting at which a quorum is present, unless a greater number of votes is required by chapters 1 through 17 of this title, the articles of incorporation or the bylaws.

(b) An action taken by written consent of the shareholders in accordance with chapters 1 through 17 of this title.

"Address" means a mailing address.
"Affiliate" means a person that directly or indirectly, through one or more intermediaries controls, is controlled by or is under common control with the person specified.
"Articles of incorporation" means the original or restated articles of incorporation or articles of merger and all amendments to the articles of incorporation or merger and includes amended and restated articles of incorporation and articles of amendment and merger.
"Authorized shares" means the shares of all classes that a domestic or foreign corporation is authorized to issue.
"Board of directors" means the group of persons vested with the management of the affairs of the corporation irrespective of the name by which the group is designated and includes the governing body or bodies of a water users' association if the articles of incorporation of the water users' association provide for a governing body or bodies denominated other than as a board of directors.
"Business day" means a day that is not a Saturday, a Sunday or any other legal holiday in this state.
"Bylaws" means the code of rules adopted for the regulation or management of the affairs of the corporation irrespective of the name by which those rules are designated.
"Certificate of disclosure" means the certificate of disclosure described in section 10-202.
"Commission" means the Arizona corporation commission.
"Conspicuous" means so written that a reasonable person against whom the writing is to operate should have noticed it. For example, printing in italics, boldface or contrasting color or typing in capitals or underlined is conspicuous.
"Corporation" or "domestic corporation" means a corporation for profit that is not a foreign corporation and that is incorporated under or subject to chapters 1 through 17 of this title.
"Court" means the superior court of this state.
"Deliver" includes sending by mail, private courier, fax or electronic transmission.
"Delivery" means actual receipt by the person or entity to which directed and for electronic transmissions means receipt as described in section 44-7015, subsection B.
"Dissolved" means the status of a corporation on either:

(a) Effectiveness of articles of dissolution pursuant to section 10-1403, subsection B or section 10-1421, subsection B.

(b) A decree pursuant to section 10-1433, subsection B becoming final.

"Distribution" means a direct or indirect transfer of money or other property, except its own shares, or incurrence of indebtedness by a corporation to or for the benefit of its shareholders in respect of any of its shares. A distribution may be in the form of any of the following:

(a) A declaration or payment of a dividend.

(b) Any purchase, redemption or other acquisition of shares.

(d) Otherwise.

"Effective date of notice" is as prescribed in section 10-141.
"Electronic transmission" means an electronic record as defined in section 44-7002 that is sent pursuant to section 44-7015.
"Employee" includes an officer but not a director. A director may accept duties that make the director also an employee.
"Entity" includes a corporation, foreign corporation, not for profit corporation, profit and not for profit unincorporated association, nonprofit corporation, close corporation, corporation sole or limited liability company, a professional corporation, association or limited liability company, a business trust, estate, partnership, registered limited liability partnership, trust or joint venture, two or more persons having a joint or common economic interest, any person other than an individual and a state, the United States and a foreign government.
"Executed by the corporation" means executed by manual or facsimile signature on behalf of the corporation by a duly authorized officer or, if the corporation is in the hands of a receiver or trustee, by the receiver or trustee.
"Filing" means the commission completing the following procedure with respect to any document delivered for that purpose:

(a) Determining that the filing fee requirements of section 10-122 have been satisfied.

(b) Determining that the document appears in all respects to conform to the requirements of chapters 1 through 17 of this title.

(c) On making the determinations, endorsement of the word "filed" with the applicable date on or attached to the document and the return of notice of the filing to the person who delivered the document or the person's representative.

"Foreign corporation" means a corporation for profit that is incorporated under a law other than the law of this state.
"Governmental subdivision" includes an authority, county, district, municipality and political subdivision.
"Includes" and "including" denotes a partial definition.
"Individual" includes the estate of an incompetent or deceased individual.
"Insolvent" means inability of a corporation to pay its debts as they become due in the usual course of its business.
"Known place of business" means the known place of business required to be maintained pursuant to section 10-501.
"Liquidate its assets and business" includes the distribution of assets, the payment of obligations and debts, the discontinuance of business or any one or more of the distribution, payment or discontinuance.
"Mail", "to mail" or "have mailed" means to deposit or have deposited a communication in the United States mail with first class or airmail postage prepaid.
"Means" denotes an exhaustive definition.
"Newspaper" has the meaning set forth in section 39-201.
"Notice" and "notify" are as prescribed in section 10-141.
"Person" includes an individual and entity.
"President" means that officer designated as the president in the articles of incorporation or bylaws or, if not so designated, that officer authorized in the articles of incorporation, bylaws or otherwise to perform the functions of the chief executive officer, irrespective of the name by which designated.
"Principal office" means the office, in or out of this state, so designated in the annual report where the principal executive offices of a domestic or foreign corporation are located or in any other document executed by the corporation by an officer and delivered to the commission for filing. If an office has not been so designated, principal office means the known place of business of the corporation.
"Proceeding" includes a civil suit and a criminal, administrative and investigatory action.
"Publish" means to publish in a newspaper of general circulation in the county of the known place of business for three consecutive publications.
"Record date" means the date established under chapter 6 or 7 of this title on which a corporation determines the identity of its shareholders and their shareholdings for purposes of chapters 1 through 17 of this title. The determinations shall be made as of the close of business on the record date unless another time for doing so is specified when the record date is fixed.
"Secretary" means that officer designated as the secretary in the articles of incorporation or bylaws or that officer authorized in the articles of incorporation, the bylaws or otherwise to perform the functions of secretary, irrespective of the name by which designated.
"Shareholder" means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.
"Shares" means the units into which the proprietary interests in a corporation are divided.
"State", if referring to a part of the United States, includes a state and commonwealth and their agencies and governmental subdivisions and a territory and insular possession of the United States and their agencies and governmental subdivisions.
"Subscriber" means a person who subscribes for shares in a corporation, whether before or after incorporation.
"Treasurer" means that officer designated as the treasurer in the articles of incorporation or bylaws or that officer authorized in the articles of incorporation or bylaws or otherwise to perform the functions of treasurer, irrespective of the name by which designated.
"United States" includes a district, authority, bureau, commission and department and any other agency of the United States.
"Vice-president" means an officer designated as the vice-president in the articles of incorporation or bylaws or an officer authorized in the articles of incorporation, the bylaws or otherwise to perform the functions of a vice-president, irrespective of the name by which designated.
"Voting group" means all shares of one or more classes or series that under the articles of incorporation or chapters 1 through 17 of this title are entitled to vote and be counted together collectively on a matter at a meeting of shareholders. All shares entitled by the articles of incorporation or chapters 1 through 17 of this title to vote generally on the matter are for that purpose a single voting group.
"Water users' association" means a corporation that operates a federal reclamation project pursuant to a contract with the United States.
"Writing" or "written" includes blockchain technology as defined in section 44-7061.

§ 10-141 Notice

A. Notice under chapters 1 through 17 of this title must be in writing unless oral notice is reasonable under the circumstances. Oral notice is not permitted if written notice is required under chapters 1 through 17 of this title.

B. Notice may be communicated in person, by telephone, telegraph, teletype, fax, electronic transmission or other form of wire or wireless communication or by mail or private carrier. If these forms of personal notice are impracticable, notice may be communicated by a newspaper of general circulation in the area where published or by radio, television or other form of public broadcast communication.

C. Written notice by a domestic or foreign corporation to its shareholders, if in a comprehensible form, is effective when mailed, if mailed postpaid and correctly addressed to the shareholder's address shown in the corporation's current record of shareholders. If in comprehensible form, notice given by electronic transmission is effective when directed to an e-mail address shown on the corporation's current record of shareholders.

D. Written notice to a domestic or foreign corporation that is authorized to transact business in this state may be addressed to its statutory agent at its known place of business or to the corporation or its secretary at its principal office shown in its most recent annual report on file with the commission, or in the case of a foreign corporation that has not yet delivered an annual report, in its application for a certificate of authority. Unless otherwise prohibited in chapters 1 through 17 of this title, written notice may also be given by electronic transmission when directed to an e-mail address that the corporation or its statutory agent provides.

E. Except as provided in subsection C, written notice, if in a comprehensible form, is effective at the earliest of the following:

When received.
Five days after its deposit in the United States mail as evidenced by the postmark, if mailed postpaid and correctly addressed.
On the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and if the receipt is signed by or on behalf of the addressee.

F. Oral notice is effective when communicated if communicated in a comprehensible manner.

G. If chapters 1 through 17 of this title prescribe notice requirements for particular circumstances, those requirements govern. If articles of incorporation or bylaws prescribe notice requirements that are not inconsistent with this section or other provisions of chapters 1 through 17 of this title, those requirements govern.

§ 10-142 Number of shareholders

A. For purposes of chapters 1 through 17 of this title, the following identified as a shareholder in a corporation's current record of shareholders constitutes one shareholder:

Three or fewer co-owners.
Any corporation, partnership, trust, estate or other entity.
The trustees, guardians, custodians or other fiduciaries of a single trust, estate or account.

B. For purposes of chapters 1 through 17 of this title, shareholdings registered in substantially similar names constitute one shareholder if it is reasonable to believe that the names represent the same person.

Chapter 2 Incorporation

Article 1 Incorporation

§ 10-201 Incorporators

One or more persons may act as the incorporator or incorporators of a corporation by delivering articles of incorporation and a certificate of disclosure to the commission for filing.

§ 10-202 Articles of incorporation; violation; classification

A. The articles of incorporation shall set forth:

A corporate name for the corporation that satisfies the requirements of section 10-401.
The number of shares the corporation is authorized to issue.
A brief statement of the character of business that the corporation initially intends to actually conduct in this state. This statement does not constitute a limitation on the character of business that the corporation ultimately may conduct.
The name and address of each person who is to serve as a director until a successor is elected and qualifies.
The name, street address and signature of the corporation's statutory agent.
The street address of the known place of business for the corporation, if different from that of its statutory agent.
The name and address of each incorporator.
Any provision elected by the incorporators that under chapters 1 through 17 of this title or any other law of this state may be elected only by specific inclusion in the articles of incorporation.
The signatures of all incorporators.

B. The articles of incorporation may set forth:

A provision eliminating or limiting the liability of a director to the corporation or its shareholders for money damages for any action taken or any failure to take any action as a director, except liability for any of the following:

(a) The amount of a financial benefit received by a director to which the director is not entitled.

(b) An intentional infliction of harm on the corporation or the shareholders.

(d) An intentional violation of criminal law.

A provision permitting or making obligatory indemnification of a director for liability, as defined in section 10-850, to any person for any action taken, or any failure to take any action, as a director, except liability for any of the exceptions described in paragraph 1 of this subsection.
Any other provision, not inconsistent with law.

C. The articles of incorporation need not set forth any of the corporate powers enumerated in chapters 1 through 17 of this title.

D. The certificate of disclosure shall set forth all of the following:

The following information regarding all persons who at the time of its delivery are officers, directors, trustees, incorporators and persons controlling or holding over ten percent of the issued and outstanding common shares or ten percent of any other proprietary, beneficial or membership interest in the corporation:

(a) Whether any of the persons have been convicted of a felony involving a transaction in securities, consumer fraud or antitrust in any state or federal jurisdiction within the five-year period immediately preceding the execution of the certificate.

(b) Whether any of the persons have been convicted of a felony, the essential elements of which consisted of fraud, misrepresentation, theft by false pretenses or restraint of trade or monopoly in any state or federal jurisdiction within the five-year period immediately preceding the execution of the certificate.

(c) Whether any of the persons are or have been subject to an injunction, judgment, decree or permanent order of any state or federal court entered within the five-year period immediately preceding the execution of the certificate, if the injunction, judgment, decree or permanent order involved any of the following:

(i) The violation of fraud or registration provisions of the securities laws of that jurisdiction.

(ii) The violation of the consumer fraud laws of that jurisdiction.

(iii) The violation of the antitrust or restraint of trade laws of that jurisdiction.

(d) With regard to any of the persons who have been convicted of the crimes or who are the subject of the judicial action described in subdivisions (a), (b) and (c) of this paragraph, information regarding:

(i) Identification of the persons, including present full name, all prior names or aliases, including full birth name, present home address, all prior addresses for the immediately preceding five-year period and date and location of birth.

(ii) The nature and description of each conviction or judicial action, the date and location, the court and public agency involved, and the file or cause number of the case.

A brief statement disclosing whether any persons who at the time of its delivery are officers, directors, trustees, incorporators and persons controlling or holding over twenty percent of the issued and outstanding common shares or twenty percent of any other proprietary, beneficial or membership interest in the corporation and who have served in any such capacity or held a twenty percent interest in any other corporation on the bankruptcy or receivership of the other corporation. If so, for each corporation, the certificate shall include:

(a) The names and addresses of each corporation and the person or persons involved.

(b) The state in which each corporation:

(i) Was incorporated.

(ii) Transacted business.

The signatures of all of the incorporators.
The date of its execution, which shall be not more than thirty days before its delivery to the commission.
A declaration by each signer that he swears to its contents under penalty of law.

E. The certificate of disclosure may set forth the name and address of any other person whom the incorporators elect to be the subject of those disclosures required under subsection D, paragraph 1 of this section.

F. If within sixty days after delivering the articles of incorporation and certificate of disclosure to the commission any person becomes an officer, director, trustee or person controlling or holding over ten percent of the issued and outstanding shares or ten percent of any other proprietary, beneficial or membership interest in the corporation and the person was not the subject of the disclosures set forth in the certificate of disclosure, the incorporators or, if the organization of the corporation has been completed as provided in section 10-205, the corporation shall execute and deliver to the commission within the sixty-day period a declaration, sworn to under penalty of law, setting forth all information required by subsection D, paragraph 1 of this section regarding the person. If the incorporators or, as applicable, the corporation fail to comply with this subsection, the commission may administratively dissolve the corporation pursuant to section 10-1421.

G. If any of the persons described in subsection D, paragraph 1 of this section have been convicted of the crimes or are the subject of the judicial action described in subsection D, paragraph 1 of this section, the commission may direct detailed interrogatories to the persons requiring any additional relevant information deemed necessary by the commission. The interrogatories shall be completely answered within thirty days after mailing of the interrogatories. With respect to corporations incorporating or seeking authority to transact business, articles of incorporation or an application for authority shall not be filed until all outstanding interrogatories have been answered to the satisfaction of the commission. With respect to existing domestic and foreign corporations, if the interrogatories are not answered as provided in this subsection or the answers to the interrogatories otherwise indicate proper grounds for an administrative dissolution, the commission shall initiate an administrative dissolution in accordance with chapters 1 through 17 of this title.

H. On a quarterly updated basis, the commission shall provide to the attorney general a list of all persons who are convicted of the crimes or who are the subject of the judicial action described in subsection D, paragraph 1 of this section as indicated by the certificates of disclosure filed during the preceding three months.

I. Any person who executes or contributes information for a certificate of disclosure and who intentionally makes any untrue statement of material fact or withholds any material fact with regard to the information required in subsection D, paragraph 1 of this section is guilty of a class 6 felony.

§ 10-203 Incorporation

A. Unless a delayed effective date is specified in the articles of incorporation, incorporation occurs and the corporate existence begins when the articles of incorporation and certificate of disclosure are delivered to the commission for filing.

B. The commission's filing of the articles of incorporation and certificate of disclosure is conclusive proof that the incorporators satisfied all conditions precedent to incorporation except in a proceeding by the state to cancel or revoke the incorporation or involuntarily dissolve the corporation pursuant to chapter 14 of this title.

C. Subject to section 10-124, if the commission determines that the requirements of chapters 1 through 17 of this title for filing have not been met, the articles of incorporation and certificate of disclosure shall not be filed and the corporate existence terminates at the time the commission completes the determination. If the corporate existence is terminated pursuant to this subsection, sections 10-1405, 10-1406 and 10-1407 apply.

D. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of incorporation shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-204 Actions before incorporation; liability

Any person purporting to act as or on behalf of a corporation that knew or should have known that the corporation has not been formed under chapters 1 through 17 of this title is liable for all debts and liabilities incurred by the act.

§ 10-205 Organization of corporation

After incorporation the board of directors shall hold an organizational meeting at the call of a majority of the directors to complete the organization of the corporation by appointing officers, adopting bylaws and carrying on any other business brought before the meeting.

§ 10-206 Bylaws

A. The board of directors of a corporation shall adopt initial bylaws for the corporation.

B. The bylaws of a corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation.

§ 10-207 Emergency bylaws

A. Unless the articles of incorporation provide otherwise, the board of directors of a corporation may adopt bylaws to be effective only in an emergency as prescribed in subsection D of this section. The emergency bylaws are subject to amendment or repeal by the shareholders and may make all provisions necessary for managing the corporation during the emergency, including all of the following:

Procedures for calling a meeting of the board of directors.
Quorum requirements for the meeting.
Designation of additional or substitute directors.

B. All provisions of the regular bylaws consistent with the emergency bylaws remain effective during the emergency. The emergency bylaws are not effective after the emergency ends.

C. Corporate action taken in good faith in accordance with the emergency bylaws both:

Binds the corporation.
May not be used to impose liability on a corporate director, officer, employee or agent.

D. An emergency exists for purposes of this section if a quorum of the corporation's directors cannot readily be assembled because of a local emergency, a state of emergency or a state of war emergency, all as defined in section 26-301.

Chapter 3 Purposes and Powers

Article 1 General Provisions

§ 10-301 Purposes

§ 10-302 General powers

Unless its articles of incorporation provide otherwise, every corporation has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including power to:

Sue and be sued, complain and defend in its corporate name.
Have a corporate seal, which may be altered at will, and to use it, or a facsimile of it, by impressing or affixing it or in any other manner reproducing it.
Make and amend bylaws, not inconsistent with its articles of incorporation or with the laws of this state, for managing the business and regulating the affairs of the corporation.
Purchase, receive, lease or otherwise acquire and to own, hold, improve, use and otherwise deal with real or personal property or any interest in property wherever located.
Sell, convey, mortgage, pledge, lease, exchange and otherwise dispose of all or any part of its property.
Purchase, receive, subscribe for or otherwise acquire, own, hold, vote, use, sell, mortgage, lend, pledge or otherwise dispose of and deal with shares or other interests in or obligations of any other entity.
Make contracts and guarantees, incur liabilities, borrow monies, issue its notes, bonds and other obligations, which may be convertible into or include the option to purchase other securities of the corporation, and secure any of its obligations by mortgage, deed of trust, security agreement, pledge or other encumbrance of any of its property, franchises or income.
Issue any bond, debenture or debt security of the corporation by causing one or more officers designated in the bylaws or by the board of directors to sign the bond, debenture or debt security either manually or in facsimile and, if deemed necessary or appropriate by the officers, by causing its authentication, countersignature or registration, either manually or in facsimile, by a trustee, transfer agent or registrar other than the corporation itself or an employee of the corporation. If an officer who has signed, either manually or in facsimile, a bond, debenture or debt security as provided in this paragraph ceases for any reason to be an officer before the security is issued, the corporation may issue the security with the same effect as if the officer were still in office at the date of issue.
Lend monies, invest and reinvest its monies and receive and hold real and personal property as security for repayment.
Be a promoter, incorporator, partner, member, associate or manager of any corporation, partnership, joint venture, trust or other entity.
Conduct its business, locate offices and exercise the powers granted by chapters 1 through 17 of this title within or without this state.
Elect directors and appoint officers, employees and agents of the corporation, define their duties, fix their compensation and lend them monies and credit.
Pay pensions and establish pension plans, pension trusts, profit sharing plans, share bonus plans, share option plans and benefit or incentive plans for any of its or its affiliates' current or former directors, officers, employees and agents.
Eliminate or limit the liability of its directors in the manner and to the extent provided by section 10-202 and chapter 8, article 5 of this title.
Make donations for the public welfare or for charitable, scientific or educational purposes.
Transact any lawful business that will aid governmental policy.
Make payments or donations or do any other act not inconsistent with law that furthers the business and affairs of the corporation.
Take any action to pursue any purpose, including a nonmonetary purpose as defined in section 10-846 or to create any private or public benefit.

§ 10-303 Emergency powers

A. In anticipation of or during an emergency as prescribed in subsection D of this section, the board of directors of a corporation may:

Modify lines of succession to accommodate the incapacity of any director, officer, employee or agent.
Relocate the principal office, designate alternative principal offices or regional offices or authorize the officers to do so.

B. During an emergency as prescribed in subsection D of this section, unless emergency bylaws provide otherwise:

Notice of a meeting of the board of directors need be given only to those directors whom it is practicable to reach and may be given in any practicable manner, including by publication and radio.
One or more officers of the corporation present at a meeting of the board of directors may be deemed to be directors for the meeting in order of rank and within the same rank in order of seniority as necessary to achieve a quorum.

C. Corporate action taken in good faith during an emergency under this section to further the ordinary business affairs of the corporation:

Binds the corporation.
May not be used to impose liability on a corporate director, officer, employee or agent.

§ 10-304 Validity of actions

A. Except as provided in subsection B of this section, the validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act.

B. A corporation's power to act may be challenged either:

In a proceeding by a shareholder against the corporation to enjoin the act.
In a proceeding by the corporation, directly, derivatively or through any receiver, trustee or other legal representative, against an incumbent or former director, officer, employee or agent of the corporation.
In a proceeding by the attorney general as provided in chapters 1 through 17 of this title to dissolve the corporation or in a proceeding by the attorney general to enjoin the corporation from the transaction of unauthorized business.

C. In a shareholder's proceeding under subsection B, paragraph 1 of this section to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss, other than anticipated profits, suffered by the corporation or another party because of enjoining the unauthorized act.

D. Except as provided in sections 10-831 and 10-845, any person who purports to act on behalf of a corporation as an officer or a director and who knew or should have known that the person did not have authority to act is liable for all debts and liabilities incurred by the act. This subsection does not apply to a person who acts on behalf of a corporation that has been administratively dissolved unless the person has actual knowledge of the dissolution.

Chapter 4 Name

Article 1 General Provisions

§ 10-401 Corporate name

A. A corporate name:

Shall contain the word "association", "bank", "company", "corporation", "limited" or "incorporated" or an abbreviation of one of these words or words or abbreviations of like import in another language.
Shall not contain language stating or implying that the corporation is organized for a purpose other than that allowed by section 10-301 and its articles of incorporation.
Notwithstanding paragraph 1 of this subsection, shall not include the words "bank", "deposit", "credit union", "trust" or "trust company" separately or in combination to indicate or convey the idea that the corporation is engaged in banking or trust business unless the corporation is to be and becomes actively and substantially engaged in the banking, credit union or trust business or the corporation is a holding company holding substantial interest in companies actively and substantially engaged in the banking or trust business.
Shall not contain the words "limited liability company" or "limited company" or the abbreviations "L.L.C.", "L.C.", "LLC" or "LC", in uppercase or lowercase letters.

B. Except as authorized by subsections C and D of this section, a corporate name shall be distinguishable from all of the following:

The corporate name of a corporation incorporated in this state or a foreign corporation authorized to transact business in this state.
A corporate name reserved under section 10-402 or registered under section 10-403.
A fictitious name adopted by a foreign corporation under section 10-1506.
The corporate name of a nonprofit corporation incorporated under this title or a foreign nonprofit or not for profit corporation authorized to conduct affairs in this state.
The partnership name of a limited partnership organized and registered under the laws of this state or of a foreign limited partnership authorized to transact business in this state.
The name of a limited liability company organized under title 29 or a foreign limited liability company authorized to transact business in this state.
A trade name registered pursuant to title 44, chapter 10, article 3.1.
The name of a registered limited liability partnership registered under title 29, chapter 5, article 10 or a foreign registered limited liability partnership authorized to transact business in this state.

C. A corporation may apply to the commission for authorization to use a name that is not distinguishable from one or more of the names described in subsection B of this section. The commission shall authorize use of the name applied for if either:

The other entity consents to the use in writing and submits an undertaking in a form satisfactory to the commission to change its name to a name that is distinguishable from the name of the applying corporation.
The applicant delivers to the commission a certified copy of the final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this state.

D. A corporation may use the name, including a fictitious name, of another domestic or foreign corporation that is used in this state if the other corporation is incorporated or authorized to transact business in this state and the proposed user corporation either has:

Merged with the other corporation.
Been formed by reorganization of the other corporation.
Acquired all or substantially all of the assets, including the corporate name, of the other corporation.

E. Chapters 1 through 17 of this title do not control the use of fictitious names.

§ 10-402 Reserved name

A. A person may reserve the exclusive use of a corporate name, including a fictitious name to be adopted by a foreign corporation under section 10-1506, by delivering an application to the commission for filing. The application shall be executed by the applicant or an authorized agent of the applicant and shall set forth the name and address of the applicant and the name proposed to be reserved. If the commission finds that the corporate name applied for is available, it shall reserve the name for the applicant's exclusive use for a nonrenewable one hundred twenty day period.

B. The owner of a reserved corporate name may transfer the reservation to another person by delivering to the commission a notice of the transfer that shall be executed by the applicant or an authorized agent of the applicant and that states the name and address of the transferee. The transfer shall not extend the period for which the name is reserved.

§ 10-403 Registered name

A. A foreign corporation may register its corporate name or its corporate name with any addition required by section 10-1506, if the name is distinguishable on the records of the commission from the corporate names that are not available under section 10-401, subsection B.

B. A foreign corporation may register its corporate name or its corporate name with any addition required by section 10-1506 by delivering to the commission for filing an application both:

Setting forth its corporate name or its corporate name with any addition required by section 10-1506, the state or country of domicile and date of its incorporation and a brief description of the nature of the business in which it is engaged.
Accompanied by a certificate of existence or a similar document from the state or country of incorporation that has been issued within sixty days of delivering the application for filing with the commission.

C. The name is registered for the applicant's exclusive use on the effective date of the application. The registration expires one year after the effective date of the application unless it is renewed pursuant to subsection D of this section.

D. A foreign corporation whose registration is effective may renew it for successive years by delivering to the commission for filing a renewal application that complies with the requirements of subsection B of this section. The renewal application when filed renews the registration for one year after the effective date of the renewal application.

E. A foreign corporation whose registration is effective may qualify as a foreign corporation under the registered name or consent in writing to the use of that name by a corporation incorporated under chapters 1 through 17 of this title or by another foreign corporation authorized to transact business in this state. The registration terminates when the domestic corporation is incorporated or the foreign corporation qualifies or consents to the qualification of another foreign corporation under the registered name.

Chapter 5 Office and Agent

Article 1 Place of Business and Agent

§ 10-501 Known place of business and statutory agent

Each corporation shall continuously maintain in this state both:

A known place of business that may be the address of its statutory agent.
A statutory agent who may be either:

(a) An individual who resides in this state.

(b) A domestic corporation formed under this title.

(d) A limited liability company formed under title 29.

(e) A limited liability company authorized to transact business in this state.

§ 10-502 Change of known place of business or statutory agent

A. A corporation may change its known place of business or statutory agent by delivering to the commission for filing a statement of change that may be the annual report and that sets forth:

The name of the corporation.
If the current known place of business is to be changed, the street address of the new known place of business.
If the current statutory agent is to be changed, the name and street address of the new statutory agent and the new agent's written consent to the appointment.

B. The statement of change shall be executed by the corporation by an officer and delivered to the commission. The change or changes set forth in the statement of change are effective on delivery to the commission for filing.

C. If a statutory agent changes its street address, it shall give written notice to the corporation of the change and sign, either manually or by fax, and deliver to the commission for filing a statement that complies with the requirements of subsection A of this section and that recites that the corporation has been given written notice of the change. The change or changes set forth in the statement are effective on delivery to the commission for filing.

§ 10-503 Resignation of statutory agent

A. A statutory agent may resign its agency appointment by signing and delivering to the commission for filing the signed original statement of resignation. The statement may include a statement that the known place of business is also discontinued. The statutory agent shall give written notice of its resignation to the corporation at an address other than the statutory agent's address.

B. After filing the statement, the commission shall mail one copy to the corporation at its known place of business, if not discontinued, and another copy to the corporation at its principal office.

C. The agency appointment is terminated and the known place of business is discontinued if so provided on the thirty-first day after the date on which the statement was delivered to the commission for filing.

§ 10-504 Service on corporation

A. The statutory agent appointed by a corporation is an agent of the corporation on whom process, notice or demand that is required or permitted by law to be served on the corporation may be served and that, when so served, is lawful personal service on the corporation.

B. If a corporation fails to appoint or maintain a statutory agent at the address shown on the records of the commission, the commission is an agent of the corporation on whom process, notice or demand may be served. Pursuant to the Arizona rules of civil procedure, service on the commission of any process, notice or demand for an entity that is registered pursuant to this title shall be made by delivering to and leaving with the commission duplicate copies of the process, notice or demand, and the commission shall immediately cause one of the copies of the process, notice or demand to be forwarded by mail, addressed to the corporation at its known place of business. Service made on the commission is returnable pursuant to applicable law relative to personal service on the corporation. If service is made on the commission, whether under this chapter or a rule of court, the corporation has thirty days to respond in addition to the time otherwise provided by law.

C. The commission shall keep a permanent record of all processes, notices and demands served on it under this section and shall record in the record the time of the service and its action with reference to the service.

D. Notice required to be served on a corporation pursuant to section 10-1421 or 10-1422 may be served:

By mail addressed to the statutory agent of the corporation or, if the corporation fails to appoint and maintain a statutory agent, addressed to the known place of business required to be maintained pursuant to section 10-501.
By electronic transmission to the statutory agent or to the corporation, or both.
Pursuant to the rules for service of process authorized by the Arizona rules of civil procedure.

Chapter 6 Shares and Distributions

Article 1 Shares

§ 10-601 Authorized shares

A. The articles of incorporation shall prescribe the classes of shares and the number of shares of each class that the corporation is authorized to issue. If more than one class of shares is authorized, the articles of incorporation shall prescribe a distinguishing designation for each class, and before the issuance of shares of a class, the preferences, limitations and relative rights of that class shall be described in the articles of incorporation. All shares of a class shall have preferences, limitations and relative rights identical to those other shares of the same class except to the extent otherwise permitted by section 10-602.

B. The articles of incorporation shall authorize both of the following:

One or more classes of shares that together have unlimited voting rights.
One or more classes of shares, which may be the same class or classes as those with voting rights, that together are entitled to receive the net assets of the corporation on dissolution.

C. The articles of incorporation may authorize one or more classes of shares that:

Have special, conditional or limited voting rights or no right to vote, except to the extent prohibited by chapters 1 through 17 of this title.
Are redeemable or convertible as specified in the articles of incorporation either:

(a) At the option of the corporation, the shareholder or another person or on the occurrence of a designated event.

(b) For cash, indebtedness, securities or other property.

(c) In a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic data or events.

Entitle the holders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative or partially cumulative.
Have preference over any other class of shares with respect to distributions, including dividends and distributions on the dissolution of the corporation.

D. The description of the designations, preferences, limitations and relative rights of share classes in subsection C of this section is not exhaustive.

§ 10-602 Terms of class or series determined by board of directors

A. If the articles of incorporation so provide, the board of directors may determine, in whole or in part, the preferences, limitations and relative rights, within the limits set forth in section 10-601, of either:

Any class of shares before the issuance of any shares of that class.
One or more series within a class before the issuance of any shares of that series.

B. Each series of a class shall be given a distinguishing designation.

C. Unless otherwise expressly permitted by chapters 1 through 17 of this title, all shares of a series shall have preferences, limitations and relative rights identical to those of other shares of the same series and, except to the extent otherwise provided in the description of the series, with those of other series of the same class.

D. Before issuing any shares of a class or series created under this section, the corporation shall deliver to the commission for filing a statement entitled "statement pursuant to section 10-602", which constitutes an amendment to the articles of incorporation and which is effective as provided in section 10-123 and without shareholder action, that sets forth all of the following:

The name of the corporation.
The text of the resolution determining the terms of the class or series of shares.
The date it was adopted.
A statement that the resolution was duly adopted by the board of directors.

§ 10-603 Issued and outstanding shares

A. A corporation may issue the number of shares of each class or series authorized by the articles of incorporation. Shares that are issued are outstanding shares until they are reacquired, redeemed, converted or canceled.

B. The reacquisition, redemption or conversion of outstanding shares is subject to the limitations of subsection C of this section and to section 10-640.

C. At all times that shares of the corporation are outstanding, one or more shares that together have unlimited voting rights and one or more shares that together are entitled to receive the net assets of the corporation on dissolution must be outstanding.

§ 10-604 Fractional shares

A. A corporation may:

Issue certificates representing fractions of a share or pay in money the fair value of fractions of a share as determined by the board of directors.
Arrange for the disposition of fractional shares by those entitled to the fractional shares.
Issue scrip in registered or bearer form that is executed by the corporation, which execution may be by facsimile signature, and that entitles the holder to receive a full share on surrendering enough scrip to equal a full share.

B. Each certificate representing scrip must be conspicuously labeled "scrip" and must contain the information required by section 10-625, subsection B.

C. A certificate representing fractions of a share entitles the holder to exercise the rights of a shareholder, including the right to vote, to receive dividends and to participate in the assets of the corporation on liquidation. The holder of scrip is not entitled to exercise any rights of a shareholder unless otherwise provided for in the scrip.

D. The board of directors may authorize the issuance of scrip subject to any conditions that the board of directors deems advisable. The conditions may, but are not required to, include any of the following:

That the scrip will become void if not exchanged for full shares before a specified date.
That the shares for which the scrip is exchangeable may be sold by the corporation and the proceeds may be paid or distributed to the holders of the scrip.

Article 2 Issuance of Shares

§ 10-620 Subscription for shares

A. A subscription for shares entered into before incorporation is irrevocable by the subscriber for a period of six months from the date of the subscription agreement, unless the subscription agreement provides a longer or shorter period or all of the subscribers agree to revocation.

B. The board of directors may determine the payment terms of subscriptions for shares, unless the subscription agreement specifies them. Any call made by the board of directors for payment on subscriptions shall be uniform as far as practicable as to all shares of the same class or series, unless the subscription agreement specifies otherwise.

C. Shares issued pursuant to subscriptions entered into before incorporation shall be fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement.

D. If a subscriber defaults in the payment of money or property when due under a subscription agreement, the corporation may collect the amount due in the same manner as any other debt. The subscription agreement may prescribe other penalties for failure to pay installments or calls that may become due, except that no penalty working a rescission or forfeiture of a subscription or of the amounts paid on a subscription may be declared as against any subscriber unless the subscriber fails to cure the default within twenty days after the corporation sends written notice of the default to the subscriber at his last known address. Subject to the foregoing, the board of directors may release, settle or compromise, on such terms and conditions as it deems appropriate, any subscription for shares or any dispute or action arising out of a subscription for shares, unless the subscription agreement provides otherwise.

E. A subscription for shares, whether entered into before or after incorporation, is not enforceable unless it is in writing and signed by the party to be charged or his agent.

§ 10-621 Issuance of shares

A. The powers granted in this section to the board of directors may be reserved to the shareholders by the articles of incorporation.

B. The board of directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation including cash, services performed or other securities of the corporation, except that neither promissory notes nor future services constitute valid consideration.

C. Before the corporation issues shares, the board of directors must determine that the consideration received or to be received for shares to be issued is adequate. That determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid and nonassessable.

D. When the corporation receives the consideration for which the board of directors authorized the issuance of shares, the shares issued for the consideration are fully paid and nonassessable.

§ 10-622 Liability of subscribers and shareholders

A. A purchaser from a corporation of its own shares is not liable to the corporation or its creditors with respect to the shares except to pay the full consideration for which the shares were authorized to be issued pursuant to section 10-621 or specified in the subscription agreement pursuant to section 10-620.

B. A shareholder of a corporation is not personally liable for the acts or debts of the corporation.

§ 10-623 Share dividends

A. Unless the articles of incorporation provide otherwise, shares may be issued pro rata without consideration to the corporation's shareholders or to the shareholders of one or more classes or series. An issuance of shares under this subsection is a share dividend.

B. Shares of one class or series may not be issued as a share dividend in respect of shares of another class or series unless one of the following occurs:

The articles of incorporation so authorize.
A majority of the votes entitled to be cast by the class or series to be issued approves the issue.
There are no outstanding shares of the class or series to be issued.

C. If the board of directors does not fix the record date for determining shareholders entitled to a share dividend, it is the date the board of directors authorizes the share dividend.

§ 10-624 Share rights, options and warrants

A. Subject to any provisions set forth in its articles of incorporation, a corporation may issue rights, options or warrants for the purchase of shares of the corporation. These rights, options or warrants shall be evidenced in writing, and the board of directors shall determine the terms on which the rights, options or warrants are issued and their form and content. The consideration to be received for any shares on the exercise of these rights, options or warrants is governed by section 10-621.

B. The articles of incorporation may provide that the issuance of rights, options or warrants to directors, officers or employees of the corporation or any affiliate of the directors, officers or employees shall be approved by the shareholders.

C. The rights, options or warrants may include provisions that adjust the terms of the rights, options or warrants if there is an acquisition of shares, reorganization, merger, consolidation, sale of assets or other occurrence.

§ 10-625 Form and content of certificates

A. Shares may but need not be represented by certificates. Unless chapters 1 through 17 of this title or another statute expressly provides otherwise, the rights and obligations of shareholders are identical whether or not their shares are represented by certificates. A certificate shall not be issued for any share until such share is fully paid.

B. At a minimum each share certificate shall state on its face all of the following:

The name of the issuing corporation and that it is organized under the laws of this state.
The name of the person to whom issued.
The number and class of shares and the designation of the series, if any, the certificate represents.

C. If the issuing corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences and limitations applicable to each class and the variations in rights, preferences and limitations determined for each series, and the authority of the board of directors to determine variations for future series, shall be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish this information to the shareholder on request in writing and without charge.

D. Each share certificate:

Shall be signed either manually or in facsimile by one or more officers designated in the bylaws or by the board of directors.
May bear the corporate seal or its facsimile.

E. If the person who signed either manually or in facsimile a share certificate no longer holds office when the certificate is issued, the certificate is nevertheless valid.

§ 10-626 Shares without certificates

A. Unless the articles of incorporation or bylaws provide otherwise, the board of directors of a corporation may authorize the issuance of some or all of the shares of any or all of its classes or series without certificates. The authorization does not affect shares already represented by certificates until these certificates are surrendered to the corporation.

B. Within a reasonable time after the issuance or transfer of shares without certificates, the corporation shall send the shareholder a written statement of the information required on certificates by section 10-625, subsections B and C, and, if applicable, section 10-627.

§ 10-627 Restriction on transfer of shares and other securities; definition

A. The articles of incorporation, the bylaws, an agreement among shareholders or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation. A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction.

B. A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this section and if its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by section 10-626, subsection B. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction.

C. A restriction on the transfer or registration of transfer of shares is authorized:

To maintain the corporation's status if it is dependent on the number or identity of its shareholders.
To preserve exemptions under federal or state securities law.
For any other reasonable purpose.

D. A restriction on the transfer or registration of transfer of shares may:

Obligate the shareholder first to offer the corporation or other persons separately, consecutively or simultaneously an opportunity to acquire the restricted shares.
Obligate or permit the corporation or other persons separately, consecutively or simultaneously to acquire the restricted shares.
Require the corporation, the holders of any class of its shares or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable.
Prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable.
Impose any other restriction on transfer or registration that is not manifestly unreasonable.

E. For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares.

§ 10-628 Expense of issue

A corporation may pay the expenses of selling or underwriting its shares and of organizing or reorganizing the corporation from the consideration received for shares.

§ 10-629 Adjustment of terms of rights, options and warrants; conditions to exercise of rights, options and warrants

Rights, options and warrants may include provisions that adjust the terms of the rights, options and warrants on the occurrence of one or more events, including acquisition of shares, reorganization, merger, consolidation or sale of assets. Rights, options and warrants may include conditions regarding the exercise of the rights, options and warrants, including conditions that prevent the holder of a specified percentage of the outstanding shares of the corporation, including subsequent transferees of the holder, from exercising those rights, options and warrants.

Article 3 Subsequent Acquisition of Shares by Shareholders and Corporation

§ 10-630 Shareholders' preemptive rights; definition

A. The shareholders of a corporation do not have any preemptive right to acquire the corporation's unissued shares except to the extent the articles of incorporation so provide.

B. A statement included in the articles of incorporation that "the corporation elects to have preemptive rights" or words of similar import means that the following principles apply except to the extent the articles of incorporation expressly provide otherwise:

The shareholders of the corporation have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors, to provide a fair and reasonable opportunity to exercise the right to acquire proportional amounts of the corporation's unissued shares on the decision of the board of directors to issue them.
A shareholder may waive his preemptive right. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration.
There is no preemptive right with respect to:

(a) Shares issued as compensation to directors, officers, agents or employees of the corporation, its subsidiaries or its affiliates.

(b) Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, agents or employees of the corporation, its subsidiaries or its affiliates.

(c) Shares authorized in articles of incorporation that are issued within six months from the effective date of incorporation.

(d) Shares issued in transactions for which shareholder approval is required by chapters 1 through 17 of this title.

Holders of shares of any class without general voting rights but with preferential rights to distributions or assets have no preemptive rights with respect to shares of any class.
Holders of shares of any class with general voting rights but without preferential rights to distributions or assets have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights.
Shares that are subject to preemptive rights and that are not acquired by shareholders may be issued to any person for a period of one year after being offered to shareholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one year is subject to the shareholders' preemptive rights.

C. For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares.

§ 10-631 Corporation's acquisition of its own shares

A. A corporation may acquire its own shares, and shares so acquired constitute authorized but unissued shares.

B. If the articles of incorporation prohibit the reissue of acquired shares, the number of authorized shares is reduced by the number of shares acquired, effective on amendment of the articles of incorporation.

C. The board of directors may adopt a statement that is entitled "statement pursuant to section 10-631", that constitutes an amendment to the articles of incorporation, that is effective as provided in section 10-123 and that is effective without shareholder action. The statement must set forth all of the following:

The name of the corporation.
The reduction in the number of authorized shares, itemized by class and series.
The total number of authorized shares, itemized by class and series, remaining after reduction of the shares.

Article 4 Distributions

§ 10-640 Distribution to shareholders

A. A board of directors may authorize and the corporation may make distributions to its shareholders subject to restriction by the articles of incorporation and the limitation in subsection C.

B. If the board of directors does not fix the record date for determining shareholders entitled to a distribution, other than one involving any purchase, redemption or other acquisition of the corporation's shares, it is the date the board of directors authorizes the distribution.

C. A distribution shall not be made if, after giving it effect, either:

The corporation would not be able to pay its debts as they become due in the usual course of business.
The corporation's total assets would be less than the sum of its total liabilities plus, unless the articles of incorporation permit otherwise, the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights on dissolution of shareholders whose preferential rights are superior to those receiving the distribution.

D. The board of directors may base a determination that a distribution is not prohibited under subsection C either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances, which in the absence of special circumstances shall be generally accepted accounting principles or applicable regulatory accounting principles, or on a fair valuation or other method that is reasonable in the circumstances.

E. Except as provided in subsection G, the effect of a distribution under subsection C is measured:

In the case of distribution by purchase, redemption or other acquisition of the corporation's shares, as of the earlier of either:

(a) The date money or other property is transferred or debt is incurred by the corporation.

(b) The date the shareholder ceases to be a shareholder with respect to the acquired shares.

In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed.
In all other cases, as of either:

(a) The date the distribution is authorized if the payment occurs within one hundred twenty days after the date of authorization.

(b) The date the payment is made if it occurs more than one hundred twenty days after the date of authorization.

F. A corporation's indebtedness to a shareholder incurred by reason of a distribution made in accordance with this section is at parity with the corporation's indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.

G. Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection C if its terms provide that payments of principal and interest are made only if and to the extent that payment of a distribution to shareholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is actually made.

Chapter 7 Shareholders

Article 1 Meetings

§ 10-701 Annual meeting

A. A corporation shall hold a meeting of shareholders annually at a time stated in or fixed in accordance with the bylaws.

B. Annual shareholders' meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings shall be held at the corporation's known place of business.

C. The failure to hold an annual meeting at the time stated in or fixed in accordance with a corporation's bylaws does not affect the validity of any corporate action.

D. Any water users' association may provide in its articles of incorporation or bylaws for any method of electing its governing body or bodies on a biannual or more frequent basis, in which event the water users' association has no obligation to hold an annual meeting notwithstanding subsection A of this section and section 10-803. Whenever a meeting of shareholders is required or permitted under this chapter, a water users' association, without conducting such a meeting, may accomplish the purpose of such meeting through an election by its shareholders pursuant to its articles of incorporation.

§ 10-702 Special meeting

A. Except as provided in section 10-2703, a corporation shall hold a special meeting of shareholders either:

On the call of its board of directors or the person or persons authorized to do so by the articles of incorporation or bylaws.
As provided in section 10-810, subsection D.

B. If not otherwise fixed under section 10-703 or 10-707, the record date for determining shareholders entitled to demand a special meeting is the date the first shareholder signs the demand.

C. Special shareholders' meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, special meetings shall be held at the corporation's principal office.

D. Only business within the purpose or purposes described in the meeting notice required by section 10-705, subsection C may be conducted at a special shareholders' meeting.

§ 10-703 Court ordered meeting

A. The court in the county where a corporation's known place of business is located may summarily order either:

An annual meeting to be held on application of any shareholder of the corporation entitled to participate in an annual meeting if an annual meeting was not held within the earlier of three months after the date specified for the annual meeting in the bylaws or fifteen months after its last annual meeting.
A special meeting to be held on application of a shareholder who signed a demand for a special meeting valid under section 10-702, if either:

(a) Notice of the special meeting was not given within thirty days after the date the demand was delivered to the corporation's secretary.

(b) The special meeting was not held in accordance with the notice.

B. The court may fix the time and place of the meeting, determine the shares entitled to participate in the meeting, specify a record date for determining shareholders entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting or direct that the votes represented at the meeting constitute a quorum for action on those matters and enter other orders necessary to accomplish the purpose or purposes of the meeting.

§ 10-704 Action by shareholders without meeting; notice

A. Except as provided in subsection B of this section, an action required or permitted by chapters 1 through 17 of this title to be taken at a shareholders' meeting may be taken without a meeting if there is written consent by the holders of outstanding shares that are entitled to at least the minimum number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action are present and voted. The action taken by the written consent of the shareholders must be evidenced by one or more written consents describing the action taken and signed by holders of outstanding shares that are entitled to at least the minimum number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action are present and voted. The written consents to the action must be delivered to the corporation for inclusion in the minutes or filing with the corporate records.

B. An action taken by shareholders without a shareholders' meeting must be taken by all shareholders and must be evidenced by written consent of all shareholders of the corporation if any of the following applies:

The action involves the election of directors or the removal of one or more directors.
The articles of incorporation or bylaws of the corporation require that an action taken by shareholders without a shareholders' meeting must be taken by all shareholders of the corporation.
The corporation is an issuing public corporation, as defined in section 10-2701, unless otherwise provided in its articles of incorporation or bylaws.
The corporation was formed in this state before August 6, 2016 unless its articles of incorporation or bylaws are amended after August 6, 2016 to provide that any action that is required or allowed to be taken at a shareholders' meeting may be taken without a meeting if there is written consent setting forth the action by the holders of outstanding shares that have at least the minimum number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action are present and voted. For the purposes of this paragraph, a corporation that becomes a corporation in this state by domestication, conversion or division before August 6, 2016 is deemed formed in this state before August 6, 2016.

C. The written consents described in subsections A and B of this section include electronic transmission. All written consents must be included in the minutes or filed with the corporate records. The filing must be in a paper format if the minutes are maintained in a paper format and must be in an electronic format if the minutes are maintained in an electronic format.

D. If not otherwise fixed under section 10-703 or 10-707, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent under subsection A or B of this section.

E. A consent signed under this section has the effect of a meeting vote and may be described as such in any document.

F. Unless otherwise specified in the consents, the action is effective on the date that the consents as prescribed by subsection A or B of this section have been delivered to the corporation, except that if chapters 1 through 17 of this title require that notice of proposed actions be given to shareholders not entitled to vote and the action is to be taken by unanimous consent of the shareholders entitled to vote, the effective date is not before ten days after the corporation gives its shareholders not entitled to vote written notice of the proposed action. The notice must contain or be accompanied by the same material that under chapters 1 through 17 of this title would have been required to be sent to shareholders not entitled to vote in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.

G. Any shareholder may revoke the shareholder's consent by delivering a signed revocation of the consent to the president or secretary before the date that the consents as prescribed by subsection A or B of this section have been delivered to the corporation.

H. Notice of the taking of a corporate action without a meeting must be given within thirty days after the effective date of the corporate action to both of the following:

Each shareholder of record on the record date for determining shareholders who are entitled to take the action pursuant to subsection D of this section and who did not consent to the action in writing.
Each shareholder who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of the meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the corporation pursuant to subsection A of this section.

§ 10-705 Notice of meeting

A. A corporation shall notify shareholders of the date, time and place of each annual and special shareholders' meeting at least ten but not more than sixty days before the meeting date. Unless chapters 1 through 17 of this title or the articles of incorporation require otherwise, the corporation is required to give notice only to shareholders entitled to vote at the meeting.

B. Unless chapters 1 through 17 of this title or the articles of incorporation require otherwise, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called.

C. Notice of a special meeting shall include a description of the purpose or purposes for which the meeting is called.

D. If not otherwise fixed under section 10-703 or 10-707, the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders' meeting is the day before the effective date of the first notice to shareholders.

E. Unless the bylaws require otherwise, if an annual or special shareholders' meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment. However, if a new record date for the adjourned meeting is or must be fixed under section 10-707, notice of the adjourned meeting shall be given under this section to persons who are shareholders as of the new record date.

§ 10-706 Waiver of notice

A. A shareholder may waive any notice required by chapters 1 through 17 of this title, the articles of incorporation or the bylaws before or after the date and time stated in the notice. The waiver shall be in writing, signed by the shareholder entitled to the notice and delivered to the corporation for inclusion in the minutes or filing with the corporate records.

B. A shareholder's attendance at a meeting:

Waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting.
Waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.

§ 10-707 Record date

A. The bylaws may fix or provide the manner of fixing the record date for one or more voting groups in order to determine the shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote or to take any other action. If the bylaws do not fix or provide for fixing a record date, the board of directors of the corporation may fix a future date as the record date.

B. A record date fixed under this section may not be more than seventy days before the meeting or action requiring a determination of shareholders.

C. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than one hundred twenty days after the date fixed for the original meeting.

D. If a court orders a meeting adjournment to a date more than one hundred twenty days after the date fixed for the original meeting, it may provide that the original record date continues in effect or it may fix a new record date.

§ 10-708 Participation in shareholders' meetings; remote communication

A. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all shareholders to participate in an annual or special shareholders' meeting by or conduct the meeting through use of any means of remote communication. If the board of directors elects to permit participation by means of remote communication, the notice of the meeting shall specify how a shareholder may participate in the meeting by means of remote communication. Participation may be limited by the board of directors to specified locations or means of communication.

B. Unless the articles of incorporation or bylaws provide otherwise, if authorized by the board of directors and subject to such guidelines and procedures as the board of directors may adopt, shareholders not physically present at a meeting of shareholders, by means of remote communication, may both:

Participate in a meeting of shareholders.
Be deemed present in person and vote at a meeting of shareholders, whether the meeting is to be held at a designated place or solely by means of remote communication if the corporation does all of the following:

(a) Implements reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a shareholder.

(b) Implements reasonable measures to provide shareholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders substantially concurrently with the proceedings. Participation may be through verbal, written or other suitable means of communication as described by this section.

(c) Maintains a record of the vote or other action if any shareholder votes or takes other action at the meeting by means of remote communication.

C. All votes of shareholders must be in writing, unless otherwise provided for in the articles of incorporation or bylaws. If authorized by the articles of incorporation, bylaws or board of directors, the requirement of a writing may be satisfied by a vote submitted by electronic transmission if the electronic transmission is either set forth or is submitted with information from which it can be determined that the electronic transmission was authorized by the shareholder.

Article 2 Voting

§ 10-720 Shareholders' list for meeting

A. After fixing a record date for a meeting, a corporation shall prepare an alphabetical list of the names of all of its shareholders who are entitled to notice of a shareholders' meeting. The list shall be arranged by voting group, and within each voting group by class or series of shares, and shall show the address of and number of shares held by each shareholder.

B. The shareholders' list shall be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation's principal office, the office of the corporation's transfer agent if specified in the meeting notice or at another place identified in the meeting notice in the city where the meeting will be held. A shareholder, its agent or its attorney on written demand may inspect and, subject to the requirements of section 10-1602, subsection C, may copy the list, during regular business hours and at his expense, during the period it is available for inspection.

C. The corporation shall make the shareholders' list available at the meeting, and any shareholder, its agent or its attorney may inspect the list at any time during the meeting or any adjournment.

D. If the corporation refuses to allow a shareholder, its agent or its attorney to inspect the shareholders' list before or at the meeting or copy the list as permitted by subsection B of this section, the court in the county where a corporation's principal office, or, if none in this state, its known place of business, is located, on application of the shareholder, may summarily order the inspection or copying at the corporation's expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete.

E. Refusal or failure to prepare or make available the shareholders' list does not affect the validity of action taken at the meeting.

§ 10-721 Voting entitlement of shares

A. Except as provided in subsections B and C of this section or section 10-728 or 10-2725 or unless the articles of incorporation provide otherwise, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a shareholders' meeting. Only shares are entitled to vote.

B. Absent special circumstances, the shares of a corporation are not entitled to vote if they are owned directly or indirectly by a second corporation, domestic or foreign, and the first corporation owns directly or indirectly a majority of the shares entitled to vote for directors of the second corporation.

C. Subsection B of this section does not limit the power of a corporation to vote any shares, including its own shares, held by it in a fiduciary capacity.

D. Redeemable shares are not deemed to be outstanding and are not entitled to vote after notice of redemption is mailed to the holders and an amount sufficient to redeem the shares has been deposited with any bank, trust company or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the certificates representing the shares, in the case of certificated shares.

E. Notwithstanding the other provisions of this section, a water users' association may provide in its articles of incorporation the qualifications of shareholders to vote, eliminate the right to vote by proxy, specify the locations where votes may be cast and limit voting to natural persons. A water users' association may adopt bylaws for the registration of voters and the method of holding elections.

§ 10-722 Proxies

A. A shareholder may vote its shares in person or by proxy.

B. A shareholder or the shareholder's agent or attorney-in-fact appoints a proxy to vote or otherwise act for the shareholder by signing an appointment form or by an electronic transmission. An electronic transmission must contain or be accompanied by information from which the recipient can determine the date of the transmission and that the transmission was authorized by the sender or the sender's agent or attorney-in-fact.

C. An appointment of a proxy is effective when the secretary, inspector of election or other officer or agent who is authorized to tabulate votes receives a signed appointment form or an electronic transmission of the appointment. Unless the articles of incorporation or bylaws provide otherwise, an appointment is valid for twelve months unless a shorter or longer period is expressly provided in the appointment form.

D. An appointment of a proxy is revocable by the shareholder unless the proxy conspicuously states that it is irrevocable and it is coupled with an interest. Proxies coupled with an interest include the appointment of any of the following:

A pledgee.
A person who purchased, agreed to purchase, holds an option to purchase or holds any other right to acquire the shares.
A creditor of the corporation who extended or continued credit to the corporation under terms requiring the appointment.
An employee of the corporation whose employment contract requires the appointment.
A party to a voting agreement created under section 10-731.

E. The death or incapacity of the shareholder appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless written notice of the death or incapacity is received by the secretary, the inspector of election or other officer or agent authorized to tabulate votes before the proxy exercises the proxy's authority under the appointment.

F. An appointment that is made irrevocable under subsection D of this section is revoked when the interest with which it is coupled is extinguished.

G. A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if the transferee did not know of its existence when the transferee acquired the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares or on the information statement for shares without certificates.

H. Subject to section 10-724 and to any express limitation on the proxy's authority stated in the appointment form or electronic transmission, a corporation is entitled to accept the proxy's vote or other action as that of the shareholder executing the proxy.

I. Notwithstanding the other provisions of this section, a water users' association may provide in its articles of incorporation the qualifications of shareholders to vote, eliminate the right to vote by proxy, specify the locations where votes may be cast and limit voting to natural persons. A water users' association may adopt bylaws for the registration of voters and method of holding elections.

§ 10-723 Shares held by nominees

A. A corporation may establish a procedure by which the beneficial owner of shares that are registered in the name of a nominee is recognized by the corporation as the shareholder. The extent of this recognition may be determined in the procedure.

B. The procedure may set forth:

The types of nominees to which it applies.
The rights or privileges that the corporation recognizes in a beneficial owner.
The manner in which the procedure is selected by the nominee.
The information that must be provided when the procedure is selected.
The period for which selection of the procedure is effective.
Other aspects of the rights and duties created.

§ 10-724 Corporation's acceptance of votes

A. If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a shareholder, the corporation if acting in good faith is entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder.

B. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of its shareholder, the corporation if acting in good faith is nevertheless entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if:

The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity.
The name signed purports to be that of an administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment.
The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment.
The name signed purports to be that of a pledgee, beneficial owner or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver or proxy appointment.
Two or more persons are the shareholder as cotenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all of the co-owners.

C. The corporation is entitled to reject any vote, consent, waiver or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has a reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder.

D. The corporation and its officer or its agent who accepts or rejects a vote, consent, waiver or proxy appointment in good faith and in accordance with the standards of this section are not liable in damages to the shareholder for the consequences of the acceptance or rejection.

E. Corporate action based on the acceptance or rejection of a vote, consent, waiver or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.

§ 10-725 Quorum and voting requirements for voting groups

A. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if the quorum of those shares exists with respect to that matter. Unless the articles of incorporation or chapters 1 through 17 of this title provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.

B. Unless otherwise provided in the articles of incorporation or bylaws, once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

C. If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or chapters 1 through 17 of this title require a greater number of affirmative votes.

D. An amendment of articles of incorporation adding, changing or deleting a quorum or voting requirement for a voting group greater than specified in subsection A or C of this section is governed by section 10-727.

E. The election of directors is governed by section 10-728.

§ 10-726 Action by single and multiple voting groups

A. If the articles of incorporation or chapters 1 through 17 of this title provide for voting by a single voting group on a matter, action on that matter is taken when voted on by that voting group as provided in section 10-725.

B. If the articles of incorporation or chapters 1 through 17 of this title provide for voting by two or more voting groups on a matter, action on that matter is taken when voted on by each of those voting groups counted separately as provided in section 10-725. Voting by individual voting groups entitled to vote on a matter need not be simultaneous.

§ 10-727 Greater quorum or voting requirements

A. The articles of incorporation may provide for a greater quorum or voting requirement for shareholders or voting groups of shareholders than is provided for by chapters 1 through 17 of this title.

B. An amendment to the articles of incorporation that adds, changes or deletes a greater quorum or voting requirement must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.

§ 10-728 Voting for directors; cumulative voting

A. Unless otherwise provided in the articles of incorporation, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.

B. At each election for directors, shareholders are entitled to cumulate their votes by multiplying the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and casting the product for a single candidate or distributing the product among two or more candidates.

Article 3 Voting Trusts and Agreements

§ 10-730 Voting trusts

One or more shareholders may create a voting trust, conferring on one or more trustees the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust and transferring their shares to the trustee or trustees. The agreement may contain any lawful provision not inconsistent with the purposes of the trust.

§ 10-731 Voting agreements

A. Two or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for that purpose.

B. Unless otherwise provided in the voting agreement, a voting agreement created under this section is specifically enforceable.

§ 10-732 Shareholder agreements

A. An agreement among the shareholders of a corporation that complies with this section is effective among the shareholders and the corporation even though it is inconsistent with one or more other provisions of chapters 1 through 17 of this title if it meets any of the following conditions:

Restricts the discretion or powers of the board of directors.
Governs the authorization or making of distributions whether or not in proportion to ownership of shares, subject to the limitations in section 10-640.
Establishes who shall be directors or officers of the corporation, their terms and conditions of office or employment or their manner of selection or removal.
Governs, in general or in regard to specific matters, the exercise or division of voting power by or between the shareholders and directors or by or among any of them, including use of weighted voting rights or director proxies.
Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer or employee of the corporation or among any of them.
Transfers to one or more shareholders or other persons all or part of the authority to exercise the corporate powers or to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or shareholders.
Requires dissolution of the corporation at the request of one or more of the shareholders or on the occurrence of a specified event or contingency.
Establishes the terms and conditions of employment of shareholders.
Addresses the use of arbitration or other forms of dispute resolution to resolve disputes among shareholders.
Restricts the transfer of shares.
Otherwise governs the exercise of the corporate powers or the management of the business and affairs of the corporation, its liquidation and dissolution or the relationship among the shareholders, the directors and the corporation, or among any of them.

B. An agreement authorized by this section shall be:

Set forth either:

(a) In the articles of incorporation or bylaws and approved by all persons who are shareholders at the time of the agreement.

(b) In a written agreement that is signed by all persons who are shareholders at the time of the agreement and that is filed with the corporation.

Subject to amendment or termination only by all persons who are shareholders at the time of the amendment, unless the agreement provides otherwise.
Valid for the duration of the corporation's existence, unless the agreement provides otherwise.

C. An agreement authorized by this section is enforceable by any person with standing. The existence of an agreement authorized by this section shall be noted conspicuously on the front or back of each certificate for outstanding shares or on the information statement required by section 10-626, subsection B. The failure to note the existence of the agreement on the certificate or information statement does not affect the validity of the agreement or any action taken pursuant to it. Any purchaser of shares who at the time of purchase did not have knowledge of the existence of the agreement is entitled to rescission of the purchase. A purchaser shall be deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate or information statement for the shares in compliance with this subsection and, if the shares are not represented by a certificate, the information statement is delivered to the purchaser at or before the time of purchase of the shares or the purchaser has actual notice of the existence of the agreement at the time of purchase. An action to enforce the right of rescission authorized by this subsection must be commenced within the earlier of ninety days after discovery of the existence of the agreement or two years after the time of the purchase of the shares.

D. An agreement authorized by this section ceases to be effective when shares of the corporation are listed on a national securities exchange or are regularly traded in a market maintained by one or more members of a national or affiliated securities association. If the agreement ceases to be effective for any reason, the board of directors, if the agreement is contained or referred to in the corporation's articles of incorporation or bylaws, may adopt an amendment to the articles of incorporation or bylaws, without shareholder action, to delete the agreement and any references to it.

E. An agreement that is authorized by this section and that limits the discretion or powers of the board of directors relieves the directors of and imposes on the person or persons in whom such discretion or powers are vested liability for acts or omissions imposed by law on directors to the extent that the discretion or powers of the directors are limited by the agreement.

F. The existence or performance of an agreement authorized by this section is not a ground for imposing personal liability on any shareholder for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.

G. Incorporators or subscribers for shares may act as shareholders with respect to an agreement authorized by this section if no shares have been issued when the agreement is made.

H. This section does not apply to, limit or invalidate agreements that are otherwise valid or authorized without regard to this section, including without limitation shareholder agreements between or among some or all of the shareholders or agreements between or among the corporation and one or more shareholders. The procedure set forth in this section is not the exclusive method of agreement among shareholders or among shareholders and the corporation with respect to any of the matters described in this section.

Article 4 Derivative Proceedings

§ 10-740 Definitions

In this article, unless the context otherwise requires:

"Derivative proceeding" means a civil suit in the right of a domestic corporation or, to the extent provided in section 10-747, in the right of a foreign corporation.
"Independent person" means a person with no personal interest in the transaction and no personal or other relationship which influences the person.
"Shareholder" includes a beneficial owner whose shares are held in a voting trust or are held by a nominee on the beneficial owner's behalf.

§ 10-741 Standing

A shareholder may not commence or maintain a derivative proceeding unless the shareholder both:

Was a shareholder of the corporation at the time of the act or omission complained of or became a shareholder through transfer by operation of law from one who was a shareholder at that time.
Fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.

§ 10-742 Demand

No shareholder may commence a derivative proceeding until both:

A written demand has been made on the corporation to take suitable action.
Ninety days have expired from the date the demand was made unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless the statute of limitations will expire within the ninety days or unless irreparable injury to the corporation would result by waiting for the expiration of the ninety day period.

§ 10-743 Stay of proceedings

If the corporation commences an inquiry into the allegations made in the demand or complaint, the court may stay any derivative proceeding for such period as the court deems appropriate.

§ 10-744 Dismissal

A. A derivative proceeding may be dismissed by the court on motion by the corporation on any legal grounds including the group specified in subsection B has determined in good faith after conducting a reasonable inquiry on which its conclusions are based that the maintenance of the derivative proceeding is not in the best interests of the corporation.

B. The court may appoint a panel of one or more independent persons on motion by the corporation to determine whether the maintenance of the derivative proceeding is in the best interests of the corporation. In such case, the plaintiff has the burden of proving by clear and convincing evidence that the requirements of subsection A have not been met. A person appointed by the court is not liable whatsoever for a determination made pursuant to this section.

§ 10-745 Discontinuance or settlement

A derivative proceeding may not be discontinued or settled without the court's approval. If the court determines that a proposed discontinuance or settlement will substantially affect the interests of the corporation's shareholders or a class of shareholders, the court shall direct that notice be given to the shareholders affected.

§ 10-746 Payment of expenses

On termination of the derivative proceeding the court may either:

Order the corporation to pay the plaintiff's reasonable expenses, including attorney fees, incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation.
Order the plaintiff to pay any defendant's reasonable expenses, including attorney fees, incurred in defending the proceeding if it finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose.
Order a party to pay an opposing party's reasonable expenses, including attorney fees, incurred because of the filing of any pleading, motion or other paper, if it finds that the pleading, motion or other paper was not well grounded in fact, after reasonable inquiry, or warranted by existing law or a good faith argument for the extension, modification or reversal of existing law and was interposed for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

§ 10-747 Applicability to foreign corporations

In any derivative proceeding in the right of a foreign corporation, the matters covered by this article are governed by the laws of the jurisdiction of incorporation of the foreign corporation except for sections 10-743, 10-745 and 10-746.

Chapter 8 Directors and Officers

Article 1 Board of Directors

§ 10-801 Board of directors

A. Notwithstanding section 10-732, each corporation shall have a board of directors.

B. All corporate powers shall be exercised by or under the authority of and the business and affairs of the corporation shall be managed under the direction of its board of directors, subject to any limitation set forth in the articles of incorporation or in an agreement authorized under section 10-732.

§ 10-802 Qualification of directors

The articles of incorporation or bylaws may prescribe qualifications for directors. A director need not be a resident of this state or a shareholder of the corporation unless the articles of incorporation or bylaws so prescribe.

§ 10-803 Number and election of directors

A. A board of directors shall consist of one or more individuals, with the number specified in or fixed in accordance with the articles of incorporation or bylaws.

B. The articles of incorporation or bylaws may establish a variable range for the size of the board of directors by fixing a minimum and maximum number of directors. If a variable range is established, the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the shareholders or the board of directors.

C. Directors shall be elected at the first annual shareholders' meeting and at each annual meeting thereafter unless their terms are staggered under section 10-806.

§ 10-804 Election of directors by certain classes or series of shareholders

A. If the articles of incorporation authorize dividing the shares into classes or series, the articles may also authorize the election of all or a specified number of directors by the holders of one or more authorized classes or series of shares.

B. One or more classes or one or more series of shares entitled to elect one or more directors is a separate voting group for purposes of the election of directors.

§ 10-805 Terms of directors generally

A. The terms of the initial directors of a corporation expire at the first shareholders' meeting at which directors are elected.

B. The terms of all other directors expire at the annual shareholders' meeting following their election except in the case of directors whose terms are staggered under section 10-806.

C. A decrease in the number of directors does not shorten the term of any incumbent director.

D. The term of a director elected to fill a vacancy expires at the next shareholders' meeting at which directors are elected.

E. Despite the expiration of a director's term, a director shall continue to hold office until the director's successor is elected and qualifies, until the director's resignation or removal or until there is a decrease in the number of directors.

§ 10-806 Staggered terms for directors

The articles of incorporation may provide for staggering the directors' terms of office by dividing the total number of directors into two, three or, to the extent not inconsistent with cumulative voting rights, more groups, with each group having at least three directors and each group containing as equal a number of directors as is possible. The term of office of the directors in the first group expires at the first annual shareholders' meeting following their election, the term of office of the directors in the second group expires at the second annual shareholders' meeting following their election, and the term of office of the directors in the third or other additional group, if any, expires at the third or other appropriate subsequent annual shareholders' meeting following their election. At each annual shareholders' meeting held after the division of the directors into groups, directors shall be elected to hold office until the second succeeding annual meeting, if there are two groups, until the third succeeding annual meeting, if there are three groups, or until the appropriate succeeding annual meeting, if there are more than three groups.

§ 10-807 Resignation of directors

A. A director may resign at any time by delivering written notice to the board of directors, its chairman or the corporation.

B. A resignation is effective when the notice is delivered unless the notice specifies a later effective date or event.

§ 10-808 Removal of directors by shareholders

A. The shareholders may remove one or more directors with or without cause unless the articles of incorporation provide that directors may be removed only for cause.

B. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove the director.

C. If less than the entire board is to be removed, a director shall not be removed if the number of votes sufficient to elect the director under cumulative voting is voted against the director's removal.

D. A director may be removed by the shareholders only at a meeting, and the meeting notice shall state that the purpose or one of the purposes of the meeting is removal of the director.

§ 10-809 Removal of directors by judicial proceeding

A. The court in the county where a corporation's known place of business or, if none in this state, its statutory agent is located may remove a director of the corporation from office in a proceeding commenced either by the corporation or by its shareholders holding at least ten per cent of the outstanding shares of any class if the court finds that both:

The director engaged in fraudulent conduct or intentional criminal conduct with respect to the corporation.
Removal is in the best interest of the corporation.

B. The court that removes a director may bar the director from reelection for a period prescribed by the court, but in no event may the period exceed five years.

C. If shareholders commence a proceeding under subsection A, they shall make the corporation a party defendant, unless the corporation elects to become a party plaintiff.

§ 10-810 Vacancy on board

A. Unless the articles of incorporation provide otherwise, if a vacancy occurs on a board of directors, including a vacancy resulting from an increase in the number of directors, either:

The shareholders may fill the vacancy.
The board of directors may fill the vacancy.
If the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all of the directors remaining in office.

B. If the vacant office was held by a director elected by a voting group of shareholders, only the holders of shares of that voting group are entitled to vote to fill the vacancy if it is filled by the shareholders.

C. A vacancy that will occur at a specific later date by reason of a resignation effective at a later date under section 10-807, subsection B or otherwise may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs.

D. If at any time by reason of death or resignation or other cause a corporation has no directors in office, any officer or any shareholder may call a special meeting of shareholders.

§ 10-811 Compensation of directors

Unless the articles of incorporation or bylaws provide otherwise, the board of directors may fix the compensation of directors.

Article 2 Meetings and Action of the Board

§ 10-820 Meetings

A. The board of directors may hold regular or special meetings in or out of this state.

B. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by or conduct the meeting through the use of any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

§ 10-821 Action by directors without meeting

A. Unless the articles of incorporation or bylaws provide otherwise, action required or permitted by chapters 1 through 17 of this title to be taken at a directors' meeting may be taken without a meeting if the action is taken by all of the directors. The action must be evidenced by one or more consents describing the action taken, which, in the aggregate, must be signed by each director. The consents and signatures may be in writing or by electronic transmission, and the writing or writings or electronic transmission or electronic transmissions must be included in the minutes or filed with the corporate records. The filing must be in a paper format if the minutes are maintained in a paper format and must be in an electronic format if the minutes are maintained in an electronic format.

B. Action taken under this section is effective when the last director signs the consent, unless the consent specifies a different effective date.

C. A consent signed under this section has the effect of a meeting vote and may be described as such in any document.

D. Any director may revoke a consent by delivering a signed revocation of the consent to the president or secretary before the date the last director signs the consent or consents.

§ 10-822 Notice of meetings

A. Unless the articles of incorporation or bylaws provide otherwise, regular meetings of the board of directors may be held without notice of the date, time, place or purpose of the meeting.

B. Unless the articles of incorporation or bylaws provide otherwise, special meetings of the board of directors shall be preceded by at least two days' notice of the date, time and place of the meeting. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or bylaws.

§ 10-823 Waiver of notice

A. A director may waive any notice required by chapters 1 through 17 of this title, the articles of incorporation or the bylaws before or after the date and time stated in the notice. Except as provided by subsection B, the waiver shall be in writing, signed by the director entitled to the notice and filed with the minutes or corporate records.

B. A director's attendance at or participation in a meeting waives any required notice to him of the meeting unless the director at the beginning of the meeting or promptly on his arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

§ 10-824 Quorum and voting

A. Unless the articles of incorporation or bylaws require a different number, a quorum of board of directors consists of either:

A majority of the fixed number of directors if the corporation has a fixed board size.
A majority of the number of directors prescribed, or if no number is prescribed, the number in office immediately before the meeting begins, if the corporation has a variable range size board.

B. The articles of incorporation or bylaws may authorize a quorum of a board of directors to consist of at least one-third of the fixed or prescribed number of directors determined under subsection A.

C. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless the articles of incorporation or bylaws require the vote of a greater number of directors.

D. A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken is deemed to have assented to the action taken unless either:

The director objects at the beginning of the meeting or promptly on the director's arrival to holding it or transacting business at the meeting.
The director's dissent or abstention from the action taken is entered in the minutes of the meeting.
The director delivers written notice of the director's dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation before 5:00 p.m. on the next business day after the meeting.

E. The right of dissent or abstention is not available to a director who votes in favor of the action taken.

§ 10-825 Committees

A. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may create one or more committees and may appoint members of the board of directors to serve on them. Each committee shall have one or more members, and each member of a committee shall serve at the pleasure of the board of directors.

B. The creation of a committee and appointment of members to it shall be approved by the greater of:

A majority of all of the directors in office when the action is taken.
The number of directors required by the articles of incorporation or bylaws to take action under section 10-824.

C. Sections 10-820 through 10-824 governing meetings, action without meetings and notice, waiver of notice, quorum and voting requirements of the board of directors also apply to committees and their members.

D. Subject to the limitations set forth in subsection E of this section, each committee may exercise the authority of the board of directors under section 10-801 to the extent specified by the board of directors or in the articles of incorporation or bylaws.

E. A committee shall not take any of the following actions:

Authorize distributions.
Approve or submit to shareholders any action that requires the shareholders' approval under this chapter.
Fill vacancies on the board of directors or on any of its committees.
Amend articles of incorporation pursuant to section 10-1002.
Adopt, amend or repeal bylaws.
Approve a plan of merger not requiring shareholder approval.
Authorize or approve reacquisition of shares, except according to a formula or method prescribed by the board of directors.
Authorize or approve the issuance, sale or contract for sale of shares or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the board of directors may authorize a committee or an executive officer of the corporation to do so within limits specifically prescribed by the board of directors.
Fix the compensation of directors for serving on the board or any committee of the board of directors.

F. The creation of, delegation of authority to or action by a committee does not alone constitute compliance by a director with the standards of conduct prescribed in section 10-830.

G. The board may designate one or more directors as alternate members of any committee who may replace any absent member at any meeting of the committee.

Article 3 Standards of Conduct

§ 10-830 General standards of conduct for directors

A. A director's duties, including duties as a member of a committee, shall be discharged:

In good faith.
With the care an ordinarily prudent person in a like position would exercise under similar circumstances.
In a manner the director reasonably believes to be in the best interests of the corporation.

B. In discharging duties, a director is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by any of the following:

One or more officers or employees of the corporation whom the director reasonably believes are reliable and competent in the matters presented.
Legal counsel, public accountants or other persons as to matters the director reasonably believes are within the person's professional or expert competence.
A committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.

C. A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection B of this section unwarranted.

D. Unless otherwise provided in the articles of incorporation or bylaws or a resolution of the board of directors of the corporation, in determining what is in the best interests of the corporation, a director:

Must consider the effect of a proposed action or inaction on the shareholders and whether a proposed action or inaction may further the purposes of the corporation.
May consider the effects of any action or inaction on the long-term and short-term interests of the corporation, its shareholders, employees, customers, community and environment and any other group and other pertinent factors that the director deems appropriate.

E. The best interests of the corporation do not require that any particular interests be given priority over other interests unless the articles of incorporation, the bylaws, a resolution of the board of directors or a resolution approved by the number of shareholders required to amend the articles of incorporation states an intention to give priority to particular interests.

§ 10-831 Standards of liability for directors; presumption

A director is not liable for any action taken as a director or any failure to take any action if the director's duties were performed in compliance with section 10-830. In any proceeding commenced under this chapter, a director has all of the defenses and presumptions ordinarily available to a director. A director is presumed in all cases to have acted, failed to act or otherwise discharged the director's duties pursuant to section 10-830. The burden is on the party challenging a director's action, failure to act or other discharge of duties to establish by clear and convincing evidence facts rebutting the presumption.

§ 10-833 Liability for unlawful distributions

A. A director who votes for or assents to a distribution made in violation of section 10-640 or the articles of incorporation is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating section 10-640 or the articles of incorporation if it is established that the director's duties were not performed in compliance with section 10-830.

B. A director of a corporation who is present at a meeting of its board of directors at which action on any distribution in violation of section 10-640 is taken is presumed to have assented to the action taken unless his dissent is entered in the minutes of the meeting or unless he files his written dissent to the action with the secretary of the meeting before the adjournment of the meeting or forwards the dissent by registered or certified mail to the secretary of the corporation before 5:00 p.m. of the next business day after the adjournment of the meeting. The right to dissent does not apply to a director who voted in favor of the action.

C. A director who is held liable under subsection A of this section for an unlawful distribution is entitled to contribution from:

Every other director who could be held liable under subsection A of this section for the unlawful distribution.
Each shareholder for the amount the shareholder accepted knowing the distribution was made in violation of section 10-640 or the articles of incorporation.

D. A proceeding under this section is barred unless it is commenced within four years after the date on which the effect of the distribution was measured under section 10-640, subsection E or G.

Article 4 Officers

§ 10-840 Required officers

A. A corporation shall have the officers described in its bylaws or appointed by the board of directors in accordance with the bylaws.

B. A duly appointed officer may appoint one or more officers or assistant officers if authorized by the bylaws or the board of directors.

C. The bylaws or the board of directors shall delegate to one of the officers responsibility for preparing minutes of the directors' and shareholders' meetings and for authenticating records of the corporation.

D. The same individual may simultaneously hold more than one office in a corporation.

§ 10-841 Duties of officers

Each officer has the authority and shall perform the duties set forth in the bylaws or, to the extent consistent with the bylaws, the duties prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties of other officers.

§ 10-842 Standards of conduct for officers

A. If an officer has discretionary authority with respect to any duties, an officer's duties shall be discharged under that authority:

In good faith.
With the care an ordinarily prudent person in a like position would exercise under similar circumstances.
In a manner the officer reasonably believes to be in the best interests of the corporation.

B. In discharging duties, an officer is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by either:

One or more directors, officers or employees of the corporation whom the officer reasonably believes to be reliable and competent in the matters presented.
Legal counsel, public accountants or other persons as to matters the officer reasonably believes are within the person's professional or expert competence.

C. An officer is not acting in good faith if the officer has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection B of this section unwarranted.

§ 10-843 Resignation and removal of officers

A. An officer may resign at any time by delivering notice to the corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date or event. If a resignation is made effective at a later date or event and the corporation accepts the future effective date, its board of directors may fill the pending vacancy before the effective date if the board of directors provides that the successor does not take office until the effective date.

B. A board of directors may remove an officer at any time with or without cause.

§ 10-844 Contract rights of officers

A. The appointment of an officer does not itself create contract rights.

B. An officer's removal does not affect the officer's contract rights, if any, with the corporation. An officer's resignation does not affect the corporation's contract rights, if any, with the officer.

§ 10-845 Standards of liability for officers; presumption

An officer is not liable for any action taken as an officer or any failure to take any action if the officer's duties were performed in compliance with section 10-842. In any proceeding commenced under this chapter, an officer has all of the defenses and presumptions ordinarily available to an officer. An officer is presumed in all cases to have acted, failed to act or otherwise discharged the officer's duties pursuant to section 10-842. The burden is on the party challenging an officer's action, failure to act or other discharge of duties to establish by clear and convincing evidence facts rebutting the presumptions.

§ 10-846 Enforcement proceedings; liability for monetary damages; definitions

A. Except as provided in subsection B of this section, a person may not bring an action or assert a claim against a corporation or its directors or officers with respect to either of the following:

The decision or failure of the corporation to pursue or create a nonmonetary purpose, whether or not the purpose is set forth in its articles of incorporation.
A director's or officer's violation of an obligation, duty or standard of conduct to consider, or the failure to consider, the effect of an act, omission or decision by a corporation on a nonmonetary purpose, whether or not the purpose is set forth in its articles of incorporation.

B. An enforcement proceeding against a corporation or its directors or officers with respect to subsection A of this section may be commenced or maintained only as follows:

Directly by the corporation.
Derivatively pursuant to chapter 7, article 4 of this title by a shareholder of the corporation.
By other persons as specified in the articles of incorporation or bylaws of the corporation.

C. A corporation and its directors and officers are not liable for monetary damages resulting from any decision or failure of the corporation to pursue or create any nonmonetary purpose, whether or not the purpose is set forth in its articles of incorporation.

D. For the purposes of this section:

"Enforcement proceeding" means any claim or action for a violation of any obligation, duty or standard of conduct under this chapter.
"Nonmonetary purpose" means any purpose other than to benefit the economic or financial interests of the shareholders of the corporation, including any purpose to benefit any interest or factor that is included in section 10-830, subsection D, paragraph 2, as applicable.

Article 5 Indemnification

§ 10-850 Definitions

In this article, unless the context otherwise requires:

"Corporation" includes any domestic or foreign predecessor entity of a corporation in a merger or other transaction in which the predecessor's existence ceased on consummation of the transaction.
"Director" means an individual who is or was a director of a corporation or an individual who, while a director of a corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity. A director is considered to be serving an employee benefit plan at the corporation's request if the director's duties to the corporation also impose duties on or otherwise involve services by the director to the plan or to participants in or beneficiaries of the plan. Director includes the estate or personal representative of a director.
"Expenses" includes attorney fees and all other costs and expenses reasonably related to a proceeding.
"Liability" means the obligation to pay a judgment, settlement, penalty or fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding and includes obligations and expenses that have not yet been paid by the indemnified person but that have been or may be incurred.
"Officer" means an individual who is or was an officer of a corporation or an individual who, while an officer of a corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity. An officer is considered to be serving an employee benefit plan at the corporation's request if the officer's duties to the corporation also impose duties on or otherwise involve services by the officer to the plan or to participants in or beneficiaries of the plan. Officer includes the estate or personal representative of an officer.
"Official capacity" means, if used with respect to a director, the office of director in a corporation and, if used with respect to an officer as contemplated in section 10-856, the office in a corporation held by the officer. Official capacity does not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, employee benefit plan or other entity.
"Outside director" means a director who, when serving as a director, was not an officer, employee or holder of more than five per cent of the outstanding shares of any class of stock of the corporation or of any affiliate of the corporation.
"Party" includes an individual who was, is or is threatened to be made a named defendant or respondent in a proceeding.
"Proceeding" means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal.

§ 10-851 Authority to indemnify

A. Except as provided in subsection D of this section and in section 10-854, a corporation may indemnify an individual made a party to a proceeding because either:

The individual is or was a director against liability incurred in the proceeding if all of the following conditions exist:

(a) The individual's conduct was in good faith.

(b) The individual reasonably believed:

(i) In the case of conduct in an official capacity with the corporation, that the conduct was in its best interests.

(ii) In all other cases, that the conduct was at least not opposed to its best interests.

The director engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the articles of incorporation pursuant to section 10-202, subsection B, paragraph 2.

B. A director's conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of subsection A, paragraph 2, subdivision (a) of this section.

C. The termination of a proceeding by judgment, order, settlement or conviction or on a plea of no contest or its equivalent is not of itself determinative that the director did not meet the standard of conduct described in this section.

D. A corporation may not indemnify a director under this section either:

In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation.
In connection with any other proceeding charging improper financial benefit to the director, whether or not involving action in the director's official capacity, in which the director was adjudged liable on the basis that financial benefit was improperly received by the director.

E. Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.

§ 10-852 Mandatory indemnification

A. Unless limited by its articles of incorporation, a corporation shall indemnify a director who was the prevailing party, on the merits or otherwise, in the defense of any proceeding to which the director was a party because the director is or was a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding.

B. Unless limited by its articles of incorporation, section 10-851, subsection D or subsection C of this section, a corporation shall indemnify an outside director against liability. Unless limited by its articles of incorporation or subsection C of this section, a corporation shall pay an outside director's expenses in advance of a final disposition of a proceeding, if the director furnishes the corporation with a written affirmation of the director's good faith belief that the director has met the standard of conduct described in section 10-851, subsection A and the director furnishes the corporation with a written undertaking executed personally, or on the director's behalf, to repay the advance if it is ultimately determined that the director did not meet the standard of conduct. The undertaking required by this subsection is an unlimited general obligation of the director but need not be secured and shall be accepted without reference to the director's financial ability to make repayment.

C. A corporation shall not provide the indemnification or advancement of expenses described in subsection B of this section if a court of competent jurisdiction has determined before payment that the outside director failed to meet the standards described in section 10-851, subsection A, and a court of competent jurisdiction does not otherwise authorize payment under section 10-854. A corporation shall not delay payment of indemnification or expenses under subsection B of this section for more than sixty days after a request is made unless ordered to do so by a court of competent jurisdiction.

§ 10-853 Advance for expenses

A. A corporation may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding if both of the following conditions exist:

The director furnishes the corporation with a written affirmation of the director's good faith belief that the director has met the standard of conduct described in section 10-851 or that the proceeding involves conduct for which liability has been eliminated under a provision of the articles of incorporation pursuant to section 10-202, subsection B, paragraph 1.
The director furnishes the corporation with a written undertaking, executed personally or on the director's behalf, to repay the advance if the director is not entitled to mandatory indemnification under section 10-852 and it is ultimately determined under section 10-854 or 10-855 that the director did not meet the standard of conduct.

B. The undertaking required by subsection A, paragraph 2 of this section is an unlimited general obligation of the director but need not be secured and may be accepted without reference to financial ability to make repayment.

C. Authorizations of payments under this section shall be made in a manner consistent with section 10-830 or 10-842.

D. This section does not apply to advancement of expenses to or for the benefit of an outside director. Advances to outside directors shall be made pursuant to section 10-852.

§ 10-854 Court ordered indemnification

Unless a corporation's articles of incorporation provide otherwise, a director of the corporation who is a party to a proceeding may apply for indemnification or an advance for expenses to the court conducting the proceeding or to another court of competent jurisdiction. On receipt of an application, the court after giving any notice the court considers necessary may order indemnification or advance for expenses if it determines either:

The director is entitled to mandatory indemnification under section 10-852, in which case the court shall also order the corporation to pay the director's reasonable expenses incurred to obtain court ordered indemnification.
The director is fairly and reasonably entitled to indemnification in view of all of the relevant circumstances, whether or not the director met the standard of conduct set forth in section 10-851 or was adjudged liable as described in section 10-851, subsection D, but if the director was adjudged liable under section 10-851, subsection D, indemnification is limited to reasonable expenses incurred.

§ 10-855 Determination and authorization of indemnification

A. A corporation may not indemnify a director under section 10-851 unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because the director has met the standard of conduct set forth in section 10-851.

B. The determination shall be made either:

By the board of directors by a majority vote of the directors not at the time parties to the proceeding.
By special legal counsel:

(a) Selected by majority vote of the disinterested directors.

(b) If there are no disinterested directors, selected by majority vote of the board.

By the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the proceeding shall not be voted on the determination.

C. Neither special legal counsel nor any shareholder has any liability whatsoever for a determination made pursuant to this section. In voting pursuant to subsection B of this section, directors shall discharge their duty in accordance with section 10-830.

D. Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under subsection B, paragraph 2 of this section to select counsel.

§ 10-856 Indemnification of officers

A. A corporation may indemnify and advance expenses under this article to an officer of the corporation who is a party to a proceeding because the individual is or was an officer of the corporation as follows:

To the same extent as a director.
If the individual is an officer but not a director, to the further extent as may be provided by the articles of incorporation, the bylaws, a resolution of the board of directors, or contract except for:

(a) Liability in connection with a proceeding by or in the right of the corporation other than for reasonable expenses incurred in connection with the proceeding.

(b) Liability arising out of conduct that constitutes:

(i) Receipt by the officer of a financial benefit to which the officer is not entitled.

(ii) An intentional infliction of harm on the corporation or the shareholders.

(iii) An intentional violation of criminal law.

B. Subsection A, paragraph 2 of this section applies to an officer who is also a director if the basis on which the officer is made a party to the proceeding is an act or omission solely as an officer.

C. An officer of a corporation who is not a director is entitled to mandatory indemnification under section 10-852, subsection A and may apply to a court under section 10-854 for indemnification or an advance for expenses, in each case to the same extent to which a director is entitled to indemnification or advance for expenses under those sections.

§ 10-857 Insurance

A corporation may purchase and maintain insurance, including retrospectively rated and self-insured programs, on behalf of an individual who is or was a director or officer of the corporation or who, while a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity, against liability asserted against or incurred by the individual in that capacity or arising from the individual's status as a director or officer, whether or not the corporation would have power to indemnify or advance expenses to the individual against the same liability under this article.

§ 10-858 Application of article

A. A provision that treats a corporation's indemnification of or advance for expenses to directors and that is contained in its articles of incorporation, its bylaws, a resolution of its shareholders or board of directors or a contract or otherwise is valid only if and to the extent the provision is consistent with this article. If articles of incorporation limit indemnification or advances for expenses, indemnification and advances for expenses are valid only to the extent consistent with the articles.

B. This article does not limit a corporation's power to pay or reimburse expenses incurred by a director in connection with the director's appearance as a witness in a proceeding at a time when the director has not been made a named defendant or respondent to the proceeding.

C. This article does not limit a corporation's power to indemnify, advance expenses or maintain insurance on behalf of an employee or agent.

Article 6 Director's Conflicting Interest Transactions

§ 10-860 Definitions

In this article, unless the context otherwise requires:

"Conflicting interest" with respect to a corporation means the interest a director of the corporation has respecting a transaction effected or proposed to be effected by the corporation, by a subsidiary of the corporation or by any other entity in which the corporation has a controlling interest if either:

(a) Whether or not the transaction is brought before the board of directors of the corporation for action, the director knows at the time of commitment that the director or a related person either:

(i) Is a party to the transaction.

(ii) Has a beneficial financial interest in or is so closely linked to the transaction and of such financial significance to the director or a related person that the interest would reasonably be expected to exert an influence on the director's judgment if he were called on to vote on the transaction.

(b) The transaction is brought or is of such character and significance to the corporation that it would in the normal course be brought before the board of directors of the corporation for action, and the director knows at the time of commitment that any of the following persons is either a party to the transaction or has a beneficial financial interest in or is so closely linked to the transaction and of such financial significance to the person that the interest would reasonably be expected to exert an influence on the director's judgment if the director were called on to vote on the transaction:

(i) An entity, other than the corporation, of which the director is a director, general partner, agent or employee.

(ii) A person that controls one or more of the entities specified in item (i) of this subdivision or an entity that is controlled by or is under common control with one or more of the entities specified in item (i) of this subdivision.

(iii) An individual who is a general partner, principal or employer of the director.

"Director's conflicting interest transaction" with respect to a corporation means a transaction effected or proposed to be effected by the corporation, by a subsidiary of the corporation or by any other entity in which the corporation has a controlling interest respecting which a director of the corporation has a conflicting interest.
"Related person" of a director means either:

(a) The spouse, or a parent or sibling of the spouse, of the director, a child, grandchild, sibling, parent or spouse of a child, grandchild, sibling or parent, of the director, an individual having the same home as the director or a trust or estate of which an individual specified in this subdivision is a substantial beneficiary.

(b) A trust, estate, incompetent, conservatee or minor of which the director is a fiduciary.

"Required disclosure" means disclosure by the director who has a conflicting interest of both:

(a) The existence and nature of the conflicting interest.

(b) All facts known to the director respecting the subject matter of the transaction that an ordinarily prudent person would reasonably believe to be material to a judgment about whether or not to proceed with the transaction.

"Time of commitment" respecting a transaction means the time when the transaction is consummated or, if made pursuant to contract, the time when the corporation, or its subsidiary or the entity in which it has a controlling interest, becomes contractually obligated so that its unilateral withdrawal from the transaction would entail significant loss, liability or other damage.

§ 10-861 Judicial action

A. A transaction that is effected or proposed to be effected by a corporation, or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest, and that is not a director's conflicting interest transaction shall not be enjoined, be set aside or give rise to an award of damages or other sanctions in a proceeding by a shareholder or by or in the right of the corporation, because a director of the corporation, or any person with whom or with which the director has a personal, economic or other association, has an interest in the transaction.

B. A director's conflicting interest transaction shall not be enjoined, be set aside or give rise to an award of damages or other sanctions in a proceeding by a shareholder or by or in the right of the corporation, because the director, or any person with whom or with which the director has a personal, economic or other association, has an interest in the transaction, if either:

Directors' action respecting the transaction was taken at any time in compliance with section 10-862.
Shareholders' action respecting the transaction was taken at any time in compliance with section 10-863.
The transaction, judged according to the circumstances at the time of commitment, is established to have been fair to the corporation.

C. Any person seeking to have a director's conflicting interest transaction enjoined, set aside or give rise to an award of damages or other sanctions shall first prove by clear and convincing evidence that subsection B of this section is not applicable.

§ 10-862 Directors' action; definition

A. Directors' action respecting a transaction is effective for purposes of section 10-861, subsection B, paragraph 1 if the transaction received the affirmative vote of a majority, but at least two, of those qualified directors on the board of directors or on a duly empowered committee of the board who voted on the transaction after either required disclosure to them, to the extent the information was not known by them, or compliance with subsection B of this section. Action by a committee is effective under this section only if both:

All of its members are qualified directors.
Members are either all of the qualified directors on the board or are appointed by the affirmative vote of a majority of the qualified directors on the board.

B. If a director has a conflicting interest respecting a transaction but neither the director nor a related person of the director specified in section 10-860, paragraph 3, subdivision (a) is a party to the transaction and if the director has a duty under law or professional canon or a duty of confidentiality to another person, respecting information relating to the transaction such that the director may not make the disclosure described in section 10-860, paragraph 4, subdivision (b), disclosure is sufficient for purposes of subsection A of this section if the director both:

Discloses to the directors voting on the transaction the existence and nature of the conflicting interest and informs them of the character and limitations imposed by that duty before their vote on the transaction.
Plays no part, directly or indirectly, in their deliberations or vote.

C. A majority, but at least two, of all of the qualified directors on the board of directors or on the committee is a quorum for purposes of action that complies with this section. Directors' action that otherwise complies with this section is not affected by the presence or vote of a director who is not a qualified director.

D. For purposes of this section, "qualified director" means, with respect to a director's conflicting transaction, any director who does not have either:

A conflicting interest respecting the transaction.
A familial, financial, professional or employment relationship with a second director who does have a conflicting interest respecting the transaction, which relationship would, in the circumstances, reasonably be expected to exert an influence on the first director's judgment when voting on the transaction.

§ 10-863 Shareholders' action; definition

A. Shareholders' action respecting a transaction is effective for purposes of section 10-861, subsection B, paragraph 2 if a majority of the votes entitled to be cast by the holders of all qualified shares was cast in favor of the transaction after all of the following:

Notice to shareholders describing the director's conflicting interest transaction.
Provision of the information referred to in subsection C of this section.
Required disclosure to the shareholders who voted on the transaction, to the extent the information was not known by them.

B. A majority of the votes entitled to be cast by the holders of all qualified shares is a quorum for the purposes of action that complies with this section. Subject to subsections C and D of this section, shareholders' action that otherwise complies with this section is not affected by the presence of holders or the voting of shares that are not qualified shares.

C. For purposes of compliance with subsection A of this section, a director who has a conflicting interest respecting the transaction shall inform, before the shareholders' vote, the secretary, or other officer or agent of the corporation authorized to tabulate votes, of the number and the identity of persons holding or controlling the vote of all shares that the director knows are beneficially owned, or the voting of which is controlled, by the director or by a related person of the director, or both.

D. If a shareholders' vote does not comply with subsection A of this section solely because of a failure of a director to comply with subsection C of this section and if the director establishes that his failure did not determine and was not intended by him to influence the outcome of the vote, the court, with or without further proceedings respecting section 10-861, subsection B, paragraph 3, may take such action respecting the transaction and the director and give such effect, if any, to the shareholders' vote, as it considers appropriate in the circumstances.

E. For purposes of this section, "qualified shares" means any shares entitled to vote with respect to the director's conflicting interest transaction except shares that, to the knowledge, before the vote, of the secretary, or other officer or agent of the corporation authorized to tabulate votes, are beneficially owned, or the voting of which is controlled, by a director who has a conflicting interest respecting the transaction or by a related person of the director, or both.

Chapter 10 Amendment of Articles of Incorporation and Bylaws

Article 1 Amendment of Articles of Incorporation

§ 10-1001 Authority to amend

A. A corporation may amend its articles of incorporation at any time to add or change a provision that is required or permitted in the articles of incorporation or to delete a provision that is not required in the articles of incorporation. Whether a provision is required or permitted in the articles of incorporation is determined as of the effective date of the amendment.

B. A shareholder of the corporation does not have a vested property right resulting from any provision in the articles of incorporation, including provisions relating to management, control, capital structure, dividend entitlement or purpose or duration of the corporation.

§ 10-1002 Amendment by board of directors

Unless the articles of incorporation provide otherwise, a corporation's board of directors may adopt one or more amendments to the corporation's articles of incorporation without shareholder action to either:

Extend the duration of the corporation if it was incorporated at a time when limited duration was required by law.
Delete the names and addresses of the initial directors.
Delete the name and address of the initial statutory agent or known place of business, if a statement of change is on file with the commission.
Change each issued and unissued authorized share of an outstanding class into a greater number of whole shares if the corporation has only shares of that class outstanding, with all shares of the class being treated identically.
Change the corporate name by substituting the word "corporation", "incorporated", "company" or "limited" or the abbreviation "corp.", "inc.", "co." or "ltd." for a similar word or abbreviation in the name or by adding, deleting or changing a geographical attribution for the name.
Make any other change expressly permitted by chapters 1 through 17 of this title to be made without shareholder action.

§ 10-1003 Amendment by board of directors and shareholders

A. The following apply to amendments to the articles of incorporation:

A corporation's board of directors may propose one or more amendments to the articles of incorporation for submission to the shareholders.
For the amendment to be adopted both:

(a) The board of directors shall recommend the amendment to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for that determination to the shareholders with the amendment.

(b) The shareholders entitled to vote on the amendment shall approve the amendment as provided in paragraph 5 of this subsection.

The board of directors may condition its submission of the proposed amendment on any basis.
The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting in accordance with section 10-705. The notice of meeting shall also state that the purpose or one of the purposes of the meeting is to consider the proposed amendment and shall contain or be accompanied by a copy or summary of the amendment.
Unless chapters 1 through 17 of this title, the articles of incorporation or the board of directors acting pursuant to paragraph 3 of this subsection requires a greater vote or a vote by voting groups, the amendment to be adopted shall be approved by both:

(a) A majority of the votes entitled to be cast on the amendment by any voting group with respect to which the amendment would create dissenters' rights.

(b) The votes required by sections 10-725 and 10-726 by every other voting group entitled to vote on the amendment.

B. The following apply to amendments to the articles of incorporation:

If the articles of incorporation expressly permit, the shareholders may propose amendments to the articles of incorporation. If so permitted, the articles of incorporation shall set forth procedures for adopting shareholder initiated amendments, including the percentage of voting power and method of notice required to propose an amendment and the responsibility for calling a shareholder meeting to consider the amendment.
For the amendment to be adopted, both:

(a) The shareholders entitled to vote on the amendment shall approve the amendment as provided in paragraph 3 of this subsection.

(b) The corporation shall notify each shareholder in accordance with subsection A, paragraph 4 of this section.

Unless chapters 1 through 17 of this title or the articles of incorporation require a greater vote or a vote by voting groups, the amendment to be adopted shall be approved by both:

(a) A majority of the votes entitled to be cast on the amendment by any voting group with respect to which the amendment would create dissenters' rights.

(b) The votes required by sections 10-725 and 10-726 by every other voting group entitled to vote on the amendment.

§ 10-1004 Voting on amendments by voting groups

A. The holders of the outstanding shares of a class are entitled to vote as a separate voting group, if shareholder voting is otherwise required by chapters 1 through 17 of this title, on a proposed amendment if the amendment would either:

Increase or decrease the aggregate number of authorized shares of the class.
Effect an exchange or reclassification of all or part of the shares of the class into shares of another class.
Effect an exchange or reclassification, or create the right of exchange of all or part of the shares of another class into shares of the class.
Change the designations, rights, obligations, preferences or limitations of all or part of the shares of the class.
Change the shares of all or part of the class into a different number of shares of the same class.
Create a new class of shares having rights or preferences with respect to distributions or to dissolution that are prior, superior or substantially equal to the shares of the class.
Increase rights, preferences or number of authorized shares of any class that, after giving effect to the amendment, have rights or preferences with respect to distributions or to dissolution that are prior, superior or substantially equal to the shares of the class.
Limit or deny an existing preemptive right of all or part of the class.
Cancel or otherwise affect rights to distributions or dividends that have accumulated but have not yet been declared on all or part of the shares of the class.

B. If a proposed amendment would affect a series of a class of shares in one or more of the ways described in subsection A, the shares of that series are entitled to vote as a separate voting group on the proposed amendment.

C. If a proposed amendment that entitles two or more series of shares to vote as separate voting groups under this section would affect those two or more series in the same or a substantially similar way, the shares of all of the series so affected must vote together as a single voting group on the proposed amendment.

D. A class or series of shares is entitled to the voting rights granted by this section although the articles of incorporation provide that the shares are nonvoting shares.

§ 10-1005 Amendment before issuance of shares

If a corporation has not yet issued shares, an amendment to the articles of incorporation may be adopted by a majority of the members of the board of directors, unless the articles of incorporation require adoption by a greater number of the members of the board of directors.

§ 10-1006 Articles of amendment

A. A corporation amending its articles of incorporation shall deliver to the commission for filing articles of amendment setting forth:

The name of the corporation.
The text of each amendment adopted.
If an amendment provides for an exchange, reclassification or cancellation of issued shares, provisions for implementing the amendment if not contained in the amendment itself.
The date of each amendment's adoption.
If an amendment was adopted by the incorporators or board of directors without shareholder action, a statement to that effect and that shareholder action was not required.
If an amendment was approved by the shareholders:

(a) The designation of outstanding shares, number of outstanding shares, number of votes entitled to be cast by each voting group entitled to vote separately on the amendment and number of votes of each voting group indisputably represented at the meeting.

(b) Either the total number of votes cast for and against the amendment by each voting group entitled to vote separately on the amendment or the total number of undisputed votes cast for the amendment by each voting group and a statement that the number cast for the amendment by each voting group was sufficient for approval by that voting group.

B. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of amendment shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-1007 Restated articles of incorporation

A. A corporation's board of directors may restate its articles of incorporation at any time with or without shareholder action.

B. The restatement may include one or more amendments to the articles. If the restatement includes an amendment requiring shareholder approval, it shall be adopted as provided in section 10-1003.

C. If the board of directors submits a restatement for shareholder action, the corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting pursuant to section 10-705. The notice shall also state that the purpose or one of the purposes of the meeting is to consider the proposed restatement and shall contain or be accompanied by a copy of the restatement that identifies any amendment or other change it would make in the articles.

D. A corporation restating its articles of incorporation shall deliver to the commission for filing articles of restatement setting forth the name of the corporation and the text of the restated articles of incorporation together with a certificate setting forth:

Whether the restatement contains an amendment to the articles requiring shareholder approval and, if it does not, that the board of directors adopted the restatement.
If the restatement contains an amendment to the articles requiring shareholder approval, the information required by section 10-1006.

E. Duly adopted restated articles of incorporation supersede the original articles of incorporation and all amendments to them.

F. The commission may certify restated articles of incorporation, as the articles of incorporation currently in effect, without including the certificate information required by subsection D of this section.

G. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of restatement shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-1008 Amendment pursuant to reorganization

A. A corporation's articles of incorporation may be amended pursuant to this section without action by the board of directors or shareholders to carry out a plan of reorganization confirmed by an order or decree of a court of competent jurisdiction under a federal statute or a statute of this state if the articles of incorporation after amendment contain only provisions required or permitted by section 10-202.

B. Before the date of entry of a final decree in the reorganization proceeding, the individual or individuals designated by the plan shall deliver to the commission for filing articles of amendment setting forth all of the following:

The name of the corporation.
The text of each amendment contained in the plan of reorganization.
The date of the court's order or decree confirming the plan of reorganization containing the articles of amendment.
The title of the reorganization proceeding in which the order or decree was entered.
A statement that the court had jurisdiction of the proceeding under federal or state statute.

C. Shareholders of a corporation undergoing reorganization do not have dissenters' rights except as and to the extent provided in the reorganization plan.

D. This section does not apply after entry of a final decree in the reorganization proceeding even though the court retains jurisdiction of the proceeding for limited purposes unrelated to consummation of the reorganization plan.

E. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of amendment shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-1009 Effect of amendments

An amendment to articles of incorporation does not affect a cause of action existing against or in favor of the corporation, a proceeding to which the corporation is a party or the existing rights of persons other than shareholders of the corporation. An amendment changing a corporation's name does not abate a proceeding brought by or against the corporation in its former name.

Article 2 Amendment of Bylaws

§ 10-1020 Amendment by board of directors or shareholders

A. A corporation's board of directors may amend or repeal the corporation's bylaws unless either:

The articles of incorporation or chapters 1 through 17 of this title reserve this power exclusively to the shareholders in whole or part.
The shareholders in amending or repealing a particular bylaw provide expressly that the board of directors may not amend or repeal that bylaw.

B. A corporation's shareholders may amend or repeal the corporation's bylaws even though the bylaws may also be amended or repealed by the board of directors.

§ 10-1021 Bylaw increasing quorum or voting requirement for shareholders

A. If authorized by the articles of incorporation, the shareholders may adopt or amend a bylaw that fixes a greater quorum or voting requirement for shareholders, or voting groups of shareholders, than is required by chapters 1 through 17 of this title. The adoption or amendment of a bylaw that adds, changes or deletes a greater quorum or voting requirement for shareholders shall meet the same quorum requirement and shall be adopted by the same vote and voting groups required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.

B. A bylaw that fixes a greater quorum or voting requirement for shareholders under subsection A shall not be adopted, amended or repealed by the board of directors.

§ 10-1022 Bylaw increasing quorum or voting requirement for directors

A. A bylaw that fixes a greater quorum or voting requirement for the board of directors may be amended or repealed as follows:

If originally adopted by the shareholders, only by the shareholders.
If originally adopted by the board of directors, either by the shareholders or by the board of directors.

B. A bylaw that is adopted or amended by the shareholders and that fixes a greater quorum or voting requirement for the board of directors may provide that it may be amended or repealed only by a specified vote of either the shareholders or the board of directors.

C. Action by the board of directors under subsection A, paragraph 2 to adopt or amend a bylaw that changes the quorum or voting requirement for the board of directors shall meet the same quorum requirement and shall be adopted by the same vote required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.

Chapter 11 Mergers and Other Restructuring Transactions

Article 1 General Provisions

§ 10-1101 Definitions

A. In this article, unless the context otherwise requires:

"Plan" means a plan of merger, interest exchange, conversion, domestication or division.
"Transaction" means a merger, an interest exchange, a conversion, a domestication or a division.

B. Except for terms defined in chapters 1 through 17 of this title or unless the context otherwise requires, terms used in this article have the same meanings prescribed in section 29-2102.

§ 10-1102 Entity restructuring transactions

A. If the board of directors of a domestic corporation adopts a plan and, if required by section 10-1103, the shareholders approve a plan, the domestic corporation may be a party to or otherwise undertake a transaction by adopting a plan and complying with this article and the following:

With respect to a merger, title 29, chapter 6, article 2.
With respect to an interest exchange, title 29, chapter 6, article 3.
With respect to a conversion, title 29, chapter 6, article 4.
With respect to a domestication, title 29, chapter 6, article 5.
With respect to a division, title 29, chapter 6, article 6.

B. The effective time and date of the transaction are as provided in title 29, chapter 6. Except as expressly set forth in this article, the procedures regarding the effect of and all other aspects of the transaction are governed by title 29, chapter 6.

C. This section does not limit the power of a corporation to acquire all or part of the interests of another entity through a voluntary exchange or otherwise.

§ 10-1103 Action on plan

A. Except as provided in subsection G of this section, after adopting a plan, the board of directors of a domestic corporation that is a party to or that is otherwise undertaking the transaction and, in the case of a domestic corporation whose shares will be acquired in an interest exchange, the board of directors of the corporation whose shares will be acquired in the interest exchange shall submit the plan for approval by its shareholders.

B. For a plan to be approved, both:

The board of directors shall recommend the plan to the shareholders, unless the board of directors determines that because of a conflict of interest or other special circumstances it should not make a recommendation and communicates the basis for its determination to the shareholders with the plan.
The shareholders entitled to vote on the plan shall approve the plan.

C. The board of directors may condition its submission of the plan on any basis.

D. The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting at which the plan is to be submitted for approval in accordance with section 10-705. The notice shall state that the purpose or one of the purposes of the meeting is to consider the plan and shall contain or be accompanied by a copy or summary of the plan.

E. Unless chapters 1 through 17 of this title, the articles of incorporation or the board of directors acting pursuant to subsection C of this section requires a greater vote or a vote by voting groups, the plan to be authorized shall be approved by each voting group entitled to vote separately on the plan by a majority of all the votes entitled to be cast on the plan by that voting group.

F. Separate voting by voting groups is required:

On a plan, other than a plan of interest exchange, if either:

(a) The plan contains a provision that, if contained in a proposed amendment to the articles of incorporation, would require action by one or more separate voting groups on the proposed amendment under section 10-1004.

(b) One or more voting groups are entitled under the articles of incorporation to vote as a voting group on the plan.

On a plan of interest exchange by each class or series of shares included in the exchange, with each class or series constituting a separate voting group.

G. Unless the articles of incorporation otherwise require, action by the shareholders of a domestic corporation that is the surviving corporation on a plan of merger is not required if all of the following conditions exist:

The articles of incorporation of the surviving corporation will not differ, except for amendments enumerated in section 10-1002, from its articles of incorporation before the merger.
Each shareholder of the surviving corporation whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares with identical designations, preferences, limitations and relative rights immediately after the effective date of the merger.
The number of voting shares outstanding immediately after the merger, plus the number of voting shares issuable as a result of the merger either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed by more than twenty per cent the total number of voting shares of the surviving corporation outstanding immediately before the merger.
The number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed by more than twenty per cent the total number of participating shares outstanding immediately before the merger.

H. For the purposes of subsection G of this section:

"Participating shares" means shares that entitle their holders to participate without limitation in distributions.
"Voting shares" means shares that entitle their holders to vote unconditionally in elections of directors.

§ 10-1104 Merger or other transaction involving subsidiary

A. A parent entity owning at least ninety per cent of the outstanding shares of each class of a subsidiary domestic corporation may merge the subsidiary into itself, cause the conversion, domestication or division of the subsidiary or cause the shares of the subsidiary to be acquired in an interest exchange without approval of the interest holders of the parent or the shareholders of the subsidiary.

B. The governors of the parent shall adopt a plan that complies with title 29, chapter 6.

C. The parent shall mail a copy or summary of the plan to each shareholder, other than the parent, of the subsidiary who does not waive the mailing requirement in writing.

D. The parent may not deliver a statement of merger or other transaction to the commission for filing until at least thirty days after the date it mailed a copy of the plan to each shareholder of the subsidiary who did not waive the mailing requirement.

E. A statement of merger or other transaction in connection with a transaction that is governed by this section shall not contain amendments to the public organizational document of the parent entity.

§ 10-1105 Statement of merger or interest exchange; publication or posting

Within sixty days after the commission approves the filing of a statement of merger or statement of interest exchange, either of the following must occur:

A copy of the statement of merger or statement of interest exchange shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

Chapter 12 Sale of Assets

Article 1 General Provisions

§ 10-1201 Sale of assets in regular course of business and mortgage of assets

A. On the terms and conditions and for the consideration determined by the board of directors, a corporation may:

Sell, lease, exchange or otherwise dispose of all or substantially all of its property in the usual and regular course of business.
Mortgage, pledge, dedicate to the repayment of indebtedness, whether with or without recourse, or otherwise encumber any or all of its property whether or not in the usual and regular course of business.
Transfer any or all of its property to a corporation all the shares of which are owned by the corporation.

B. Unless the articles of incorporation require it, approval by the shareholders of a transaction described in subsection A is not required.

§ 10-1202 Sale of assets other than in regular course of business

A. On the terms and conditions and for the consideration determined by the corporation's board of directors, a corporation may sell, lease, exchange or otherwise dispose of all or substantially all of its property, with or without the goodwill, other than in the usual and regular course of business, if the board of directors proposes and its shareholders approve the proposed transaction.

B. For a transaction to be authorized:

The board of directors shall recommend the proposed transaction to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the submission of the proposed transaction.
The shareholders entitled to vote shall approve the transaction.

C. The board of directors may condition its submission of the proposed transaction on any basis.

D. The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting in accordance with section 10-705. The notice shall also state that the purpose or one of the purposes of the meeting is to consider the sale, lease, exchange or other disposition of all or substantially all of the property of the corporation and shall contain or be accompanied by a description of the transaction.

E. Unless the articles of incorporation or the board of directors, acting pursuant to subsection C of this section, requires a greater vote or a vote by voting groups, a majority of all of the votes entitled to be cast on the transaction shall approve the transaction to be authorized.

F. After any sale, lease, exchange or other disposition of property is authorized, the transaction may be abandoned, subject to any contractual rights, without further shareholder action.

G. A transaction that constitutes a distribution is governed by section 10-640 and not by this section.

Chapter 13 Dissenters' Rights

Article 1 Dissent and Payment for Shares

§ 10-1301 Definitions

In this article, unless the context otherwise requires:

"Beneficial shareholder" means the person who is a beneficial owner of shares held in a voting trust or by a nominee as the record shareholder.
"Corporation" means the issuer of the shares held by a dissenter before the corporate action or the surviving or acquiring corporation by merger or share exchange of that issuer.
"Dissenter" means a shareholder who is entitled to dissent from corporate action under section 10-1302 and who exercises that right when and in the manner required by article 2 of this chapter.
"Fair value" with respect to a dissenter's shares means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion is inequitable.
"Interest" means interest from the effective date of the corporate action until the date of payment at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under the circumstances.
"Record shareholder" means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.
"Shareholder" means the record shareholder or the beneficial shareholder.

§ 10-1302 Right to dissent; applicability

A. A shareholder of a domestic corporation is entitled to dissent from and obtain payment of the fair value of the shareholder's shares in the event of any of the following corporate actions:

Consummation of a plan of merger to which the corporation is a party if either:

(a) Shareholder approval is required for the merger by section 10-1103 or the articles of incorporation and if the shareholder is entitled to vote on the merger.

(b) The corporation is a subsidiary that is merged with its parent under section 10-1104.

Consummation of a plan of interest exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan.
Consummation of a sale or exchange of all or substantially all of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to a court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one year after the date of sale.
An amendment of the articles of incorporation that materially and adversely affects rights in respect of a dissenter's shares because it either:

(a) Alters or abolishes a preferential right of the shares.

(b) Creates, alters or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of the shares.

(d) Excludes or limits the right of the shares to vote on any matter or to cumulate votes other than a limitation by dilution through issuance of shares or other securities with similar voting rights.

(e) Reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under section 10-604.

Any corporate action taken pursuant to a shareholder vote to the extent the articles of incorporation, the bylaws or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares.
An election of the shareholders pursuant to section 10-2404 to have benefit corporation status or an election of the shareholders pursuant to section 10-2405 to terminate status as a benefit corporation.
Consummation of a plan of domestication if the shareholder does not receive interests in the foreign domesticated entity that have terms as favorable to the shareholder in all material respects and that represent at least the same percentage interest of the total voting rights of the outstanding interests of the domesticated entity as the shares held by the shareholder before the domestication.
Consummation of a plan of conversion if the shareholder does not receive interests in the converted entity that have terms as favorable to the shareholder in all material respects and that represent at least the same percentage interest of the total voting rights of the outstanding interests of the converted entity as the shares held by the shareholder before the conversion.
Consummation of a plan of division if the shareholder does not receive interests in each resulting entity that have terms as favorable to the shareholder in all material respects and that represent at least the same percentage interest of the total voting rights of the outstanding interests of each resulting entity as the shares held by the shareholder before the division.

B. A shareholder entitled to dissent and obtain payment for his shares under this chapter may not challenge the corporate action creating the shareholder's entitlement unless the action is unlawful or fraudulent with respect to the shareholder or the corporation.

C. This section does not apply to the holders of shares of any class or series if the shares of the class or series are redeemable securities issued by a registered investment company as defined pursuant to the investment company act of 1940 (15 United States Code section 80a-1 through 80a-64).

D. Unless the articles of incorporation of the corporation provide otherwise, this section does not apply to the holders of shares of a class or series if the shares of the class or series were registered on a national securities exchange, were listed on the national market systems of the national association of securities dealers automated quotation system or were held of record by at least two thousand shareholders on the date fixed to determine the shareholders entitled to vote on the proposed corporate action.

§ 10-1303 Dissent by nominees and beneficial owners

A. A record shareholder may assert dissenters' rights as to fewer than all of the shares registered in the record shareholder's name only if the record shareholder dissents with respect to all shares beneficially owned by any one person and notifies the corporation in writing of the name and address of each person on whose behalf the record shareholder asserts dissenters' rights. The rights of a partial dissenter under this subsection are determined as if the shares as to which the record shareholder dissents and the record shareholder's other shares were registered in the names of different shareholders.

B. A beneficial shareholder may assert dissenters' rights as to shares held on the beneficial shareholder's behalf only if both:

The beneficial shareholder submits to the corporation the record shareholder's written consent to the dissent not later than the time the beneficial shareholder asserts dissenters' rights.
The beneficial shareholder does so with respect to all shares of which the beneficial shareholder is the beneficial shareholder or over which the beneficial shareholder has power to direct the vote.

Article 2 Procedure for Exercise of Dissenters' Rights

§ 10-1320 Notice of dissenters' rights

A. If proposed corporate action creating dissenters' rights under section 10-1302 is submitted to a vote at a shareholders' meeting, the meeting notice shall state that shareholders are or may be entitled to assert dissenters' rights under this article and shall be accompanied by a copy of this article.

B. If corporate action creating dissenters' rights under section 10-1302 is taken without a vote of shareholders, the corporation shall notify in writing all shareholders entitled to assert dissenters' rights that the action was taken and shall send them the dissenters' notice described in section 10-1322.

§ 10-1321 Notice of intent to demand payment

A. If proposed corporate action creating dissenters' rights under section 10-1302 is submitted to a vote at a shareholders' meeting, a shareholder who wishes to assert dissenters' rights shall both:

Deliver to the corporation before the vote is taken written notice of the shareholder's intent to demand payment for the shareholder's shares if the proposed action is effectuated.
Not vote the shares in favor of the proposed action.

B. A shareholder who does not satisfy the requirements of subsection A of this section is not entitled to payment for the shares under this article.

§ 10-1322 Dissenters' notice

A. If proposed corporate action creating dissenters' rights under section 10-1302 is authorized at a shareholders' meeting, the corporation shall deliver a written dissenters' notice to all shareholders who satisfied the requirements of section 10-1321.

B. The dissenters' notice shall be sent no later than ten days after the corporate action is taken and shall:

State where the payment demand must be sent and where and when certificates for certificated shares shall be deposited.
Inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received.
Supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and that requires that the person asserting dissenters' rights certify whether or not the person acquired beneficial ownership of the shares before that date.
Set a date by which the corporation must receive the payment demand, which date shall be at least thirty but not more than sixty days after the date the notice provided by subsection A of this section is delivered.
Be accompanied by a copy of this article.

§ 10-1323 Duty to demand payment

A. A shareholder sent a dissenters' notice described in section 10-1322 shall demand payment, certify whether the shareholder acquired beneficial ownership of the shares before the date required to be set forth in the dissenters' notice pursuant to section 10-1322, subsection B, paragraph 3 and deposit the shareholder's certificates in accordance with the terms of the notice.

B. A shareholder who demands payment and deposits the shareholder's certificates under subsection A of this section retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.

C. A shareholder who does not demand payment or does not deposit the shareholder's certificates if required, each by the date set in the dissenters' notice, is not entitled to payment for the shareholder's shares under this article.

§ 10-1324 Share restrictions

A. The corporation may restrict the transfer of uncertificated shares from the date the demand for their payment is received until the proposed corporate action is taken or the restrictions are released under section 10-1326.

B. The person for whom dissenters' rights are asserted as to uncertificated shares retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.

§ 10-1325 Payment

A. Except as provided in section 10-1327, as soon as the proposed corporate action is taken, or if such action is taken without a shareholder vote, on receipt of a payment demand, the corporation shall pay each dissenter who complied with section 10-1323 the amount the corporation estimates to be the fair value of the dissenter's shares plus accrued interest.

B. The payment shall be accompanied by all of the following:

The corporation's balance sheet as of the end of a fiscal year ending not more than sixteen months before the date of payment, an income statement for that year, a statement of changes in shareholders' equity for that year and the latest available interim financial statements, if any.
A statement of the corporation's estimate of the fair value of the shares.
An explanation of how the interest was calculated.
A statement of the dissenter's right to demand payment under section 10-1328.
A copy of this article.

§ 10-1326 Failure to take action

A. If the corporation does not take the proposed action within sixty days after the date set for demanding payment and depositing share certificates, the corporation shall return the deposited certificates and release the transfer restrictions imposed on uncertificated shares.

B. If after returning deposited certificates and releasing transfer restrictions, the corporation takes the proposed action, it shall send a new dissenters' notice under section 10-1322 and shall repeat the payment demand procedure.

§ 10-1327 After-acquired shares

A. A corporation may elect to withhold payment required by section 10-1325 from a dissenter unless the dissenter was the beneficial owner of the shares before the date set forth in the dissenters' notice as the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action.

B. To the extent the corporation elects to withhold payment under subsection A of this section, after taking the proposed corporate action, it shall estimate the fair value of the shares plus accrued interest and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated and a statement of the dissenters' right to demand payment under section 10-1328.

§ 10-1328 Procedure if shareholder dissatisfied with payment or offer

A. A dissenter may notify the corporation in writing of the dissenter's own estimate of the fair value of the dissenter's shares and amount of interest due and either demand payment of the dissenter's estimate, less any payment under section 10-1325, or reject the corporation's offer under section 10-1327 and demand payment of the fair value of the dissenter's shares and interest due, if either:

The dissenter believes that the amount paid under section 10-1325 or offered under section 10-1327 is less than the fair value of the dissenter's shares or that the interest due is incorrectly calculated.
The corporation fails to make payment under section 10-1325 within sixty days after the date set for demanding payment.
The corporation, having failed to take the proposed action, does not return the deposited certificates or does not release the transfer restrictions imposed on uncertificated shares within sixty days after the date set for demanding payment.

B. A dissenter waives the right to demand payment under this section unless the dissenter notifies the corporation of the dissenter's demand in writing under subsection A of this section within thirty days after the corporation made or offered payment for the dissenter's shares.

Article 3 Judicial Appraisal of Shares

§ 10-1330 Court action

A. If a demand for payment under section 10-1328 remains unsettled, the corporation shall commence a proceeding within sixty days after receiving the payment demand and shall petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the sixty day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.

B. The corporation shall commence the proceeding in the court in the county where a corporation's principal office or, if none in this state, its known place of business is located. If the corporation is a foreign corporation without a known place of business in this state, it shall commence the proceeding in the county in this state where the known place of business of the domestic corporation was located.

C. The corporation shall make all dissenters, whether or not residents of this state, whose demands remain unsettled parties to the proceeding as in an action against their shares, and all parties shall be served with a copy of the petition. Nonresidents may be served by certified mail or by publication as provided by law or by the Arizona rules of civil procedure.

D. The jurisdiction of the court in which the proceeding is commenced under subsection B of this section is plenary and exclusive. There is no right to trial by jury in any proceeding brought under this section. The court may appoint a master to have the powers and authorities as are conferred on masters by law, by the Arizona rules of civil procedure or by the order of appointment. The master's report is subject to exceptions to be heard before the court, both on the law and the facts. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.

E. Each dissenter made a party to the proceeding is entitled to judgment either:

For the amount, if any, by which the court finds the fair value of his shares plus interest exceeds the amount paid by the corporation.
For the fair value plus accrued interest of the dissenter's after-acquired shares for which the corporation elected to withhold payment under section 10-1327.

§ 10-1331 Court costs and attorney fees

A. The court in an appraisal proceeding commenced under section 10-1330 shall determine all costs of the proceeding, including the reasonable compensation and expenses of any master appointed by the court. The court shall assess the costs against the corporation, except that the court shall assess costs against all or some of the dissenters to the extent the court finds that the fair value does not materially exceed the amount offered by the corporation pursuant to sections 10-1325 and 10-1327 or that the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment under section 10-1328.

B. The court may also assess the fees and expenses of attorneys and experts for the respective parties in amounts the court finds equitable either:

Against the corporation and in favor of any or all dissenters if the court finds that the corporation did not substantially comply with the requirements of article 2 of this chapter.
Against the dissenter and in favor of the corporation if the court finds that the fair value does not materially exceed the amount offered by the corporation pursuant to sections 10-1325 and 10-1327.
Against either the corporation or a dissenter in favor of any other party if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by this chapter.

C. If the court finds that the services of an attorney for any dissenter were of substantial benefit to other dissenters similarly situated and that the fees for those services should not be assessed against the corporation, the court may award to these attorneys reasonable fees to be paid out of the amounts awarded the dissenters who were benefitted.

Chapter 14 Dissolution

Article 1 Voluntary Dissolution

§ 10-1401 Dissolution by incorporators or initial directors

A majority of the incorporators or initial directors of a corporation that has not issued shares or has not commenced business may dissolve the corporation by delivering to the commission for filing the articles of dissolution. An incorporator or an initial director, whose signature shall be acknowledged, shall execute the articles of dissolution, and the articles shall set forth all of the following:

The name of the corporation.
The date of its incorporation.
Either:

(a) That none of the corporation's shares have been issued.

(b) That the corporation has not commenced business.

That no debt of the corporation remains unpaid.
That the net assets of the corporation remaining after winding up have been distributed to the shareholders, if shares were issued.
That a majority of the incorporators or initial directors authorized the dissolution.

§ 10-1402 Dissolution by board of directors and shareholders

A. A corporation's board of directors may propose dissolution for submission to the shareholders.

B. For a proposal to dissolve to be adopted both:

The board of directors shall recommend dissolution to the shareholders, unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders.
The shareholders entitled to vote shall approve the proposal to dissolve as provided in subsection E of this section.

C. The board of directors may condition its submission of the proposal for dissolution on any basis.

E. Unless the articles of incorporation or the board of directors acting pursuant to subsection C of this section requires a greater vote or a vote by voting groups, the proposal to dissolve, in order to be adopted, shall be approved by a majority of all of the votes entitled to be cast on that proposal.

§ 10-1403 Articles of dissolution; effective date of dissolution

A. At any time after dissolution is authorized, the corporation may dissolve by delivering to the commission for filing articles of dissolution setting forth all of the following:

The name of the corporation.
The date dissolution was authorized.
If dissolution was approved by the shareholders, both:

(a) The number of votes entitled to be cast on the proposal to dissolve.

(b) Either the total number of votes cast for and against dissolution or the total number of undisputed votes cast for dissolution and a statement that the number cast for dissolution was sufficient for approval.

If voting by voting groups was required, the information required by paragraph 3 of this subsection shall be separately provided for each voting group entitled to vote separately on the plan to dissolve.

B. A corporation is dissolved on the effective date of its articles of dissolution.

C. The articles of dissolution shall not be considered complete until the commission has received a notice from the department of revenue to the effect that the tax levied under title 42, chapter 5, article 1 against the corporation has been paid, or until it is notified by the department of revenue that the corporation is not subject to the tax and until the commission has received from the department of revenue its certificate issued pursuant to section 43-1151.

D. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of dissolution shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

E. The articles of dissolution shall not be considered complete until all fees, penalties and costs required to be paid under this title have been paid.

F. Notwithstanding subsection E of this section, if an annual report becomes due on or after the first date on which the articles of dissolution are delivered to the commission for filing, the annual report requirement and penalty accrual prescribed in section 10-1622 are suspended for a period of six months after the first date on which the articles of dissolution are delivered to the commission for filing. On the expiration of the six-month suspension, if the articles of dissolution are not approved for filing or if the corporation is administratively dissolved pursuant to section 10-1420, paragraph 9, all past due annual reports required by section 10-1622, together with fees and any applicable penalties, are owed as if the suspension never occurred.

§ 10-1404 Revocation of dissolution

A. A corporation may revoke its dissolution within one hundred twenty days of its effective date.

B. Revocation of dissolution shall be authorized in the same manner as the dissolution was authorized unless that authorization permitted revocation by action of the board of directors alone, in which event the board of directors may revoke the dissolution without shareholder action.

C. After the revocation of dissolution is authorized, the corporation may revoke the dissolution by delivering to the commission for filing articles of revocation of dissolution, together with a copy of its articles of dissolution, that set forth all of the following:

The name of the corporation.
The effective date of the dissolution that was revoked.
The date that the revocation of dissolution was authorized.
If the corporation's board of directors or incorporators revoked the dissolution, a statement to that effect.
If the corporation's board of directors revoked a dissolution authorized by the shareholders, a statement that revocation was permitted by action by the board of directors alone pursuant to that authorization.
If shareholder action was required to revoke the dissolution, the information required by section 10-1403, subsection A, paragraph 3 or 4.

D. Revocation of dissolution is effective on the effective date of the articles of revocation of dissolution.

E. When the revocation of dissolution is effective, it relates back to and takes effect as of the effective date of the dissolution and the corporation resumes carrying on its business as if dissolution had never occurred.

§ 10-1405 Effect of dissolution

A. A dissolved corporation continues its corporate existence but shall not carry on any business except that business appropriate to wind up and liquidate its business and affairs, including:

Collecting its assets.
Disposing of its properties that will not be distributed in kind to its shareholders.
Discharging or making provisions for discharging its liabilities.
Distributing its remaining property among its shareholders according to their interests.
Doing every other act necessary to wind up and liquidate its business and affairs.

B. Dissolution of a corporation does not:

Transfer title to the corporation's property.
Prevent transfer of its shares or securities, although the authorization to dissolve may provide for closing the corporation's share transfer records.
Subject its directors or officers to standards of conduct different from those prescribed in chapter 8 of this title.
Change quorum or voting requirements for its board of directors or shareholders, change provisions for selection, resignation or removal of its directors or officers, or both, or change provisions for amending its bylaws.
Prevent commencement of a proceeding by or against the corporation in its corporate name or any officers, directors or shareholders or affect applicable statutes of limitation.
Abate or suspend a proceeding pending by or against the corporation or any officers, directors or shareholders on the effective date of dissolution.
Terminate the authority of the statutory agent of the corporation.

§ 10-1406 Known claims against dissolved corporation; definition

A. A dissolved corporation may dispose of the known claims against it by following the procedure described in this section.

B. The dissolved corporation shall notify its known claimants in writing of the dissolution at any time and from time to time after its effective date. The written notice shall:

Describe information that shall be included in a claim.
Provide a mailing address where a claim may be sent.
State the deadline, which may not be fewer than one hundred twenty days from the effective date of the written notice, by which the dissolved corporation must receive the claim.
State that the claim will be barred if not received by the deadline.

C. A claim against the dissolved corporation is barred either:

If a claimant who was given written notice under subsection B does not deliver the claim to the dissolved corporation by the deadline.
If a claimant whose claim was rejected by the dissolved corporation does not commence a proceeding to enforce the claim within ninety days from the effective date of the rejection notice.

D. For purposes of this section, "claim" does not include a contingent claim. Notwithstanding the foregoing, a claim that is contingent as of the effective date of dissolution but later ripens into a known claim or a claim based on an event occurring after the effective date of dissolution may be disposed of by the dissolved corporation by following the procedures described in subsections B and C.

§ 10-1407 Unknown claims against dissolved corporation

A. A dissolved corporation may also publish notice of its dissolution and request that persons with claims against the corporation present them in accordance with the notice.

B. The notice shall:

Be published one time in a newspaper of general circulation in the county where the dissolved corporation's known place of business is or was last located.
Describe the information that must be included in a claim and provide a mailing address where the claim may be sent.
State that a claim against the corporation will be barred unless a proceeding to enforce the claim is commenced within five years after the publication of the notice or before the expiration of any other applicable limitations period, whichever is earlier.

C. If the dissolved corporation publishes a newspaper notice in accordance with subsection B of this section, the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved corporation within five years after the publication date of the newspaper notice or before the expiration of any other applicable limitations period, whichever is earlier:

A claimant who did not receive written notice under section 10-1406.
A claimant whose claim was timely sent to the dissolved corporation but not acted on.
A claimant whose claim is contingent or based on an event occurring after the effective date of the dissolution.

D. A claim, including a contingent claim or a claim based on an event occurring after the effective date of dissolution, may be enforced under this section either:

Against the dissolved corporation to the extent of its undistributed assets.
If the assets have been distributed in liquidation, against a shareholder of the dissolved corporation to the extent of the shareholder's pro rata share of the claim or the corporate assets distributed to the shareholder in liquidation, whichever is less, but a shareholder's total liability for all claims under this subsection shall not exceed the total amount of assets distributed to the shareholder.

E. This section does not extend or lengthen any otherwise applicable time period during which claims may be brought against the corporation.

Article 2 Administrative Dissolution

§ 10-1420 Grounds for administrative dissolution

The commission may commence a proceeding under section 10-1421 to administratively dissolve a corporation if either:

The corporation does not pay within sixty days after they are due any fees or penalties imposed by chapters 1 through 17 of this title.
The corporation does not deliver its annual report to the commission within sixty days after it is due.
The corporation is without a statutory agent or known place of business in this state for sixty days or more.
The corporation does not notify the commission within sixty days that its statutory agent or known place of business has been changed, that its statutory agent has resigned or that its principal office has been discontinued.
The corporation has failed to make any publication required by this title, provided the commission has notified the corporation of the intent of the commission to commence a dissolution proceeding for that reason and the corporation has failed to file an affidavit of publication or other appropriate evidence of publication within sixty days after that notice.
The corporation's period of duration stated in its articles of incorporation expires.
The corporation has failed to comply with section 10-202, subsection F.
Any officer or other representative of the corporation has made any misrepresentation of a material matter in any application, report or other document submitted by the corporation pursuant to chapters 1 through 17 of this title.
The corporation has failed to comply with section 10-1403, subsection D or E, or the commission has not received the notice required by section 10-1403, subsection C, within six months after filing articles of dissolution.
The corporation has failed to file a certificate of disclosure or answer interrogatories as prescribed in chapters 1 through 17 of this title.
The corporation failed to comply with section 10-1623, subsection A.

§ 10-1421 Procedure for and effect of administrative dissolution

A. If the commission determines that one or more grounds exist under section 10-1420 for dissolving a corporation, it shall serve the corporation with written notice of its determination under section 10-504.

C. Subject to the provisions of section 10-1422 regarding reinstatement, a corporation administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business and affairs under section 10-1405 and notify claimants under sections 10-1406 and 10-1407. If the corporation has not applied for reinstatement within six months after the effective date of the dissolution, the commission shall release the corporate name for use in accordance with chapters 1 through 17 of this title or by a person intending to register the name as a trade name pursuant to title 44, chapter 10, article 3.1.

D. The administrative dissolution of a corporation does not terminate the authority of its statutory agent.

§ 10-1422 Reinstatement following administrative dissolution

A. A corporation administratively dissolved under section 10-1421 may apply to the commission for reinstatement within six years after the effective date of dissolution. The application shall both:

Recite the name of the corporation and the effective date of its administrative dissolution.
State that the ground or grounds for dissolution either did not exist or have been eliminated.

B. If the commission determines that the application contains the information required by subsection A of this section and that the information is correct, it shall cancel the certificate of dissolution and shall prepare a certificate of reinstatement that recites this determination and the effective date of reinstatement, shall file the original of the certificate and shall serve a copy on the corporation under section 10-504.

C. When the reinstatement is effective, it relates back to and takes effect as of the effective date of the administrative dissolution and the corporation resumes carrying on its business as if the administrative dissolution had never occurred.

D. If another corporation has adopted the name of the corporation or another person has adopted the name of the corporation as a trade name, the application shall be accompanied by articles of amendment that are in accordance with chapter 10, article 1 of this title and that adopt a new name for the corporation that complies with chapter 4, article 1 of this title.

Article 3 Judicial Dissolution

§ 10-1430 Grounds for judicial dissolution or equitable relief

A. The court may dissolve a corporation in a proceeding by the attorney general if it is established that either:

The corporation obtained its articles of incorporation through fraud.
The corporation has continued to exceed or abuse the authority conferred on it by law.

B. The court may dissolve a corporation in a proceeding by a shareholder if it is established that either:

The directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock and irreparable injury to the corporation is threatened or being suffered or the business and affairs of the corporation cannot be conducted to the advantage of the shareholders generally because of the deadlock.
The directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent.
The shareholders are deadlocked in voting power and have failed for a period that includes at least two consecutive annual meeting dates to elect one or more directors.
The corporate assets are being wasted, misapplied or diverted for noncorporate purposes.

C. The court may dissolve a corporation in a proceeding by a creditor if it is established that either:

The creditor's claim has been reduced to a judgment, the execution of the judgment has been returned unsatisfied and the corporation is insolvent.
The corporation has admitted in writing that the creditor's claim is due and owing and the corporation is insolvent.

D. The court may dissolve a corporation in a proceeding by the corporation to have its voluntary dissolution continued under court supervision.

§ 10-1431 Procedure for judicial dissolution or equitable relief

A. Venue for a proceeding by the attorney general to dissolve a corporation or for a proceeding brought by any other party named in section 10-1430 is in the county where a corporation's known place of business is or was last located.

B. It is not necessary to make shareholders parties to a proceeding to dissolve a corporation unless relief is sought against them personally.

C. A court in a proceeding brought to dissolve a corporation may issue injunctions, appoint a receiver with all of the powers and duties the court directs, take other action required to preserve the corporate assets wherever located and carry on the business of the corporation until a full hearing can be held.

§ 10-1432 Receivership

A. A court in a judicial proceeding brought to dissolve a corporation may appoint one or more receivers to wind up and liquidate or manage the business and affairs of the corporation. After notifying all parties to the proceeding and any interested persons designated by the court, the court shall hold a hearing before appointing a receiver. The court appointing a receiver has exclusive jurisdiction over the corporation and all of its property wherever located.

B. The court may appoint an individual or a domestic or foreign corporation authorized to transact business in this state as a receiver. The court may require the receiver to post bond with or without sureties in an amount the court directs.

C. The court shall describe the powers and duties of the receiver in its appointing order, which may be amended from time to time. Among other powers, the receiver may exercise all of the powers of the corporation, through or in place of its board of directors, executive committee or officers, to the extent necessary to carry on the ordinary and necessary business of the corporation and to manage the affairs of the corporation in the best interests of its shareholders and creditors.

D. The court from time to time during the receivership may order compensation paid and expense disbursements or reimbursements made to the receiver and its counsel from the assets of the corporation or proceeds from the sale of the assets.

E. A receiver of a corporation may sue and defend in all courts in his own name as receiver of such corporation.

§ 10-1433 Decree of dissolution

A. If after a hearing the court determines that one or more of the grounds for judicial dissolution described in section 10-1430 exist, it may enter a decree that dissolves the corporation and that specifies the effective date. The clerk of the court shall deliver a certified copy of a dissolution decree to the commission which shall file it.

B. After entering a decree of dissolution, the court shall direct the winding up and liquidation of the corporation's business and affairs in accordance with section 10-1405 and the notification of claimants in accordance with sections 10-1406 and 10-1407.

§ 10-1434 Election to purchase in lieu of dissolution

A. In a proceeding under section 10-1430, subsection B to dissolve a corporation that has no shares listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association, the corporation may elect or, if it fails to elect, one or more shareholders may elect to purchase all shares owned by the petitioning shareholder at the fair value of the shares. An election pursuant to this section is irrevocable unless the court determines that it is equitable to set aside or modify the election.

B. An election to purchase pursuant to this section may be filed with the court at any time within ninety days after the filing of the petition under section 10-1430, subsection B or at a later time as the court may allow. If the election to purchase is filed by one or more shareholders, the corporation, within ten days after the filing, shall give written notice to all shareholders other than the petitioner. The notice shall state the name and number of shares owned by the petitioner and the name and number of shares owned by each electing shareholder and shall advise the recipients of their right to join in the election to purchase shares in accordance with this section. Shareholders who wish to participate shall file notice of their intention to join in the purchase no later than thirty days after the effective date of the notice to them. All shareholders who have filed an election or notice of their intention to participate in the election to purchase become parties to the proceeding and shall participate in the purchase in proportion to their ownership of shares as of the date the first election was filed, unless they otherwise agree or the court otherwise directs. After an election has been filed by the corporation or one or more shareholders, the proceeding under section 10-1430, subsection B shall not be discontinued or settled, and the petitioning shareholder shall not sell or otherwise dispose of his shares, unless the court determines that it would be equitable to the corporation and the shareholders other than the petitioner to permit this discontinuance, settlement, sale or other disposition.

C. If, within sixty days of the filing of the first election, the parties reach agreement as to the fair value and terms of purchase of the petitioner's shares, the court shall enter an order directing the purchase of the petitioner's shares on the terms and conditions agreed to by the parties.

D. If the parties are unable to reach an agreement as provided for in subsection C of this section, the court, on application of any party, shall stay the proceedings under section 10-1430, subsection B and determine the fair value of the petitioner's shares as of the day before the date on which the petition under section 10-1430, subsection B was filed or as of another date as the court deems appropriate under the circumstances.

E. On determining the fair value of the shares, the court shall enter an order directing the purchase on the terms and conditions as the court deems appropriate, which may include payment of the purchase price in installments, if necessary in the interests of equity, provision for security to assure payment of the purchase price and any additional costs, fees and expenses as may have been awarded and, if the shares are to be purchased by shareholders, the allocation of shares among them. In allocating the petitioner's shares among holders of different classes of shares, the court shall attempt to preserve the existing distribution of voting rights among holders of different classes insofar as practicable and may direct that holders of a specific class or classes shall not participate in the purchase. Interest may be allowed at the rate and from the date determined by the court to be equitable, but if the court finds that the refusal of the petitioning shareholder to accept an offer of payment was arbitrary or otherwise not in good faith, interest shall not be allowed. If the court finds that the petitioning shareholder had probable grounds for relief under section 10-1430, subsection B, paragraph 2 or 4, it may award to the petitioning shareholder reasonable fees and expenses of an attorney and of any experts employed by him.

F. On entry of an order under subsection C or E of this section, the court shall dismiss the petition to dissolve the corporation under section 10-1430 and the petitioning shareholder does not have any rights or status as a shareholder of the corporation, except the right to receive the amounts awarded to the petitioning shareholder by the order of the court that is enforceable in the same manner as any other judgment.

G. The purchase ordered pursuant to subsection E of this section shall be made within ten days after the date the order becomes final unless before that time the corporation files with the court a notice of its intention to adopt articles of dissolution pursuant to sections 10-1402 and 10-1403, which articles shall be adopted and filed within fifty days thereafter. On filing of the articles of dissolution, the corporation shall be dissolved in accordance with sections 10-1405, 10-1406 and 10-1407, and the order entered pursuant to subsection E of this section does not have any force or effect, except that the court may award the petitioning shareholder reasonable fees and expenses in accordance with subsection E of this section and the petitioner may continue to pursue any claims previously asserted on behalf of the corporation.

H. Any payment by the corporation pursuant to an order under subsection C or E of this section, other than an award of fees and expenses pursuant to subsection E of this section, is subject to section 10-640.

Article 4 Miscellaneous

§ 10-1440 Deposit with department of revenue

Assets of a dissolved corporation that should be transferred to a creditor, claimant or shareholder of the corporation who either cannot be found or who is not competent to receive them and does not have a legal representative who is legally competent to receive them shall be reduced to cash and deposited with the unclaimed property division of the department of revenue for safekeeping. When the creditor, claimant, shareholder or legal representative who is legally competent to receive the distributive portion furnishes satisfactory proof of entitlement to the amount deposited, the unclaimed property division of the department of revenue shall pay the creditor, claimant, shareholder or legal representative that amount.

Chapter 15 Foreign Corporation

Article 1 Grant of Authority

§ 10-1501 Authority to transact business required

A. A foreign corporation shall not transact business in this state until it is granted authority to transact business in this state as provided in this chapter from the commission.

B. The following activities, among others, do not constitute transacting business within the meaning of subsection A:

Maintaining, defending or settling any proceeding.
Holding meetings of the board of directors or shareholders or carrying on other activities concerning internal corporate affairs.
Maintaining bank accounts.
Maintaining offices or agencies for the transfer, exchange and registration of the corporation's own securities or maintaining trustees or depositaries with respect to those securities.
Selling through independent contractors.
Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts.
Creating or acquiring indebtedness, mortgages and other security interests in real or personal property.
Securing or collecting debts or enforcing mortgages and security interests in property securing the same.
Owning, without more, real or personal property.
Conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like nature.
Transacting business in interstate commerce.
Being a limited partner of a limited partnership or a member of a limited liability company.

C. The list of activities in subsection B is not exhaustive.

D. This section does not apply to insurance corporations or any corporation transacting in this state only the business of lending monies to religious, social or benevolent associations.

§ 10-1502 Consequences of transacting business without authority; penalty

A. A foreign corporation transacting business in this state without a grant of authority shall not be permitted to maintain a proceeding in any court in this state until it is authorized to transact business.

B. The successor to a foreign corporation that transacted business in this state without a grant of authority and the assignee of a cause of action arising out of that business may not maintain a proceeding based on that cause of action in any court in this state until the foreign corporation or its successor obtains authority to transact business.

C. A court may stay a proceeding commenced by a foreign corporation, its successor or its assignee until it determines whether the foreign corporation, its successor or its assignee requires authority to transact business in this state. If it so determines, the court may further stay the proceeding until the foreign corporation or its successor obtains authority to transact business in this state.

D. A foreign corporation that transacts business in this state without authority is liable to this state, for the years or portions of years during which it transacted business in this state without authority, in an amount equal to all fees that would have been imposed by chapters 1 through 17 of this title on the corporation if it had duly applied for and received authority to transact business in this state as required by chapters 1 through 17 of this title and thereafter filed all reports required by chapters 1 through 17 of this title. In addition to all penalties imposed by chapters 1 through 17 of this title for failure to pay the fees, the corporation shall pay a penalty of up to one thousand dollars to this state for violating this section. The attorney general may bring proceedings to recover all amounts due this state under this section.

E. Notwithstanding subsections A and B, the failure of a foreign corporation to obtain authority to transact business in this state does not impair the validity of its corporate acts or prevent it from defending any proceedings in this state.

F. The attorney general or any other person may bring and maintain an action to enjoin any foreign corporation from transacting business in this state without authority. On a foreign corporation obtaining authority, the action shall be dismissed, but the plaintiff shall recover its costs and reasonable attorney fees. A determination by a court of competent jurisdiction in this state that a party to the action is a foreign corporation that was required but failed to qualify as a foreign corporation under chapters 1 through 17 of this title is prima facie evidence against the foreign corporation in any other action brought by or against it by any other person of the requirement to and failure to qualify.

§ 10-1503 Application for authority to transact business

A. A foreign corporation may apply for authority to transact business in this state by delivering an application and a certificate of disclosure to the commission for filing. The certificate of disclosure shall contain the information set forth in section 10-202, subsection D and is subject to the requirements of section 10-202, subsection F. The application shall be executed by the corporation and shall set forth:

The name of the foreign corporation and, if its name is unavailable for use in this state, a corporate name that satisfies the requirements of section 10-1506.
The name of the state or country under whose law it is incorporated.
Its date of incorporation and period of duration.
The street address of its principal office in its state or country of incorporation or, if none, the street address of its registered agent in its state or country of incorporation.
The street address of the proposed known place of business of the corporation in this state and the name and street address of its proposed statutory agent in this state.
If its purpose or purposes are narrower than the transaction of any or all lawful business in which corporations may engage in the state or country under whose law it is incorporated, a statement of the limitations on its purpose.
The names and usual business addresses of its current directors and officers.
A statement of the aggregate number of shares that the corporation has authority to issue, itemized by classes and series, if any, within a class.
A statement of the aggregate number of issued shares itemized by classes and series, if any, within a class.
A brief statement of the character of business that the corporation initially intends actually to conduct in this state. This statement does not limit the character of business that the corporation ultimately conducts.

B. The foreign corporation shall deliver the application and the certificate of disclosure to the commission, together with a copy of its articles of incorporation, any amendments to the articles of incorporation and a certificate of existence or a document of similar import duly authenticated by the secretary of state or other official having custody of corporate records in the state or country under whose law it is incorporated, and the nonrefundable fees required by law.

C. After determining that the application sets forth the information required by this section, does not use as the name of the corporation in this state a name that is in violation of section 10-1506 and appears in all other respects to conform to the requirements of this article, the commission shall file the application. The date of filing shall be the date on which the corporation is granted authority to transact business in this state.

D. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the application shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

E. A foreign corporation authorized to transact business in this state is subject to section 10-1623.

§ 10-1504 Delivery of changes; changes requiring amended authority

A. Whenever the articles of incorporation of a foreign corporation authorized to transact business in this state are amended or restated by merger or otherwise, within sixty days after the amendment or restatement becomes effective, the foreign corporation shall deliver to the commission a copy of the amendment or restatement duly authenticated by the secretary of state or other official having custody of corporate records in the state or country where the foreign corporation is incorporated.

B. In addition to the requirement prescribed in subsection A of this section, a foreign corporation authorized to transact business in this state shall amend its application for authority by filing with the commission articles of amendment to application for authority if any of the following occurs:

The foreign corporation changes its actual corporate name or the name under which it has obtained authority to transact business in this state pursuant to section 10-1503, subsection A, paragraph 1.
The foreign corporation changes its period of duration.
The foreign corporation changes its state or country of incorporation.
A statement in the application for authority was inaccurate when made.

§ 10-1505 Effect of grant of authority

A. A grant of authority to transact business authorizes the foreign corporation to transact business in this state subject to the right of this state to revoke the grant of authority as provided in chapters 1 through 17 of this title.

B. A foreign corporation with a valid grant of authority has the same but no greater rights and has the same but no greater privileges as and except as otherwise provided by chapters 1 through 17 of this title and is subject to the same duties, restrictions, penalties and liabilities now or later imposed on a domestic corporation of like character.

C. Chapters 1 through 17 of this title do not authorize this state to regulate the organization or internal affairs of a foreign corporation authorized to transact business in this state.

§ 10-1506 Corporate name of foreign corporation

A. If the corporate name of a foreign corporation does not satisfy the requirements of section 10-401, to obtain or maintain a grant of authority to transact business in this state the foreign corporation:

Shall either:

(a) Add the word "association", "bank", "company", "corporation" or "incorporated" or an abbreviation of one of these words to its corporate name for use in this state.

(b) Use a fictitious name that satisfies the requirements of section 10-401 to transact business in this state if its real name is unavailable and it delivers to the commission for filing a copy of the resolution of its board of directors, certified by its secretary, adopting the fictitious name.

Shall not include language in its corporate name stating or implying that the foreign corporation is organized for a purpose other than that allowed by section 10-301 and its articles of incorporation.
Notwithstanding paragraph 1, subdivision (a) of this subsection, shall not include the words "bank", "deposit", "credit union", "trust" or "trust company" separately or in combination in its corporate name to indicate or convey the idea that the foreign corporation is engaged in banking or trust business unless the foreign corporation is to be and becomes actively and substantially engaged in the banking, credit union or trust business or the foreign corporation is a holding company holding a substantial interest in companies actively and substantially engaged in the banking or trust business.

B. Except as authorized by subsection C of this section, the corporate name, including a fictitious name, of a foreign corporation shall be distinguishable from:

The corporate name of a corporation incorporated in this state or a foreign corporation authorized to transact business in this state.
A corporate name reserved under section 10-402 or registered under section 10-403.
The fictitious name adopted by another foreign corporation under this section.
The corporate name of a nonprofit corporation incorporated under this title or a foreign nonprofit or not for profit corporation authorized to conduct affairs in this state.
The partnership name of a limited partnership organized and registered under the laws of this state or of a foreign limited partnership authorized to transact business in this state.
The name of a limited liability company organized under title 29 or a foreign limited liability company authorized to transact business in this state.
A trade name registered pursuant to title 44, chapter 10, article 3.1.
The name of a registered limited liability partnership registered under title 29, chapter 5, article 10 or a foreign registered limited liability partnership authorized to transact business in this state.

C. The commission shall authorize the use of a name that is not distinguishable under subsection B of this section from one or more of the names described in subsection B of this section if the applicant delivers to the commission a certified copy of a final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this state.

D. If a foreign corporation authorized to transact business in this state changes its corporate name to one that does not satisfy the requirements of section 10-401, it may not transact business in this state under the changed name until it adopts a name satisfying the requirements of section 10-401 and obtains amended authority under section 10-1504.

§ 10-1507 Known place of business and statutory agent of foreign corporation

Each foreign corporation authorized to transact business in this state shall continuously maintain in this state both:

A known place of business that may be the address of its statutory agent.
A statutory agent who may be either:

(a) An individual who resides in this state.

(b) A domestic corporation formed under this title.

(d) A limited liability company formed under title 29.

(e) A limited liability company authorized to transact business in this state.

§ 10-1508 Change of known place of business or statutory agent of foreign corporation

A. A foreign corporation authorized to transact business in this state may change its known place of business or statutory agent by delivering to the commission for filing a statement of change, which may be the annual report, that sets forth:

The name of the foreign corporation.
The street address of its current known place of business.
If the current known place of business is to be changed, the street address of the new known place of business.
The name and street address of its current statutory agent.
If the current statutory agent is to be changed, the name of its new statutory agent and the new agent's written consent to the appointment.

B. The statement of change shall be executed by the foreign corporation by an officer and delivered to the commission. The change or changes set forth in the statement of change are effective on delivery to the commission for filing.

C. If a statutory agent changes its street address, it shall give written notice to the foreign corporation of the change and shall sign, either manually or in facsimile, and deliver to the commission for filing a statement that complies with the requirements of subsection A and recites that the foreign corporation has been given written notice of the change. The change or changes are effective on delivery to the commission for filing.

§ 10-1509 Resignation of statutory agent of foreign corporation

A. The statutory agent of a foreign corporation may resign the agency appointment by delivering to the commission for filing an original and two copies of a signed statement of resignation. The statement of resignation may include a disclosure that the known place of business of the foreign corporation has changed or has been discontinued. The statutory agent shall give written notification of the resignation to the foreign corporation at its last known address, other than that of the resigning statutory agent.

B. After the receipt and the filing of the statement of resignation, the commission shall mail one copy to the foreign corporation at its known place of business within the state, if not discontinued. The commission shall mail another copy of the statement of resignation to the foreign corporation at its last known office in the jurisdiction of incorporation.

C. The agency appointment is deemed terminated and the known place of business is discontinued, if so provided, on the thirty-first day after the date on which the statement was delivered to the commission for filing.

§ 10-1510 Service on foreign corporation

A. The statutory agent appointed by a foreign corporation is an agent of the foreign corporation on whom process, notice or demand that is required or permitted by law to be served on the foreign corporation may be served and that, when so served, is lawful personal service on the foreign corporation.

B. If a foreign corporation fails to appoint or maintain a statutory agent at the address shown on the records of the commission, the commission is an agent of the foreign corporation on whom any process, notice or demand may be served. Pursuant to the Arizona rules of civil procedure, service on the commission of any process, notice or demand shall be made by delivering to and leaving with the commission duplicate copies of the process, notice or demand, and the commission shall immediately cause one of the copies of the process, notice or demand to be forwarded by mail, addressed to the foreign corporation at its known place of business. Service made on the commission is returnable pursuant to applicable law relative to personal service on the corporation. If service is made on the commission, whether under this chapter or a rule of court, the foreign corporation has thirty days to respond in addition to the time otherwise provided by law.

D. Notice required to be served on a foreign corporation pursuant to section 10-1531 may be served:

By mail addressed to the statutory agent of the foreign corporation or, if the foreign corporation fails to appoint and maintain a statutory agent, addressed to its known place of business in this state or its principal place of business in its state or country of incorporation.
By electronic transmission to the statutory agent or to the corporation, or both.
Pursuant to the rules for service of process authorized by the Arizona rules of civil procedure.

Article 2 Withdrawal

§ 10-1520 Withdrawal of foreign corporation

A. A foreign corporation authorized to transact business in this state shall not withdraw from this state until the commission files its application for withdrawal.

B. A foreign corporation authorized to transact business in this state may apply to surrender the authority by delivering an application to the commission for filing. The application shall set forth:

The name of the foreign corporation and the name of the state or country under whose law it is incorporated.
That it is not transacting business in this state and that it surrenders its authority to transact business in this state.
That the foreign corporation revokes the authority of its statutory agent to accept service on its behalf and appoints the commission as its agent for service of process in any proceeding based on a cause of action arising during the time it was authorized to transact business in this state.
A mailing address to which the commission may mail a copy of any process served on the commission pursuant to its appointment as the foreign corporation's agent for service of process.
A commitment to notify the commission in the future of any change in the foreign corporation's mailing address.

C. The application for withdrawal is not considered complete until the commission has received a notice from the department of revenue to the effect that the tax levied under title 42, chapter 5, article 1 against the foreign corporation has been paid or until it is notified by the department of revenue that the applicant is not subject to the tax and further has received from the department of revenue its certificate issued pursuant to section 43-1151.

D. The application for withdrawal is not considered complete until all fees, penalties and costs required to be paid under this chapter have been paid.

E. After determining that the application appears in all respects to conform to the requirements of this chapter and when all fees have been paid as are prescribed in this chapter, the commission shall file the application in the manner provided in section 10-120. On the filing of the application for withdrawal, the authority of the foreign corporation to transact business in this state ceases.

F. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the application for withdrawal shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

G. After withdrawal of the foreign corporation is effective, service of process on the commission under this section is service on the foreign corporation. On receipt of process, the commission shall mail a copy of the process to the foreign corporation at the most recent mailing address provided by the foreign corporation in the application or by notice to the commission.

H. Notwithstanding subsection D of this section, if an annual report becomes due on or after the first date on which an application for withdrawal is delivered to the commission for filing, the annual report requirement and penalty accrual prescribed in section 10-1622 are suspended for a period of six months after the first date on which the application for withdrawal is delivered to the commission for filing. On the expiration of the six-month suspension, if the application for withdrawal is not approved for filing or if the authority of the corporation to transact business is revoked pursuant to section 10-1530, paragraph 10, all past due annual reports required by section 10-1622, together with fees and any applicable penalties, are owed as if the suspension never occurred.

§ 10-1521 Withdrawal by duly authorized officers; foreign corporations

A. A majority of the duly authorized officers of a foreign corporation that has not issued shares or that has not commenced transacting business in this state may withdraw the foreign corporation by delivering to the commission for filing an application for withdrawal that sets forth all of the following:

The name of the foreign corporation and the name of the state or country under whose laws it is incorporated.
That the foreign corporation revokes the authority of its statutory agent to accept service on its behalf and appoints the commission as its agent for service of process in any proceeding based on a cause of action arising during the time it was authorized to transact business in this state.
A mailing address to which the commission may mail a copy of any process served on the commission pursuant to its appointment as the foreign corporation’s agent for service of process.
A commitment to notify the commission in the future of any change in the foreign corporation’s mailing address.
Either of the following:

(a) That none of the foreign corporation's shares have been issued in this state.

(b) That the foreign corporation has not commenced business in this state and that it surrenders its authority to transact business in this state.

That no debt of the foreign corporation acquired in this state remains unpaid.
That a majority of the duly authorized officers authorized the withdrawal.

B. The application for withdrawal filed pursuant to this section must be executed pursuant to section 10-120, subsection F.

C. After determining that the application appears in all respects to conform to the requirements of this chapter and when all fees have been paid as are prescribed by this chapter, the commission shall file the application in the manner provided in section 10-120. On the filing of the application for withdrawal, the authority of the foreign corporation to transact business in this state ceases.

Article 3 Revocation of Grant of Authority

§ 10-1530 Grounds for revocation

The commission may commence a proceeding under section 10-1531 to revoke the authority of a foreign corporation to transact business in this state if any of the following conditions exist:

The foreign corporation does not deliver its annual report to the commission within the time required by chapters 1 through 17 of this title.
The foreign corporation does not pay any fees or penalties imposed by chapters 1 through 17 of this title when they become due and payable.
The foreign corporation is without a statutory agent or known place of business in this state for sixty days or more.
The foreign corporation does not inform the commission that its statutory agent or known place of business has changed or that its statutory agent has resigned within sixty days after the change or resignation.
The foreign corporation has failed to make any publication required by this title, provided the commission has notified the foreign corporation of the intent of the commission to commence a revocation proceeding for that reason and the foreign corporation has failed to file an affidavit or other appropriate evidence of publication within sixty days after that notice.
An incorporator, director, officer or agent of the foreign corporation signed a document he knew was false in any material respect with intent that the document be delivered to the commission for filing.
The commission receives a duly authenticated certificate from the secretary of state or other official having custody of corporate records in the state or country under whose law the foreign corporation is incorporated stating that it has been dissolved or disappeared as the result of a merger.
The corporation has failed to file a certificate of disclosure or answer interrogatories as prescribed in chapters 1 through 17 of this title.
Any officer or other representative of the corporation has made any misrepresentation of a material matter in any application, report or other document submitted by the corporation pursuant to chapters 1 through 17 of this title.
The corporation has failed to pay fees, penalties and costs required under this chapter or to comply with section 10-1520, subsection F or the commission has not received the notice required by section 10-1520, subsection C within six months after filing the application for withdrawal.

§ 10-1531 Procedure for and effect of revocation; reinstatement

A. If the commission determines that one or more grounds exist under section 10-1530 for revocation of a grant of authority, the commission shall serve the foreign corporation with written notice of the determination under section 10-1510.

B. If the foreign corporation does not correct each ground for revocation or demonstrate to the reasonable satisfaction of the commission that each ground determined by the commission does not exist within sixty days after service of the notice is perfected under section 10-1510, the commission may revoke the foreign corporation's grant of authority by signing a certificate of revocation that recites the ground or grounds for revocation and its effective date. The commission shall file the original of the certificate and serve a copy on the foreign corporation under section 10-1510.

C. The authority of a foreign corporation to transact business in this state ceases on the date shown on the certificate revoking its grant of authority.

D. The commission's revocation of a foreign corporation's grant of authority appoints the commission the foreign corporation's agent for service of process in any proceeding based on a cause of action that arose during the time the foreign corporation was authorized to transact business in this state. Service of process on the commission under this subsection is service on the foreign corporation. On receipt of process, the commission shall mail a copy of the process to the secretary of the foreign corporation at its principal office shown in its most recent annual report or in any subsequent communication received from the foreign corporation stating the current mailing address of its principal office, or, if none is on file, in its application for authority.

E. Revocation of a foreign corporation's grant of authority does not terminate the authority of the statutory agent of the foreign corporation.

F. A foreign corporation whose authority was revoked pursuant to this section may apply to the commission for reinstatement within six years after the effective date of the revocation. The application shall state both:

The name of the foreign corporation and the effective date of the foreign corporation's revocation of authority.
That the ground or grounds for the revocation either did not exist or have been eliminated.

G. If the commission determines that the application contains the information prescribed in subsection F of this section and that the information is correct, the commission shall do all of the following:

Cancel the certificate of revocation.
Prepare a certificate of reinstatement that states the determination and the effective date of the reinstatement.
File the original of the certificate of reinstatement.
Serve a copy on the foreign corporation pursuant to section 10-1510.

H. Once the reinstatement is effective, the reinstatement relates back to and takes effect as of the effective date of the revocation and the foreign corporation shall resume its business as if the revocation had never occurred.

I. If the corporation has not applied for reinstatement within six months after the effective date of the dissolution, the commission shall release the corporation name for use pursuant to chapters 1 through 17 of this title or by a person intending to register the name as a trade name pursuant to title 44, chapter 10, article 3.1. If another corporation has adopted the name of the foreign corporation or another person has adopted the name of the foreign corporation as a trade name, the foreign corporation shall attach to the application for reinstatement an application for amended authority and adopt a fictitious name for use in this state that satisfies the requirements of sections 10-1504 and 10-1506.

Chapter 16 Records and Reports

Article 1 Records

§ 10-1601 Corporate records

A. A corporation shall keep as permanent records minutes of all meetings of its shareholders and board of directors, a record of all actions taken by the shareholders or board of directors without a meeting and a record of all actions taken by a committee of the board of directors in place of the board of directors on behalf of the corporation.

B. A corporation shall maintain appropriate accounting records.

C. A corporation or its agent shall maintain a record of its shareholders in a form that permits preparation of a list of the names and addresses of all shareholders and in alphabetical order by class of shares showing the number and class of shares held by each.

D. A corporation shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time.

E. A corporation shall keep a copy of all of the following records at its principal office, at its known place of business or at the office of its agent:

Its articles or restated articles of incorporation and all amendments to them currently in effect.
Its bylaws or restated bylaws and all amendments to them currently in effect.
Resolutions adopted by its board of directors creating one or more classes or series of shares and fixing their relative rights, preferences and limitations, if shares issued pursuant to those resolutions are outstanding.
The minutes of all shareholders' meetings and records of all action taken by shareholders without a meeting for the past three years.
All written communications to shareholders generally within the past three years, including the financial statements furnished for the past three years under section 10-1620.
A list of the names and business addresses of its current directors and officers.
Its most recent annual report delivered to the commission under section 10-1622.
An agreement among shareholders under section 10-732.

§ 10-1602 Inspection of records by shareholders

A. Any shareholder who has been a holder of record of shares or of a voting trust beneficial interest therefor at least six months immediately preceding its demand or will be the holder of record of or the holder of record of a voting trust beneficial interest for at least five per cent of all of the outstanding shares of a corporation is entitled to inspect and copy any of the records of the corporation described in section 10-1601, subsection E during regular business hours at the corporation's principal office, if the shareholder gives the corporation written notice of its demand as provided in section 10-141 at least five business days before the date on which it wishes to inspect and copy.

B. Any shareholder who has been a holder of record of shares or of a voting trust beneficial interest for at least six months immediately preceding its demand or will be the holder of record of or the holder of record of a voting trust beneficial interest for at least five per cent of all of the outstanding shares of a corporation is entitled to inspect and copy any of the following records of the corporation during regular business hours at a reasonable location specified by the corporation, if the shareholder meets the requirements of subsection C of this section and gives the corporation written notice of its demand as provided in section 10-141 at least five business days before the date on which it wishes to inspect and copy the following:

Excerpts from minutes of any meeting of the board of directors, records of any action of a committee of the board of directors while acting in place of the board of directors on behalf of the corporation, minutes of any meeting of the shareholders and records of action taken by the shareholders or board of directors without a meeting, to the extent not subject to inspection under subsection A of this section.
Accounting records of the corporation.
The record of shareholders.
The corporation's most recent financial statements showing in reasonable detail its assets and liabilities and the results of its operations.

C. A shareholder may inspect and copy the records described in subsection B of this section only if all of the following conditions are met:

The shareholder's demand is made in good faith and for a proper purpose.
The shareholder describes with reasonable particularity its purpose and the records it desires to inspect.
The records are directly connected with the shareholder's purpose.

D. The right of inspection granted by this section shall not be abolished or limited by a corporation's articles of incorporation or bylaws.

E. This section does not affect:

The right of a shareholder to inspect records under section 10-720, or if the shareholder is in litigation with the corporation, to the same extent as any other litigant.
The power of a court, independently of chapters 1 through 17 of this title, to compel the production of corporate records for examination on proof by a shareholder or holder of a voting trust beneficial interest of proper purpose, irrespective of the period of time during which the shareholder or holder of a voting trust beneficial interest has been a shareholder of record or a holder of record of a voting trust beneficial interest and irrespective of the number of shares held by the shareholder or represented by a voting trust beneficial interest held by the shareholder.

§ 10-1603 Scope of inspection right; charge

A. A shareholder's agent or attorney has the same inspection and copying rights as the shareholder it represents.

B. The right to copy records under section 10-1602 includes, if reasonable, the right to receive copies made by photographic, xerographic or other means.

C. The corporation may impose a reasonable charge covering the costs of labor and material for copies of any documents provided to the shareholder. The charge shall not exceed the estimated cost of production or reproduction of the records.

D. The corporation may comply with a shareholder's demand to inspect the record of shareholders under section 10-1602, subsection B, paragraph 3 by providing the shareholder with a list of the corporation's shareholders that was compiled no earlier than the date of the shareholder's demand.

§ 10-1604 Court-ordered inspection

A. If a corporation does not allow a shareholder who complies with section 10-1602, subsection A to inspect and copy any records required by that subsection to be available for inspection, the court in the county where the corporation's known place of business is located may summarily order inspection and copying of the records demanded at the corporation's expense on application of the shareholder.

B. If a corporation does not allow within a reasonable time a shareholder to inspect and copy any other record, the shareholder who complies with section 10-1602, subsections B and C may apply to the court in the county where the corporation's principal office is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis.

C. If the court orders inspection and copying of the records demanded, it shall also order the corporation to pay the shareholder's costs, including reasonable attorney fees, incurred to obtain the order, unless the corporation proves that it refused inspection in good faith because it had a reasonable basis for doubt about the right of the shareholder to inspect the records demanded. The court may order a shareholder to pay all or a portion of the corporation's costs, including reasonable attorney fees, if the demand to inspect is denied in whole or in material part.

D. If the court orders inspection and copying of the records demanded, it may impose reasonable restrictions on the use or distribution of the records by the demanding shareholder.

Article 2 Reports

§ 10-1620 Financial statements for shareholders

A. A corporation shall furnish its shareholders annual financial statements that may be consolidated or combined statements of the corporation and one or more of its subsidiaries, as appropriate, and that include a balance sheet as of the end of the fiscal year, an income statement for that year and a statement of changes in shareholders' equity for the year unless that information appears elsewhere in the financial statements. If financial statements are prepared for the corporation on the basis of generally accepted accounting principles, the annual financial statements shall also be prepared on that basis.

B. If the annual financial statements are reported on by a certified public accountant, that report shall accompany them. If not, the statements shall be accompanied by a statement of the president or the person responsible for the corporation's accounting records both:

Stating that person's reasonable belief whether the statements were prepared on the basis of generally accepted accounting principles and, if not, describing the basis of preparation.
Describing any respects in which the statements were not prepared on a basis of accounting consistent with the statements prepared for the preceding year.

C. A corporation shall mail or transmit the annual financial statements to each shareholder within one hundred twenty days after the close of each fiscal year. On written request from a shareholder the corporation shall mail or transmit that shareholder the latest annual financial statements.

§ 10-1621 Other reports to shareholders

If a corporation indemnifies or advances expenses to a director under sections 10-851 through 10-854, the corporation shall report the indemnification or advance in writing to the shareholders with or before the annual financial statements required under section 10-1620. Failure to report under this section does not invalidate otherwise valid indemnification. This section does not apply to a corporation whose shares are listed on a national securities exchange or are regularly traded in a market maintained by one or more members of a national or affiliated securities association.

§ 10-1622 Annual report

A. Each domestic corporation and each foreign corporation authorized to transact business in this state shall deliver to the commission for filing an annual report that sets forth all of the following:

The name of the corporation and the state or country under whose law it is incorporated.
The address of its known place of business and the name and address of its statutory agent in this state.
The address of its principal office.
The names and business addresses of its directors and principal officers.
A brief description of the nature of its business.
The total number of authorized shares, itemized by class and series, if any, within each class.
The total number of issued and outstanding shares, itemized by class or series, if any, within each class.
A certificate of disclosure containing the information set forth in section 10-202, subsection D.
The names of shareholders of record of the corporation holding more than twenty per cent of any class of shares issued by the corporation, including persons beneficially holding the shares through nominees.
A statement that all corporate income tax returns required by title 43 have been filed with the department of revenue.

B. Information in the annual report shall be current as of the date the annual report is executed on behalf of the corporation.

C. The annual report for all corporations shall be delivered to the commission for filing, and the annual fee shall be paid on or before the date assigned by the commission. The commission may stagger the annual report filing date for all corporations and adjust the annual registration fee on a pro rata basis. The corporation shall deliver the annual report to the commission for filing each subsequent year in the anniversary month on the date determined by the commission. If a corporation is unable to file the annual report required by this section on or before the date prescribed by this section, the corporation may file, but only on or before this date, a written request with the commission for an extension of time, not to exceed six months, in which to file the annual report. The request for an extension of time shall be accompanied by the annual registration fee required by law. After filing the request for an extension of time and on receipt of the annual registration fee, the commission shall grant the request.

D. If an annual report does not contain the information required by this section, the commission shall promptly notify the reporting domestic or foreign corporation in writing and shall return the report to it for correction. If the report is corrected to contain the information required by this section and delivered to the commission within thirty days after the effective date of notice, it is deemed to be timely filed.

E. Any corporation that is exempt from the requirement of filing an annual report shall deliver annually a certificate of disclosure that contains the information set forth in section 10-202, subsection D and that is executed by any two executive officers or directors of the corporation on or before May 31. If the certificate is not delivered within ninety days after the due date of the annual report or within ninety days after May 31 in the case of any corporation that is exempt from the requirement of filing an annual report, the commission shall initiate administrative dissolution of that corporation in accordance with chapters 1 through 17 of this title.

F. If the annual report is not delivered for filing and the fee is not paid within the time specified by this section, the commission shall assess and, upon collection, deposit, pursuant to sections 35-146 and 35-147, penalties of twenty per cent per month or fraction of the month of the fees then due until either the payment is made or the domestic corporation is administratively dissolved or the authority of the foreign corporation is revoked, whichever occurs first. Beginning January 1, 1999, this subsection does not apply to nonprofit corporations organized under chapters 24 through 42 of this title.

§ 10-1623 Statement of bankruptcy or receivership; interrogatories before subsequent incorporation; violation; classification; definitions

A. On the filing of a petition for bankruptcy or the appointment of a receiver for any corporation, the corporation shall deliver a statement to the commission listing:

All officers, directors, trustees and major stockholders of the corporation within one year of filing the petition for bankruptcy or the appointment of a receiver. If a major stockholder is a corporation, the statement shall list the current president, chairman of the board of directors and major stockholders of such corporate stockholder.
Whether any such person has been an officer, director, trustee or major stockholder of any other corporation within one year of the bankruptcy or receivership of the other corporation.
If the answer in paragraph 2 of this subsection is in the affirmative, for each such corporation the following information:

(a) Name and address.

(b) States in which it:

(i) Was incorporated.

(ii) Transacted business.

B. The commission shall maintain a suitably indexed list of all such persons. The index is a public record of the commission for purposes of title 39.

C. On receipt for filing of articles of incorporation of a new corporation or application for authority to transact business by a foreign corporation, the commission shall determine whether any person proposed as an officer, director, trustee, incorporator or major stockholder of the new or foreign corporation has been involved two or more times in a corporate bankruptcy, receivership, revocation, administrative dissolution or judicial dissolution commenced by any state. If so, the commission may direct detailed interrogatories to the persons requiring any additional relevant information deemed necessary by the commission and at the same time shall provide public notice of the interrogatory procedure. Any person may request additional interrogatories or may provide additional information to the commission. The interrogatories shall be completely answered within thirty days after mailing. With respect to corporations incorporated or seeking authority to transact business, articles of incorporation or application for authority shall not be filed until all outstanding interrogatories have been answered to the satisfaction of the commission.

D. Any applicant for filing articles of incorporation or authority to transact business who is dissatisfied with a determination of the commission or any other proceeding under this section may demand and the commission or its designee shall convene a public hearing at the county seat of the county of the corporate headquarters of the proposed corporation. The commission shall give public notice of the hearing at least twenty days before the hearing by publication in a newspaper of general circulation in any county in which a relevant prior bankruptcy or receivership occurred.

E. The commission shall provide the attorney general with a copy of statements furnished pursuant to subsection A and answers to interrogatories propounded pursuant to subsection C on a quarterly updated basis.

F. Any person or corporation failing to comply with the requirements of this section is guilty of a class 1 misdemeanor. Any person making a false statement or giving false information pursuant to this section is guilty of a class 5 felony.

G. In this section:

"Controlling" includes the total shares of stock issued to a husband and wife and their relatives to the first degree of consanguinity.
"Major stockholder" means a shareholder possessing or controlling twenty per cent of the issued and outstanding shares or twenty per cent of any proprietary, beneficial or membership interest in the corporation.

Article 3 Miscellaneous Provisions

§ 10-1630 Certificate of good standing; license and registration renewal

If a state agency can confirm through the commission that an applicant for renewal of a license or registration is entitled to the issuance of a certificate of good standing at the time of the inquiry, the agency shall not require an applicant to obtain a certificate.

§ 10-1631 Civil liability for false statements

A. If any report, certificate or other statement made or public notice given by the officers or directors of a corporation is false in a material representation or if any book, record or account of the corporation is knowingly or wrongfully altered, the officers, directors or agents knowingly or wrongfully authorizing, signing or making the false report, certificate, other statement or notice or authorizing or making the wrongful alteration are jointly and severally personally liable to a person who has become a creditor or shareholder of the corporation on the faith of the false material representation or alteration for all damages resulting.

B. An action for the liability imposed by this section shall be commenced within two years after discovery of the false representation or alteration and within six years after the certificate, report, public notice or other statement or the alteration has been made or given by the officers, directors or agents of the corporation.

§ 10-1632 Interrogatory or signature violations; corporate records; classification

A. A person who knowingly fails or refuses within the time prescribed by this chapter to answer truthfully any interrogatories propounded to that person by the commission in accordance with this chapter or who signs any articles, statement, report, application or other document filed with the commission that is known to the person as false in any material respect is guilty of a class 4 felony.

B. A person who with the intent to defraud or deceive knowingly falsifies, alters, steals, destroys, mutilates, defaces, removes or secretes the books, records or accounts of a corporation is guilty of a class 5 felony.

§ 10-1633 Interrogatories by the commission

The commission may propound to any domestic or foreign corporation subject to chapters 1 through 17 of this title and to any officer or director of the corporation interrogatories as may be reasonably necessary and proper to enable it to ascertain whether the corporation complied with all of the provisions of chapters 1 through 17 of this title applicable to the corporation. The interrogatories shall be answered within thirty days after the mailing of the interrogatories or within an additional time fixed by the commission, and the answers to the interrogatories shall be full and complete and shall be made in writing and under oath. If the interrogatories are directed to an individual they shall be answered by the individual, and if directed to a corporation they shall be answered by the president, vice-president, secretary or assistant secretary of the corporation. The commission need not file any document to which the interrogatories relate until the interrogatories have been answered as provided in this section, and not then if the answers to the interrogatories disclose that the document is not in conformity with the provisions of chapters 1 through 17 of this title. The commission shall certify to the attorney general, for such action as the attorney general deems appropriate, all interrogatories and answers to the interrogatories that disclose a violation of any of the provisions of chapters 1 through 17 of this title.

§ 10-1634 Information disclosed by interrogatories

Interrogatories propounded by the commission and the answers to the interrogatories shall not be open to public inspection and the commission shall not disclose any facts or information obtained from the interrogatories and answers except if its official duty requires the facts or information to be made public or if the interrogatories or the answers are required for evidence in any criminal proceeding or in any other action by this state.

§ 10-1635 Certified copies received in evidence

All copies of documents delivered to and filed by the commission in accordance with chapters 1 through 17 of this title when certified by it shall be taken and received in all courts, public offices and official bodies as prima facie evidence of the facts stated in the documents. A certificate by the commission under seal as to the existence or nonexistence of the facts relating to corporations shall be taken and received in all courts, public offices and official bodies as prima facie evidence of the existence or nonexistence of the facts stated in the certificate.

§ 10-1636 Civil liability for false filings; exceptions

A. Except as provided in subsection C or D of this section, any person that authorizes or signs a report, certificate, notice or other document with respect to a corporation that is delivered for filing with the commission pursuant to this chapter and that has knowledge at the time of delivery to the commission for filing that the information contained in that report, certificate, notice or other document is materially false or misleading is liable to the corporation and its creditors and shareholders for all damages resulting. The prevailing party in an action for the liability imposed under this subsection is entitled to an award for its costs and reasonable attorney fees.

B. An action for the liability imposed by subsection A of this section must be commenced within two years after discovery of the false statement or the time a reasonable person would have discovered it, but not later than six years after the report, certificate, notice or other document was filed or received by the commission.

C. This section does not apply to any filing made by a corporation whose shares are listed or approved for listing on any stock exchange or national market system of a national securities association specified in section 44-1843, subsection A, paragraph 7 or the rules of the corporation commission relating to that paragraph or whose securities are issued by an entity that is exempt from section 44-1841 pursuant to section 44-1843, subsection A, paragraph 2 or 3 or the rules of the corporation commission relating to those paragraphs.

D. Execution of a consent to serve as a statutory agent does not by itself constitute a certification of the truth or accuracy of the information contained in a report, certificate, notice or other document with respect to the corporation even if the consent is attached to another filing.

E. This section does not prevent the award of equitable remedies, if appropriate.

Chapter 17 Transition Provisions

Article 1 General Provisions

§ 10-1701 Application to existing domestic corporations

A. Except as provided in subsection B, beginning January 1, 1996 chapters 1 through 17 of this title apply to all Arizona corporations that were incorporated under or that were subject to chapter 1, articles 1 through 12 of this title on December 31, 1995.

B. Beginning January 1, 1996, any existing corporation that was originally organized under the laws of the territory of Arizona may elect to amend or restate its articles of incorporation and retain any previously valid provisions of its articles of incorporation, even if the previously valid provisions of its articles of incorporation are in conflict with any provisions of chapters 1 through 17 of this title. Upon such amendment or restatement, all of the provisions of chapters 1 through 17 of this title which are not specifically in conflict with the amended or restated articles of incorporation shall be applicable to the existing corporations that were originally organized under the laws of the territory of Arizona. The previously valid provisions of its articles of incorporation that are retained shall apply to the existing corporations originally organized under the laws of the territory of Arizona and to all persons contracting or in any manner dealing with the corporation, including its shareholders, subscribers, affiliates, directors, officers and employees.

§ 10-1702 Application to qualified foreign corporations

A foreign corporation authorized to transact business in this state on January 1, 1996 is subject to chapters 1 through 17 of this title but is not required to obtain a new certificate of authority to transact business under chapters 1 through 17 of this title.

Chapter 18 Miscellaneous Provisions and Corporations

Article 1 Close Corporations

§ 10-1801 Law applicable to close corporations

Close corporations organized pursuant to this article are subject to the provisions of chapters 1 through 17 of this title except insofar as this article modifies or differs from such provisions, in which case this article prevails. This article shall be applicable to all close corporations except insofar as this article otherwise provides. This article shall be construed to simplify the management, structure and operations of close corporations.

§ 10-1802 Definitions

In this article, unless the context otherwise requires:

"Capital units" means the proportions of the proprietary interest in the corporation owned by the investors.
"Commission" means the Arizona corporation commission.
"Corporation" or "close corporation" means a corporation for profit organized pursuant to the provisions of this article.
"Good faith" or "in good faith" means an act or thing done when it is in fact done honestly, whether it be done negligently or not.
"Investor" means one who is the owner of capital units in a close corporation.
"Manager" means the person or persons named in the articles of incorporation either originally or by amendment thereto in the capacity of manager or assistant manager and does not include any person who is not so named.

§ 10-1803 Mandatory provisions of articles of incorporation

A. The articles of incorporation of a close corporation shall set forth:

The name of the corporation which shall contain the words "Arizona close corporation" or an abbreviation therefor.
The name and address of the manager or managers of the corporation.
The names, addresses and amount of initial contribution of capital units of each of the original investors. The number of original investors shall not exceed ten.
The aggregate amount in dollars of the initial capital units to be paid to the corporation.
The name, address and signature of the corporation's initial statutory agent.

B. It shall not be necessary to set forth in the articles of incorporation any corporate powers or any corporate purposes.

§ 10-1804 Optional provisions of articles of incorporation

The articles of incorporation of a close corporation may set forth any of the following:

The period of duration, if less than perpetual.
Any restrictions on the authority of the manager or managers of the close corporation.
Any reservations of authority to the investors.
Any restriction on the power of any investor to sell, to transfer or to create a security interest in his capital units. No restriction on the power to sell, transfer or create a security interest shall be binding except as to persons who have actual knowledge thereof unless such restriction is set forth in the articles of incorporation.
Any restriction on the subsequent issuance of additional capital units.
If any preemptive right is to be granted to investors, the provisions therefor.
Whether the corporation will have the power to acquire its capital units and if so any restrictions or limitations thereon. If no power to acquire its capital units is set forth in the articles of incorporation, the corporation may not acquire any of its outstanding capital units.
Any provisions which provide for arbitration or other non-judicial procedure seeking resolution of any dispute as provided in section 10-1806.
Any provision for replacement or succession of a manager inconsistent with section 10-1805, subsection D.
Any provision which either relieves the manager entirely of the obligation to make accountings to investors or which modifies the period or form of such accounting in a manner inconsistent with section 10-1805, subsection E.
Any provision for annual or other periodic meetings of investors. If no such provision is set forth in the articles of incorporation, there shall be no requirement for meetings for investors.
Any requirement for bond or other security to be given to the corporation by a manager to secure the faithful performance of his duties.
Any restrictions upon competition by investors directly or indirectly with the business of the corporation.
Any provision for delegation of his authority by a manager.
Any provision for a dissolution option pursuant to section 10-1807.
Any provision for varying relationships among investors as to relative rights in capital units.
Any other provisions which are consistent with law and which the incorporators elect to set forth.

§ 10-1805 Managers

A. All managers named in the articles of incorporation shall be natural persons. It is the purpose of this article that the corporation be operated on a day-to-day basis by one manager, by managers having divided functions or by assistant managers who can serve either as alternates to the manager or assume some portion of managerial responsibility. As among the corporation, its investors and any manager, there shall be no limitations on the authority of a manager unless specifically limited by provisions of the articles of incorporation, the written employment contract of such manager or the records of the corporation evidencing the acts of the investors. Any person other than a manager or investor who deals in good faith with the corporation is not subject to any limitation on the authority of any manager, even though such manager's authority is expressly limited in the articles of incorporation.

B. No manager may delegate any of his authority to any other agent, employee or representative of a corporation unless authority to do so is contained in the articles of incorporation or is granted by act of the investors.

C. Any manager shall have the same rights, duties, obligations and privileges as a person who is both a director and officer of a corporation for profit under the provisions of chapters 1 through 17 of this title and the other articles of this chapter, except as specifically modified in this article.

D. Any manager may be replaced or succeeded by a new manager at any time by a majority of the voting power of the investors, unless otherwise provided by the articles of incorporation. Such replacement shall be effective when a certificate of change of manager, sworn under oath by an investor, is filed with the commission stating the name of the replaced manager and the name and address of the new manager and that such new manager was elected by the required vote.

E. Unless the articles of incorporation or vote of the investors provide otherwise, a manager shall mail to each investor an annual accounting which complies with section 10-1622. Such annual accounting shall be mailed or delivered to the investors within thirty days after the date filing is required with the commission by section 10-1622. Such annual accounting shall be acknowledged by the manager or certified by an independent public accountant.

§ 10-1806 Settlement of disputes; arbitration

The articles of incorporation may provide for arbitration of any deadlock or dispute involving the internal affairs of the corporation. To the extent the articles of incorporation do not provide to the contrary, such arbitration shall be governed by title 12, chapter 21. Unless otherwise provided in the articles of incorporation, if the arbitrators determine that such deadlock or dispute either impairs or threatens to impair the value of the assets or continued conduct of the business of the corporation, the arbitrators may appoint a conservator or interim manager to preserve the business and assets of the corporation or to continue the operation of the business of the corporation, or both, during the pendency of such arbitration proceedings. If such arbitrators appoint a conservator or interim manager, the arbitrators may suspend, revoke or nullify the authority of any existing manager or managers. The articles of incorporation may also provide that the arbitrators may suspend, revoke or nullify the employment or any employment contract of any existing manager or managers without payment of compensation and without liability for damages or breach of contract. Unless provided otherwise in the articles of incorporation, the arbitrators may define the authority and set the compensation of the conservator or interim manager, and shall immediately file a certificate of the appointment of such conservator or interim manager with the commission. Such arbitration proceedings shall not supersede the power of the superior court of Arizona to appoint an interim manager under section 10-1814. A court appointed interim manager shall replace any conservator or interim manager appointed under this section.

§ 10-1807 Option to dissolve

A. The articles of incorporation of any corporation may include a provision granting to any investor or investors an option to have the corporation dissolved at will or upon the performance or occurrence of any specified event or contingency. Whenever any such option to dissolve is exercised, the investor or investors exercising such option shall give written notice thereof to all other investors. After the expiration of thirty days following the mailing of such notice, the dissolution of the corporation shall proceed as if the required vote power had consented to the dissolution of the corporation as provided by section 10-1402.

B. If the articles of incorporation as originally filed do not contain a provision authorized by subsection A of this section, the articles of incorporation may be amended to include such provision if adopted by the affirmative vote of all investors. If the articles of incorporation as originally filed contain a provision authorized by subsection A of this section, such provision may be amended only by the affirmative vote of all investors.

C. Sections 10-1401, 10-1402 and 10-1801 shall be applicable to voluntary dissolution notwithstanding the reference in subsection A of this section to section 10-1402.

§ 10-1808 Purposes

Close corporations may be organized under this article for any lawful purpose or purposes except for those purposes set forth in titles 6, 20 or 40.

§ 10-1809 Capital units, transfers and encumbrances

A. Until a statement substantially in the form set forth in subsection B of this section has been filed with the commission, any transfer, hypothecation, other voluntary encumbrance or security interest in or of any capital unit or units shall be void as to creditors and subsequent purchasers for valuable consideration without notice.

B. The statement of transfer, hypothecation or other voluntary encumbrance or security interest in or of any capital unit or units in a close corporation shall be acknowledged and be substantially in one of the following forms:

Transfer:

On the ___________________ day of _______________, _____________, the undersigned (name of transferor) transferred to (name of transferee), whose address is (address of transferee) (all or a stated percentage) of the undersigned's interest in the capital units of (name of corporation), an Arizona close corporation.

(signature of transferor)

acknowledgment

Hypothecation, other voluntary encumbrance or security interest:

On the __________ day of _______________, ___________, the undersigned (name of debtor) hypothecated and voluntarily encumbered to (name of creditor) (all or a stated percentage) of the undersigned's interest in the capital units of (name of corporation) , an Arizona close corporation.

(signature of debtor)

acknowledgment

C. Sections 47-8101 through 47-8407 and title 47, chapter 9, articles 3, 4 and 5 do not apply to any hypothecation, other voluntary encumbrance or any creation of a security interest in or of capital units of a close corporation. Title 47, chapter 9, article 6 applies to defaults and the rights and remedies for the enforcement of defaults.

§ 10-1810 Definition of relative rights of capital units

"Relative rights of capital units" means all the rights, privileges, obligations and duties of the capital units and may include, but are not limited to, disproportionate variations of the following:

Participation in dividends or distributions from operating income.
Participation in dividends or distributions from income other than operating income.
Participation in distributions of the proceeds of a sale of all or substantially all of the assets of the corporation with further disproportionate variation depending upon the degree of gain or loss.
Participation in distributions upon liquidation or dissolution.
Voting rights.
Restrictions or limitations on transfer.
The obligation to perform services or provide goods or other property to the corporation.
The obligation to devote time and energies which are collateral to corporate purposes.
Assessments, if any.

§ 10-1811 Changes in investor relationships

Any redemption, termination or cancellation of capital units, acquisition of capital units by the corporation, issuance of additional units or change in the relative rights of capital units other than transfers or encumbrances provided for in section 10-1809 shall be effective only upon an amendment of the articles of incorporation. The unanimous vote of all outstanding capital units shall be required to amend the articles of incorporation to create or to change the relative rights in capital units.

§ 10-1812 Variable relative rights

The articles of incorporation may provide for varying relationships among investors as to relative rights in capital units. It is not necessary that each close corporation provide in its articles of incorporation for variable relative rights of capital units as enumerated in this section. Only those variable relative rights of capital units set forth in the articles of incorporation shall apply to the particular close corporation. When no provision is made in the articles of incorporation concerning a particular relative right of capital units, then that particular relative right of capital units shall be proportionate to the dollar amount of the capital units.

§ 10-1813 Limitation of liability

The investors shall not be liable for the debts, obligations or liabilities of the close corporation.

§ 10-1814 Appointment of conservator

A. The superior court in the county in which the known place of business or statutory agent of the corporation is situated, may in an action by any investor, appoint a conservator or interim manager of the corporation if the court finds that a deadlock or dispute involving the internal affairs of the corporation impairs or threatens to impair the value of the assets or the continued conduct of the business of the corporation. Upon or subsequent to appointing such a conservator or interim manager, the court may enter orders which, despite any contract or provision of the articles of incorporation to the contrary:

Suspend, revoke or nullify the authority, in whole or in part, of any existing manager or managers or any conservator or interim manager appointed pursuant to section 10-1806.
Define the authority of such conservator or interim manager.
Set the compensation of such conservator or interim manager to be paid by the corporation.
Resolve, partially resolve or aid in the resolution of any such deadlock or dispute.

B. When any order or appointment is issued pursuant to subsection A of this section, the clerk of the court shall immediately supply a copy thereof to the commission.

§ 10-1815 Involuntary dissolution or liquidation pursuant to court order

The superior court shall have full power to liquidate the assets and business of a close corporation:

In an action filed by an investor when the court finds:

(a) That a deadlock or dispute involving the internal affairs of the corporation, continues to impair or threatens to impair the value of the assets or the continued conduct of the business of the corporation, notwithstanding bona fide attempts to utilize the arbitration provisions in the articles of incorporation if available and the provisions of section 10-1814.

(b) That a deadlock or dispute involving the internal affairs of the corporation, impairs or threatens to impair the value of the assets or the continued conduct of the business of the corporation and no provision is contained in the articles of incorporation for arbitration of such disputes and that it would be useless effort to invoke the provisions of section 10-1814.

(c) That the investors are so divided respecting the management of the business and affairs of the corporation that either the corporation is suffering or will suffer irreparable injury, or the business and affairs of the corporation can no longer be conducted to the advantage of the investors generally, and the provisions of sections 10-1806 and 10-1814 are inapplicable.

(d) That the corporation has abandoned its business and has failed within a reasonable period of time to take steps to dissolve and liquidate its affairs and distribute its assets.

In an action by a creditor of the corporation in the manner provided by section 10-1430, subsection B.
In an action filed by the attorney general in the manner provided by section 10-1430, subsection A.

§ 10-1816 Court relief other than dissolution, liquidation or appointment of conservator

A. The superior court in an action filed either by an investor or by a creditor seeking relief under section 10-1815 shall have full power to make any such order or grant any such relief other than dissolution or liquidation as in its discretion it may deem appropriate including but not limited to:

Canceling, altering or amending any provision contained in the articles of incorporation of such close corporation.
Directing, prohibiting or enjoining any act of the corporation or other persons who are parties to the court action.
Providing for the purchase by the corporation or by other investors at their fair market value of the capital units or claims of the person bringing such action.

B. Relief under this section may be granted even though the court does not find any of the elements prescribed for relief under section 10-1815.

§ 10-1817 Merger, interest exchange, conversion, domestication or division; definitions

A. A domestic close corporation may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapters 11 and 13 of this title and title 29, chapter 6. For the purposes of this subsection:

References in chapters 11 and 13 of this title to:

(a) "Directors" are deemed references to managers.

(b) "Shares" are deemed references to capital units.

References in title 29, chapter 6 to:

(a) "Governors" are deemed references to managers.

(b) "Interest holders" are deemed references to investors.

B. A plan of merger must be approved by all of the investors.

C. A plan of conversion must be approved by at least two-thirds of the investors.

D. A plan of interest exchange, domestication or division must be approved by a majority of the investors.

E. If a domestic close corporation is to be created in a merger, a conversion, a domestication or a division, the number of investors in the corporation on the effective date of the transaction may not exceed ten investors.

F. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.

Article 2 Unclaimed Shares and Dividends

§ 10-1841 Claim for unclaimed shares or dividends

A. A person who is the owner, or the heir, devisee, successor or assign of the owner, of monies or securities acquired by the state pursuant to article XI, section 8, Constitution of Arizona, as unclaimed shares or dividends of a corporation, may file a verified claim for them with the department of administration alleging the nature of the claim and praying that the monies or shares be paid or delivered to him.

B. Claims for monies or securities acquired before June 16, 1941 shall be filed within ten years after that date. Claims for monies or securities thereafter acquired shall be filed within twenty years after the date of acquisition.

C. A claim filed under the provisions of this section shall be accompanied by the certificate of stock upon which it is based, together with a statement signed and sworn to by the person having lawful custody of the books of the corporation, stating that the claimant, or his predecessor in interest, appears on the books as the rightful owner of the stock. If the claimant is the heir, devisee, successor or assign of the owner shown on the books of the corporation, he shall also make satisfactory proof of his claim of ownership.

§ 10-1842 Payment of claim

A. If the department of administration is satisfied that the person making a claim, as provided by section 10-1841, is entitled to the monies or securities claimed, the director of the department of administration shall approve the claim and order the department of revenue to deliver the securities to the claimant or draw a warrant for payment to the claimant of the money claimed, as the case may be.

B. All monies acquired by the state as unclaimed shares or dividends of a corporation shall be deposited, pursuant to sections 35-146 and 35-147, into a clearing account from which payment of claims for the money may be made. The monies shall remain in the clearing account until the expiration of the period in which claims thereon may be filed, as prescribed by section 10-1841, and shall, during such period, be available for payment of such claims without further appropriation. On expiration of the claim period, the monies shall be credited to the permanent state school fund.

§ 10-1843 Court action upon refusal to pay claim

In the event the director of the department of administration refuses to approve any claim presented as provided in section 10-1841, the claimant may file a complaint in the superior court in Maricopa county, and shall serve a copy thereof upon the attorney general, alleging the nature of his claim and praying that the money or securities be paid or delivered to him. If the court finds for the plaintiff, judgment shall be entered accordingly, and the court shall certify the judgment to the director of the department of administration, who shall thereupon issue the order or draw the warrant as provided in section 10-1842. Appeal may be taken from the judgment of the superior court as in other cases.

Article 4 Business Trusts

§ 10-1871 Definitions

In this article, unless the context otherwise requires:

"Business trust" means an unincorporated association or trust of the type which at common law was known as a "business trust" or "Massachusetts trust", created by an instrument under which property is held and managed by trustees for the benefit and profit of such persons as are or may become the holders of transferable certificates evidencing beneficial interests in the trust estate.

§ 10-1872 Classifications of business trusts

Business trusts shall be either domestic or foreign. A domestic business trust is a business trust organized under the laws of this state. A foreign business trust includes every other business trust.

§ 10-1873 Form of association authorized

A business trust is permitted as a recognized form of association for the conduct of business within this state.

§ 10-1874 Required delivery to commission; certified copy of trust instrument

A. Any business trust desiring to transact business in this state shall deliver to the commission:

An executed copy of the articles, declaration of trust or trust agreement by which the trust was created and all amendments thereto, or a true copy thereof certified to be such by a trustee of the trust before an official authorized to administer oaths or by a public official of another state, territory or country in whose office an executed copy thereof is on file. Such true copy shall be certified within sixty days before it is delivered to the commission.
A verified list of the names, residences and post office addresses of its trustees.
An affidavit setting forth its assumed business name, if any.
If a domestic business trust, the name of its statutory agent appointed as provided for domestic corporations in section 10-501. A foreign business trust shall deliver to the commission, as provided for in section 10-501, the location of its statutory office, the name of its statutory agent and its irrevocable consent to service of process, duly signed by a sufficient number of its trustees to bind the business trust by such irrevocable consent, or accompanied by a duly certified copy of an order or resolution of its trustees authorizing the execution and delivery of such irrevocable consent.

B. The business trust shall file a copy of its articles, declaration of trust or trust agreement by which it was created, certified by the corporation commission, in the office of the county recorder in the county where the principal place of business of the trust is located, where such certified copy shall be indexed and recorded.

C. When a business trust has complied with the delivery requirements as provided in subsections A and B of this section, the commission shall, after determining that the requirements of chapters 1 through 17 of this title, this chapter and other provisions of law have been satisfied, file such delivered documents of foreign and domestic business trusts and such business trusts may thereupon commence business.

§ 10-1875 Merger, interest exchange, conversion, domestication or division; definitions

A. A domestic business trust may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapters 11 and 13 of this title and title 29, chapter 6.

B. If a domestic business trust is to be created in a merger, a conversion, a domestication or a division, the trust must comply with the delivery requirements set forth in section 10-1874, subsections A and B.

C. For the purposes of this section, references in chapters 11 and 13 of this title to:

"Corporations" are deemed references to business trusts.
"Directors" are deemed references to trustees.
"Shareholders" are deemed references to holders of transferable certificates evidencing beneficial interests in the trust estate.

D. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.

§ 10-1876 Amendments to trust instrument; filing; recordation

The articles, declaration of trust or trust agreement by which any business trust was created may be amended in the manner specified therein or in such manner as is valid under the law applicable to such business trust, provided that no such amendment shall be legally effective in this state until a copy thereof, certified as provided in section 10-1874, subsection A, paragraph 1, has been filed with the corporation commission and a copy thereof, certified by the corporation commission, has been filed in the office of the county recorder in the county where the principal place of business of the trust is located, where such certified copy shall be indexed and recorded.

§ 10-1877 Powers; construction of instrument; binding effect of terms and conditions

A. Subject to the provisions of section 10-1878, the powers and authority of any business trust authorized under this article to transact business in this state shall be as specified in the instrument by which it was created, as amended, which instrument shall be construed and interpreted in accordance with the law applicable to such business trust, provided that no business trust shall engage in any activity in this state which would violate the public policy of this state or engage in any business in this state which private corporations for profit organized under the laws of this state may not legally transact.

B. Subject to the limitations on power and authority as provided in subsection A of this section, any person dealing with a business trust authorized under this article to transact business in this state shall be bound by the terms and conditions of the instrument by which the business trust was created and by any amendments thereto which have been filed and recorded in compliance with section 10-1876.

§ 10-1878 Taxation

Any business trust created under this article or entering this state pursuant to this article shall pay such taxes and fees as are imposed by the laws of this state or any political subdivision thereof on domestic and foreign corporations, respectively, on an identical basis therewith.

§ 10-1879 Corporation laws applicable

Any business trust shall be subject to such applicable provisions of law from time to time in effect with respect to domestic and foreign corporations, respectively. These shall include, without limitation, such applicable provisions of law as relate to the issuance of securities, filing of required statements or reports, service of process, general grants of power to act, withdrawal, right to sue and be sued, limitation of individual liability of shareholders, and rights to acquire, mortgage, sell, lease, operate and otherwise deal in or with real and personal property.

Chapter 19 Not for Profit Corporations and Associations, Cooperatives and Fraternal and Benevolent Societies

Article 1 Cooperative Marketing Associations

§ 10-2001 Definitions

In this article, unless the context otherwise requires:

"Active member" is a member growing, producing, manufacturing, marketing, distributing or selling products or services handled by the association at the time of the membership meeting, or who during the previous year, delivered products or services to the association.
"Agricultural products" includes horticultural, viticultural, forestry, dairy, livestock, poultry, bee and any farm products.
"Association" means a corporation organized under this article.
"Marketing agreement" or "marketing contract" means any agreement entered into between an association organized under this article and its members, by the terms of which a subscribing grower, producer, manufacturer, marketer, distributor or seller and all other growers, producers, manufacturers, marketers, distributors or sellers signing similar agreements, agree to sell their products or services, goods for import or export purposes to or through such association.
"Member" includes members of associations.

§ 10-2002 Law governing associations

Any law in conflict with this article shall not apply to the associations organized hereunder, but general corporation laws shall apply to the associations except when they conflict or are inconsistent with the express provisions of this article.

§ 10-2003 Requirements for formation; association profits

A. The following may form a cooperative association with or without capital stock under this article:

Five or more persons engaged in the production of products or services.
Five or more small businesses, individuals or entities engaged in the marketing and distribution of manufactured goods for import and export purposes.

B. Associations organized under this article may make profits for themselves or for their members.

§ 10-2004 Articles of incorporation; amendments

A. Articles of incorporation shall be filed setting forth:

The name of the association.
The purposes for which it is formed.
The place where its principal business will be transacted.
The term for which it is to exist.
The number of directors thereof, which shall not be less than five, and their term of office.
A statement indicating whether the association will be a for-profit association or a nonprofit association.
If the association will be a for-profit association and will have capital stock, a statement indicating the number of shares that the association is authorized to issue.

B. The articles shall be subscribed and filed in accordance with the provisions of general corporation law.

C. The articles of incorporation may be altered or amended at a regular meeting, or at a special meeting called for that purpose, by the affirmative vote of a majority of the active members of the association, and on at least thirty days' notice in writing of the proposed alteration or amendment. Amendments to the articles when adopted shall be filed as required by law.

§ 10-2005 Powers of association

An association incorporated under this article may:

Engage in any activity in connection with the manufacturing, marketing, harvesting, processing, storing, handling or utilization of products or services, or the providing of labor, or in connection with the purchase, hiring or use by its patrons of supplies, machinery or equipment, or in the financing of any such activities, but the associations shall not deal in the products of nonmembers to an amount greater in value than that of products handled for members.
Borrow money and make advances on products delivered.
Act as the agent or representative of any member or patron in such activities.
Acquire, hold, own and exercise all rights of ownership in, and sell, transfer or pledge shares of the capital stock or bonds, or become a member or a stockholder of any corporation or association engaged in a related activity or in the handling, marketing or financing of any products handled by the association, but stocks, bonds or other securities owned by a subsidiary may not be pledged, sold or otherwise disposed of until thirty days notice has been given to all members of the association in the manner provided by its bylaws. Such stock, bonds and other securities of a subsidiary may be placed with the state treasurer for safe keeping, and he shall not surrender them until proof of notice as required by this article has been given.
Establish reserves and invest the funds thereof in stocks and bonds of any corporation or association engaged in a related activity, or in the handling, marketing, processing or financing of the products handled by the association, or in such other property as the board of directors of the association deems satisfactory.
Do any act necessary to carry out the specific powers conferred by this article, and do such acts within or without the state.
Possess the powers, rights and privileges of corporations organized under the general law of the state, unless inconsistent with this article.
Engage in any activity in connection with the marketing or distribution of manufactured goods for import and export purposes or the providing of labor, in connection with the purchase, hiring or use by the association's patrons of supplies, machinery or equipment, or in connection with the financing of any such activities, but the association may not deal in the products of nonmembers to an amount greater in value than that of products handled for members.
Engage in any activity involving the harvesting, processing, storing, handling or use of products for the production, manufacturing and sale of products or services or the providing of labor, in connection with the purchase, hiring or use by the association's patrons of supplies, machinery or equipment, or in connection with the financing of any such activities, but the association may not deal in the products of nonmembers to an amount greater in value than that of products handled for members.
Raise equity from nonprofit investors and patron members.

§ 10-2006 Bylaws; renewal upon expiration of contract period

A. Each association shall within thirty days after incorporation adopt bylaws. A majority vote of the members or their written assent is necessary to adopt such bylaws. The bylaws may provide for:

The time, place and manner of calling and conducting meetings.
The number of members constituting a quorum.
The right of members to vote by proxy, by mail or by both methods, and the conditions, manner, form and effect of the votes.
The number of directors constituting a quorum.
The qualifications, compensation, duties and term of office of directors and officers, time of their election and the manner of giving notice of the election.
Penalties for violation of the bylaws.
The amount of entrance, organization and membership fees, if any, the method of collecting them and the purposes for which they may be used.
The annual dues or assessments.
The charge to be paid by each member for services rendered by the association to him, the time of payment and the manner of collection.
The marketing contract between the association and its members, which every member may be required to sign.
The number and qualification of members of the association and the conditions precedent to membership.
The method, time and manner of permitting members to withdraw.
The manner of assignment and transfer of the interest of members.
The conditions upon which, and time when membership of a member shall cease.
The automatic suspension of the rights of a member when he ceases to be eligible to membership, and the manner and effect of the expulsion of a member.
The manner of determining the value of a member's interest, and providing for purchase of such interest by the association upon his death, withdrawal, expulsion or forfeiture of membership, at the option of the association.
If members are to be accorded unequal voting rights, the manner of determining the number of votes to which each member is entitled.

B. Upon termination of each contract period, the board of directors of the association may renew or revise the bylaws to be in effect for the next contract period, and the renewal or revision shall be the bylaws of the association after thirty days notice has been given to the members, unless more than fifty per cent of the members of the association have filed objections thereto in writing, except that when property rights of the members are affected, section 10-2007 shall apply.

§ 10-2007 By-laws concerning property rights of members; amendment

The property rights and interest of each member, whether equal or unequal, shall be set forth in the by-laws of the association as general rules applicable to all members by which the property rights and interest of each member shall be determined and fixed. The association may admit new members, who, when admitted, shall share in the property of the association with the old members in accordance with such general rules. By-laws defining the property rights of members shall not be altered, amended or repealed except by written consent or the vote of three fourths of the members qualified to vote under the by-laws of the association.

§ 10-2008 Eligibility for membership

Under the terms and conditions prescribed in its bylaws, an association may admit as members persons engaged in production of the products or services to be handled by or through the association, including lessees and tenants of land used for production of such products, lessors and landlords who receive as rent part of the crop raised or products created on the leased premises and persons or corporations regularly engaged in financing such production of commodities.

§ 10-2009 Membership certificates; voting; liability

If a member of an association established without capital stock has paid his membership fee, he may receive a certificate of membership. Members are not liable for debts of the association above the sum remaining unpaid on their membership fees. No member is entitled to more than one vote unless the bylaws provide otherwise. In no event is a member allowed to have more than five votes which are based on actual patronage, and a member is not allowed more than one vote because of the amount of membership capital he may own.

§ 10-2010 Appraisal of interest and payment upon withdrawal or expulsion of member

If a member withdraws or is expelled, the board of directors shall, within three years after withdrawal or expulsion, equitably appraise his property interest in the association and pay him for that interest. The appraisal is conclusive.

§ 10-2011 General powers of directors; election; compensation

A. The affairs of the association shall be managed by the board of directors elected by the members from their number. The bylaws may provide that the territory in which the association has members be divided into districts and that the directors be elected according to such districts. If the territory is so divided the bylaws shall also specify the number of directors to be elected by each district, the manner and method of apportioning the directors and of dividing the territory into districts. The bylaws may provide that primary elections be held in each district to elect the directors apportioned to the districts, and the result of such elections shall be ratified by the next regular meeting of the association. The bylaws may further provide that additional directors be elected at large and the manner of their election.

B. The association may provide a fair remuneration for the time actually spent by its officers and directors in its service.

C. If a vacancy on the board occurs other than by expiration of term, the remaining members by a majority vote shall fill the vacancy.

§ 10-2012 Organization of board of directors

The directors shall elect from their number a president and one or more vice-presidents, and a secretary and treasurer, who need not be members. The offices of secretary and treasurer may be combined. The funds of the association shall be deposited only as authorized by the board.

§ 10-2013 Removal of officer or director

A. A member may bring charges against an officer or director by filing them in writing with the secretary of the association, together with a petition for removal signed by ten per cent of the members. The removal shall be voted upon at the next regular or special meeting and the association may remove the officer or director by a majority vote of the members. The director or officer shall be informed in writing of the charges previous to the meeting, and he and the person bringing the charges may be heard in person or by counsel and may call witnesses at the meeting.

B. If the by-laws provide for election of directors by districts with primary elections in each district, then the petition for removal of a director shall be signed by twenty per cent of the members residing in the district from which he was elected. The board shall call a special meeting of the members residing in that district to consider the removal of the director, and he may be removed by a vote of the majority of the members of that district.

§ 10-2014 General and special meetings of association; notice

The by-laws shall provide for one or more regular meetings annually. The board of directors may call a special meeting at any time, or ten per cent of the members may file a request for a special meeting, stating the specific business to be brought before the association, and the meeting shall thereupon be called by the directors. Notice of all meetings, together with a statement of the purposes thereof, shall be mailed to each member at least ten days prior to the meeting, but the by-laws may require that such notice be given by publication in a newspaper.

§ 10-2015 Referral to membership

Upon demand of one half of the entire board of directors any matter that has been approved or passed by the board shall be referred to the membership or the shareholders for decision at the next special or regular meeting.

§ 10-2016 Marketing contracts; remedies for breach

A. The association and its members may make and execute marketing contracts requiring the members to sell, for any period of time not over ten years, all or any specified part of their agricultural products, their specified commodities or their manufactured goods exclusively to or through the association or its facilities.

B. The membership contract may provide for membership for a longer period than ten years but not exceeding thirty years, if the contract provides opportunity to the members for withdrawal at least once each year.

C. The contract may provide that the association may sell the products of its members, with or without taking title thereto, and pay to its members the average sale price based on grade and quantity, after deducting all necessary selling, overhead and other costs and expenses.

D. When provided in the bylaws, the marketing contract may fix, as liquidated damages, specific sums to be paid by the members to the association upon the breach by him of any provision of the marketing contract regarding the sale or delivery or withholding of products, and that the member will pay all costs, premiums for bonds, expenses and fees if an action is brought upon the contract by the association, and such provision shall be valid and enforceable in the courts.

E. In event of a breach, or threatened breach, of the marketing contract by a member, the association may apply for an injunction to prevent the further breach of the contract, and to enforce specific performance thereof.

§ 10-2017 Pilot agreement; list of other agreements; recording

The association may record one of the executed marketing agreements in the office of the county recorder of the county in which the subscribing member is producing or proposing to produce the products to be marketed for him, and such agreement shall be known as the pilot agreement. After recording the pilot agreement, the association may, from time to time, in lieu of recording other agreements obtained from its members, file with the recorder an affidavit of its secretary stating that the association has executed agreements with other members, giving their names and addresses, a description of the premises owned or leased by each of the members and the date on which the agreements were executed by the members. The affidavit, when so filed, shall be recorded in the book of miscellaneous records, and shall constitute notice of the agreements.

§ 10-2018 Investments; limitation; disposition of profits

A. An association may organize, form, operate, own, control, have an interest in, own stock of or be a member of any other corporation, with or without capital stock, engaged in processing, handling, utilizing, manufacturing, marketing, financing or selling products or services handled by the association, or the by-products thereof.

B. Profits or income received from the investments provided for in subsection A may be added to the reserves of the association to be distributed or handled according to the discretion of the board of directors.

C. An association may enter into agreements and arrangements with another cooperative corporation or association formed in this or any other state for the cooperative and more economical carrying on of its business, or any part thereof. Any two or more associations may by agreement unite in employing and using the same methods, means and agencies for conducting their businesses.

§ 10-2019 Annual reports

The association shall make an annual report on forms furnished by the corporation commission, containing a general statement of its business during the fiscal year showing:

The number of members and amount of membership fees received.
The total expense of operations.
Its indebtedness or liabilities, and its balance sheets.

§ 10-2020 License and other fees; tax exemption

Each association shall pay a nonrefundable annual license fee of ten dollars. A nonprofit agricultural products association formed pursuant to this article shall be exempt from all franchise or license taxes imposed on its income. Each association shall pay a nonrefundable fee of ten dollars for filing articles of incorporation and a nonrefundable fee of two dollars fifty cents for filing an amendment to the articles. All other for-profit association filing, service and copying fees are determined pursuant to section 10-122 and all other nonprofit association filing, service and copying fees are determined pursuant to section 10-3122.

§ 10-2021 Distribution of unclaimed reserves

If, after ten years from the date of declaration of distribution of reserves, any reserves so distributable remain unclaimed, they may be used by the association in its research and educational work.

§ 10-2022 Associations not deemed in restraint of trade

An association shall not be deemed to be a combination in restraint of trade, an illegal monopoly or an attempt to lessen competition or fix prices arbitrarily. The marketing contracts or agreements between the association and its members, or any agreements or acts authorized by this article, shall not be considered in restraint of trade.

§ 10-2023 Inducing breach of contract; spreading false report; classification

A person knowingly inducing any member of an association to breach his marketing contract with the association, or who knowingly spreads false reports concerning the finances or management thereof, is guilty of a class 2 misdemeanor, and is also liable to the injured association in a civil action in the sum of five hundred dollars.

§ 10-2024 Producer-distributor agreement not to join, become or remain member of cooperative or trade association

Every undertaking or promise made, whether written or oral, express or implied, is contrary to public policy and void and shall not afford any reason for granting legal or equitable relief, when constituted or contained in a contract or agreement for the sale of agricultural, horticultural or dairy products between a producer of such products and a distributor or purchaser thereof, whereby either party to the contract or agreement undertakes or promises not to join, become or remain a member of a cooperative association organized under this article, or of a trade association of the producers, distributors or purchasers of such products.

§ 10-2025 Security law; applicability

Title 44, chapter 12 applies only to a cooperative association that is formed under this article if either:

The cooperative association is formed with capital stock.
The cooperative association exercises its powers pursuant to section 10-2005, paragraph 10.

§ 10-2026 Merger, interest exchange, conversion, domestication or division; definitions

A. A domestic cooperative association may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapter 34 of this title and title 29, chapter 6.

B. If a domestic cooperative association is to be created in a merger, a conversion, a domestication or a division, the initial members of the association must consist of any of the following:

Five or more persons engaged in the production of agricultural products pursuant to section 10-2003, subsection A.
Five or more small businesses, individuals or entities engaged in the marketing and distribution of manufactured goods for import and export purposes.
Five or more persons for the purpose of producing, manufacturing and selling goods or services.

C. For the purposes of this section, references in chapter 34 of this title to a "corporation" are deemed references to a domestic cooperative association.

D. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.

Article 2 Electric Cooperative Nonprofit Membership Corporations

§ 10-2051 Definitions

In this article, unless the context otherwise requires:

"Affiliate" means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with another person.
"Broadband service" means providing access and transport to the internet, computer processing, information storage or protocol conversion at a download rate of at least twenty-five megabits per second and at an upload rate of at least three megabits per second.
"Cooperative" means a corporation that is organized under this article or that becomes subject to this article in the manner provided in this article.
"Executed by the cooperative" means executed by manual or facsimile signature on behalf of the cooperative by a duly authorized officer or, if the corporation is under the control of a receiver or trustee, by the receiver or trustee.
"Person" means a natural person, firm, association, corporation, business trust, partnership, federal agency, state or political subdivision or agency of a state or any body politic.

§ 10-2052 Purpose

A. Cooperative nonprofit membership corporations may be organized under this article for any of the following purposes:

Supplying, purchasing, marketing, selling, transmitting or distributing electric energy to persons and promoting and extending the use of electric energy.
Providing billing, metering, communications and other services related or incidental to supplying, providing or transmitting electric energy, whether or not the cooperative is itself supplying or transmitting that energy.
Engaging in activities designed to promote economic development of rural areas as described in section 10-2057.
Engaging in activities for any lawful purpose.
Directly or through an affiliate, providing broadband service to areas in which the cooperative provides electric energy services.

B. In a rural area where there is no telephone service, a cooperative that is supplying electric energy in the area may enter into a cooperative agreement with the existing holder of a certificate of convenience and necessity for telephone service in the general area to supply telephone service in the same area.

C. Generation and transmission cooperatives as defined in article 4 of this chapter are subject to article 4 of this chapter and not to this article.

§ 10-2053 Requirements for formation

Five or more natural persons, or two or more cooperatives, may organize a cooperative in the manner provided in this article.

§ 10-2054 Name

A. The name of a cooperative shall include the words "electric" and "cooperative," and the abbreviation "inc.," unless, in a statement executed by the cooperative and filed with the corporation commission, or in an affidavit made by a person signing the articles of incorporation, consolidation, merger or conversion, which relate to the cooperative, and filed, together with the articles, with the corporation commission, it appears that the cooperative desires to do business in another state and is or would be precluded from doing so by reason of the inclusion of either or both of those words in its name.

B. The name of a cooperative shall be distinguishable from the name of any other cooperative or corporation organized under the laws of, or authorized to do business in, this state. Only a cooperative doing business in this state pursuant to this article shall use both the words "electric" and "cooperative" in its name, but this section shall not apply to any corporation that becomes subject to this article by converting to a cooperative pursuant to title 29, chapter 6 and that elects to retain a corporate name that does not comply with this section. The restriction on the use of the words "electric" and "cooperative" does not apply to generation and transmission cooperatives organized under article 4 of this chapter.

§ 10-2055 Articles of incorporation

A. Articles of incorporation of a cooperative shall recite that they are executed pursuant to this article and shall state:

The name of the cooperative.
The address of its principal office.
The names and addresses of the incorporators.
The names and addresses of its directors.

B. The articles may also contain provisions not inconsistent with this article which are deemed necessary or advisable for the conduct of its business.

C. The articles shall be executed by an incorporator.

D. It is not necessary to recite in the articles of incorporation the purpose for which the cooperative is organized or to recite any of its corporate powers.

§ 10-2056 Amendment of articles

A. A cooperative may amend its articles by complying with the requirements prescribed in subsection B of this section, but a change in location of its principal office may be effected in the manner set forth in section 10-2066.

B. The proposed amendment shall be presented to a meeting of the members, and the notice of the meeting shall set forth or have attached to it the proposed amendment. If the proposed amendment, with any changes, is approved by the affirmative vote of not less than two-thirds of those members voting or the number of members prescribed in the bylaws but not less than a majority of those members voting, the articles of amendment shall be executed by the cooperative.

C. The articles of amendment shall state:

The name of the cooperative.
The address of its principal office.
The amendment of its articles of incorporation.

§ 10-2057 Powers of electric cooperative

A. A cooperative organized under this article may:

Sue and be sued in its corporate name.
Have perpetual existence.
Adopt and alter a corporate seal.
Engage in the generation, manufacture, purchase, acquisition, accumulation, transmission, marketing, sale, distribution, supply and disposition of electric energy, either individually or jointly in collaboration with other entities.
Assist persons to whom electric energy is or will be supplied by the cooperative in wiring their premises and in acquiring and installing electrical and plumbing appliances, equipment, fixtures and apparatus by means of financing.
Assist persons to whom electric energy is or will be supplied by the cooperative in constructing, equipping, maintaining and operating electric cold storage or processing plants by means of financing.
Construct, purchase, lease or otherwise acquire, and equip, maintain and operate, and sell, assign, convey, lease, mortgage, pledge or otherwise dispose of or encumber electric transmission and distribution lines or systems, electric generating plants, lands, buildings, structures, dams, plants and equipment, and any other real or personal property, tangible or intangible, that is deemed necessary, convenient or appropriate to accomplish any purpose for which the cooperative is organized or that it elects to undertake.
Purchase, lease or otherwise acquire, and use, and exercise and sell, assign, convey, mortgage, pledge or otherwise dispose of or encumber, franchises, rights, privileges, licenses and easements.
Borrow money and otherwise contract indebtedness, and issue notes, bonds and other evidences of indebtedness, and secure the payment thereof by mortgage, pledge or deed of trust of, or any other encumbrance on, any or all of its presently owned or after-acquired real or personal property, assets, franchises or revenues.
Construct, maintain and operate electric transmission and distribution lines along, on, under and across publicly owned lands and public thoroughfares, including all roads, highways, streets, alleys, bridges and causeways, and acquire for such purposes franchises, licenses, permits, easements, rights-of-way and all similar rights and privileges relating to such purposes.
Exercise the power of eminent domain in the manner and to the extent provided by the laws of this state for the exercise of such power by other corporations constructing or operating electric transmission and distribution lines or systems.
Become a member of other cooperatives or corporations or own stock in those cooperatives or corporations or otherwise financially participate and invest in those cooperatives or corporations.
Conduct its business and exercise its powers within or outside this state.
Adopt, amend and repeal bylaws.
Do and perform other acts and things and have and exercise other powers that may be necessary, convenient or appropriate to accomplish the purpose for which the cooperative is organized or to carry out its business and affairs.
Subject to any limitation imposed by federal law, invest its own monies, make loans or guarantees or participate in rural community infrastructure projects, in job creation activities and in other activities to promote economic development in rural areas if the rural development activities are approved by the rural utilities service.
Directly or through an affiliate, construct, operate, maintain, lease and license fiber-optic cables and other facilities to provide broadband service over, under, across, on or along real property, personal property, rights-of-way, easements and licenses and other property rights that are owned, held or used by the cooperative, including easement or other property rights owned, held or used by the cooperative to provide electricity or other services.

B. The authority granted in subsection A, paragraph 16 of this section shall be used only for economic development in rural areas, and the electric cooperative shall not use monies intended for rural economic development to purchase or acquire electrical works or electrical facilities, whether real or personal property, or both, by the exercise of the right of eminent domain or condemnation nor shall such monies be used to purchase, construct, lease or acquire any electrical works or electrical facilities or make any extensions or additions designed to serve areas or territories already being lawfully served. For the purposes of subsection A, paragraph 16 of this section and this subsection:

"Economic development" includes project feasibility studies, start-up costs, incubator projects and other reasonable expenses for the purpose of fostering rural economic development.
"Invest" means to commit monies to earn a financial return on assets that are not expected to be used or useful in furnishing electric service. The total amount that the electric cooperative invests, loans or uses as a guarantee is limited to those monies authorized under federal law for rural development programs.
"Job creation activities" includes providing technical, financial and managerial assistance.
"Rural community infrastructure projects" includes water and waste systems and garbage collection services.

C. The indemnification of members, directors, officers, employees and agents of a cooperative shall be in accordance with chapter 31, article 5 of this title.

§ 10-2058 Board of directors; compensation; term; quorum

A. The business of a cooperative shall be managed by a board of directors. Unless the bylaws provide otherwise, each of the directors shall be a member of the cooperative or of another cooperative that is a member. The bylaws shall prescribe the number of directors, their qualifications other than those prescribed in this article and the manner of holding meetings of the board of directors and of electing successors to directors who resign or die or who are otherwise incapable of acting. The bylaws may also provide for the removal of directors from office and for the election of their successors.

B. Unless the bylaws provide otherwise, the directors shall not receive salaries for services as directors and, except in emergencies, shall not be employed by the cooperative in any capacity involving compensation without the approval of the members. The bylaws may allow a payment of a fee and provide that expenses of attendance may be allowed to each director for attendance at each meeting of the board of directors.

C. The directors of a cooperative named in the articles of incorporation, consolidation, merger or conversion shall hold office until successors are elected and qualify. The bylaws shall prescribe the manner of electing directors and the number and terms of the directors, including whether the terms are staggered. If stated in the bylaws, at each annual meeting, or, in case of failure to hold the annual meeting as specified in the bylaws, at a special meeting called for that purpose, the members shall elect directors to hold office until the next annual meeting of the members, except as otherwise provided in this article. Each director shall hold office for the term for which the director is elected and until a successor is elected and qualifies. A director may resign at any time by delivering written notice to the board of directors, its presiding officer or the cooperative. A resignation is effective when the notice is delivered unless the notice specifies a later effective date or event.

D. A majority of the board of directors shall constitute a quorum.

E. If a husband and wife hold a joint membership in a cooperative, either one, but not both, may be elected a director.

F. The board of directors may take any action without a meeting if the action would be allowed at a meeting and if before the board takes the action all of the directors who are normally required to approve the action at a meeting provide prior consent by signing a written statement that explains and approves the action.

G. The board of directors may exercise all the powers of a cooperative not conferred upon the members by this article, or its articles of incorporation or bylaws.

H. Any person who serves as a director or officer or who serves on a board or council in an advisory capacity to the cooperative or board of directors of a cooperative is immune from civil liability and is not subject to a suit directly or by way of contribution for any act or omission that results in damage or injury if that person was acting in good faith and within the scope of that person's official capacity and the damage or injury was not caused by the wilful conduct or gross negligence of that person. Nothing in this subsection limits or modifies in any manner the duties or liabilities of a director or person who serves in any advisory capacity to the cooperative or the cooperative members. For the purposes of this subsection, "official capacity" means any decision, act or event the cooperative undertakes in furtherance of the purposes for which the cooperative is organized or operating.

§ 10-2059 Officers of cooperative

The officers of a cooperative shall consist of a president, vice-president, secretary and treasurer, who shall be elected annually by and from the board of directors. If stated in the bylaws, the officers of the cooperative do not have to be directors. Unless the bylaws provide otherwise, if a person holding any office ceases to be a director the person shall cease to hold the office. The offices of secretary and treasurer may be held by the same person. The board of directors may also elect or appoint all other officers, agents or employees it deems necessary or advisable and shall prescribe their powers and duties. An officer may be removed from office and his successor may be elected in the manner prescribed in the bylaws.

§ 10-2060 Members in cooperative

Each incorporator of a cooperative shall be a member of the cooperative, but no other person may become a member unless the person agrees to use electric energy or other services furnished by the cooperative as the cooperative establishes in its bylaws. A husband and wife may hold a joint membership in a cooperative. Membership in a cooperative is not transferable, except as provided in the bylaws. The bylaws may prescribe additional qualifications, limitations, classifications and rights concerning membership.

§ 10-2061 Nonliability of members for cooperative indebtedness

A member shall not be liable or responsible for the acts, debts, liabilities or obligations of the cooperative and the property of the members shall not be subject to execution therefor.

§ 10-2062 Annual and special meetings of members; notice; quorum; voting

A. An annual meeting of the members of a cooperative shall be held at such time and place as provided in the bylaws. Special meetings of the members may be called by the president, by the board of directors, by any three directors or by not less than ten per cent of the members.

B. Except as otherwise provided in this article, written or printed notice stating the time and place of each meeting of the members and, in the case of a special meeting, the purpose for which the meeting is called shall be given to each member, either personally or by mail, not less than ten nor more than twenty-five days before the date of the meeting. If mailed, the notice shall be deemed to be given when deposited in the United States mail with postage prepaid addressed to the member at the member's address appearing on the records of the cooperative.

C. Unless the bylaws prescribe the presence of a greater percentage or number of the members for a quorum, a quorum for the transaction of business at all meetings of the members of a cooperative having not more than one thousand members shall be five per cent of all members present in person or by ballot, and of a cooperative having more than one thousand members, shall be fifty members present in person or by ballot. If less than a quorum is present at any meeting, a majority of those present in person may adjourn the meeting from time to time without further notice.

D. Unless the bylaws provide otherwise, each member shall be entitled to one vote on each matter submitted to a vote at a meeting of the members. Voting shall be in person but, if the bylaws so provide, may also be by mail or by proxy.

§ 10-2063 Waiver of notice of meeting

A person entitled to notice of a meeting may waive notice in writing either before or after the meeting. If the person attends the meeting, his attendance constitutes a waiver of notice of the meeting, unless he participates therein solely to object to the transaction of any business because the meeting has not been legally called or convened.

§ 10-2064 Bylaws

The board of directors shall adopt the first bylaws of a cooperative to be adopted following incorporation, conversion, merger or consolidation. Thereafter either the board of directors or the members may amend or repeal the bylaws. The bylaws shall set forth the rights and duties of members and directors and may contain other provisions for the regulation and management of the affairs of the cooperative not inconsistent with this article or with its articles of incorporation.

§ 10-2065 Districts; boundaries

The bylaws may provide for the division of the territory served or to be served by a cooperative into two or more districts for any purpose, including, without limitation, the nomination and election of directors and the election and functioning of district delegates. The bylaws shall prescribe the boundaries of the districts, or the manner of establishing the boundaries, the manner of changing such boundaries and the manner in which the districts shall function.

§ 10-2066 Change of location of principal office

A cooperative may, upon authorization of its board of directors or its members, change the location of its principal office by filing in the office of the corporation commission a certificate reciting the change of principal office, executed by the cooperative.

§ 10-2067 Nonprofit operation

A cooperative shall be operated on a nonprofit basis for the mutual benefit of its members and patrons. The by-laws of a cooperative or its contracts with consumers shall contain such provisions relative to the disposition of revenues and receipts as may be necessary and appropriate to establish and maintain its nonprofit and cooperative character.

§ 10-2068 Disposition of property

A. The board of directors of a cooperative, without authorization by the members of the cooperative, may authorize the execution and delivery of mortgages or deeds of trust pledging or encumbering any or all of the property, assets, rights, privileges, licenses, franchises and permits of the cooperative, whether acquired or to be acquired, and wherever situated, as well as the revenues therefrom, all upon such terms and conditions as the board of directors determines, to secure any indebtedness of the cooperative. Any such mortgages or deeds of trust shall be exempt from the mortgage recording tax.

B. A cooperative may not sell, lease or otherwise dispose of all or a substantial portion of its property unless the sale, lease or other disposition is authorized by the affirmative vote of not less than a majority of those members of the cooperative present at the meeting of the members.

§ 10-2069 Recording of mortgages; effect

A. Any mortgage, deed of trust or other instrument executed by a cooperative doing business in this state pursuant to this article, which affects real and personal property and which is recorded in the office of the county recorder in any county in which the property is located or is to be located, shall have the same force and effect as if the mortgage, deed of trust or other instrument were also recorded, filed or indexed as provided by law in the office of the county recorder in such county as a mortgage of personal property. All after-acquired property of the cooperative described or referred to as being mortgaged or pledged in the mortgage, deed of trust or other instrument, shall become subject to the lien thereof immediately upon acquisition of such property by the cooperative whether or not such property was in existence at the time of execution of such mortgage, deed of trust or other instrument. Recording of the mortgage, deed of trust or other instrument constitutes notice and otherwise has the same effect with respect to after-acquired property as it has under the laws relating to recording with respect to property owned by the cooperative at the time of execution of the mortgage, deed of trust or other instrument and therein described or referred to as being mortgaged or pledged thereby.

B. The lien upon personal property of the mortgage, deed of trust or other instrument shall, after recording, continue in existence and of record for the period of time specified therein without refiling or the filing of a renewal certificate, affidavit or other supplemental information required by law relating to renewal, maintenance or extension of liens upon personal property.

§ 10-2070 Use of roads and streets; notice; protest

A. A cooperative shall have the use of, and the right is expressly granted to it to use, the public highways, county highways and streets and alleys in or outside the service area of the cooperative. The cooperative may construct and operate lines connecting any points within the state and connect at the state boundary with like lines.

B. Within the confines of municipal corporations however, use and occupancy of streets shall be under such rights as may be acquired by franchises according to law, and subject to control and regulation by municipal authorities, and the use of public highways, except state highways, by cooperatives not within the confines of an incorporated city or town, shall be regulated by the board of supervisors of the county, by license or franchise. The board of supervisors in granting the license or franchise, or at any time after it is granted, may impose such restrictions and limitations as to the use of the public roads as may be deemed best for the public safety or welfare. Every franchise granted under this section shall include provisions requiring the grantee to bear all expenses, including damage and compensation for any alteration of the direction, surface, grade or alignment of any county road, made for the purpose of such franchise.

C. The board of supervisors before granting the privileges contemplated by this section, shall give public notice of its intention to make the grant, by publishing notice in some newspaper of general circulation, published within the county, for at least once a week for three weeks prior to the day set for the consideration of such action. If, on or before such date, more than fifty per cent of the qualified electors of the county petition the board of supervisors to deny the privilege, they shall so act, and any privilege granted contrary to the petition shall be void.

§ 10-2071 Unclaimed patronage capital credits; fees; uses; exemption; definition

A. A patronage capital credit retirement payment or fee payment from a cooperative to its member or former member is an unclaimed capital credit or fee if the credit or fee remains unclaimed for a period of two years after the payment was made available to the member or former member.

B. All unclaimed capital credits or fees are exempt from title 44, chapter 3, and a cooperative may retain or use all unclaimed capital credits or fees for any lawful purpose.

C. A cooperative may retain, use or assign all unclaimed capital credits or fees for any lawful purpose if the purpose is consistent with the cooperative's bylaws and is specified by the cooperative's board of directors.

D. The cooperative shall pay a verifiable unclaimed capital credit or fee claim by a member or former member originating on, before and after August 3, 2018.

E. Each cooperative shall maintain a searchable list on its website that contains the name and last known address of each member or former member appearing from the cooperative's records to be the owner of the unclaimed capital credits or fees of fifty dollars or more and instructions on how to claim the unclaimed capital credits or fees. The list shall include records from and after December 31, 2001.

F. For the purposes of this section, "patronage capital" includes all amounts received by a cooperative from sales of electric power, energy distribution services or other services to members in excess of the cooperative's cost of furnishing electric power, energy distribution services or other services to members and other margins as determined by the board of directors of the cooperative.

§ 10-2073 Merger, interest exchange, conversion, domestication or division; definitions

A. A domestic electric cooperative nonprofit membership corporation may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapter 34 of this title and title 29, chapter 6. A plan must be approved by two-thirds of the members.

B. If a domestic electric cooperative nonprofit membership corporation is to be created in a merger, a conversion, a domestication or a division, both of the following apply:

The initial members of the corporation must consist of five or more natural persons or two or more cooperatives in accordance with section 10-2053.
The name of the corporation must comply with section 10-2054.

C. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.
"Plan" means a plan of merger, interest exchange, conversion, domestication or division.

§ 10-2077 Dissolution

A. A cooperative that has not commenced business may be dissolved by delivering to the corporation commission articles of dissolution, which shall be executed by the cooperative and which shall state:

The name of the cooperative.
The address of its principal office.
That the cooperative has not commenced business.
That any monies received by the cooperative, less any part disbursed for expenses of the cooperative, have been returned or paid to those entitled to the monies.
That no debt of the cooperative is unpaid.
That a majority of the incorporators elect that the cooperative be dissolved.

B. A cooperative that has commenced business may be dissolved in the following manner:

The proposition to dissolve shall be submitted to the members of the cooperative at any annual or special meeting, the notice of which shall set forth the proposition.
The members at the meeting shall approve, by the affirmative vote of not less than a majority of all members of the cooperative, the proposition that the cooperative be dissolved.
On approval, a certificate of election to dissolve, designated in this subsection as the "certificate", shall be executed by the cooperative.
The certificate shall state:

(a) The name of the cooperative.

(b) The address of its principal office.

The certificate shall be submitted to the corporation commission for filing.
On filing the certificate with the corporation commission the cooperative shall cease to carry on its business except to the extent necessary for winding up, but its corporate existence shall continue until articles of dissolution have been filed with the corporation commission.
The board of directors shall immediately cause notice of the dissolution proceedings to be mailed to each known creditor of and claimant against the cooperative, and such notice shall be published once a week for two successive weeks in a newspaper of general circulation in the county in which the principal office of the cooperative is located.
The board of directors shall wind up and settle the affairs of the cooperative, collect monies owing to it, liquidate its property and assets, pay and discharge its debts, obligations and liabilities, other than those to patrons arising by reason of their patronage, and do all other things required to wind up its business. After paying or discharging or adequately providing for the payment or discharge of all its debts, obligations and liabilities, other than those to patrons arising by reason of their patronage, the board of directors shall distribute any remaining sums, first to patrons for the pro rata return of all amounts standing to their credit by reason of their patronage, and second to members for the pro rata repayment of membership fees. Any sums then remaining shall be distributed among its members and former members in proportion to their patronage.
The board of directors shall thereupon authorize the execution of articles of dissolution, which shall be executed by the cooperative.
The articles of dissolution shall recite that they are executed pursuant to this article and shall state:

(a) The name of the cooperative.

(b) The address of its principal office.

(d) That there are no actions or suits pending against the cooperative.

(e) That all debts, obligations and liabilities of the cooperative have been paid and discharged or that adequate provision has been made for payment and discharge.

(f) That the preceding provisions of this subsection have been duly complied with.

The articles of dissolution prepared pursuant to paragraph 10 of this subsection shall be delivered to the corporation commission for filing. Within sixty days after the corporation commission approves the filing, either of the following must occur:

(a) A copy of the articles of dissolution shall be published. An affidavit evidencing the publication may be filed with the corporation commission.

(b) The corporation commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-2078 Filing of articles

Articles of incorporation, amendment, consolidation, merger, conversion or dissolution, when executed by the cooperative, shall be delivered to the corporation commission for filing. If the corporation commission finds that the articles presented conform to the requirements of this article, it shall, upon the payment of the fees as provided in this article, file the articles, and upon such filing, the incorporation, amendment, consolidation, merger, conversion or dissolution shall be in effect. The provisions of this section shall also apply to certificates of election to dissolve.

§ 10-2079 Fees

The corporation commission shall charge and collect the following nonrefundable fees for:

Filing articles of incorporation, ten dollars.
Filing articles of amendment, ten dollars.
Filing statement of merger, interest exchange, conversion, domestication or division, ten dollars.
Filing certificate of election to dissolve, ten dollars.
Filing articles of dissolution, ten dollars.
Filing certificate of change of principal office, five dollars.

§ 10-2080 Exemption from securities regulations

The provisions of chapter 12 of title 44 shall not apply to any note, bond or other evidence of indebtedness issued by a cooperative doing business in this state pursuant to this article to the United States or any agency or instrumentality thereof, or to any mortgage, deed of trust or other instrument executed to secure such note, bond or other evidence of indebtedness, nor shall such provisions apply to the issuance of membership certificates or other evidence of member interest by a cooperative.

§ 10-2081 Exemption from antitrust statutes

Title 44, chapter 10, article 1 does not apply to any conduct or activity of a cooperative organized pursuant to this article, if the conduct or activity is approved by a statute of this state or of the United States or by the corporation commission or an administrative agency of this state or of the United States that has jurisdiction of the subject matter.

§ 10-2082 Taking of acknowledgments by officer or member

A person authorized to take acknowledgments under the laws of this state shall not be disqualified from taking acknowledgments of instruments executed in favor of a cooperative or to which it is a party, by reason of being an officer, director or member of the cooperative.

§ 10-2083 Construction of article

This article shall be construed liberally, and the enumeration of any object, purpose, power, manner, method or thing shall not be deemed to exclude like or similar objects, purposes, powers, manners, methods or things.

§ 10-2084 Electric cooperative nonprofit membership corporations; annual report

Each electric cooperative nonprofit membership corporation incorporated pursuant to this article shall deliver to the commission for filing an annual report as required by section 10-11622.

§ 10-2085 Expanded use for broadband service; just compensation; notice; fees; definitions

A. For the purposes of providing broadband service, if a cooperative, directly or through its affiliate, expands the use of an existing easement or other property right that is owned, held or used by the cooperative to provide electricity or other services and the expanded use reduces the fair market value of the property over which the easement or other property right runs, the property owner is entitled to just compensation from the cooperative.

B. The property owner must commence an action in the superior court for just compensation based on diminution in value not later than eighteen months after the date that the cooperative provides notice to the property owner of the expanded use for broadband service. If an action is not commenced within this time, the expanded use is deemed fully vested in the cooperative and its affiliate without the need to pay just compensation and the expanded use runs with the land.

C. Notice under subsection B of this section is effective if sent by first class mail to the last known address of the property owner, by a printed insertion in the property owner's electric bill or by other commonly used publication or communication channels employed by the cooperative.

D. In an action for just compensation based on a claim of expanded use for broadband service all of the following apply:

The court or jury shall ascertain and assess the diminution in value of the property based on the difference between the fair market value of the entire parcel immediately before the expanded use and the fair market value of the entire parcel immediately after the expanded use.
Evidence of revenues or profits derived from or the rental value of an assembled communications corridor is not admissible in determining fair market value.
On payment of just compensation, the expanded use for broadband service is deemed fully vested in the cooperative and its affiliate and the expanded use runs with the land.

E. A class action may not be maintained against a cooperative or its affiliate in any action for just compensation based on a claim of expanded use for broadband service.

F. Actions for just compensation as described in this section include trespass, inverse condemnation and other similar causes of action.

G. This section does not prohibit a cooperative or its affiliate from reaching an agreement with a property owner to waive a claim for just compensation related to expanded use for broadband service or from acquiring the right to use the property for broadband service by other lawful means.

H. If excavation is required to install fiber-optic cable or other underground facilities to provide broadband service, the cooperative or its affiliate shall provide written notice to the property owner of the expanded use for broadband service before excavation. The cooperative or its affiliate shall send the notice by first class mail to the last known address of the property owner, by a printed insertion in the property owner's electric bill or by other commonly used publication or communication channels employed by the cooperative or its affiliate. A notice sent to a property owner entitled to notice under this subsection must include all of the following:

The name and mailing address of the cooperative or its affiliate.
The mailing address, telephone number and email address for a representative of the cooperative or its affiliate.
A summary statement describing the activities to be conducted during the excavation.
The approximate dates when the excavation will start and end.

I. The notice prescribed in subsection H of this section is not required before a cooperative's or its affiliate's use of an easement or other property right that includes an authorization for excavation for purposes of providing broadband service. Failure to provide the notice prescribed in subsection H of this section:

Prohibits the cooperative or its affiliate from proceeding with an excavation until the notice is provided.
Does not invalidate or prevent the cooperative or its affiliate from expanding the use of the easement or property right as otherwise described in this section.

J. Any pole attachment agreement between a cooperative and an affiliate for broadband service pursuant to section 10-2057, subsection A, paragraph 17 that includes attachment to the cooperative's poles shall specifically require the pole attachment fees that are charged to any unaffiliated video service provider or any unaffiliated telecommunications provider to be equal to the pole attachment fees charged to the affiliate where the affiliate and video service provider or telecommunications provider are jointly attached to the same pole.

K. For the purposes of this section:

"Telecommunications provider" has the same meaning prescribed in section 9-1401 or 11-1901.
"Video service provider" has the same meaning prescribed in section 9-1401 or 11-1901.

Article 3 Fraternal and Benevolent Societies

§ 10-2101 Requirements for formation

A. The members of a grand lodge or division, or of a subordinate lodge or division, acting under the authority of a grand lodge or division of Free Masons, Odd Fellows, Knights of Pythias, Workmen, Elks or of any other society constituted in a manner generally similar thereto, whether or not acting under the jurisdiction of a grand lodge or division, may assemble at their usual place of meeting, and in accordance with the rules of their society, elect not less than three nor more than nine of their number trustees for the purpose of preserving the property belonging to the society and transacting all business relating to the investment and disposal thereof.

B. The trustees may have a common seal and alter it at pleasure, and for all purposes for which they are authorized to act shall be deemed a corporation.

§ 10-2102 Powers of trustees

In pursuance of the rules and regulations of the society, and in conformity with the rules and regulations of the grand lodge, division or society from which they derive their charter, the trustees may manage, purchase, lease, hold, convey, mortgage, execute deeds of trust and improve the property of the society, including burial places owned by the society, and as trustees may sue and be sued in all matters pertaining to such property, and to claims, demands and liabilities thereof.

§ 10-2103 Title to property of society

The property conveyed or acquired by devise, gift, purchase or otherwise to the society, or to any person as trustee for the use thereof, shall vest in the trustees and their successors in office as fully as if originally conveyed to them, and shall be held by them and by their successors in trust for the society.

§ 10-2104 Election, removal and meetings of trustees

A. The trustees shall be elected annually and they shall severally hold office for one year and until their successors are elected, but the society may classify the trustees so that the term of office of one third of them shall expire each year, and when so classified the term of office of the trustees shall be three years and until their successors are elected. A trustee may be removed in accordance with the rules or by-laws of the society and vacancies may be filled for the remainder of the term.

B. Any two of the trustees may call a meeting thereof, and a majority may transact business.

§ 10-2105 Filing facsimile of society insignia

Benevolent, fraternal or secret societies or organizations in this state may file in the office of the secretary of state a facsimile of its insignia, distinctive ribbon, membership rosette or button prescribed and adopted by the society or organization for the use of its members. The secretary of state shall keep the facsimile on file and shall receive for such filing two dollars and fifty cents.

§ 10-2106 Wearing insignia of patriotic or fraternal order without authority to obtain aid; classification

A person who wears the insignia, badge, emblem, distinctive ribbon or membership rosette or button of a benevolent, fraternal, patriotic or veterans' organization, or secret society or organization, or its auxiliary, a facsimile of which has been filed in the office of the secretary of state, or uses such insignia, badge, emblem, distinctive ribbon or membership rosette or button to obtain aid or assistance within this state, unless the person is entitled to use or wear them, is guilty of a class 3 misdemeanor.

§ 10-2107 Merger, interest exchange, conversion, domestication or division; definitions

A. A fraternal or benevolent society may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapter 34 of this title and title 29, chapter 6.

B. For the purposes of this section, references in chapter 34 of this title to "directors" are deemed references to trustees, and references to a "corporation" are deemed references to a fraternal or benevolent society.

C. If a fraternal or benevolent society governed by this article is to be created in a merger, a conversion, a domestication or a division:

The initial members of the society must be members of the type described in section 10-2101.
The trustees of the society must be members of the society and must be not less than three nor more than nine in number in accordance with section 10-2101.

D. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.

Article 4 Nonprofit Electric Generation and Transmission Cooperative Corporations

§ 10-2121 Definitions

In this article, unless the context otherwise requires:

"Affiliate" means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with another person.
"Broadband service" means providing access and transport to the internet, computer processing, information storage or protocol conversion at a download rate of at least twenty-five megabits per second and at an upload rate of at least three megabits per second.
"Electric utility" means any corporation, governmental agency, political subdivision or other entity or combination of such entities that produces, generates, purchases, sells, transmits or distributes electricity to another electric utility or to a user of electricity.
"Executed by the cooperative" means executed by manual or facsimile signature on behalf of the cooperative by a duly authorized officer or, if the corporation is under the control of a receiver or trustee, by the receiver or trustee.
"Generation and transmission cooperative" means a corporation that is organized under this article or that becomes subject to this article as provided in this article.
"Person" means a natural person, firm, association, corporation, business trust or partnership or any agency or political subdivision of the United States or of this state or any other political body.

§ 10-2122 Purpose

Nonprofit electric generation and transmission cooperative corporations may be organized under this article for the purpose of:

Producing and generating, purchasing, marketing or selling electric energy or transmitting such energy to other electric utilities or persons.
Providing services relating to producing and generating, purchasing, marketing or selling electric energy or transmitting this energy to other electric utilities or persons or services relating to any other lawful purpose.
Directly or through an affiliate, providing broadband service to areas in which the cooperative provides electric energy services.

§ 10-2123 Incorporators

Two or more electric utilities or persons that fulfill the requirements for being a member may organize a generation and transmission cooperative as provided in this article.

§ 10-2124 Use of name

A. The name of a generation and transmission cooperative shall include the word "cooperative" and the abbreviation "inc.", unless, in a statement executed by the cooperative and filed with the corporation commission, it appears that the generation and transmission cooperative desires to transact business in another state and would be precluded from doing so by reason of including these words in its name.

B. The name of the generation and transmission cooperative must be distinguishable from the name of any other cooperative or corporation organized under the laws of or authorized to do business in this state. Only a generation and transmission cooperative doing business in this state pursuant to this article may use all of the words "electric", "power" and "cooperative" in its name.

§ 10-2125 Articles of incorporation

A. Articles of incorporation of a generation and transmission cooperative shall recite that they are executed pursuant to this article and shall state:

The name of the generation and transmission cooperative.
The address of its principal office.
The names and addresses of its incorporators.
The names and addresses of persons who constitute its first board of directors.
Any provisions not inconsistent with this article which is deemed necessary or advisable for the conduct of its business.

B. The articles shall be signed by a duly appointed representative of each incorporator and shall then be filed with the corporation commission as provided in this article.

C. It is not necessary to recite in the articles of incorporation the purpose for which the generation and transmission cooperative is organized or to recite any of its corporate powers.

§ 10-2126 Amendment of articles; change of location of principal office

A. A generation and transmission cooperative may amend its articles of incorporation by complying with the following requirements:

A proposed amendment shall be presented to a meeting of the members. The meeting notice shall state or have attached to it all proposed amendments. A proposed amendment, with any changes, shall be approved by the affirmative vote of either:

(a) At least two-thirds of the total number of voting delegates voting at the meeting.

(b) The number prescribed in the bylaws but not less than a majority of the total number of voting delegates voting at the meeting.

After approval, the articles of amendment shall be executed by the cooperative.
The articles of amendment shall recite that they are executed pursuant to this article and shall state:

(a) The name of the generation and transmission cooperative.

(b) The address of its principal office.

B. On authorization of the board of directors or its members, a generation and transmission cooperative may, without amending its articles of incorporation, change the location of its principal office by filing with the corporation commission a certificate that recites the change of principal office and that is executed by the cooperative.

§ 10-2127 Powers of a generation and transmission cooperative

A. A generation and transmission cooperative may:

Sue and be sued and complain and defend in its corporate name.
Have perpetual existence by its corporate name.
Adopt a corporate seal and alter the seal at its pleasure, and use the seal by causing it, or a facsimile of it, to be impressed or affixed or in any other manner reproduced, but failure to have or to affix a corporate seal does not affect the validity of any instrument or any action taken in pursuance of or in reliance on the seal.
Own, operate, lease or control plants, property and facilities for the generation or transmission, sale or furnishing of electricity for light, heat or power or other uses, and generate, manufacture, purchase, acquire, accumulate and transmit electric energy.
Engage in, individually or jointly in collaboration with other entities, the acquisition, purchase, marketing, sale, supply and disposition of electric energy to or for its members and persons, entities, governmental agencies and political subdivisions and other electric utilities.
Purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, exercise rights arising out of the ownership or possession, use, employ, sell, assign, transfer, convey, mortgage, lend, pledge, hypothecate or otherwise use and deal in and with shares, rights, memberships or other interests in, or notes, bonds, debentures, mortgages, passbooks, certificates of deposit or other obligations of other domestic or foreign corporations, associations, partnerships, limited partnerships or individuals, or direct or indirect obligations or securities of individuals, associations, cooperatives, partnerships, corporations or of the United States or of any other government, state, territory, governmental district or municipality or of any instrumentality thereof.
Construct, purchase, take, receive, lease as lessee or otherwise acquire, and own, hold, improve, use, equip, maintain and operate, and sell, assign, transfer, convey, exchange, lease as lessor, mortgage, pledge or otherwise dispose of or encumber electric transmission lines and systems, electric generating plants, lands, buildings, structures, dams, plants and equipment, and any and all kinds and classes of real or personal property, tangible or intangible, that are deemed necessary, convenient or appropriate to accomplish the purpose for which the generation and transmission cooperative is organized or that it elects to undertake.
Purchase or otherwise acquire, and own, hold, use and exercise and sell, assign, transfer, convey, mortgage, pledge, hypothecate or otherwise dispose of or encumber franchises, rights, privileges, licenses, rights-of-way and easements.
Make contracts and guarantees and incur liabilities, borrow money and otherwise contract indebtedness, and issue its notes, bonds and other evidence of indebtedness, and secure the payment of any indebtedness by mortgage, pledge, deed of trust, assignment, security agreement or any other hypothecation or encumbrance on any or all of its real or personal property, assets, franchises, revenue or income.
Construct, maintain and operate electric transmission lines along, on, under and across publicly owned lands and public thoroughfares, including all roads, highways, streets, alleys, bridges and causeways, and acquire for such purposes franchises, licenses, permits, easements, rights-of-way and all similar rights and privileges relating to such purposes.
Exercise the power of eminent domain in the manner and to the extent provided by the laws of this state for the exercise of such power by other corporations constructing or operating electric transmission lines or systems.
Become a member of other cooperative organizations or corporations or own stock in or otherwise financially participate and invest in those other organizations or corporations.
Conduct its business, carry on its operations, have offices and exercise the powers granted by this article in any state, territory, district or possession of the United States or in any foreign country.
Adopt, amend and repeal bylaws consistent with this article.
Cease its corporate activities and surrender its corporate franchise.
Do and perform other acts and things, and have and exercise other powers, that may be necessary, convenient or appropriate to accomplish the purpose for which the generation and transmission cooperative is organized or to carry out its business and affairs.
Directly or through an affiliate, construct, operate, maintain, lease and license fiber-optic cables and other facilities to provide broadband service over, under, across, on or along real property, personal property, rights-of-way, easements and licenses and other property rights owned, held or used by the generation and transmission cooperative, including easement or other property rights that are owned, held or used by the cooperative to provide electricity or other services.

B. The indemnification of members, directors, officers, employees and agents of a cooperative shall be in accordance with chapter 31, article 5 of this title.

§ 10-2128 Membership in a generation and transmission cooperative; voting; nonliability

A. Only electric utilities and other persons as the bylaws provide are eligible to be members of a generation and transmission cooperative. All incorporators shall be original members of a generation and transmission cooperative, and new members may be admitted by a majority vote of all voting delegates. The bylaws may prescribe additional qualifications, limitations and classifications and rights concerning membership.

B. The articles of incorporation or the bylaws of a generation and transmission cooperative may provide for classifications of members in a generation and transmission cooperative.

C. The bylaws shall provide the number of voting delegates that each member may designate. The bylaws may provide that each classification of members may designate a different number of voting delegates.

D. Members are entitled to vote as members only through their duly designated voting delegate. A reference in this article to approval or votes by members refers to the members approving or voting through their voting delegates.

E. A member is not liable or responsible for the acts, debts, liabilities or obligations of the generation and transmission cooperative, and the property of the members is not subject to execution for such acts, debts, liabilities or obligations unless the member otherwise agrees.

§ 10-2129 Annual and special meetings of members; notice; quorum

A. An annual meeting of the members of a generation and transmission cooperative shall be held at a time and place provided in the bylaws. Special meetings of the members may be called by the president, by the board of directors, by any three directors or by not less than twenty-five per cent of the voting delegates.

B. Except as otherwise provided in this article, written or printed notice stating the time and place of each meeting of the members and, in the case of a special meeting, the purpose for which the meeting is called shall be given to each member, either personally or by mail, not less than ten nor more than twenty-five days before the date of the meeting. If mailed, the notice is deemed to be given when deposited in the United States mail with postage prepaid addressed to the member at his address appearing on the records of the generation and transmission cooperative.

D. A member entitled to notice of a meeting may waive notice in writing either before or after the meeting. If any voting delegate of a member attends the meeting, his attendance constitutes a waiver of notice of the meeting, unless he participates solely to object to the transaction of any business because the meeting has not been legally called or convened.

§ 10-2130 Board of directors; term; compensation; quorum

A. A board of directors shall manage the business of a generation and transmission cooperative. The directors named in the articles of incorporation, consolidation, merger or conversion hold office until the directors' successors are elected and qualify. The bylaws shall prescribe the number and terms of directors and the manner of electing the directors. Each director shall hold office for the term for which the director is elected and until the director's successor is elected and qualifies. A director may resign at any time by delivering written notice to the board of directors, its presiding officer or the cooperative. A resignation is effective when the notice is delivered unless the notice specifies a later effective date or event.

B. The bylaws shall prescribe the number of directors as provided in subsection A, the directors' qualifications other than those prescribed in this article and the manner of holding meetings of the board of directors and of electing successors to directors who resign or die or who are otherwise incapable of acting. The bylaws may also provide for the removal of directors from office and for the election of the directors' successors.

C. Unless the bylaws provide otherwise, the directors shall not receive salaries for services as directors and, except in emergencies, shall not be employed by the generation and transmission cooperative in any capacity involving compensation without the approval of the members. The bylaws may allow a payment of a fee and may provide that expenses of attendance are allowed to each director for attendance at each meeting of the board of directors.

D. A majority of the board of directors constitutes a quorum.

E. Any action which may be taken at a meeting may be taken without a meeting if a writing stating and approving the action taken is signed prior to the action being taken by the number of directors normally required to approve the action at a meeting. This prior consent has the same force and effect as a vote at a meeting.

F. The board of directors may exercise all the powers of a cooperative not conferred on the members by this article, or its articles of incorporation or bylaws.

G. Any person who serves as a director or officer or who serves on a board or council in an advisory capacity to the cooperative or board of directors of a cooperative is immune from civil liability and is not subject to a suit directly or by way of contribution for any act or omission that results in damage or injury if that person was acting in good faith and within the scope of that person's official capacity and the damage or injury was not caused by the wilful or grossly negligent conduct of that person. Nothing in this subsection limits or modifies in any manner the duties or liabilities of a director or person who serves in an advisory capacity to the cooperative or the cooperative's members. For the purposes of this subsection, "official capacity" means any decision, act or event undertaken by the cooperative in furtherance of the purposes for which that cooperative is organized or operating.

§ 10-2131 Officers of a generation and transmission cooperative

The officers of a generation and transmission cooperative consist of a president, vice-president, secretary and treasurer, who are elected annually by and from the board of directors. If stated in the bylaws, the officers of the cooperative do not need to be members of the board of directors. Unless the bylaws provide otherwise, if a person holding any office ceases to be a director, the person ceases to hold the office. The offices of secretary and treasurer may be held by the same person. The board of directors may also elect or appoint such other officers, agents or employees it deems necessary or advisable and shall prescribe their powers and duties. An officer may be removed from office and the officer's successor may be elected in the manner prescribed in the bylaws.

§ 10-2132 Bylaws

The board of directors shall adopt the first bylaws of a generation and transmission cooperative to be adopted following incorporation, conversion, merger or consolidation. Thereafter, bylaws shall be adopted, amended or repealed either by the board of directors or by a majority of the members acting through their voting delegates present in person or by proxy at any regular meeting or special meeting called for that purpose at which a quorum is present. The bylaws shall state the rights and duties of members and directors and may contain other provisions for the regulation and management of the affairs of the generation and transmission cooperatives if the provisions are not inconsistent with this article or with articles of incorporation.

§ 10-2133 Nonprofit operation

A generation and transmission cooperative shall be operated on a nonprofit basis for the mutual benefit of its members and patrons. The bylaws of a generation and transmission cooperative or its contracts with consumers shall contain such provisions relative to the disposition of revenues and receipts as are necessary and appropriate to establish and maintain its nonprofit and cooperative character.

§ 10-2134 Disposition of property

A. The board of directors of a generation and transmission cooperative may, without authorization by the members, authorize the execution and delivery of mortgages or deeds of trust pledging or encumbering any or all of the property, assets, rights, privileges, licenses, franchises and permits of the generation and transmission cooperative, whether acquired or to be acquired, and wherever situated, as well as their revenues, all upon terms and conditions as the board of directors determines, to secure any indebtedness of the generation and transmission cooperative. Any such mortgages or deeds of trust are exempt from the mortgage recording tax.

B. A generation and transmission cooperative may not sell, lease or otherwise dispose of all or a substantial portion of its property unless the sale, lease or other disposition is authorized by the affirmative vote of not less than a majority of those members of the generation and transmission cooperative, acting through their voting delegates, present at a meeting of the members.

§ 10-2135 Recording of mortgages; effect

A. Any mortgage, deed of trust or other instrument executed by a generation and transmission cooperative doing business in this state pursuant to this article, which affects real and personal property which is recorded in the office of the county recorder in any county in which the property is located or is to be located, has the same force and effect as if the mortgage, deed of trust or other instrument were also recorded, filed or indexed as provided by statute in the office of the county recorder in the county as a mortgage of personal property. All property of the generation and transmission cooperative described or referred to as being mortgaged or pledged in the mortgage, deed of trust or other instrument becomes subject to the lien immediately upon acquisition of the property by the generation and transmission cooperative whether or not the property was in existence at the time of execution of the mortgage, deed of trust or other instrument. Recording of the mortgage, deed of trust or other instrument constitutes notice and otherwise has the same effect with respect to after-acquired property as it has under the statutes relating to recording with respect to property owned by the generation and transmission cooperative at the time of execution of the mortgage, deed of trust or other instrument and described or referred to as being mortgaged or pledged.

B. The lien on personal property of the mortgage, deed of trust or other instrument, after recording, continues in existence and of record for the period of time specified without refiling or the filing of a renewal certificate, affidavit or other supplemental information required by statute relating to renewal, maintenance or extensions of liens upon personal property.

§ 10-2136 Use of roads and streets; notice; protest

A. A generation and transmission cooperative has the use of, and the right is expressly granted to it to use, the public highways, county highways and streets and alleys in any area of this state. The generation and transmission cooperative may construct and operate lines connecting any points within this state and connect at the state boundary with like lines.

B. Within the confines of municipal corporations, the use and occupancy of streets shall be under such rights as are acquired by franchises according to law and subject to control and regulation by municipal authorities, and the use of public highways, except state highways, by generation and transmission cooperatives not within the confines of an incorporated city or town shall be regulated by the board of supervisors of the county by license or franchise. The board of supervisors in granting the license or franchise, or at any time after it is granted, may impose such restrictions and limitations concerning the use of the public roads as deemed best for the public safety or welfare. Every franchise granted under this section must include provisions requiring the grantee to bear all expenses, including damage and compensation for any alteration of the direction, surface, grade or alignment of any county road, made for the purpose of the franchise.

C. The board of supervisors before granting the privilege contemplated by this section shall give public notice of its intention to make the grant by publishing notice in some newspaper of general circulation, published within the county, for at least once a week for three weeks prior to the day set for the consideration of the action. If, on or before the date, more than fifty per cent of the qualified electors of the county petition the board of supervisors to deny the privilege, they shall so act, and any privilege granted contrary to the petition is void.

§ 10-2138 Prohibition of duplication of service

A generation and transmission cooperative organized pursuant to this article is expressly prohibited from supplying electric generation service in the certificated service territory of or to any corporation in the certificated service territory of or to any member of a member owned nonprofit cooperative corporation unless the cooperative has the consent of that corporation.

§ 10-2139 Merger, interest exchange, conversion, domestication or division; definitions

A. A domestic nonprofit electric generation and transmission cooperative corporation may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapter 34 of this title and title 29, chapter 6.

B. Except as set forth in section 10-2141, a plan must be approved by two-thirds of the members.

C. If a domestic nonprofit electric generation and transmission cooperative corporation is to be created in a merger, a conversion, domestication or a division:

The initial members of the corporation must consist of two or more electric utilities or persons that fulfill the requirements for being a member as prescribed by section 10-2123.
The name of the corporation must comply with section 10-2124.

D. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.
"Plan" means a plan of merger, interest exchange, conversion, domestication or division.

§ 10-2141 Conversion of cooperatives into generation and transmission cooperatives

A cooperative created pursuant to article 2 of this chapter and which meets the requirements of this article may be converted into a generation and transmission cooperative authorized to do business and entitled to all privileges and immunities of a generation and transmission cooperative organized pursuant to this article upon the adoption of a resolution to such effect by its board of directors and the submission of the resolution to the corporation commission.

§ 10-2143 Dissolution

A. A generation and transmission cooperative that has not commenced business may dissolve voluntarily by delivering to the corporation commission articles of dissolution, executed and acknowledged on behalf of the generation and transmission cooperative by a majority of the incorporators, which shall state:

The name of the generation and transmission cooperative.
The address of its principal office.
The date of its incorporation.
That the generation and transmission cooperative has not commenced business.
That the amount, if any, actually paid in on account of membership fees, less any part disbursed for necessary expenses, has been returned to those entitled and that all easements have been released to the grantors.
That no debt of the generation and transmission cooperative remains unpaid.
That a majority of the incorporators elect that the generation and transmission cooperative be dissolved. The articles of dissolution shall be submitted to the corporation commission for filing as provided in this article.

B. A generation and transmission cooperative that has commenced business may dissolve voluntarily and wind up its affairs in the following manner:

The proposition that the generation and transmission cooperative be dissolved must be submitted to the members of the generation and transmission cooperative at any meeting. The meeting notice shall state the proposition. The proposed voluntary dissolution is deemed to be approved on the affirmative vote of not less than two-thirds of those members acting through their voting delegates voting at the meeting.
On approval, a certificate of election to dissolve, designated the "certificate", shall be executed by the generation and transmission cooperative. The certificate shall be submitted to the corporation commission for filing as provided in this article and shall state:

(a) The name of the generation and transmission cooperative.

(b) The address of its principal office.

(d) The total number of voting delegates of the generation and transmission cooperative and the number of voting delegates who voted for and against the voluntary dissolution of the generation and transmission cooperative.

On the filing of the certificate with the corporation commission, the generation and transmission cooperative shall cease to carry on its business except as is necessary for the winding up of business, but its corporate existence continues until articles of dissolution have been filed with the corporation commission.
After the filing of the certificate with the corporation commission, the board of directors shall immediately mail notice of the winding up of proceedings to each known creditor and claimant and publish notice once a week for two successive weeks in a newspaper of general circulation in the county in which the principal office of the generation and transmission cooperative is located.
The board of directors has full power to wind up and settle the affairs of the cooperative and shall proceed to collect the debts owing to the generation and transmission cooperative, convey and dispose of its property and assets, pay, satisfy and discharge its debts, obligations and liabilities and do all other things required to liquidate its business and affairs and, after paying or adequately providing for the payment of all its debts, obligations and liabilities, shall distribute the remainder of its property and assets among its members without priority in proportion to the aggregate patronage of each member during the seven years next preceding the date of filing the certificate, or, if the generation and transmission cooperative was not in existence for such period, during the period of its existence.
When all debts, liabilities and obligations of the generation and transmission cooperative have been paid and discharged or adequate provision has been made for them, and all the remaining property and assets of the generation and transmission cooperative have been distributed to the members pursuant to this section, the board of directors shall authorize the execution of articles of dissolution. The articles of dissolution shall state:

(a) The name of the generation and transmission cooperative.

(b) The address of the principal office of the generation and transmission cooperative.

(c) That the generation and transmission cooperative has previously delivered to the corporation commission a certificate of election to dissolve and the date on which the certificate was filed by the corporation commission.

(d) That all debts, obligations and liabilities of the generation and transmission cooperative have been paid and discharged or that adequate provision has been made for them.

(e) That all the remaining property and assets of the generation and transmission cooperative have been distributed among the members in accordance with this section.

(f) That there are no actions or suits pending against the generation and transmission cooperative.

The articles of dissolution prepared pursuant to paragraph 6 of this subsection shall be delivered to the corporation commission for filing. Within sixty days after the corporation commission approves the filing, either of the following must occur:

(a) A copy of the articles of dissolution shall be published. An affidavit evidencing the publication may be filed with the corporation commission.

(b) The corporation commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-2144 Filing of articles

Articles of incorporation, amendment, consolidation, merger, conversion or dissolution, when executed by the cooperative, shall be delivered to the corporation commission for filing. If the corporation commission finds that the articles presented conform to the requirements of this article, it shall, on the payment of the required fees, file the articles, and on filing, the incorporation, amendment, consolidation, merger, conversion or dissolution becomes effective. This section also applies to a certificate of election to dissolve as provided in section 10-2143, subsection B, paragraph 2.

§ 10-2145 Fees

The corporation commission shall charge and collect the following nonrefundable fees:

Filing articles of incorporation, ten dollars.
Filing articles of amendment, ten dollars.
Filing statement of merger, interest exchange, conversion, domestication or division, ten dollars.
Filing certificate of election to dissolve, ten dollars.
Filing articles of dissolution, ten dollars.
Filing certificate of change of principal office, five dollars.

§ 10-2146 Exemption from securities regulations

The provisions of title 44, chapter 12 do not apply to any note, bond or other evidence of indebtedness issued by a generation and transmission cooperative doing business in this state pursuant to this article, to the United States or any agency or instrumentality of the United States or to any mortgage, deed of trust or other instrument executed to secure the note, bond or other evidence of indebtedness, and such provisions do not apply to the issuance of membership certificates or other evidence of member interest by a generation and transmission cooperative.

§ 10-2147 Exemption from antitrust statutes

The provisions of title 44, chapter 10, article 1 do not apply to any conduct or activity of a generation and transmission cooperative organized pursuant to this article, which conduct or activity is approved by a statute of this state or of the United States or by the corporation commission or an administrative agency of this state or of the United States having jurisdiction of the subject matter.

§ 10-2148 Taking of acknowledgments by officer or member

A person authorized to take acknowledgments under the laws of this state shall not be disqualified from taking acknowledgments of instruments executed in favor of a generation and transmission cooperative or to which it is a party, by reason of being an officer, director or member of the generation and transmission cooperative.

§ 10-2149 Admission of foreign generation and transmission cooperatives

A foreign generation and transmission cooperative is entitled to all rights, exemptions, privileges and immunities of a generation and transmission cooperative organized under this article, except that a foreign generation and transmission cooperative need not comply with section 10-2124. A foreign distributive cooperative is eligible to become a member of a generation and transmission cooperative by complying with the applicable provisions of this article.

§ 10-2150 Nonprofit electric generation and transmission cooperative corporations; annual report

Each nonprofit electric generation and transmission cooperative corporation incorporated pursuant to this article shall deliver to the commission for filing an annual report as required by section 10-11622.

§ 10-2151 Expanded use for broadband service; notice; just compensation actions

A. For the purposes of providing broadband service, if a generation and transmission cooperative, directly or through its affiliate, expands the use of an existing easement or other property right that is owned, held or used by the cooperative to provide electricity or other services and the expanded use reduces the fair market value of the property over which the easement or other property right runs, the property owner is entitled to just compensation from the cooperative.

B. The property owner must commence an action in the superior court for just compensation based on diminution in value not later than eighteen months after the date the generation and transmission cooperative provides notice to the property owner of the expanded use for broadband service. If an action is not commenced within this time, the expanded use is deemed fully vested in the generation and transmission cooperative and its affiliate without the need to pay just compensation and the expanded use runs with the land.

C. Notice under subsection B of this section is effective if sent by first class mail to the last known address of the property owner or by other commonly used publication or communication channels employed by the generation and transmission cooperative.

D. In an action for just compensation based on a claim of expanded use for broadband service all of the following apply:

The court or jury shall ascertain and assess the diminution in value of the property based on the difference between the fair market value of the entire parcel immediately before the expanded use and the fair market value of the entire parcel immediately after the expanded use.
Evidence of revenues or profits derived from or the rental value of an assembled communications corridor are not admissible in determining fair market value.
On payment of just compensation, the expanded use for broadband service shall be deemed fully vested in the generation and transmission cooperative and its affiliate and the expanded use shall run with the land.

E. A class action may not be maintained against a generation and transmission cooperative or its affiliate in any action for just compensation based on a claim of expanded use for broadband service.

F. Actions for just compensation as described in this section include trespass, inverse condemnation and other similar causes of action.

G. This section does not prohibit a generation and transmission cooperative or its affiliate from reaching an agreement with a property owner to waive a claim for just compensation related to expanded use for broadband service or from acquiring the right to use the property for broadband service by other lawful means.

§ 10-2152 Annual assessments; gross intrastate revenue exception

Title 40, chapter 2, article 8 applies to a generation and transmission cooperative that is regulated by the corporation commission but does not apply to the cooperative's gross intrastate revenues that are derived from sales of electricity to another cooperative electric utility that is both:

Regulated by the corporation commission.
Subject to the corporation commission's annual assessment.

Chapter 20 Professional Corporations

Article 1 General Provisions

§ 10-2201 Definitions

In this chapter, unless the context otherwise requires:

"Disqualified person" means an individual or entity that is not or ceases to be a qualified person.
"Foreign professional corporation" means a corporation or association for profit incorporated for the purpose of rendering professional services under a law other than the law of this state.
"License" or "licensed" means any license, authorization, certificate, registration, certificate of registration, membership or other evidence of the satisfaction of the requirements of this state for the practice of a professional service.
"Licensing authority" means the officer, board, agency, court or other authority in this state empowered by law to license or otherwise authorize the rendition of a professional service.
"Professional corporation" or "domestic professional corporation" means a corporation for profit that is not a foreign professional corporation and that is incorporated under or subject to this chapter.
"Professional service" means a service that may be lawfully rendered only by a person licensed or otherwise authorized by a licensing authority in this state to render the service.
"Qualified person" means a person that is eligible under this chapter to be issued shares by a professional corporation.
"Voting shares" means shares entitled to vote for election of directors of the professional corporation.

§ 10-2202 Application of Arizona business corporation act

Chapters 1 through 17 of this title apply to professional corporations, both domestic and foreign, to the extent they are not inconsistent with the express provisions of this chapter.

Article 2 Creation

§ 10-2210 Election of professional corporation status

A. One or more persons may incorporate a professional corporation by delivering to the commission for filing a certificate of disclosure that contains the information set forth in section 10-202, subsection D and is subject to the requirements of section 10-202, subsection F and articles of incorporation that state, with respect to the character of its business:

It is a professional corporation.
Its purpose is to render the specified professional services.

B. A corporation incorporated under a general law of this state other than this chapter may elect professional corporation status by amending its articles of incorporation to comply with subsection A of this section and section 10-2215.

§ 10-2211 Purposes

A. Except to the extent authorized by subsection B of this section or the other provisions of this chapter, a corporation may elect professional corporation status under section 10-2210 solely for the purpose of rendering professional services, including services ancillary to them, and solely within a single profession.

B. A corporation may elect professional corporation status under section 10-2210 for the purpose of rendering professional services within two or more categories of professional service, and for the purpose of engaging in any lawful business authorized by section 10-301, unless the combination of professional purposes or of professional and business purposes is expressly prohibited by a licensing law of this state applicable to one or more of the professions in the combination or by a licensing authority with jurisdiction over one or more of the professions in the combination.

§ 10-2212 General powers

A. Except as provided in subsection B of this section, a professional corporation has the powers enumerated in section 10-302.

B. A professional corporation may be a general partner of a partnership, a trustee of a trust, a co-venturer of a joint venture or a manager of a limited liability company or any other entity, only if the partnership, trust, joint venture, limited liability company or other entity is engaged solely in rendering professional services or in carrying on business authorized by the professional corporation's articles of incorporation.

§ 10-2213 Rendering professional services; applicability

A. A domestic or foreign professional corporation may render professional services in this state only through individuals licensed in this state to render the services.

B. Subsection A of this section does not:

Require an individual employed by a professional corporation to be licensed to perform services for the corporation if a license is not otherwise required or prohibit the professional corporation from employing that individual.
Prohibit a licensed individual from rendering professional services in an individual capacity although the licensed individual is a shareholder, director, officer, employee or agent of a domestic or foreign professional corporation or any other person or from being a shareholder, director, officer, employee or agent of more than one domestic or foreign professional corporation or other person.
Prohibit an individual licensed in another state from rendering professional services for a domestic or foreign professional corporation in this state if not prohibited by the licensing authority.

C. Nothing contained in this chapter alters the right of persons licensed to engage in the rendering of a professional service from rendering a professional service, and those persons may render a professional service, in any other business form or entity, including a corporation incorporated under a general law of this state other than this chapter, unless the use of the form or entity is expressly prohibited by the licensing law of this state applicable to the profession or by the licensing authority with jurisdiction over the profession.

D. This chapter does not apply to any persons in this state who before January 1, 1996 were permitted to render personal services or professional services by means of a corporation other than a professional corporation incorporated under chapter 3, article 1 of this title prior to January 1, 1996 or other business form or entity, or to any corporations other than professional corporations incorporated under chapter 3, article 1 of this title prior to January 1, 1996 or other business forms or entities organized by them unless an exempt corporation or other business form or entity elects professional corporation status pursuant to section 10-2210.

§ 10-2214 Prohibited activities; authorized investments

A. A professional corporation may not render any professional service or engage in any business other than the professional service, including services ancillary to the professional service, and the business authorized by its articles of incorporation, except to the extent that the other service or business is incidental to or an inconsequential portion of the authorized service or business of that corporation.

B. A professional corporation may invest its monies in or otherwise own real estate, mortgages, stocks, bonds, partnership interests, limited liability company memberships, securities or any other type of investment or property.

§ 10-2215 Corporation name

A. The name of a domestic professional corporation and of a foreign professional corporation authorized to transact business in this state, in addition to satisfying the requirements of sections 10-401 and 10-1506, shall:

Contain the words "professional corporation", "professional association", "service corporation", "limited" or "chartered" or the abbreviation "P.C.", "P.A.", "S.C.", "Ltd.", "Chtd.", "PC", "PA", "SC", "LTD" or "CHTD".
Not contain language stating or implying that it is incorporated for a purpose other than that authorized by section 10-2211 and its articles of incorporation.
Conform with any rule adopted by the licensing authority having jurisdiction over a professional service described in the corporation's articles of incorporation.

B. Sections 10-401 and 10-1506 do not prevent the use of a name otherwise prohibited by those sections if it is the personal name of a shareholder or former shareholder of the domestic or foreign professional corporation or the name of an individual who was associated with a predecessor of the corporation.

Article 3 Shares

§ 10-2220 Issuance of shares

A. A professional corporation may issue voting shares, fractional voting shares and rights or options to purchase voting shares only to:

Individuals who are licensed by law in this or another state to render a professional service described in the corporation's articles of incorporation.
General partnerships, registered limited liability partnerships and other partnerships and joint ventures, domestic or foreign, in which all of the partners are qualified persons with respect to the professional corporation and in which at least one partner is authorized by law in this state to render a professional service described in the corporation's articles of incorporation.
Professional corporations, professional limited liability companies and other persons, domestic or foreign, authorized by law in this state to render a professional service described in the corporation's articles of incorporation.
Other persons, if after the issuance of voting shares the other persons in the aggregate do not hold more than forty-nine per cent of the voting shares, unless a greater or lesser percentage is prescribed by the licensing authority.
An employee stock ownership plan as defined in section 4975(e)(7) of the internal revenue code of 1986, as amended, if both of the following apply:

(a) All of the voting trustees of the plan are professionals who are licensed to provide at least one category of the professional services described in the corporation's articles of incorporation.

(b) The ownership interests are not directly issued to persons other than the employee stock ownership plan trust or professionals who are licensed to provide at least one category of the professional services described in the corporation's articles of incorporation.

B. The following are not violations of subsection A, paragraph 1 of this section:

Any community interest of an unlicensed spouse in the voting shares issued to a licensed spouse in which the unlicensed spouse with a community interest in the voting shares does not have the right to vote the shares.
Issuance of voting shares to a trust established for the benefit of the licensed individual or members of the licensed individual's immediate family in which the licensed individual has the right to vote the shares and the trust and the members of the licensed individual's immediate family do not have the right to vote the shares.

C. Subsection B of this section does not prohibit an issuance to an unlicensed spouse or to a trust in accordance with subsection A, paragraph 4 of this section or section 10-2231, subsection B.

D. An issuance made in violation of subsection A of this section is void.

§ 10-2221 Shares and professional corporation status on shares

Notwithstanding section 10-627, no statement or notice of any restrictions imposed by this chapter on the transfer of shares of a professional corporation is required to appear on any share certificate issued by a professional corporation or to otherwise be provided to the shareholders of a professional corporation.

§ 10-2222 Share transfer restriction

A. Voting shares, fractional voting shares and rights or options to purchase voting shares of a professional corporation that are held by persons described in section 10-2220, subsection A, paragraphs 1, 2 and 3 may be transferred or pledged, whether voluntarily, involuntarily, by operation of law or by court judgment or otherwise, only to those persons. Voting shares, fractional voting shares and rights or options to purchase voting shares of a professional corporation that are held by persons described in section 10-2220, subsection A, paragraph 4 may be transferred or pledged, whether voluntarily, involuntarily, by operation of law or by court judgment or otherwise, only to persons qualified under section 10-2220 to be issued voting shares.

B. A transfer or pledge made in violation of subsection A of this section is void.

§ 10-2223 Compulsory acquisition of shares after death, dissolution or disqualification of shareholder

A. Except as provided in subsection C of this section, and unless the shares are otherwise acquired by a qualified person within the applicable time period specified in section 10-2227, a professional corporation shall acquire the voting shares of its shareholder within the applicable time period if any of the following occurs:

The shareholder dies or dissolves and any person to whom the shares are to devolve is not a person to whom section 10-2222 permits the shares to be transferred.
The shareholder becomes a disqualified person.

B. The price shall be as follows:

If a price for the shares is fixed in accordance with the articles of incorporation or bylaws or by private agreement, that price controls and sections 10-2224, 10-2225 and 10-2226 are inapplicable.
If a price is not fixed, in accordance with the articles of incorporation or bylaws or by private agreement, the corporation shall offer to acquire the shares in accordance with section 10-2224, and if the disqualified shareholder rejects the corporation's purchase offer, either the shareholder or the corporation may commence a proceeding under section 10-2225 to determine the fair value of the shares.

C. This section does not require the acquisition of shares if the disqualification of the shareholder or the transferee lasts no more than five months from the date the disqualification or transfer occurs.

D. This section and section 10-2224 do not prevent or relieve a professional corporation from paying pension benefits or other deferred compensation for services rendered to a former shareholder if otherwise permitted by law.

E. A provision for the acquisition of shares contained in a professional corporation's articles of incorporation or bylaws or in a private agreement is specifically enforceable.

§ 10-2224 Acquisition procedure

A. If shares must be acquired under section 10-2223 and the price is not fixed as described in section 10-2223, subsection B, paragraph 1, the professional corporation shall deliver within the applicable time period specified in section 10-2227 a written notice to the disqualified shareholder, offering to purchase the shares at a price the corporation believes represents their fair value as of the date of death, dissolution, disqualification or transfer. The offer notice shall be accompanied by the corporation's balance sheet for a fiscal year ending not more than sixteen months before the effective date of the offer notice, an income statement for that year, a statement of changes in shareholders' equity for that year and the latest available interim financial statements, if any.

B. The disqualified shareholder has thirty days after the effective date of the offer notice to accept the corporation's offer or demand that the corporation commence a proceeding under section 10-2225 to determine the fair value of the disqualified shareholder's shares. If the disqualified shareholder accepts the offer, the corporation shall make payment for the shares within sixty days after the effective date of the offer notice, unless a later date is agreed on, on the disqualified shareholder's surrender of the disqualified shareholder's shares to the corporation.

C. After the corporation makes payment for the shares, the disqualified person has no further interest in them.

§ 10-2225 Court action to appraise shares

A. If a disqualified shareholder does not accept the professional corporation's offer under section 10-2224, subsection B within the thirty day period or if the professional corporation does not make an offer pursuant to section 10-2224, subsection A within the applicable time period, the shareholder during the following thirty day period may deliver a written notice to the corporation demanding that it commence a proceeding to determine the fair value of the shares. The corporation may commence a proceeding at any time during the sixty days following the effective date of its offer notice. If it does not do so within the sixty day period or thirty days after the shareholder demand, whichever is earlier, the shareholder may commence a proceeding against the corporation to determine the fair value of its shares.

B. The corporation or disqualified shareholder shall commence the proceeding in the superior court in the county in which the corporation's principal office is located or, if the corporation's principal office is not located in this state, the county in which the corporation's known place of business is located. The corporation shall make the disqualified shareholder a party to the proceeding as in an action against the disqualified party's shares. The jurisdiction of the court in which the proceeding is commenced is plenary and exclusive.

C. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the power described in the order appointing them, or in any amendment to it.

D. The disqualified shareholder is entitled to judgment for the fair value of the disqualified shareholder's shares determined by the court as of the date of death, dissolution, disqualification or transfer together with interest from that date at a rate found by the court to be fair and equitable.

E. The court may order the judgment to be paid in installments determined by the court.

§ 10-2226 Court costs and fees of experts

A. The court in an appraisal proceeding commenced under section 10-2225 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court, and shall assess the costs against the professional corporation unless the court assesses costs against the disqualified shareholder, in an amount the court finds equitable, if the court finds the shareholder acted arbitrarily, vexatiously or not in good faith in refusing to accept the corporation's offer.

B. The court may also assess the fees and expenses of counsel and experts for the disqualified shareholder against the corporation and in favor of the shareholder if the court finds that the fair value of the disqualified shareholder's shares substantially exceeded the amount offered by the corporation or that the corporation did not make an offer.

§ 10-2227 Cancellation of disqualified shares

If the shares of a disqualified shareholder are not acquired pursuant to section 10-2223 within ten months after the death or dissolution of the shareholder or within five months after the disqualification or transfer, the professional corporation shall immediately cancel the shares on its books and the disqualified shareholder shall have no further interest as a shareholder in the corporation other than the right to payment of the price specified in section 10-2223, subsection B.

§ 10-2228 Definition of disqualified shareholder

In this article, unless the context otherwise requires, "disqualified shareholder" means a shareholder described in subsection 10-2223, subsection A, paragraph 1 or 2 or the legal representative of that shareholder.

Article 4 Governance

§ 10-2230 Directors and officers

At least one-half of the directors of a professional corporation and its president, if any, shall be licensed in this or another state to render a professional service described in the corporation's articles of incorporation.

§ 10-2231 Voting of shares

A. Only a qualified person may be appointed a proxy to vote any voting shares of a professional corporation.

B. A voting trust with respect to voting shares of a professional corporation is not valid unless all of its trustees and beneficiaries are qualified persons. If a trustee or beneficiary who is a qualified person dies or dissolves and the person to whom the trusteeship or beneficial interest is to devolve is not a person to whom section 10-2222 would permit the shares held by the trust to be transferred or a trustee or beneficiary becomes disqualified, a voting trust valid under this subsection continues to be valid for ten months after the date of death or for five months after the disqualification occurred.

§ 10-2232 Professional relationship

Nothing in this chapter shall be construed to alter any law applicable to the relationship between persons furnishing and receiving professional service.

§ 10-2233 Privileged communications

Nothing in this chapter shall be construed to alter any privilege applicable to communications between an individual rendering professional services and the person receiving the services recognized under any applicable law. The privilege applies to a domestic or foreign professional corporation and to its employees in all situations in which it applies to communications between an individual rendering professional services on behalf of the corporation and the person receiving the services.

§ 10-2234 Responsibility for professional services

A shareholder of a professional corporation is personally and fully liable and accountable for any negligent or wrongful act or misconduct committed by the shareholder or by any person under the shareholder's direct supervision and control while rendering professional services on behalf of the professional corporation to the person for whom the professional services are rendered. The liability of a shareholder of the professional corporation is several only, and a shareholder is not vicariously responsible for the liability of another shareholder.

Article 5 Reorganization and Termination

§ 10-2240 Merger, interest exchange, conversion, domestication or division; definitions

A. A domestic professional corporation may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapters 11 and 13 of this title and title 29, chapter 6.

B. If a domestic professional corporation is to be created in a merger, a conversion, a domestication or a division, the shareholders of the corporation must be qualified to be shareholders as provided in this chapter.

C. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.

§ 10-2241 Termination of professional corporation status

A. If a professional corporation ceases to render professional services or otherwise elects to terminate its professional corporation status, it shall amend its articles of incorporation to:

Delete references to rendering professional services, unless as described in section 10-2213 the services may be rendered in the business corporation form.
Delete references to it being a professional corporation.
Conform its corporation name to the requirements of section 10-401.

B. After the amendment becomes effective, the corporation may continue in existence as a business corporation under chapters 1 through 17 of this title and it is no longer subject to this chapter.

§ 10-2242 Judicial dissolution

The attorney general may commence a proceeding under sections 10-1430 through 10-1433 to dissolve a professional corporation if:

The commission serves written notice on the corporation under section 10-504 that it has violated or is violating a provision of this chapter.
The corporation does not correct each alleged violation, or demonstrate to the reasonable satisfaction of the commission that it did not occur, within sixty days after service of the notice is perfected under section 10-504.
The commission certifies to the attorney general a description of the violation, that it notified the corporation of the violation and that the corporation did not correct it, or demonstrate that it did not occur, within sixty days after perfection of service of the notice.

Article 6 Foreign Professional Corporations

§ 10-2244 Authority to transact business

A. Except as provided in subsection C of this section, a foreign professional corporation shall not transact business in this state until it is granted authority to transact business in this state from the commission.

B. A foreign professional corporation may not obtain authority to transact business in this state unless:

Its corporate name satisfies the requirements of section 10-2215.
It is incorporated for one or more of the purposes described in section 10-2211.
At least one-half of its shareholders who are entitled to vote for the election of directors, at least one-half of its directors and its president, if any, are licensed in one or more states to render a professional service described in its articles of incorporation.

C. A foreign professional corporation is not required to obtain authority to transact business in this state unless it maintains or intends to maintain an office in this state for the conduct of business or professional practice.

§ 10-2245 Application for authority to transact business

The application of a foreign professional corporation for authority to transact business in this state shall contain the information prescribed in section 10-1503 and shall include a statement that at least one-half of its shareholders who are entitled to vote for the election of directors, at least one-half of its directors and its president, if any, are licensed in one or more states to render a professional service described in its articles of incorporation and be accompanied by a statement from the licensing authority indicating that at least one of its shareholders or employees is licensed in this state to render that professional service.

§ 10-2246 Revocation of certificate of authority

Pursuant to chapter 15, article 3 of this title, the commission may administratively revoke the authority of a foreign professional corporation to transact business in this state if a licensing authority with jurisdiction over a professional service described in the corporation's articles of incorporation certifies to the commission that the corporation has violated or is violating a provision of this chapter and describes the violation in the certificate.

Article 8 Transition Provisions

§ 10-2249 Application to existing corporations

A. This chapter applies to all Arizona corporations that were incorporated under or that were subject to chapter 3, article 1 of this title on December 31, 1995. If an existing corporation to which this chapter applies is required to amend its articles of incorporation to comply with this chapter, it shall do so on or before April 1, 1996.

B. This chapter does not apply to a corporation now existing or later incorporated under a law of this state other than this chapter unless the corporation elects professional corporation status under section 10-2210.

Chapter 21 Business Development Corporations

Article 1 Formation and Operation

§ 10-2251 Definitions

In this chapter, unless the context otherwise requires:

"Bank" means any banking corporation or national banking association.
"Corporation" means a business development corporation formed under this chapter.
"Deputy director of financial institutions" means the deputy director of the financial institutions division of the department of insurance and financial institutions.
"Member" means any bank or federal or state savings and loan association authorized to do business within this state that shall undertake to lend money to the corporation on its call and in accordance with this chapter.
"Shareholder" means a registered owner of shares in a corporation formed under the provisions of this chapter.
"Shares" means units into which the shareholders' rights to participate in the control of a corporation, in its surplus or profits, or in the distribution of its assets, are divided.

§ 10-2252 Purposes

The purposes of a corporation formed under the terms of this chapter shall be to:

Assist, promote, encourage and, through the cooperative efforts of the shareholders and the members of the corporation, develop and advance the business prosperity and economic welfare of Arizona.
Encourage and assist in the location of new business and industry in Arizona.
Rehabilitate existing business and industry in Arizona.
Stimulate and assist in the expansion of all kinds of business activity which will tend to promote the business development and maintain the economic stability of the state, provide maximum opportunities for employment, encourage thrift, and improve the standard of living of the citizens of the state.
Cooperate and act in conjunction with other organizations, public or private, the objects of which are the promotion and advancement of industrial, commercial, agricultural or recreational development of the state.
Furnish money and credit to approved and deserving applicants for the promotion, development and conduct of all kinds of business activity in the state, thereby establishing a source of capital and credit not otherwise readily available therefor.

§ 10-2253 General powers

A corporation formed under the provisions of this chapter shall have all of the powers, rights, privileges and immunities available to any other corporation incorporated under chapters 1 through 18 of this title, and in addition thereto and subject to the restrictions and limitations set forth in this chapter, shall have power to:

Borrow money and otherwise incur indebtedness for any of its purposes, to issue its bonds, debentures, notes, other evidences of indebtedness, whether secured or unsecured therefor, and to secure the same by mortgage, pledge, deed of trust or other lien on its property, franchises, rights and privileges, of every kind and nature, or any part thereof.
Lend money to and guarantee, endorse or act as surety on the bonds, notes, contracts or other obligations of, or otherwise assist financially, any person, firm, corporation, joint stock company or association, and to establish and regulate the terms and conditions with respect to any such loans or financial assistance and the charges for interest and service connected therewith. No loan or financial assistance shall be made available unless the loan or financial assistance applied for is not otherwise available to the applicant from financial institutions on reasonable terms, it being the intent hereof that customary sources of credit be utilized whenever possible.
Purchase, receive, hold, lease or otherwise acquire, and to sell, convey, mortgage, lease, pledge or otherwise dispose of, upon such terms and conditions as its board of directors may deem advisable, real and personal property, together with such rights and privileges as may be incidental and appurtenant thereto, and the use thereof, including but not restricted to any real or personal property acquired by such corporation from time to time in the satisfaction of debts or enforcements of obligations.
Acquire the good will, business rights, real and personal property and other assets or any part thereof, of such persons' firms, corporations, joint stock companies or associations as may be in furtherance of the corporate purposes provided herein, and to assume, undertake, guarantee or pay the obligations, debts and liabilities of any such person, firm, corporation, joint stock company or association; to acquire improved or unimproved real estate for the purpose of constructing industrial plants or other business establishments thereon, or for the purpose of disposing of such real estate to others for the construction of industrial plants or other business establishments, and in furtherance of the corporate purposes provided herein, to acquire, construct or reconstruct, alter, repair, maintain, operate, sell, lease or otherwise dispose of industrial plants or business establishments.
Acquire, subscribe for, own, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the stock, shares, bonds, debentures, notes or other securities and evidences of interest in or indebtedness of, any person, firm, corporation, joint stock company or association and while owner or holder thereof to exercise all the rights, powers, and privileges of ownership including the right to vote thereon.
Accept grants, loans, subsidies and other aids from and to enter into agreement or other transactions with any state or federal agency and to participate with such state or federal agency and with other corporations in making loans and rendering financial assistance to any person, firm, corporation, joint stock company or association.
Cooperate with, and avail itself of, the facilities of the Arizona development board or its successor and any other government agency, and to cooperate with and assist and otherwise encourage other organizations in the state in the promotion, assistance and development of the business, prosperity and economic welfare of the state.

§ 10-2254 Capital stock

The capital stock of a corporation shall be not less than one hundred thousand dollars to be evidenced by shares, having a par value of not less than ten dollars each.

§ 10-2255 Loans by members

A. Notwithstanding the provisions of any other law, the notes or other interest-bearing obligations of a corporation shall be legal investments for the members of the corporation, subject to the applicable loan limits of subsection B.

B. As required by its loan agreement, a member shall lend funds to the corporation as and when called upon by it to do so, but the total amount in which a corporation may be indebted to a member at any one time shall not exceed:

If a bank, two per cent of the total of the bank's capital stock, surplus, capital notes and capital debentures.
If a savings and loan association, one per cent of loans outstanding or two hundred fifty thousand dollars, whichever is the lesser.

C. All loan limits shall be established at the thousand dollars nearest to the amount computed on an actual basis. All calls of funds which members are committed to lend to a corporation shall be prorated by the corporation among the members in the same proportion that the lending commitment of each bears to the aggregate lending commitments of all members of the corporation. Upon six months' prior written notice to the corporation of its intention, a member may terminate its loan agreement and after the effective date of withdrawal, the member shall not be obligated to make any loan to the corporation, but shall remain a member so long as the corporation is indebted to it.

D. At no time shall the total obligations of a corporation exceed ten times the amount of its paid-in capital and surplus.

§ 10-2256 Authority to become shareholders

Notwithstanding any other rule or provision of law or any provision in their respective charters, agreements of association, articles or organization, certificates or articles of incorporation to the contrary, all persons, except banks and savings and loan associations, organized for the purpose of doing or authorized to do business within this state, including without implied limitation any railroad or transportation corporation or other public utility, are authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of any bonds, securities, or other evidences of indebtedness created by or the shares of the capital stock of a corporation, and while owners of the stock, to exercise all the rights, powers and privileges of ownership without the approval of any regulatory authority of this state.

§ 10-2257 Temporary board of directors

Until the election of a board of directors under section 10-2258, all of the affairs of the corporation shall be conducted by a temporary board of directors. The temporary board shall consist of fifteen members who shall all be at least eighteen years of age and citizens of the United States and who shall be designated by incorporators of the corporation in the articles of incorporation. Upon the election and qualification of a board of directors under section 10-2258, the temporary board of directors shall be deemed dissolved.

§ 10-2258 Board of directors

A. The affairs of a corporation shall be conducted by a board of directors, consisting of fifteen persons, who shall all be at least eighteen years of age and be citizens of the United States. In addition, the executive director of the Arizona development board or its successor, shall act as a nonvoting ex officio member of the board of directors.

B. At the first meeting of the shareholders and members of a corporation and at each annual meeting thereafter, six directors shall be elected by the shareholders and nine directors shall be elected by the members. Each member shall have one vote for each $1,000 of the member's outstanding loans to the corporation and the uncalled balance of the member's loan agreement with the corporation. A member shall be entitled to cast the member's votes for directors on a cumulative basis.

C. The first meeting of the shareholders and members of the corporation shall be held at a time and place to be fixed by the temporary board of directors, which shall be as soon as reasonably possible after the certificate required by section 10-2261 has been filed with the deputy director of financial institutions.

§ 10-2259 Method of incorporation

A. A corporation may be formed by five or more residents of this state who each subscribe to at least one share of stock of the corporation.

B. The articles of incorporation shall set forth:

The name of the proposed corporation, which shall include the words "business development corporation".
The purpose for which the corporation is to be formed, which shall be within the purposes and powers set forth in this chapter.
The location of the principal place of business of the corporation, but the corporation may have offices in such other places in this state as may be fixed by the board of directors.
The term of its existence.
The authorized capital stock of the corporation.
The names and addresses of the incorporators and the amount of their capital stock subscriptions.
The names and addresses of eight temporary directors.
The name and address of the treasurer.
The names and addresses of five qualified banks that have obligated themselves to become members of the corporation at the time of its incorporation.
Any other provisions not inconsistent with law that the proposed corporation may adopt governing the regulation and conduct of its affairs.

C. A corporation formed under this chapter may amend its articles of incorporation provided that prior to the filing of articles of amendment with the corporation commission the articles of amendment shall have been approved by the deputy director of financial institutions in the manner and as provided for in section 10-2260.

§ 10-2260 Approval of articles of incorporation; incorporation

A. The articles of incorporation required by this chapter shall be filed with the deputy director of financial institutions. Within sixty days after the receipt of the articles of incorporation, the deputy director shall approve or disapprove the articles of incorporation.

B. If the deputy director disapproves the articles, the deputy director shall promptly give notice of the disapproval to the incorporators, stating in detail the reason for the deputy director's action. On remedying the defect or defects, the incorporators, in the same manner, may refile the articles.

C. If the deputy director finds that the articles of incorporation are in the form prescribed by this chapter or have been made to conform with this chapter, the deputy director shall conduct any investigation deemed necessary to ascertain from the best sources of information available:

Whether the name of the proposed corporation is likely to mislead the public as to its character or purposes.
Whether the convenience and advantage of the public will be served by the proposed corporation.
Whether the economic condition of the area in which the corporation may be expected to do most of its business affords reasonable promise of adequate support for the activities of such corporation.
Whether the responsibility, character and general fitness for the business of the incorporators, directors and officers named in the articles are such as to command confidence and to warrant the belief that the business of the proposed corporation will be honestly and efficiently conducted, in accordance with the intent and purpose of this chapter.

D. If the deputy director finds, on the basis of the facts disclosed by the deputy director's investigation, that the proposed incorporation meets all the requirements of this chapter, the deputy director shall endorse approval on the articles of incorporation and the articles may then be filed with the corporation commission. The corporation commission shall not issue a certificate of incorporation to a business development corporation without the approval by the deputy director endorsed on the articles of incorporation.

E. If the deputy director finds, on the basis of the facts disclosed by the deputy director's investigation, that the proposed incorporation does not meet all the requirements of this chapter, the deputy director shall disapprove the articles and return them to the incorporators stating in detail the reasons for doing so.

§ 10-2261 Authorization to commence business

A corporation formed under this chapter shall not begin the transaction of any business, except such as is incident to its organization or to the obtaining of members of subscriptions to or payment for its shares, until it certifies to the deputy director of financial institutions that there has been paid into the corporate treasury a minimum of $100,000 from the sale at par value of the capital stock of the corporation.

§ 10-2262 Surplus and dividends

Each year a corporation shall set apart, as earned surplus, all of its net earnings until such earned surplus shall equal the total of the capital and paid-in surplus then outstanding or ten per cent of the total outstanding borrowings of the corporation whichever is greater. The earned surplus shall be held in cash, shall be invested in United States government bonds or such other securities as may be legal investments under section 10-2263 and shall be kept and used to meet losses and contingencies of such corporation. Whenever the amount of earned surplus shall become impaired it shall be built up again to the required amount in the manner provided for its original accumulation. Net earnings and surplus shall be determined by the board of directors, after providing for such reserves as the directors deem desirable and the directors' determination made in good faith shall be conclusive on all persons. After setting aside the required reserves the directors may declare dividends from the balance of net earnings.

§ 10-2263 Investment of excess funds

A. If the board of directors determines at any time that funds are available in excess of the demands and needs of the corporation, the corporation may invest such funds as follows:

In an account of any bank or savings and loan association authorized to do business in Arizona.
In obligations of or fully guaranteed by the United States government.
Bonds or other direct obligations of or guaranteed as to principal and interest by this state.
Bonds or other evidences of indebtedness which are direct general obligations of any county, incorporated city or town, school district, or other political subdivision or municipal corporation of this state.

B. A corporation shall not deposit or invest any of its funds in any bank or savings and loan association unless such institution has been designated as a depository by a vote of the majority of the directors of the corporation, exclusive of any director who is an officer or director of the depository so designated. A corporation shall not receive money on deposit.

C. A corporation shall not make any loan, directly or indirectly, to any of its officers or directors or to any person, corporation or other form of organization in which such officer or director is a member, director or officer or in which such officer or director has any interest, direct or indirect, financial or otherwise, except when a full and complete disclosure of the relationship is made at a regularly called meeting of the board of directors of the corporation, entered upon the minutes, and voted on by secret ballot with the officer or director making such disclosure refraining from voting on the motion.

§ 10-2264 Members as agents for corporations

A corporation may by contract authorize and empower any member to act as agent for the corporation in the carrying out of the purposes for which such corporation was formed and to render to the corporation such administrative auditing, collecting and other related fiscal services as shall be deemed by the directors necessary for the proper and efficient operation and management of the corporation.

§ 10-2265 Supervision and reports

The deputy director of financial institutions may supervise, examine and control a corporation in the same manner as financial institutions are so supervised, examined and controlled by the deputy director pursuant to law, except that it shall not be the duty of the deputy director to supervise the investment or lending policies of a corporation. In addition to such other reports as are required by law, a corporation shall make an annual report of its condition to the deputy director on or before March 1 of each year. An audit report prepared by a certified public accountant shall accompany the annual report of condition. The audit may be accepted by the deputy director in lieu of an examination.

§ 10-2266 Dissolution or liquidation

In the event of dissolution or liquidation of a corporation none of the corporation's assets shall be distributed to the shareholders until all sums due the members of the corporation as creditors have been paid in full.

§ 10-2267 Merger, interest exchange, conversion, domestication or division; definitions

A. A domestic business development corporation may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapters 11 and 13 of this title and title 29, chapter 6.

B. If a domestic business development corporation is to be created in a merger, a conversion, a domestication or a division:

The shareholders of the corporation must be residents of this state as prescribed by section 10-2259, subsection A.
The formation of the corporation must otherwise comply with this chapter.

C. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.

Chapter 22 Benefit Corporations

Article 1 General Provisions

§ 10-2401 Application and effect of chapter

A. This chapter is applicable to all benefit corporations.

B. The existence of a provision of this chapter does not of itself create an implication that a contrary or different rule of law is applicable to a business corporation that is not a benefit corporation. This chapter does not affect a statute or rule of law that is applicable to a business corporation that is not a benefit corporation.

C. Except as otherwise provided in this chapter, chapters 1, 2, 3, 4, 5, 6, 7, 8, 10, 11, 12, 13, 14, 15, 16 and 17 of this title are generally applicable to all benefit corporations. The specific provisions of this chapter control over the general provisions of chapters 1 through 17 of this title.

D. A benefit corporation may be subject simultaneously to this chapter and chapter 18 or 20 of this title. In that event, the provisions of this chapter control over chapter 18 or 20.

E. A provision of the articles of incorporation or bylaws of a benefit corporation may not limit, be inconsistent with or supersede a provision of this chapter.

F. The enumeration in this chapter of powers and interests of a benefit corporation does not imply that the powers and interests do not exist in or may not be considered by any other type of corporation, and unless provided otherwise in the articles of incorporation or bylaws or a resolution of the board of directors, any corporation formed under this title has the powers of a benefit corporation under this chapter and a director of any corporation formed under this title may consider any interests that may be considered by a director of a benefit corporation under this chapter in determining what is in the best interests of the corporation.

§ 10-2402 Definitions

In this chapter, unless the context otherwise requires:

"Benefit corporation" means a corporation that both:

(a) Has elected to become subject to this chapter.

(b) The status of which as a benefit corporation has not been terminated.

"Benefit enforcement proceeding" means any claim or action for either of the following:

(a) The failure of a benefit corporation to pursue or create general public benefit or a specific public benefit purpose set forth in its articles.

(b) A violation of any obligation, duty or standard of conduct under this chapter.

"General public benefit" means a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard, from the business and operations of a benefit corporation.
"Minimum status vote" means:

(a) In the case of a business corporation, in addition to any other required approval or vote, the satisfaction of the following conditions:

(i) The shareholders of every class or series are entitled to vote as a separate voting group on the corporate action regardless of a limitation stated in the articles of incorporation or bylaws on the voting rights of any class or series.

(ii) The corporate action is approved by vote of the shareholders of each class or series entitled to cast at least two-thirds of the votes that all shareholders of the class or series are entitled to cast on the action.

(b) In the case of a domestic entity other than a business corporation, in addition to any other required approval, vote or consent, the satisfaction of the following conditions:

(i) The holders of every class or series of equity interest in the entity that are entitled to receive a distribution of any kind from the entity are entitled to vote on or consent to the action regardless of any otherwise applicable limitation on the voting or consent rights of any class or series.

(ii) The action is approved by vote or consent of the holders described in item (i) of this subdivision entitled to cast at least two-thirds of the votes or consents that all of those holders are entitled to cast on the action.

"Specific public benefit" includes:

(a) Providing low-income or underserved individuals or communities with beneficial products or services.

(b) Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business.

(d) Improving human health.

(e) Promoting the arts, sciences or advancement of knowledge.

(f) Increasing the flow of capital to entities with a purpose to benefit society or the environment.

(g) Conferring any other particular benefit on society or the environment as specified in the benefit corporation's articles of incorporation.

"Subsidiary" means, in relation to a person, an entity in which the person owns beneficially or of record fifty per cent or more of the outstanding equity interests.
"Supermajority status vote" means:

(a) For a business corporation, in addition to any other required approval or vote, the satisfaction of the following conditions:

(ii) The corporate action is approved by vote of the shareholders of each class or series entitled to cast at least three-fourths of the votes that all shareholders of the class or series are entitled to cast on the action.

(b) For a domestic entity other than a business corporation, in addition to any other required approval, vote or consent, the satisfaction of the following conditions:

(ii) The action is approved by vote or consent of the holders described in item (i) of this subdivision entitled to cast at least three-fourths of the votes or consents that all of those holders are entitled to cast on the action.

"Third-party standard" means a recognized standard for defining, reporting and assessing corporate social and environmental performance that is:

(a) Comprehensive because it assesses the effect of a business and its operations on the interests listed in section 10-2431, subsection A, paragraph 1.

(b) Developed by an entity that is not controlled by the benefit corporation.

(i) Has access to necessary expertise to assess overall corporate social and environmental performance.

(ii) Uses a balanced multistakeholder approach to develop the standard, including a reasonable public comment period.

(d) Transparent because the following information is publicly available about the standard:

(i) The criteria considered when measuring the overall social and environmental performance of a business.

(ii) The relative weightings, if any, of those criteria.

(e) Transparent because the following information is publicly available about the development and revision of the standard:

(i) The identity of the directors, officers, material owners and governing body of the entity that developed and controls revisions to the standard.

(ii) The process by which revisions to the standard and changes to the membership of the governing body are made.

(iii) An accounting of the revenue and sources of financial support for the entity, with sufficient detail to disclose any relationships that could reasonably be considered to present a potential conflict of interest.

§ 10-2403 Incorporation of benefit corporation

A benefit corporation shall be incorporated in accordance with chapter 2, article 1 of this title, except that its articles of incorporation must also state that it is a benefit corporation.

§ 10-2404 Election of benefit corporation status

A. An existing business corporation may become a benefit corporation under this chapter by amending its articles of incorporation so that they contain, in addition to the requirements of section 10-202, a statement that the corporation is a benefit corporation. In order to be effective, the amendment must be adopted by at least the supermajority status vote.

B. If an entity that is not a benefit corporation is a party to a merger or the acquired entity in a share exchange, and the surviving or acquired entity in the merger or share exchange is to be a benefit corporation, the plan of merger or share exchange must be adopted by at least the supermajority status vote.

§ 10-2405 Termination of benefit corporation status

A. A benefit corporation may terminate its status as a benefit corporation and cease to be subject to this chapter by amending its articles of incorporation to delete the provision required by section 10-2403 or 10-2404 to be stated in the articles of a benefit corporation. In order to be effective, the amendment must be adopted by at least the minimum status vote.

B. Any sale, lease, exchange or other disposition of all or substantially all of the assets of a benefit corporation, unless the transaction is in the usual and regular course of business, shall not be effective unless the transaction is approved by at least the minimum status vote.

§ 10-2406 Merger, interest exchange, conversion, domestication or division; definitions

A. A domestic benefit corporation may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapters 11 and 13 of this title and title 29, chapter 6.

B. If a benefit corporation is to be created in a merger, a conversion, a domestication or a division, the formation of the corporation must otherwise comply with this chapter.

C. If a merger, an interest exchange, a conversion, a domestication or a division would have the effect of terminating the status of a business corporation as a benefit corporation, the plan must be adopted by at least the minimum status vote in order to be effective.

D. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.
"Plan" means a plan of merger, interest exchange, conversion, domestication or division.

Article 2 Corporate Purposes

§ 10-2421 Corporate purposes

A. A benefit corporation shall have a purpose of creating general public benefit. This purpose is in addition to its purpose under section 10-301.

B. The articles of incorporation of a benefit corporation may identify one or more specific public benefits that it is the purpose of the benefit corporation to create in addition to its purposes under section 10-301 and subsection A of this section. The identification of a specific public benefit under this subsection does not limit the obligation of a benefit corporation under subsection A of this section.

C. The creation of general public benefit and a specific public benefit under subsections A and B of this section is in the best interests of the benefit corporation.

D. A benefit corporation may amend its articles of incorporation to add, amend or delete the identification of a specific public benefit that it is the purpose of the benefit corporation to create. In order to be effective, the amendment must be adopted by at least the minimum status vote.

E. A professional corporation that is a benefit corporation does not violate section 10-2211 by having the purpose to create general public benefit or a specific public benefit.

Article 3 Accountability

§ 10-2431 Standard of conduct for directors

A. In discharging the duties of their respective positions and in considering the best interests of the benefit corporation, the board of directors, committees of the board and individual directors of a benefit corporation:

Shall consider the effects of any action or inaction on:

(a) The shareholders of the benefit corporation.

(b) The employees and workforce of the benefit corporation, its subsidiaries and its suppliers.

(c) The interests of customers as beneficiaries of the general public benefit or specific public benefit purposes of the benefit corporation.

(d) Community and societal factors, including those of each community in which offices or facilities of the benefit corporation, its subsidiaries or its suppliers are located.

(e) The local and global environment.

(f) The short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by the continued independence of the benefit corporation.

(g) The ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose.

May consider the interests referred to in section 10-2702 and other pertinent factors or the interests of any other group that they deem appropriate except that they do not have to give priority to the interests of a particular person or group referred to in this subsection over the interests of any other person or group unless the benefit corporation has stated in its articles of incorporation its intention to give priority to certain interests related to its accomplishment of its general public benefit purpose or of a specific public benefit purpose identified in its articles.

B. The consideration of interests and factors in the manner required by subsection A of this section does not constitute a violation of section 10-830.

C. Except as otherwise provided in this section, the standards of conduct and presumptions prescribed in chapter 8 of this title apply to directors of benefit corporations.

D. Except as provided in the articles of incorporation or bylaws, a director is not personally liable for monetary damages for failure of the benefit corporation to pursue or create general public benefit or a specific public benefit.

E. A director does not have a duty to a person that is a beneficiary of the general public benefit purpose or a specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary.

§ 10-2432 Standard of conduct for officers

A. Each officer of a benefit corporation shall consider the interests and factors described in section 10-2431, subsection A, in the manner provided in that subsection, if both of the following apply:

The officer has discretion to act with respect to a matter.
It reasonably appears to the officer that the matter may have a material effect on the general public benefit or specific public benefit identified in the articles of incorporation of the benefit corporation.

B. The consideration of interests and factors in the manner described in subsection A of this section does not constitute a violation of section 10-842.

C. Except as otherwise provided in this section, the standards of conduct and presumptions prescribed in chapter 8 of this title apply to officers of benefit corporations.

D. Except as provided in the articles of incorporation or bylaws, an officer is not personally liable for monetary damages for failure of the benefit corporation to pursue or create general public benefit or a specific public benefit.

E. An officer does not have a duty to a person that is a beneficiary of the general public benefit purpose or the specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary.

F. An officer who makes a business judgment in good faith fulfills the duty under this section if all of the following apply:

The officer is not interested in the subject of the business judgment.
The officer is informed with respect to the subject of the business judgment to the extent the officer reasonably believes to be appropriate under the circumstances.
The officer rationally believes that the business judgment is in the best interests of the benefit corporation.

§ 10-2433 Right of action

A. Except in a benefit enforcement proceeding, a person may not bring an action or assert a claim against a benefit corporation or its directors or officers with respect to either of the following:

The failure to pursue or create general public benefit or a specific public benefit set forth in its articles of incorporation.
The violation of an obligation, duty or standard of conduct under this chapter.

B. A benefit corporation is not liable for monetary damages under this chapter for any failure of the benefit corporation to pursue or create general public benefit or a specific public benefit.

C. A benefit enforcement proceeding may be commenced or maintained only by either of the following:

Directly by the benefit corporation.
Derivatively in accordance with chapter 7, article 4 of this title by any of the following:

(a) A person or group of persons that owns beneficially or of record at least two per cent of the total number of shares of all classes and series outstanding at the time of the act or omission that is the subject of the complaint.

(b) A director.

(c) A person or group of persons that owns beneficially or of record five per cent or more of the outstanding equity interests in an entity of which the benefit corporation is a subsidiary at the time of the act or omission that is the subject of the complaint.

(d) Other persons as specified in the articles of incorporation or bylaws of the benefit corporation.

D. For the purposes of this section, a person is the beneficial owner of shares or equity interests if the shares or equity interests are held in a voting trust or by a nominee on behalf of the beneficial owner.

Article 4 Transparency

§ 10-2441 Preparation of annual benefit report

A. A benefit corporation shall prepare an annual benefit report that includes all of the following:

A narrative description of:

(a) The ways in which the benefit corporation pursued general public benefit during the year and the extent to which general public benefit was created.

(b) Both:

(i) The ways in which the benefit corporation pursued a specific public benefit that the articles of incorporation state is the purpose of the benefit corporation to create.

(ii) The extent to which the specific public benefit was created.

(c) Any circumstances that have hindered the benefit corporation in creating general public benefit or a specific public benefit.

(d) The process and rationale for selecting or changing the third-party standard used to prepare the benefit report.

An assessment of the overall social and environmental performance of the benefit corporation against a third-party standard that is either of the following:

(a) Applied consistently with any application of that standard in prior benefit reports.

(b) Accompanied by an explanation of the reasons for either of the following:

(i) Any inconsistent application.

(ii) The change to that standard from the one used in the immediately prior report.

The compensation paid by the benefit corporation during the year to each director in the capacity of a director.
A statement of any connection between the organization that established the third-party standard, or its directors, its officers or any holder of five per cent or more of the governance interests in the organization and the benefit corporation or its directors, its officers or any holder of five per cent or more of the outstanding shares of the benefit corporation, or any other financial or governance relationship that might materially affect the credibility of the use of the third-party standard.

B. Neither the benefit report nor the assessment of the performance of the benefit corporation in the benefit report required by subsection A, paragraph 2 of this section is required to be audited or certified by a third-party standards provider.

§ 10-2442 Availability of annual benefit report

A. A benefit corporation shall send its annual benefit report to each shareholder:

Within one hundred twenty days following the end of the fiscal year of the benefit corporation.
At the same time the benefit corporation delivers any other annual report to its shareholders.

B. A benefit corporation shall post all of its benefit reports on the public portion of its internet website, if any, except that the compensation paid to directors and financial or proprietary information included in the benefit reports may be omitted from the benefit reports as posted.

C. If a benefit corporation does not have an internet website, the benefit corporation shall provide a copy of its most recent benefit report, without charge, to any person that requests a copy, except that the compensation paid to directors and financial or proprietary information included in the benefit report may be omitted from the copy of the benefit report provided.

D. Concurrently with the delivery of the benefit report to shareholders under subsection A of this section, the benefit corporation shall deliver a copy of the benefit report to the Arizona corporation commission for filing, except that the compensation paid to directors and financial or proprietary information included in the benefit report may be omitted from the benefit report as delivered to the Arizona corporation commission.

Chapter 23 Corporate Takeovers

Article 1 In General

§ 10-2701 Definitions

In this chapter, unless the context otherwise requires:

"Acquiring person" means a person that makes or proposes to make a control share acquisition. If two or more persons act as a partnership, syndicate or other group pursuant to any agreement, arrangement, relationship, understanding or otherwise, whether or not in writing, for the purposes of acquiring, owning or voting shares of an issuing public corporation, all members of the partnership, syndicate or other group constitute a person. Acquiring person does not include a licensed broker or dealer or licensed underwriter that purchases shares of an issuing public corporation solely for purposes of resale to the public and that is not acting in concert with an acquiring person.
"Affiliate" means a person that directly or indirectly controls, is controlled by or is under common control with a specified person.
"Announcement date", when used in reference to any business combination, means the date of the first public announcement of the final, definitive proposal for the business combination.
"Associate", when used to indicate a relationship with any person, means any of the following:

(a) Any corporation or entity of which the person is an officer, director or partner or is, directly or indirectly, the beneficial owner of ten per cent or more of any class or series of shares or other equity interest.

(b) Any trust or estate in which the person has a substantial beneficial interest or as to which the person serves as trustee or personal representative or in a similar fiduciary capacity.

"Beneficial owner", "beneficial ownership" and "beneficially owned", when used with respect to shares, refers to any of the following:

(a) A person who, directly or indirectly through any agreement, arrangement, relationship, understanding or otherwise, whether or not in writing, has or shares the power to vote, or direct the voting of the shares, or has or shares the power to dispose of or direct the disposition of the shares, except that:

(i) A person is not deemed the beneficial owner of shares tendered pursuant to a tender or exchange offer made by the person or any of the person's affiliates or associates until the tendered shares are accepted for purchase or exchange.

(ii) A person is not deemed the beneficial owner of shares with respect to which the person or any of the person's affiliates or associates has the power to vote or direct the voting arising solely from a revocable proxy given in response to a proxy solicitation required to be made and made in accordance with the applicable rules and regulations under the securities exchange act of 1934 and is not then reportable under that act on a schedule 13d or comparable report.

(iii) A person is not deemed the beneficial owner of shares to be issued to or transferred to the person or any of the person's affiliates or associates pursuant to terms of an agreement and plan of merger between the person and the issuing public corporation unless the merger is effective.

(b) A person who presently has the right to acquire shares through the exercise of options, warrants or rights, the conversion of convertible securities or otherwise. The shares subject to the options, warrants, rights or conversion privileges held by a person are deemed to be outstanding for the purpose of computing the percentage of outstanding shares of the class or series owned or voting power held by the person but are not deemed to be outstanding for the purpose of computing the percentage of the class or series owned or voting power held by any other person.

(c) A person whose relative or spouse, or any relative of the spouse, residing in the home of the person is the beneficial owner of the shares.

(d) A person who owns ten per cent or more of the total beneficial interest in or serves as trustee or personal representative in any trust or estate beneficially owning the shares.

(e) A person who owns ten per cent or more of the equity in any corporation or entity beneficially owning the shares.

(f) A person who is an affiliate of the person beneficially owning the shares.

"Business combination", when used in reference to any issuing public corporation and any interested shareholder of the issuing public corporation, means any of the following:

(a) Any merger or consolidation of the issuing public corporation or any subsidiary of the issuing public corporation with either:

(i) The interested shareholder.

(ii) Any other corporation or entity, whether or not itself an interested shareholder of the issuing public corporation, that is, or after the merger would be, an affiliate or associate of the interested shareholder, except that the foregoing does not include the merger of a wholly owned subsidiary of the issuing public corporation into the issuing public corporation or the merger of two or more wholly owned subsidiaries of the issuing public corporation.

(b) Any exchange, pursuant to a plan of exchange under the laws of this state or a comparable statute of any other state or jurisdiction, of shares of the issuing public corporation or any subsidiary of the issuing corporation for shares of either:

(i) The interested shareholder.

(ii) Any other corporation or entity, whether or not itself an interested shareholder of the issuing public corporation, that is, or after the exchange would be, an affiliate or associate of the interested shareholder.

(c) Any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in a single transaction or a series of transactions, to or with the interested shareholder or any affiliate or associate of the interested shareholder, of assets of the issuing public corporation or any subsidiary of the issuing public corporation to which any of the following applies:

(i) Has an aggregate market value, as defined in paragraph 12 of this section, equal to ten per cent or more of the aggregate market value of all the assets, determined on a consolidated basis, as of the end of the most recent fiscal quarter, of the issuing public corporation.

(ii) Has an aggregate market value, as defined in paragraph 12 of this section, equal to ten per cent or more of the aggregate market value of all the outstanding shares of the issuing public corporation.

(iii) Represents ten per cent or more of either the revenues or net income, determined on a consolidated basis for the most recent four fiscal quarters, or such shorter period as the issuing public corporation has been in existence, of the issuing public corporation.

(d) The issuance or transfer by the issuing public corporation or any subsidiary of the issuing public corporation, in a single transaction or a series of transactions, of any shares of the issuing public corporation or any subsidiary of the issuing public corporation that have an aggregate market value equal to five per cent or more of the aggregate market value of all the outstanding shares of the issuing public corporation to the interested shareholder or any affiliate or associate of the interested shareholder, except pursuant to the exercise of warrants or rights to purchase shares offered or a dividend or distribution paid or made pro rata to all shareholders of the issuing public corporation.

(e) The adoption of any plan or proposal for the liquidation or dissolution of the issuing public corporation, or any reincorporation of the issuing public corporation in another state or jurisdiction, proposed by, on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with the interested shareholder or any affiliate or associate of the interested shareholder.

(f) Any reclassification of securities, including any share dividend or split, reverse share split or other distribution of shares in respect of shares, recapitalization of the issuing public corporation, merger or consolidation of the issuing public corporation with any subsidiary of the issuing public corporation, exchange of shares of the issuing public corporation with any subsidiary of the issuing public corporation or other transaction, whether or not with or into or otherwise involving the interested shareholder, proposed by, on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with the interested shareholder or any affiliate or associate of the interested shareholder that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of shares, or securities that are exchangeable for or convertible into or that carry a right to acquire shares, of the issuing public corporation or any subsidiary of the issuing public corporation that is, directly or indirectly, owned by the interested shareholder or any affiliate or associate of the interested shareholder, except as a result of immaterial changes due to fractional share adjustments.

(g) Any receipt by the interested shareholder or any affiliate or associate of the interested shareholder of the benefit, directly or indirectly, except proportionately as a shareholder of the issuing public corporation, of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by or through the issuing public corporation or any subsidiary of the issuing public corporation.

"Consummation date", with respect to any business combination, means the date on which the business combination is effective, except in the case of a business combination as to which a shareholder vote is taken by the shareholders of the issuing public corporation, in which case it means the later of:

(a) The business day before the vote.

(b) Twenty days before the date on which the business combination is effective.

"Control", "controlling", "controlled by" or "under common control with" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. A person's beneficial ownership of ten per cent or more of the voting power of a corporation's outstanding securities creates a presumption that the person has control of the corporation. A person is not considered to have control of a corporation if the person holds voting power, in good faith and not for the purpose of avoiding article 2 of this chapter, as an agent, bank, broker, nominee, custodian or trustee for one or more beneficial owners who do not individually or as a group have control of the corporation.
"Control share acquisition" means an acquisition, directly or indirectly, by an acquiring person of beneficial ownership of shares of an issuing public corporation that, except for article 2 of this chapter, would, when added to all other shares of the issuing public corporation beneficially owned by the acquiring person, entitle the acquiring person, immediately after the acquisition, to exercise or direct the exercise of a new range of voting power within any of the ranges specified in section 10-2722, subsection A, paragraph 4, but does not include any of the following:

(a) An acquisition by a donee pursuant to an inter vivos gift not made to avoid article 2 of this chapter or by a distributee as defined in section 14-1201.

(b) An acquisition pursuant to a security agreement not created to avoid article 2 of this chapter.

(c) An acquisition under chapter 1, article 4 of this title if the issuing public corporation or a subsidiary is a party to the transaction.

(d) An acquisition from the issuing public corporation.

(e) An acquisition for the benefit of others by a person acting in good faith and not made to avoid article 2 of this chapter to the extent that the person may not exercise or direct the exercise of voting power or dispose of or direct the disposition of the shares except on the instruction of others.

All shares, the beneficial ownership of which is acquired within a one hundred twenty day period, and all shares, the beneficial ownership of which is acquired pursuant to a plan to make a control share acquisition, are deemed to have been acquired in the same acquisition.

"Interested shareholder", when used in reference to any issuing public corporation, means any person, other than the issuing public corporation or any subsidiary of the issuing public corporation, that is either:

(a) The beneficial owner, directly or indirectly, of ten per cent or more of the voting power of the outstanding shares of the issuing public corporation.

(b) An affiliate or associate of the issuing public corporation who at any time within the three year period immediately before the date in question was the beneficial owner of ten per cent or more of the voting power of the then outstanding shares of the issuing public corporation.

"Issuing public corporation" means a corporation that has a class of equity securities registered pursuant to section 12 or is subject to section 15(d) of the securities exchange act of 1934 or has elected to be subject to all or part of this chapter pursuant to section 10-2706 and which either:

(a) Is incorporated under the laws of this state.

(b) Has its principal place of business or its principal executive office located in this state and owns or controls assets located within this state that have a fair market value of at least one million dollars and has more than five hundred employees residing in this state.

"Market value", when used in reference to stock or property of any issuing public corporation, means the following:

(a) In the case of stock, the highest closing sale price during the thirty day period immediately preceding the date in question of the stock on the composite tape for New York stock exchange listed stock or, if the stock is not quoted on the composite tape or not listed on the New York stock exchange, on the principal United States securities exchange registered under the securities exchange act of 1934 on which the stock is listed or, if the stock is not listed on any such exchange, on the national association of securities dealers, inc. automated quotations national market system or, if the stock is not quoted on the national association of securities dealers, inc. automated quotations national market system, the highest closing bid quotation during the thirty day period preceding the date in question of the stock on the national association of securities dealers, inc. automated quotations system or any system then in use or, if no such quotation is available, the fair market value on the date in question of the stock as determined in good faith by the board of directors of the issuing public corporation.

(b) In the case of property other than cash or stock, the fair market value of the property on the date in question as determined in good faith by the board of directors of the issuing public corporation.

"Person" means an individual, a corporation, a partnership, a syndicate, an association, a joint stock company, a trust in which the interests of the beneficiaries are evidenced by securities, an unincorporated organization or entity or a government or political subdivision of a government.
"Share acquisition date", with respect to any person and any issuing public corporation, means the date that the person first becomes an interested shareholder of the issuing public corporation.
"Shares" means those shares presently entitled to vote in the election of directors of the issuing public corporation.
"Subsidiary of a person" means a corporation or entity of which the person is the beneficial owner of a majority of the voting power of the corporation or entity.
"Tender offer" means a tender offer under the securities exchange act of 1934.

§ 10-2702 Duties of director

In discharging the duties of the position of director under this chapter, a director of an issuing public corporation, in considering the best interests of the corporation, shall consider the long-term as well as the short-term interests of the corporation and its shareholders including the possibility that these interests may be best served by the continued independence of the corporation. This section does not modify the duties of the position of director in any matter outside the scope of this chapter and does not limit the ability of a director to consider any other factor permitted by section 10-830, subsection D.

§ 10-2703 Special meetings of shareholders

A. Special meetings of the shareholders of issuing public corporations may be called for any purpose or purposes under this chapter at any time by any of the following:

The president.
The secretary.
Two or more directors.
A person authorized in the articles of incorporation or bylaws to call special meetings.
A shareholder or shareholders holding ten per cent or more of the voting power of all shares, except that a special meeting for the purpose of considering any action to directly or indirectly facilitate or effect a business combination, including any action to change or otherwise affect the composition of the board of directors for that purpose, must be called by twenty-five per cent or more of the voting power of all shares.

B. A shareholder or shareholders holding the voting power specified in subsection A, paragraph 5 may demand a special meeting of shareholders by written notice of demand given to the president or secretary of the issuing public corporation and containing the purposes of the meeting. Within thirty days after receipt of the demand by one of those officers, the board shall cause a special meeting of shareholders to be called and held on notice no later than ninety days after receipt of the demand, all at the expense of the issuing public corporation. If the board fails to call and hold a special meeting as required by this section, the shareholder or shareholders making the demand may call the meeting by giving notice as required, all at the expense of the issuing public corporation.

§ 10-2704 Limitation on share repurchases; definition

A. An issuing public corporation shall not, directly or indirectly, purchase or agree to purchase any shares from a beneficial owner of more than five per cent of the voting power of the issuing public corporation for more than the average market price of the shares if the shares have been beneficially owned by the beneficial owner for less than three years, unless either:

The purchase or agreement to purchase is approved at a meeting of shareholders by the affirmative vote of the holders of a majority of the voting power of all shares excluding shares beneficially owned by the beneficial owner or its affiliates or associates or by any officer or director of the issuing public corporation.
The issuing public corporation makes an offer, of at least equal value per share, to all holders of shares of such class or series and to all holders of any class or series into which the shares may be converted.

B. For the purposes of this section, "average market price" means the average closing sale price during the thirty trading days immediately preceding the purchase of the shares in question, or if the person or persons have commenced a tender offer or have announced an intention to seek control of the issuing public corporation, during the thirty trading days preceding the earlier of the commencement of the tender offer or the making of the announcement, of a share on the composite tape for New York stock exchange listed shares or, if the shares are not quoted on the composite tape or not listed on the New York stock exchange, on the principal United States securities exchange registered under the securities exchange act of 1934 on which the shares are listed or, if the shares are not listed on any such exchange, on the national association of securities dealers, inc. automated quotations national market system or, if the shares are not quoted on the national association of securities dealers, inc. automated quotations national market system, the average closing bid quotation, during the thirty trading days preceding the purchase of the shares in question of a share on the national association of securities dealers, inc. automated quotations system or any system then in use, or if the person or persons have commenced a tender offer or have announced an intention to seek control of the issuing public corporation, during the thirty trading days preceding the earlier of the commencement of the tender offer or the making of the announcement, except that if no quotation is available the average market price is the fair market value on the date of purchase of the shares in question of a share as determined in good faith by the board of directors of the issuing public corporation.

§ 10-2705 Compensation agreements

During any tender offer or request or invitation for tenders of any class or series of shares of an issuing public corporation, other than an offer, request or invitation by the issuing public corporation, the issuing public corporation shall not enter into or amend, directly or indirectly, agreements containing provisions, whether or not dependent on the occurrence of any event or contingency, that increase, directly or indirectly, the current or future compensation of any officer or director of the issuing public corporation. This section does not prohibit routine increases in compensation or other routine compensation agreements undertaken in the ordinary course of the issuing public corporation's business.

§ 10-2706 Application

A. This chapter applies only to issuing public corporations and to corporations which elect pursuant to subsection C of this section to be subject to:

All of the provisions of this article.
All of the provisions of article 2 of this chapter.
All of the provisions of article 3 of this chapter.
Any combination of paragraph 1, 2 or 3.

B. A corporation may not elect to be subject to less than all of the provisions in any article of this chapter. A corporation which elects to be subject to all or part of this chapter pursuant to subsection C of this section, for purposes of applying the provisions of this chapter or part of this chapter, shall be deemed an issuing public corporation.

C. An election by a corporation pursuant to subsection A of this section must be contained either:

In its articles of incorporation at the time of incorporation.
In an amendment to its articles of incorporation or bylaws which is approved by the shareholders holding a majority of the outstanding voting power of all shares.

§ 10-2721 Control share acquisitions; exemption from article

A. This article does not apply to a control share acquisition if any of the following applies:

The articles of incorporation or bylaws of the issuing public corporation contain a provision adopted before it became an issuing public corporation and not subsequently amended expressly electing not to be subject to this article.
An amendment to the articles of incorporation or bylaws of the issuing public corporation is approved by the shareholders which hold a majority of the outstanding voting power of all shares, excluding shares beneficially owned by interested shareholders and their affiliates and associates, expressly electing not to be subject to this article and the amendment provides that it does not apply to any control share acquisition made on or before the effective date of the amendment to the articles of incorporation or bylaws.
The control share acquisition was consummated before, or a binding agreement to make the control share acquisition was entered into before, July 23, 1987.
The control share acquisition was inadvertent and the acquiring person, as soon as practicable, divests itself of a sufficient amount of the shares so that it no longer is the beneficial owner, directly or indirectly, of shares within the range specified in section 10-2722, subsection A that resulted in the control share acquisition.
The corporation, by action of its board of directors, adopts an amendment to its bylaws within forty-five days of the effective date of this section expressly electing not to be governed by this article.

B. An amendment to the bylaws adopted pursuant to subsection A, paragraph 2 of this section shall not be further amended by the board of directors without the approval of the shareholders which hold a majority of the outstanding voting power of all shares excluding shares beneficially owned by interested shareholders and their affiliates and associates.

C. An amendment to the bylaws adopted pursuant to subsection A, paragraph 5 shall not be further amended by the board of directors without the approval of shareholders which hold a majority of the outstanding voting power of all shares excluding shares beneficially owned by interested shareholders and their affiliates and associates.

§ 10-2722 Information statement

A. Not later than ten days after a control share acquisition, the acquiring person shall deliver to the issuing public corporation at its principal executive office an information statement containing all of the following:

The identity of the acquiring person, including the identity of each member of any partnership, syndicate or other group constituting the acquiring person and the identity of each affiliate and associate of the acquiring person, including the identity of each affiliate and associate of each member of such partnership, syndicate or other group.
A reference that the information statement is made under this section.
The number and class or series of shares of the issuing public corporation beneficially owned, directly or indirectly, before the control share acquisition by each of the persons identified pursuant to paragraph 1.
The number and class or series of shares of the issuing public corporation acquired or proposed to be acquired pursuant to the control share acquisition by each of the persons identified pursuant to paragraph 1 and specification of which of the following ranges of voting power in the election of directors that, except for this section, the acquiring person in good faith believes resulted or would result from consummation of the control share acquisition:

(a) At least twenty per cent but less than thirty-three and one-third per cent.

(b) At least thirty-three and one-third per cent but less than or equal to fifty per cent.

The terms of the control share acquisition or proposed control share acquisition, including the source of monies or other consideration and the material terms of the financial arrangements for the control share acquisition, plans or proposals of the acquiring person, including plans or proposals under consideration, to liquidate or dissolve the issuing public corporation, to sell all or a substantial part of its assets or merge or consolidate it or exchange its shares with any other person, to change the location of its principal place of business or its principal executive office or of a material portion of its business activities, to change materially its management or policies of employment, to change materially its charitable or community contributions or its policies, programs or practices relating thereto, to change materially its relationship with suppliers or customers or the communities in which it operates or to make any other material change in its business, corporate structure, management or personnel and such other objective facts as would be substantially likely to affect the decision of a shareholder with respect to voting on the control share acquisition.

B. If any material change occurs in the facts set forth in the information statement, including any material increase or decrease in the number of shares of the issuing public corporation acquired or proposed to be acquired by the persons identified pursuant to subsection A, paragraph 1, the acquiring person shall promptly deliver to the issuing public corporation at its principal executive office an amendment to the information statement containing information relating to such material change. An increase or decrease or proposed increase or decrease equal, in the aggregate for all persons identified pursuant to subsection A, paragraph 1, to one per cent or more of the total number of outstanding shares of any class or series of the issuing public corporation is deemed material for purposes of this subsection. An increase or decrease or proposed increase or decrease of less than this amount may be material, depending on the facts and circumstances.

§ 10-2723 Meeting of shareholders

If the acquiring person so requests in writing at the time of delivery of an information statement pursuant to section 10-2722 and has made, or has made a bona fide written offer to make, a control share acquisition and gives a written undertaking to pay or reimburse the issuing public corporation's expenses of a special meeting, except the expenses of the issuing public corporation in opposing approval of the control share acquisition, within thirty days after receipt by the issuing public corporation of the information statement, a special meeting of the shareholders of the issuing public corporation shall be called pursuant to section 10-2703, for the purpose of considering the voting rights to be accorded to shares referred to in section 10-2725, subsection A acquired or to be acquired pursuant to the control share acquisition. The special meeting shall be held no later than ninety days after receipt of the information statement, unless the acquiring person agrees to a later date. If no request for a special meeting is made, consideration of the voting rights to be accorded to shares referred to in section 10-2725, subsection A acquired or to be acquired pursuant to the control share acquisition shall be presented at the next special or annual meeting of the shareholders, unless the matter of the voting rights becomes moot. The notice of the meeting shall be accompanied at a minimum by a copy of the information statement and a copy of any amendment to the information statement previously delivered to the issuing public corporation and a statement disclosing that the board of directors of the issuing public corporation recommends approval of, expresses no opinion and is remaining neutral toward, recommends rejection of or is unable to take a position with respect to according voting rights to shares referred to in section 10-2725, subsection A acquired or to be acquired in the control share acquisition. The notice of any meeting required by this section shall be given at least thirty days before the meeting.

§ 10-2724 Financing

No call of a special meeting of the shareholders of the issuing public corporation is required to be made pursuant to section 10-2723 and no consideration of the voting rights to be accorded to shares referred to in section 10-2725, subsection A acquired or to be acquired pursuant to a control share acquisition shall be presented at any special or annual meeting of the shareholders of the issuing public corporation unless at the time of delivery of the information statement pursuant to section 10-2722 the acquiring person has entered into and has delivered to the issuing public corporation a copy or copies of a definitive financing agreement or agreements with one or more responsible financial institutions or other entities having the necessary financial capacity for any financing of the control share acquisition not to be provided by monies of the acquiring person.

§ 10-2725 Voting rights

A. Shares of an issuing public corporation that are acquired by an acquiring person in a control share acquisition and that exceed the threshold of voting power of any of the ranges prescribed in section 10-2722, subsection A, paragraph 4 have the same voting rights as other shares of the same class or series for all elections of directors but do not have the right to vote on other matters unless approved by a resolution of shareholders of the issuing public corporation at a special or annual meeting of shareholders pursuant to section 10-2723.

B. The resolution of shareholders must be approved by the affirmative vote of the holders of a majority of the voting power of all shares, excluding all shares beneficially owned by the acquiring person or its affiliates or associates or by any officer or director of the issuing public corporation.

C. A class or series of shares of the issuing public corporation is entitled to vote separately as a class or series if any provision of the control share acquisition would, if contained in a proposed amendment to the articles of incorporation, entitle the class or series to vote separately as a class or series.

D. To have the voting rights accorded by approval of a resolution of shareholders, any proposed control share acquisition not consummated before the time of the shareholders' approval must be consummated within one hundred eighty days after the shareholders' approval.

E. Any shares referred to in subsection A of this section acquired in a control share acquisition that do not have voting rights accorded to them by approval of a resolution of shareholders shall regain their voting rights on transfer to a person other than the acquiring person or any affiliate or associate of the acquiring person unless the acquisition of the shares by the other person constitutes a control share acquisition, in which case the voting rights of the shares remain subject to the provisions of this article.

§ 10-2726 Rights of action

An acquiring person, an issuing public corporation and shareholders of an issuing public corporation may sue at law or in equity to enforce the provisions of this article.

§ 10-2727 Redemption

A. Unless otherwise expressly provided in the articles of incorporation or in bylaws approved by the shareholders of an issuing public corporation, the issuing public corporation may call for redemption of all but not less than all shares referred to in section 10-2725, subsection A acquired in a control share acquisition at a redemption price equal to the market value of the shares at the time the call for redemption is given if either:

An information statement has not been delivered to the issuing public corporation by the acquiring person by the tenth day after the control share acquisition.
An information statement has been delivered but the shareholders have voted not to accord voting rights to such shares pursuant to section 10-2725, subsection B.

B. If exercising its redemption right pursuant to this section, the issuing public corporation shall give the acquiring person written notice of the call for redemption within thirty days after the event giving the issuing public corporation the option to call the shares for redemption and the shares shall be redeemed within sixty days after the call is given.

Article 3 Business Combinations

§ 10-2741 Business combination with interested shareholder; approval by committee of the directors

A. Except for the provisions of section 10-2743, an issuing public corporation may not engage in any business combination or vote, consent or otherwise act to authorize a subsidiary of the issuing public corporation to engage in any business combination with respect to, proposed by or on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with any interested shareholder of the issuing public corporation or any affiliate or associate of the interested shareholder for a period of three years after the interested shareholder's share acquisition date, unless either:

The business combination with the interested shareholder is approved by a committee, formed in accordance with subsection D of this section, of the board of directors of the issuing public corporation before the interested shareholder's share acquisition date pursuant to subsection B of this section.
The acquisition of shares made by the interested shareholder on the shareholder's share acquisition date is approved by a committee, formed in accordance with subsection D of this section, of the board of directors of the issuing public corporation before the interested shareholder's share acquisition date pursuant to subsection C of this section.

B. Any approval of a business combination pursuant to subsection A, paragraph 1 of this section must be given by the committee in writing within forty-five days after receipt by the committee of a good faith definitive proposal in writing regarding the business combination, and in the absence of such approval, the proposed business combination shall be deemed to have been disapproved.

C. Any approval of a share acquisition pursuant to subsection A, paragraph 2 of this section must be given by the committee in writing within forty-five days after receipt by the committee of a good faith definitive proposal in writing regarding the share acquisition, and in the absence of such approval, the proposed share acquisition shall be deemed to have been disapproved.

D. When a business combination or acquisition of shares is proposed pursuant to this section, the board of directors shall promptly form a committee composed of all disinterested directors. The committee shall take action on the proposal by the affirmative vote of a simple majority of committee members. The committee is not subject to any direction or control by the board of directors with respect to the committee's consideration of or any action concerning a proposed business combination or acquisition of shares pursuant to this section. A committee formed pursuant to this subsection shall be composed of one or more members. Only disinterested directors may be members of a committee formed pursuant to this subsection. However, if there are no disinterested directors, the board of directors shall select three or more disinterested persons to be committee members. For purposes of this subsection, a director or person is disinterested if the director or person is not an interested shareholder, an affiliate or associate of an interested shareholder or a present or former officer or employee of the issuing public corporation or of an affiliate or associate of the issuing public corporation or of the interested shareholder or of any affiliate or associate of the interested shareholder.

§ 10-2742 Requirements after three years

Except for the provisions of sections 10-2741 and 10-2743, an issuing public corporation may not engage at any time in any business combination or vote, consent or otherwise act to authorize a subsidiary of the issuing public corporation to engage in any business combination with respect to, proposed by or on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with an interested shareholder of the issuing public corporation or any affiliate or associate of the interested shareholder other than a business combination meeting all the requirements of this chapter, any other applicable section of this title, the articles of incorporation of the issuing public corporation and the requirements specified in any of the following:

A business combination, with respect to which the consummation date is no earlier than three years after the interested shareholder's share acquisition date, approved by the board of directors of the issuing public corporation before the interested shareholder's share acquisition date, or as to which the acquisition of shares made by the interested shareholder on the interested shareholder's share acquisition date had been approved by the board of directors of the issuing public corporation before the interested shareholder's share acquisition date.
A business combination approved by the affirmative vote of the shareholders holding a majority of the voting power of all shares, excluding shares beneficially owned by the interested shareholder proposing the business combination or any affiliate or associate of the interested shareholder proposing the business combination, at a meeting called for that purpose no earlier than three years after the interested shareholder's share acquisition date.
A business combination, with respect to which the consummation date is no earlier than three years after the interested shareholder's share acquisition date, that meets all of the following conditions:

(a) The aggregate amount of the cash and the market value as of the consummation date of consideration other than cash to be received per share by holders of outstanding common shares of the issuing public corporation in the business combination is at least equal to the higher of the following:

(i) The highest per share price paid by the interested shareholder, at a time when the interested shareholder was the beneficial owner, directly or indirectly, of five per cent or more of the voting power of all shares of the issuing public corporation, for any common shares of the same class or series acquired by it within the three year period immediately before the announcement date with respect to the business combination or within the three year period immediately before, or in, the transaction in which the interested shareholder became an interested shareholder, whichever is higher, plus, in either case, interest compounded annually from the earliest date on which the highest per share acquisition price was paid through the consummation date at the rate for one year United States treasury obligations from time to time in effect less the aggregate amount of any cash dividends paid, and the market value of any dividends paid other than in cash, per common share since the earliest date, up to the amount of the interest.

(ii) The market value per common share on the announcement date with respect to the business combination or on the interested shareholder's share acquisition date, whichever is higher, plus interest compounded annually from that date through the consummation date at the rate for one year United States treasury obligations from time to time in effect less the aggregate amount of any cash dividends paid, and the market value of any dividends paid other than in cash, per common share since that date, up to the amount of the interest.

(b) The aggregate amount of the cash and the market value as of the consummation date of consideration other than cash to be received per share by holders of outstanding shares of any class or series of stock, other than common shares, of the issuing public corporation in the business combination is at least equal to the highest of the following, whether or not the interested shareholder has previously acquired any stock of the class or series:

(i) The highest per share price paid by the interested shareholder, at a time when the interested shareholder was the beneficial owner, directly or indirectly, of five per cent or more of the voting power of all shares of the issuing public corporation, for any shares of the class or series acquired by it within the three year period immediately before the announcement date with respect to the business combination or within the three year period immediately before, or in, the transaction in which the interested shareholder became an interested shareholder, whichever is higher, plus, in either case, interest compounded annually from the earliest date on which the highest per share acquisition price was paid through the consummation date at the rate for one year United States treasury obligations from time to time in effect less the aggregate amount of any cash dividends paid and the market value of any dividends paid other than in cash, per share of the class or series since such earliest date, up to the amount of the interest.

(ii) The highest preferential amount per share to which the holders of stock of the class or series are entitled in the event of any voluntary liquidation, dissolution or winding up of the issuing public corporation, plus the aggregate amount of any unpaid dividends declared or due as to which the holders are entitled before payment of dividends on some other class or series of stock, unless the aggregate amount of the dividends is included in the preferential amount.

(iii) The market value per share of the class or series on the announcement date with respect to the business combination or on the interested shareholder's share acquisition date, whichever is higher, plus interest compounded annually from that date through the consummation date at the rate for one year United States treasury obligations from time to time in effect less the aggregate amount of any cash dividends paid and the market value of any dividends paid other than in cash, per share of the class or series since that date, up to the amount of the interest.

(c) The consideration to be received by holders of a particular class or series of outstanding stock, including common shares, of the issuing public corporation in the business combination is in cash or in the same form as the interested shareholder has used to acquire the largest number of shares of the class or series of stock previously acquired by it and the consideration is distributed promptly.

(d) The holders of all outstanding stock of the issuing public corporation not beneficially owned by the interested shareholder immediately before the consummation date with respect to the business combination are entitled to receive in the business combination cash or other consideration for the stock in compliance with subdivisions (a), (b) and (c).

(e) After the interested shareholder's share acquisition date and before the consummation date with respect to the business combination, the interested shareholder has not become the beneficial owner of any additional shares of the issuing public corporation except:

(i) As part of the transaction that resulted in the interested shareholder becoming an interested shareholder.

(ii) By virtue of proportionate share splits, share dividends or other distributions of shares in respect of shares not constituting a business combination.

(iii) Through a business combination meeting all of the conditions of this article.

(iv) Through purchase by the interested shareholder at any price that, if the price had been paid in an otherwise permissible business combination the announcement date and consummation date of which were the date of the purchase, would have satisfied the requirements of subdivisions (a), (b) and (c).

§ 10-2743 Business combinations; exemptions

A. This article does not apply to any business combination of an issuing public corporation if any of the following applies:

The articles of incorporation or bylaws of the issuing public corporation contain a provision adopted before it became an issuing public corporation and not subsequently amended expressly electing not to be subject to this article.
An amendment to the articles of incorporation or bylaws of the issuing public corporation is approved by the shareholders holding a majority of the outstanding voting power of all shares, excluding shares beneficially owned by interested shareholders and their affiliates and associates, expressly electing not to be subject to this article and such amendment provides that it does not apply to any business combination of the issuing public corporation with an interested shareholder whose share acquisition date is on or before the effective date of the amendment to the articles of incorporation or bylaws.
The business combination was consummated before, or a binding agreement for the business combination was entered into before, July 23, 1987.
The business combination of the issuing public corporation is with an interested shareholder whose share acquisition date is on or before July 22, 1987, if the business combination is approved by a simple majority vote of a committee of the board of directors of the issuing public corporation which is formed in accordance with section 10-2741, subsection D.
The business combination of the issuing public corporation is with an interested shareholder of the issuing public corporation who became an interested shareholder inadvertently, if the interested shareholder both:

(a) As soon as practicable, divests itself of a sufficient amount of the shares so that it no longer is the beneficial owner, directly or indirectly, of ten per cent or more of the outstanding shares of the issuing public corporation.

(b) Would not at any time within the three year period preceding the announcement date with respect to the business combination have been an interested shareholder except for the inadvertent acquisition.

The issuing public corporation is an insurance company regulated under title 20, unless the company elects to be subject to this article in whole or in part pursuant to section 10-2706.

B. A bylaw adopted or amended pursuant to subsection A, paragraph 2 of this section shall not be amended or further amended without the approval of the shareholders which hold a majority of the outstanding voting power of all shares excluding shares beneficially owned by an interested shareholder or their affiliates or associates.

Chapter 24 General Provisions-Nonprofit Corporations

Article 1 Short Title

§ 10-3101 Short title

Chapters 24 through 40 shall be known and may be cited as the Arizona nonprofit corporation act.

§ 10-3102 Reservation of power to amend or repeal

The legislature has the power to amend or repeal all or part of this act at any time and all domestic and foreign corporations subject to this act are governed by the amendment or repeal.

Article 2 Filing Documents and Fees-Nonprofit Corporations

§ 10-3120 Filing requirements

A. In order to qualify for filing by the commission, a document shall satisfy the requirements of this section and any other section of chapters 24 through 42 of this title that adds to or varies these requirements.

B. Chapters 24 through 42 of this title require or permit filing of the document in the office of the commission.

C. The document shall contain the information required by chapters 24 through 42 of this title. It may contain other information.

D. The document shall be typewritten or printed and shall be legible and capable of microfilm or other process reduction and subsequent reproduction as determined by the commission.

F. The document shall be executed:

By the presiding officer or its board of directors of a domestic or foreign corporation, its president or by another of its officers.
If directors have not been selected or the corporation has not been formed, by an incorporator.
If the corporation is in the hands of a receiver, trustee or other court appointed fiduciary, by that fiduciary.

G. The document shall state the name of each person who signs it and the capacity in which each person signs. The document may but need not contain:

The corporate seal.
An attestation by the secretary or an assistant secretary.
An acknowledgment, verification or proof.

H. If the commission has prescribed a mandatory form for the document under section 10-3121, the document shall be in or on the prescribed form.

I. Except as provided in subsection J of this section and sections 10-3503 and 10-11509, the document shall be delivered to the office of the commission for filing and shall be accompanied by the correct fee and any other payment or penalty required by chapters 24 through 42 of this title or other law.

J. Notwithstanding subsection I of this section:

A person may deliver by means of a fax or electronic transmission a document that is required or permitted by chapters 24 through 42 of this title to be delivered to the commission for filing. The person shall retain the original document for at least twelve months in the books and records of the corporation or of the person making the delivery for filing, if the delivery is not made on behalf of the corporation, and the person shall make the original documents available for inspection and copying by the commission on reasonable notice.
A document that is reproduced at a fax machine or through an electronic transmission at the commission is deemed delivered to the commission:

(a) On the date of the reproduction if reproduced on or before 5:00 p.m. mountain standard time and if the day is a business day of the commission.

(b) On the next succeeding business day if reproduced after 5:00 p.m. mountain standard time and if the day is a business day of the commission.

On the request of the person transmitting the document, the commission shall confirm by fax or electronic transmission or other writing the receipt of the document.
A person shall pay and deliver to the commission any fee or penalty imposed by this title with respect to delivery of a document to the commission for filing in the manner as the commission determines.
If the commission determines that the legality of the document reproduced by means of a fax or electronic transmission is not sufficient, the commission may require that either:

(a) The document be delivered to the commission by means of an additional fax or electronic transmission.

(b) An original document be delivered to the commission by means other than a fax or electronic transmission.

The commission shall not file a document if any required amount is not paid as provided in paragraph 4 of this subsection or if any required additional counterpart is not delivered as provided in paragraph 5 of this subsection.
A reproduced document delivered under this subsection is deemed to satisfy any requirement in chapters 24 through 42 of this title for delivery of an original and one or more copies of the document. A document subject to this paragraph is deemed to have been delivered on the date on which it was delivered as provided in paragraph 2 of this subsection only if the first reproduction at a minimum permits identification of the corporation to which the document pertains and of the general nature of the document and the commission subsequently determines that paragraphs 4 and 5 of this subsection and any other requirements of chapters 24 through 42 of this title regarding the document have been satisfied.
The commission may prescribe the format of an electronic document delivered to the commission pursuant to this subsection.

§ 10-3121 Forms

A. Certificates, reports and statements required by section 10-3202, subsection D and sections 10-11622 and 10-11623 to be delivered to and filed by the commission shall be made on the forms that are prescribed and furnished by the commission.

B. The commission may prescribe and furnish on request forms for other documents required or permitted to be filed by chapters 24 through 40 of this title, but their use is not mandatory.

§ 10-3122 Filing, service and copying fees; public access fund; expedited report filing and access; same day and next day services

A. The commission shall collect and deposit, pursuant to sections 35-146 and 35-147, in the state general fund the following nonrefundable fees when the documents described in this subsection are delivered to the commission for filing or issuance:

Document Fee

Articles of incorporation $ 30
Application for use of indistinguishable name $ 10
Application for reserved name $ 10
Notice of transfer of reserved name $ 10
Application for registered name $ 10
Application for renewal of registered name $ 10
Agent's statement of resignation $ 10
Amendment of articles of incorporation $ 25
Restatement of articles of incorporation

with amendment of articles $ 25

Statement of merger, interest exchange,

conversion, domestication or division if

the entity responsible for filing the

statement is a nonprofit corporation $100

Articles of dissolution $ 25
Articles of revocation of dissolution $ 25
Application for reinstatement following

administrative dissolution or revocation,

in addition to other fees and penalties due $ 25

Application for authority $150
Application for withdrawal $ 25
Annual report $ 10
Articles of correction $ 25
Application for certificate of good standing $ 10

B. The commission shall collect a nonrefundable fee of twenty-five dollars each time process is served on it under chapters 24 through 42 of this title. The party to a proceeding causing service of process is entitled to recover this fee as costs if the party prevails in the proceeding. The fee collected pursuant to this subsection shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund.

C. The commission shall charge and collect fifty cents per page for copying documents on request. The commission shall also charge five dollars plus fifty cents per page for certifying the copy of a filed document. The fees collected pursuant to this subsection shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund.

D. A penalty of one hundred dollars payable in addition to other fees accrues and is payable if a foreign corporation fails to file an amendment, restated articles that include an amendment, or articles of merger within sixty days of the time of filing in the jurisdiction in which the corporation is domiciled. The penalty collected pursuant to this subsection shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund.

E. Pursuant to section 10-122, subsection F, the commission shall provide for and establish an expedited service for the filing of all documents and services provided pursuant to chapters 24 through 42 of this title.

F. Pursuant to section 10-122, subsection F, the commission may provide for and establish same day and next day services for the filing of any documents and services provided pursuant to chapters 24 through 42 of this title.

Filing articles of incorporation of a domestic corporation, ten dollars.
Filing an application of a foreign corporation for authority to transact business in this state, twenty-five dollars.

I. All monies received pursuant to subsections E through H of this section shall be deposited, pursuant to sections 35-146 and 35-147, in the public access fund established by section 10-122.01.

J. Fees charged pursuant to this section are exempt from section 39-121.03, subsection A, paragraph 3.

K. Any person may advance monies to the commission to pay fees required pursuant to this section for future filings and services. All monies received pursuant to this subsection shall be deposited, pursuant to sections 35-146 and 35-147, in the money on deposit account in the public access fund established by section 10-122.01.

§ 10-3123 Effective time and date of document

A. Except as provided in subsections B and C of this section, a document delivered to the commission for filing is effective when the document is delivered to the commission for filing.

C. Subject to section 10-3124, if the commission determines that the requirements of chapters 24 through 40 of this title for filing have not been met, the document shall not be filed and, except as provided in section 10-3203, the delivery of the document is ineffective. If the commission determines that the requirements for filing have been met, the commission shall file the document as provided in section 10-3125 and the filing is effective as of the date and time determined pursuant to subsection A or B of this section.

§ 10-3124 Correcting filed document; articles of incorporation; application for authority to conduct affairs

A. A domestic or foreign corporation may correct a document that has been filed by the commission if the document either:

Contains an incorrect statement and the correction does not materially alter a substantive provision.
Was defectively executed, attested, sealed, verified or acknowledged.

B. A document is corrected by both:

Preparing articles of correction that:

(a) Describe the document or attach a copy of it to the articles.

(b) Specify the date the document was delivered to the commission.

(d) Correct the incorrect statement or other defect.

Delivering the articles to the commission for filing.

D. If articles of incorporation, articles of domestication or an application for authority to conduct affairs is rejected for filing by the commission, the articles or application may be resubmitted within thirty days after the date of rejection. If the resubmitted articles or application cures the defect that caused the rejection, the resubmitted articles or application shall be filed by the commission and is effective on the date that would have been the effective date of filing the articles or application if the articles or application had not been rejected.

§ 10-3125 Filing duty of commission

A. At the time of delivery of a document to the commission, the commission shall stamp, endorse or attach the date and time of delivery of the document.

B. The commission shall file a document delivered to the commission for filing if both of the following apply:

The commission determines that the document satisfies the requirements of chapters 24 through 40 of this title.
The corporation filing the document or on whose behalf the document is being filed is in good standing pursuant to section 10-3128.

D. If the commission refuses to file a document, it shall provide notice of the refusal to the domestic or foreign corporation or its representative within five days after the determination of the refusal to file, together with a brief written explanation of the reason for the refusal.

E. The filing or refusing to file a document by the commission does not:

Affect the validity or invalidity of the document in whole or in part, except to the extent that filing is required to make the document valid.
Relate to the correctness or incorrectness of information contained in the document.
Create a presumption that the document is valid or invalid or that information contained in the document is correct or incorrect.

§ 10-3127 Evidentiary effect of copy of filed document

A stamp affixed to a copy of a document filed by the commission, bearing the signature of the executive director of the commission, which may be in facsimile, and the seal of the commission, is conclusive evidence that the original document is on file with the commission.

§ 10-3128 Certificate of good standing

A. A person may apply to the commission to furnish a certificate of good standing for a domestic or foreign corporation.

B. The certificate of good standing sets forth all of the following:

The domestic corporation's corporate name or the foreign corporation's corporate name used in this state.
That either:

(a) The domestic corporation is incorporated under the law of this state and the date of its incorporation.

(b) The foreign corporation is authorized to transact business in this state.

That all affidavits and annual reports required before the date of the certificate have been filed with the commission.
That all annual filing fees due before the date of the certificate have been paid.
That according to the records of the commission, the corporation is in good standing in this state.

C. Subject to any qualification stated in the certificate, a certificate of good standing issued by the commission may be relied on as conclusive evidence of the matters stated in the certificate.

Article 3 Arizona Corporation Commission

§ 10-3130 Powers

The commission has the power and authority reasonably necessary to enable it to administer this title efficiently and to perform the duties imposed on it by this title, including the power and authority to make rules and regulations for those purposes.

Article 4 Definitions, Notice, Private Foundations, Judicial Relief and Religious Organizations

§ 10-3140 Definitions

In chapters 24 through 40 of this title, unless the context otherwise requires:

"Acknowledged" or "acknowledgment" means either:

(a) An acknowledgment made by the person or persons signing an instrument and taken by a notarial officer pursuant to title 41, chapter 2, article 1.

"Act of the board of directors" means either:

(a) An act of the majority of the directors present at a duly called meeting at which a quorum is present, unless the act of a greater number is required by chapters 24 through 40 of this title, the articles of incorporation or the bylaws.

(b) Action taken by written consent of the directors in accordance with chapters 24 through 40 of this title.

"Act of the members" means either:

(a) An act adopted or rejected by a majority of the votes represented and voting at a duly held meeting at which a quorum is present where affirmative votes also constitute a majority of the required quorum unless a greater number of votes is required by chapters 24 through 40 of this title, the articles of incorporation or the bylaws.

(b) An action taken by written consent of the members in accordance with chapters 24 through 40 of this title.

"Address" means a mailing address.
"Affiliate" means a person that directly or indirectly, through one or more intermediaries controls, is controlled by or is under common control with the person specified.
"Articles of incorporation" means the original or restated articles of incorporation or articles of merger and all amendments to the articles of incorporation or merger and includes amended and restated articles of incorporation and articles of amendment and merger.
"Board", "board of directors" or "board of trustees" means the group of persons vested with the direction of the affairs of the corporation irrespective of the name by which the group is designated, except that no person or group of persons shall be deemed to be the board of directors solely because of powers delegated to that person or group pursuant to section 10-3801, subsection C.
"Business day" means a day that is not a Saturday, a Sunday or any other legal holiday in this state.
"Bylaws" means the code of rules adopted for the regulation or management of the affairs of the corporation irrespective of the name by which those rules are designated.
"Certificate of disclosure" means the certificate of disclosure described in section 10-3202.
"Class" refers to a group of memberships that have the same rights with respect to voting, dissolution, redemption and transfer. Rights are the same if they are determined by a formula applied uniformly.
"Commission" means the Arizona corporation commission.
"Conspicuous" means so written that a reasonable person against whom the writing is to operate should have noticed it. For example, printing in italics, boldface or contrasting color or typing in capitals or underlined is conspicuous.
"Corporation" or "domestic corporation" means a nonprofit corporation that is not a foreign corporation and that is incorporated under or subject to chapters 24 through 40 of this title.
"Corporation sole" means a corporation formed pursuant and subject to chapter 42, article 1 of this title.
"Court" means the superior court of this state.
"Delegates" means those persons elected or appointed to vote in a representative assembly for the election of a director or directors or on other matters.
"Deliver" includes sending by mail, private courier, fax or electronic transmission.
"Delivery" means actual receipt by the person or entity to which directed and for electronic transmissions means receipt as described in section 44-7015, subsection B.
"Directors" or "trustees" means individuals, designated in the articles of incorporation or bylaws or elected by the incorporators, and their successors and individuals elected or appointed by any other name or title to act as members of the board.
"Dissolved" means the status of a corporation on either:

(a) Effectiveness of articles of dissolution pursuant to section 10-11403, subsection B or section 10-11421, subsection B.

(b) A decree pursuant to section 10-11433, subsection B becoming final.

"Distribution" means a direct or indirect transfer of money or other property or incurrence of indebtedness by a corporation to or for the benefit of its members in respect of any of its membership interests. A distribution may be in the form of any of the following:

(a) A declaration of payment of a dividend.

(b) Any purchase, redemption or other acquisition of membership interests.

(d) Otherwise.

"Effective date of notice" is prescribed in section 10-3141.
"Electronic transmission" means an electronic record as defined in section 44-7002 and that is sent pursuant to section 44-7015, subsection A.
"Employee" means an officer, director or other person who is employed by the corporation.
"Entity" includes a corporation, foreign corporation, not for profit corporation, business corporation, foreign business corporation, profit and not for profit unincorporated association, close corporation, corporation sole, limited liability company or registered limited liability partnership, a professional corporation, association or limited liability company or registered limited liability partnership, a business trust, estate, partnership, trust or joint venture, two or more persons having a joint or common economic interest, any person other than an individual and a state, the United States and a foreign government.
"Executed by the corporation" means executed by manual or facsimile signature on behalf of the corporation by a duly authorized officer or, if the corporation is in the hands of a receiver or trustee, by the receiver or trustee.
"Filing" means the commission completing the following procedure with respect to any document delivered for that purpose:

(a) Determining that the filing fee requirements of this title have been satisfied.

(b) Determining that the document appears in all respects to conform to the requirements of chapters 24 through 40 of this title.

"Foreign corporation" means a corporation that is organized under a law other than the law of this state and that would be a nonprofit corporation if formed under the laws of this state.
"Governmental subdivision" includes an authority, county, district, municipality and political subdivision.
"Includes" and "including" denotes a partial definition.
"Individual" includes the estate of an incompetent individual.
"Insolvent" means inability of a corporation to pay its debts as they become due in the usual course of its business.
"Known place of business" means the known place of business required to be maintained pursuant to section 10-3501.
"Mail", "to mail" or "have mailed" means to deposit or have deposited a communication in the United States mail with first class postage prepaid.
"Means" denotes an exhaustive definition.
"Member" means, without regard to what a person is called in the articles of incorporation or bylaws, any person or persons who, pursuant to a provision of a corporation's articles of incorporation or bylaws, have the right to vote for the election of a director or directors. A person is not a member by virtue of any of the following:

(a) Any rights that person has as a delegate.

(b) Any rights that person has to designate a director or directors.

(d) Being referred to as a member in the articles of incorporation, bylaws or any other document, if the person does not have the right to vote for the election of a director or directors.

"Membership" refers to the rights and obligations a member or members have pursuant to a corporation's articles of incorporation and bylaws and chapters 24 through 40 of this title.
"Newspaper" has the same meaning prescribed in section 39-201.
"Notice" and "notify" are prescribed in section 10-3141.
"Person" includes individual and entity.
"President" means that officer designated as the president in the articles of incorporation or bylaws or, if not so designated, that officer authorized in the articles of incorporation, bylaws or otherwise to perform the functions of the chief executive officer, irrespective of the name by which designated.
"Principal office" means the office, in or out of this state, so designated in the annual report where the principal executive offices of a domestic or foreign corporation are located or in any other document executed by the corporation by an officer and delivered to the commission for filing. If an office has not been so designated, principal office means the known place of business of the corporation.
"Proceeding" includes a civil suit and a criminal, administrative and investigatory action.
"Publish" means to publish in a newspaper of general circulation in the county of the known place of business for three consecutive publications.
"Record date" means the date, if any, established under chapter 29 or 30 of this title on which a corporation determines the identity of its members and their membership interests for purposes of chapters 24 through 40 of this title. The determinations shall be made as of the close of business on the record date unless another time for doing so is specified when the record date is fixed.
"Secretary" means that officer designated as the secretary in the articles of incorporation or bylaws or that officer authorized in the articles of incorporation, the bylaws or otherwise to perform the functions of secretary, irrespective of the name by which designated.
"State" if referring to a part of the United States, includes a state and commonwealth and their agencies and governmental subdivisions and a territory and insular possession of the United States and their agencies and governmental subdivisions.
"Treasurer" means that officer designated as the treasurer in the articles of incorporation or bylaws or that officer authorized in the articles of incorporation, bylaws or otherwise to perform the functions of treasurer, irrespective of the name by which designated.
"United States" includes a district, authority, bureau, commission and department and any other agency of the United States.
"Vice-president" means an officer designated as a vice-president in the articles of incorporation or bylaws or an officer authorized in the articles of incorporation or the bylaws or otherwise to perform the functions of a vice-president, irrespective of the name by which designated.
"Vote" includes authorization by written ballot and written consent.
"Voting power" means the total number of votes entitled to be cast for the election of directors at the time the determination of voting power is made, excluding a vote that is contingent on the happening of a condition or event that has not occurred at the time. If a class is entitled to vote as a class for directors, the determination of voting power of the class shall be based on the percentage of the number of directors the class is entitled to elect out of the total number of authorized directors.

§ 10-3141 Notice

A. Notice under chapters 24 through 40 of this title must be in writing unless oral notice is reasonable under the circumstances. Oral notice is not permitted if written notice is required under chapters 24 through 40 of this title.

B. Notice may be communicated in person, by telephone, telegraph, teletype, fax, electronic transmission or other form of wire or wireless communication, or by mail or private carrier. If these forms of personal notice are impracticable, notice may be communicated by a newspaper of general circulation in the area where published or by radio, television or other form of public broadcast communication.

C. Written notice by a domestic or foreign corporation to its members or directors, if in comprehensible form, is effective when mailed, if correctly addressed to the member's or director's address shown on the corporation's current list of members or directors. Notice given by electronic transmission, if in comprehensible form, is effective when directed to an e-mail address shown on the corporation's current list of members or directors.

D. A written notice or report by a domestic or foreign corporation to its members delivered as part of a newsletter, magazine or other publication regularly sent to members shall constitute a written notice or report if addressed or delivered to the member's address shown in the corporation's current list of members, or in the case of members who are residents of the same household and who have the same address in the corporation's current list of members, if addressed or delivered to one of such members, at the address appearing on the current list of members.

E. Written notice to a domestic or foreign corporation that is authorized to transact business in this state, other than in its capacity as a member, may be addressed to its statutory agent at its known place of business or to the corporation or its secretary at its principal office shown in its most recent annual report on file with the commission, or in the case of a foreign corporation that has not yet delivered an annual report in its application for a certificate of authority. Unless otherwise prohibited in chapters 24 through 40 of this title, written notice may also be given by electronic transmission when directed to an e-mail address that the corporation or its statutory agent provides.

F. Except as provided in subsection C of this section, written notice, if in a comprehensible form, is effective at the earliest of the following:

When received.
Five days after its deposit in the United States mail as evidenced by the postmark, if mailed postpaid and correctly addressed.
On the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and if the receipt is signed by or on behalf of the addressee.

G. Oral notice is effective when communicated if communicated in a comprehensible manner.

H. If chapters 24 through 40 of this title prescribe notice requirements for particular circumstances, those requirements govern. If articles of incorporation or bylaws prescribe notice requirements that are not inconsistent with this section or other provisions of chapters 24 through 40 of this title those requirements govern.

§ 10-3150 Private foundations; definition

A. Except if otherwise determined by a court of competent jurisdiction or to the extent no longer required by the internal revenue code of 1986, a corporation that is a private foundation as defined in section 509(a) of the internal revenue code of 1986 shall:

Distribute such amounts for each taxable year at a time and in a manner that does not subject the corporation to tax under section 4942 of the code.
Not engage in any act of self-dealing as defined in section 4941(d) of the code.
Not retain any excess business holdings as defined in section 4943(c) of the code.
Not make any taxable expenditures as defined in section 4944 of the code.
Not make any taxable expenditures as defined in section 4945(d) of the code.

B. For the purposes of this section, "code" means the internal revenue code of 1986 as amended.

§ 10-3160 Judicial relief

A. If for any reason it is impractical or impossible for any corporation to call or conduct a meeting of its members, delegates or directors, or otherwise obtain their consent, in the manner prescribed by its articles of incorporation, bylaws, or chapters 24 through 40 of this title, on petition of a director, officer, delegate or member, the court may order that such a meeting be called or that a written ballot or other form of obtaining the vote of members, delegates or directors be authorized, in such a manner as the court finds fair and equitable under the circumstances.

B. The court, in an order issued pursuant to this section, shall provide for a method of notice reasonably designed to give actual notice to all persons who would be entitled to notice of a meeting held pursuant to the articles of incorporation, bylaws and chapters 24 through 40 of this title, whether or not the method results in actual notice to all such persons or conforms to the notice requirements that would otherwise apply. In a proceeding under this section the court may determine who the members or directors are.

C. The order issued pursuant to this section may dispense with any requirement relating to the holding of or voting at meetings or obtaining votes, including any requirement as to quorums or as to the number or percentage of votes needed for approval, than would otherwise be imposed by the articles of incorporation, bylaws, or chapters 24 through 40 of this title.

D. If practical, any order issued pursuant to this section shall limit the subject matter of meetings or other forms of consent authorized to items, including amendments to the articles of incorporation or bylaws, the resolution of which will or may enable the corporation to continue managing its affairs without being subject to this section.

E. Notwithstanding subsection D, an order under this section may also authorize the obtaining of the votes and approvals that are necessary for the dissolution, merger or sale of assets.

F. Any meeting or other method of obtaining the vote of members, delegates or directors conducted pursuant to an order issued under this section, and that complies with all the provisions of that order, is a valid meeting or vote and shall have the same force and effect as if it complied with every requirement imposed by the articles of incorporation, bylaws and chapters 24 through 40 of this title.

§ 10-3180 Religious corporations; constitutional protections

If religious doctrine governing the affairs of a corporation organized primarily for religious purposes is inconsistent with the provisions of chapters 24 through 40 of this title on the same subject, the religious doctrine shall control to the extent required by the Constitution of the United States or the constitution of this state or both.

Chapter 25 Incorporation-Nonprofit Corporations

Article 1 Incorporation

§ 10-3201 Incorporators

One or more persons may act as the incorporator or incorporators of a corporation by delivering articles of incorporation and a certificate of disclosure to the commission for filing.

§ 10-3202 Articles of incorporation; violation; classification

A. The articles of incorporation shall set forth:

A corporate name for the corporation that satisfies the requirements of section 10-3401.
A brief statement of the character of affairs that the corporation initially intends to conduct. This statement does not limit the affairs that the corporation may conduct.
The name and address of each person who is to serve as a director until a successor is elected and qualifies.
The name, street address and signature of the corporation's statutory agent.
The street address of the known place of business for the corporation, if different from that of its statutory agent.
The name and address of each incorporator.
Whether or not the corporation will have members.
Any provision elected by the incorporators that under chapters 24 through 40 of this title or any other law of this state may be elected only by specific inclusion in the articles of incorporation.
The signatures of all incorporators.

B. The articles of incorporation may set forth:

A provision eliminating or limiting the liability of a director to the corporation or its members for money damages for any action taken or any failure to take any action as a director, except liability for any of the following:

(a) The amount of a financial benefit received by a director to which the director is not entitled.

(b) An intentional infliction of harm on the corporation or the members.

(d) An intentional violation of criminal law.

A provision permitting or making obligatory indemnification of a director for liability, as defined in section 10-3850, to any person for any action taken, or any failure to take any action, as a director, except liability for any of the exceptions described in paragraph 1 of this subsection.
Any other provision, not inconsistent with law.

C. The articles of incorporation need not set forth any of the corporate powers enumerated in chapters 24 through 40 of this title.

D. The certificate of disclosure shall set forth all of the following:

The following information regarding all persons who at the time of its delivery are officers, directors, trustees and incorporators:

(i) The violation of fraud or registration provisions of the securities laws of that jurisdiction.

(ii) The violation of consumer fraud laws of that jurisdiction.

(iii) The violation of the antitrust or restraint of trade laws of that jurisdiction.

(ii) The nature and description of each conviction or judicial action, the date and location, the court and public agency involved, and the file or case number of the case.

A brief statement disclosing whether any persons who at the time of its delivery are officers, directors, trustees and incorporators and who have served in any such capacity in any other corporation on the bankruptcy or receivership of the other corporation. If so, for each corporation, the certificate shall include:

(a) The names and addresses of each corporation and the person or persons involved.

(b) The state in which each corporation:

(i) Was incorporated.

(ii) Transacted business.

The signatures of all the incorporators.
The date of its execution, which shall be not more than thirty days before its delivery to the commission.
A declaration by each signer that the signer swears to its contents under penalty of law.

E. The certificate of disclosure may set forth the name and address of any other person whom the incorporator or incorporators choose to be the subject of those disclosures required under subsection D, paragraph 1 of this section.

F. If within sixty days after delivering the articles of incorporation and certificate of disclosure to the commission any person becomes an officer, director or trustee and the person was not the subject of the disclosures set forth in the certificate of disclosure, the incorporator or incorporators or, if the organization of the corporation has been completed as provided in section 10-3205, the corporation shall execute and deliver to the commission within the sixty-day period a declaration, sworn to under penalty of law, setting forth all information required by subsection D, paragraph 1 of this section, regarding the person. If the incorporator or incorporators or, as applicable, the corporation fails to comply with this subsection, the commission may administratively dissolve the corporation pursuant to section 10-11421.

G. If any of the persons described in subsection D, paragraph 1 of this section have been convicted of the crimes or are the subject of the judicial action described in subsection D, paragraph 1 of this section, the commission may direct detailed interrogatories to the persons requiring any additional relevant information deemed necessary by the commission. The interrogatories shall be completely answered within thirty days after mailing of the interrogatories. With respect to corporations incorporating or seeking authority to conduct affairs, articles of incorporation or an application for authority shall not be filed until all outstanding interrogatories have been answered to the satisfaction of the commission. With respect to existing domestic and foreign corporations, if the interrogatories are not answered as provided in this subsection or the answers to the interrogatories otherwise indicate proper grounds for an administrative dissolution, the commission shall initiate an administrative dissolution in accordance with chapters 24 through 40 of this title.

H. On a quarterly updated basis, the commission shall provide to the attorney general a list of all persons who are convicted of the crimes or who are the subject of the judicial action described in subsection D, paragraph 1 of this section as indicated by the certificate of disclosure filed during the preceding three months.

I. Any person who executed or contributed information for a certificate of disclosure and who intentionally makes any untrue statement of material fact or withholds any material fact with regard to the information required in subsection D, paragraph 1 of this section is guilty of a class 6 felony.

§ 10-3203 Incorporation

C. Subject to section 10-3124, if the commission determines that the requirements of chapters 24 through 42 of this title for filing have not been met, the articles of incorporation and certificate of disclosure shall not be filed and the corporate existence terminates at the time the commission completes the determination. If the corporate existence is terminated pursuant to this subsection, sections 10-11404, 10-11405 and 10-11406 apply.

D. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of incorporation shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-3204 Liability for noncorporate transactions

All persons purporting to act as or on behalf of a corporation with actual knowledge that no corporation exists under chapters 24 through 40 of this title are jointly and severally liable to the extent not precluded by section 12-2506 for all liabilities created while so acting.

§ 10-3205 Organization of corporation

After incorporation the board of directors shall hold an organizational meeting at the call of a majority of the directors to complete the organization of the corporation by appointing officers, adopting bylaws, and carrying on any other business brought before the meeting.

§ 10-3206 Bylaws

A. The board of directors of a corporation shall adopt initial bylaws for the corporation.

B. The bylaws of a corporation may contain any provision for regulating and managing the affairs of the corporation that is not inconsistent with law or the articles of incorporation.

§ 10-3207 Emergency bylaws

A. Unless the articles of incorporation provide otherwise, the board of directors of a corporation may adopt bylaws to be effective only in an emergency defined in subsection D of this section. The emergency bylaws are subject to amendment or repeal by the members and may make all provisions necessary for managing the corporation during the emergency, including all of the following:

Procedures for calling a meeting of the board of directors.
Quorum requirements for the meeting.
Designation of additional or substitute directors.

B. All provisions of the regular bylaws consistent with the emergency bylaws remain effective during the emergency. The emergency bylaws are not effective after the emergency ends.

C. Corporate action taken in good faith in accordance with the emergency bylaws both:

Binds the corporation.
May not be used to impose liability on a corporate director, officer, employee or agent.

Chapter 26 Purposes and Powers-Nonprofit Corporations

Article 1 General Provisions

§ 10-3301 Purposes

Subject to any limitations or requirements contained in its articles of incorporation or in any other applicable law, a corporation shall have the purpose of engaging in and may engage in any lawful activity including the practice of medicine as defined in section 32-1401 or the practice of dentistry as described in section 32-1202, or both, provided that the corporation engages in the practice of medicine or dentistry only through individuals licensed to practice in this state. This section does not alter any law or change any liability that might otherwise be applicable to the relationship between persons furnishing a professional service and persons receiving a professional service, including liability arising from that relationship.

§ 10-3302 General powers

Sue and be sued, complain and defend in its corporate name.
Have a corporate seal, which may be altered at will, and to use it, or a facsimile of it, by impressing or affixing or in any other manner reproducing it.
Make and amend bylaws, not inconsistent with its articles of incorporation or with the laws of this state, for regulating and managing the affairs of the corporation.
Purchase, receive, lease or otherwise acquire and own, hold, improve, use and otherwise deal with real or personal property or any interest in property wherever located.
Sell, convey, mortgage, pledge, lease, exchange and otherwise dispose of all or any part of its property.
Purchase, receive, subscribe for or otherwise acquire, own, hold, vote, use, sell, mortgage, lend, pledge or otherwise dispose of and deal with shares or other interests in or obligations of any entity.
Make contracts and guarantees, incur liabilities, borrow monies, issue its notes, bonds and other obligations, which may be convertible into or include the option to purchase other securities of the corporation, and secure any of its obligations by mortgage, deed of trust, security agreement, pledge or other encumbrance of any of its property, franchises or income.
Issue any bond, debenture or debt security of the corporation by causing one or more officers designated in the bylaws or by the board of directors to sign the bond, debenture or debt security either manually or in facsimile and, if deemed necessary or appropriate by the officers, by causing its authentication, countersignature or registration, either manually or in facsimile, by a trustee, transfer agent or registrar other than the corporation itself or an employee of the corporation. If an officer who has signed, either manually or in facsimile, a bond, debenture or debt security as provided in this paragraph ceases for any reason to be an officer before the security is issued, the corporation may issue the security with the same effect as if the officer were still in office at the date of issue.
Lend monies, invest and reinvest its monies and receive and hold real and personal property as security for repayment, except as limited by section 10-3833.
Be a promoter, incorporator, partner, member, associate or manager of any entity.
Conduct its activities, locate offices and exercise the powers granted by chapters 24 through 40 of this title within or without this state.
Elect or appoint directors, officers, employees and agents of the corporation, define their duties, fix their compensation and lend them monies and credit.
Pay pensions and establish pension plans, pension trusts and other benefit or incentive plans for any of its or its affiliates' current or former directors, officers, employees and agents.
Eliminate or limit the liability of its directors in the manner and to the extent provided by section 10-3202 and chapter 31, article 5 of this title.
Make payments or donations not inconsistent with law for the public welfare or for charitable, religious, scientific or educational purposes and for other purposes that further the corporate interest.
Impose dues, assessments, admission and transfer fees on its members.
Establish conditions for admission of members, admit members and issue memberships.
Carry on a business.
Transact any lawful activity that will aid governmental policy.
Do any other act not inconsistent with law that furthers the activities and affairs of the corporation.

§ 10-3303 Emergency powers

A. In anticipation of or during an emergency as prescribed in subsection D of this section, the board of directors of a corporation may:

Modify lines of succession to accommodate the incapacity of any director, officer, employee or agent.
Relocate the principal office, designate alternative principal offices or regional offices or authorize the officers to do so.

B. During an emergency as prescribed in subsection D of this section, unless emergency bylaws provide otherwise:

Notice of a meeting of the board of directors need be given only to those directors whom it is practicable to reach and may be given in any practicable manner, including by publication and radio.
One or more officers of the corporation present at a meeting of the board of directors may be deemed to be directors for the meeting, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.

C. Corporate action taken in good faith during an emergency under this section to further the ordinary affairs of the corporation:

Binds the corporation.
May not be used to impose liability on a corporate director, officer, employee or agent.

§ 10-3304 Validity of actions

A. Except as provided in subsection B of this section, the validity of corporate action shall not be challenged on the ground that the corporation lacks or lacked power to act.

B. A corporation's power to act may be challenged by any of the following:

In a proceeding by members of a corporation that is not a condominium association as defined in section 33-1202, or a planned community association as defined in section 33-1802, having at least ten per cent or more of the voting power or by at least fifty members, unless a lesser percentage or number is provided in the articles of incorporation, against the corporation to enjoin the act.
In a proceeding by any member of a condominium or a planned community association against the corporation to enjoin the act pursuant to title 12, chapter 10, article 1.
In a proceeding by the corporation, directly, derivatively or through any receiver, trustee or other legal representative, against an incumbent or former director, officer, employee or agent of the corporation.

C. In a member's proceeding under subsection B, paragraph 1 of this section to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss, other than anticipated profits, suffered by the corporation or another party because of enjoining the unauthorized act.

Chapter 27 Name-Nonprofit Corporations

Article 1 General Provisions

§ 10-3401 Corporate name

A. A corporate name shall not contain language that states or implies that the corporation is organized for a purpose other than the purpose allowed by section 10-3301 and in its articles of incorporation.

B. Except as authorized by subsections C and D of this section, a corporate name must be distinguishable from all of the following:

The corporate name of a corporation incorporated in this state or a foreign corporation authorized to conduct affairs in this state.
A corporate name reserved under section 10-402 or 10-3402 or registered under section 10-403 or 10-3403.
A fictitious name of a foreign corporation under section 10-1506 or 10-11506.
The corporate name of a business corporation incorporated under this title or a foreign business corporation authorized to transact business in this state.
The partnership name of a limited partnership organized and registered under the laws of this state or of a foreign limited partnership authorized to transact business in this state.
The name of a limited liability company organized under title 29 or a foreign limited liability company authorized to transact business in this state.
A trade name registered pursuant to title 44, chapter 10, article 3.1.
The name of a registered limited liability partnership registered under title 29, chapter 5, article 10 or a foreign registered limited liability partnership authorized to transact business in this state.

The other corporation consents to the use in writing and submits an undertaking in a form satisfactory to the commission to change its name to a name that is distinguishable from the name of the applying corporation.
The applicant delivers to the commission a certified copy of a final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this state.

D. A corporation may use the name, including a fictitious name, of another domestic or foreign business or nonprofit corporation that is used in this state if the other corporation is incorporated or authorized to transact business or conduct affairs in this state and the proposed user corporation either has:

Merged with the other corporation.
Been formed by reorganization of the other corporation.
Acquired all or substantially all of the assets, including the corporate name, of the other corporation.

E. Chapters 24 through 42 of this title do not control the use of fictitious names.

§ 10-3402 Reserved name

A. A person may reserve the exclusive use of a corporate name, including a fictitious name to be adopted by a foreign corporation under section 10-11506, by delivering an application to the commission for filing. The application shall be executed by the applicant or an authorized agent of the applicant and shall set forth the name and address of the applicant and the name proposed to be reserved. If the commission finds that the corporate name applied for is available, it shall reserve the name for the applicant's exclusive use for a nonrenewable one hundred twenty day period.

§ 10-3403 Registered name

A. A foreign corporation may register its corporate name, or its corporate name with any change required by section 10-11506, if the name is distinguishable from the corporate names that are not available under section 10-3401, subsection B.

B. A foreign corporation registers its corporate name or its corporate name with any change required by section 10-11506, by delivering to the commission an application both:

Setting forth its corporate name or its corporate name with any change required by section 10-11506, the state or country and date of its incorporation and a brief description of the nature of the activities in which it is engaged.
Accompanied by a certificate of existence or a similar document from the state or country of incorporation that has been issued within sixty days of delivering the application for filing with the commission.

D. A foreign corporation whose registration is effective may renew it for successive years by delivering to the commission for filing a renewal application that complies with the requirements of subsection B of this section. The renewal application renews the registration for one year after the effective date of the renewal application.

E. A foreign corporation whose registration is effective may qualify as a foreign corporation under the registered name or consent in writing to the use of that name by a corporation thereafter incorporated under chapters 24 through 42 of this title or by another foreign corporation authorized to conduct affairs in this state. The registration terminates when the domestic corporation is incorporated or the foreign corporation qualifies or consents to the qualification of another foreign corporation under the registered name.

Chapter 28 Office and Agent-Nonprofit Corporations

Article 1 Place of Business and Agent

§ 10-3501 Known place of business and statutory agent

Each corporation shall continuously maintain in this state both:

A known place of business that may be the address of its statutory agent.
A statutory agent who may be either:

(a) An individual who resides in this state.

(b) A domestic business or nonprofit corporation formed under this title.

(d) A limited liability company formed under title 29.

(e) A limited liability company authorized to transact business in this state.

§ 10-3502 Change of known place of business and statutory agent

A. A corporation may change its known place of business or statutory agent by delivering to the commission for filing a statement of change that may be the annual report and that sets forth:

The name of the corporation.
If the current known place of business is to be changed, the street address of the new known place of business.
If the current statutory agent is to be changed, the name and street address of the new statutory agent and the new agent's written consent to the appointment.

C. If the statutory agent changes its street address, it shall give written notice to the corporation of the change and sign, either manually or by fax, and deliver to the commission for filing a statement that complies with the requirements of subsection A of this section and that recites that the corporation has been given written notice of the change. The change or changes set forth in the statement are effective on delivery to the commission for filing.

§ 10-3503 Resignation of statutory agent

B. After filing the statement, the commission shall mail one copy to the corporation at its known place of business, if not discontinued, and another copy to the corporation at its principal office.

C. The agency appointment is terminated and, if so provided in the statement, the known place of business is discontinued on the thirty-first day after the date on which the statement was delivered to the commission for filing.

§ 10-3504 Service on corporation

B. If a corporation fails to appoint or maintain a statutory agent at the address shown on the records of the commission, the commission is an agent of the corporation on whom any process, notice or demand may be served. Pursuant to the Arizona rules of civil procedure, service on the commission of any process, notice or demand for an entity that is registered pursuant to this title shall be made by delivering to and leaving with the commission duplicate copies of the process, notice or demand, and the commission shall immediately cause one of the copies of the process, notice or demand to be forwarded by mail, addressed to the corporation at its known place of business. Service made on the commission is returnable pursuant to applicable law relative to personal service on the corporation. If service is made on the commission, whether under this chapter or a rule of court, the corporation has thirty days to respond in addition to the time otherwise provided by law.

D. Notice required to be served on a corporation pursuant to section 10-11421 or 10-11422 may be served:

By mail addressed to the statutory agent of the corporation or, if the corporation fails to appoint and maintain a statutory agent, addressed to the known place of business required to be maintained pursuant to section 10-3501.
By electronic transmission to the statutory agent or to the corporation, or both.
Pursuant to the rules for service of process authorized by the Arizona rules of civil procedure.

Chapter 29 Members and Membership-Nonprofit Corporations

Article 1 Admission of Members

§ 10-3601 Admission

A. The articles of incorporation or bylaws may establish criteria or procedures for admission of members and continuation of membership.

B. No person shall be admitted as a member without that person's consent. Consent may be express or implied.

§ 10-3602 Consideration

Except as provided in its articles of incorporation or bylaws, a corporation may admit members for no consideration or for such consideration as is determined by the board.

§ 10-3603 No requirement of members

A corporation is not required to have members.

Article 2 Types of Memberships-Members' Rights and Obligations

§ 10-3610 Difference in rights and obligations of members

All members have the same rights and obligations with respect to voting, dissolution, redemption and transfer, unless the articles of incorporation or bylaws establish classes of membership with different rights or obligations or otherwise provide. All members have the same rights and obligations with respect to any other matters, except as set forth in or authorized by the articles of incorporation or bylaws.

§ 10-3611 Transfers

A. Except as set forth in or authorized by the articles of incorporation or bylaws, no member of a corporation may transfer a membership or any right arising from that membership.

B. If transfer rights are provided, no restriction on them is binding with respect to a member holding a membership issued prior to the adoption of the restriction unless the restriction is approved by the members and the affected member.

§ 10-3612 Member's liability to third parties

A member of a corporation is not personally liable for the acts, debts, liabilities or obligations of the corporation.

§ 10-3613 Member's liability for dues, assessments and fees

A. A member may become liable to the corporation for dues, assessments and fees. A provision of the articles of incorporation, a provision of the bylaws or a resolution adopted by the board authorizing or imposing dues, assessments or fees does not, of itself, create liability for dues, assessments or fees. An express or implied agreement, consent or acquiescence by the member is necessary to create liability for dues, assessments or fees. A member is deemed to have agreed to the liability if there exists at the time the member becomes a member a provision of the articles of incorporation, a provision of the bylaws, a provision of the declaration of a condominium or a planned community or a resolution adopted by the board authorizing or imposing dues, assessments or fees.

B. A home buyer may implicitly consent to liability for dues, assessments and fees.

C. Unless the provision authorizing dues expressly limits the amount of the dues, the amount and the member's liability are subject to increase or decrease.

§ 10-3614 Creditor's action against member

A. No creditor of the corporation may bring a proceeding to reach the liability of a member to the corporation unless final judgment has been rendered in favor of the creditor against the corporation, and execution has been returned unsatisfied in whole or in part.

B. All creditors of the corporation, with or without reducing their claims to judgment, may intervene in any creditor's proceeding brought under subsection A to reach and apply unpaid amounts due the corporation. Any or all members who owe amounts to the corporation may be joined in that proceeding.

C. In any proceeding by a creditor under this section, the member shall pay any amount that is determined to be owed by the member to the corporation directly to the corporation and not to any creditor. The member is not liable directly or indirectly for any costs incurred by the creditor in the proceeding. If the member has paid the amount to the corporation, the liability of the member to the corporation for that amount is fully satisfied, the member is no longer a party to the proceeding and is immune from further proceedings under this section for the amount.

Article 3 Resignation and Termination

§ 10-3620 Resignation

A. A member may resign at any time, except as set forth in or authorized by the articles of incorporation or bylaws.

B. The resignation of a member does not relieve the member from any obligations the member may have to the corporation as a result of obligations incurred or commitments made prior to resignation.

C. This section does not apply to corporations that are condominium associations or planned community associations.

§ 10-3621 Termination, expulsion and suspension

A. No member of a corporation may be expelled or suspended, and no membership or memberships in such a corporation may be terminated or suspended, except pursuant to a procedure that is set forth in the articles of incorporation, bylaws or an agreement between the member and the corporation or a procedure that is otherwise appropriate.

B. For purposes of subsection A, a procedure is otherwise appropriate if either:

The following are provided:

(a) A written notice at least fifteen days before the expulsion, suspension or termination and the reasons therefor.

(b) An opportunity for the member to be heard, orally or in writing, at least five days before the effective date of the expulsion, suspension or termination by a person or persons authorized to decide that the proposed expulsion, termination or suspension should not take place.

It is fair and reasonable taking into consideration all of the relevant facts and circumstances.

C. Any written notice that is mailed shall be sent to the last address of the member shown on the corporation's records.

D. Any proceeding challenging an expulsion, suspension or termination, including a proceeding in which defective notice is alleged, shall begin within six months after the effective date of the expulsion, suspension or termination.

E. A member who has been expelled or suspended may be liable to the corporation for dues, assessments or fees as a result of obligations incurred or commitments made prior to expulsion or suspension.

F. This section does not apply to corporations organized primarily for religious purposes.

§ 10-3622 Purchase of memberships

Except as provided in the articles of incorporation or bylaws, a corporation may purchase the membership of a member who resigns or whose membership is terminated for the amount and pursuant to the conditions set forth in or authorized by its articles of incorporation or bylaws. A corporation shall not make a payment that violates section 10-11301 or 10-11302.

Article 4 Derivative Suits

§ 10-3630 Definitions

In this article, unless the context otherwise requires:

"Derivative proceeding" means a civil suit in the right of a domestic corporation or, to the extent provided in section 10-3637, in the right of a foreign corporation.
"Independent person" means a person with no personal interest in the transaction and no personal or other relationship which influences the person.

§ 10-3631 Standing

A. A proceeding may be brought in the right of a domestic corporation to procure a judgment in its favor by either:

In the case of a corporation that has members, any member or members having twenty-five per cent or more of the voting power or by fifty members, whichever is less.
In the case of a corporation that does not have members, any director or twenty-five per cent of the directors, whichever is greater.

B. In any such proceeding, each complainant shall both:

Have been a member or director, as applicable, of the corporation at the time of the act or omission complained of.
Fairly and adequately represent the interests of the corporation in enforcing the right of the corporation.

§ 10-3632 Demand

No complainant may commence a derivative proceeding until both:

A written demand has been made on the corporation to take suitable action.
Ninety days have expired from the date the demand was made unless the complainant has earlier been notified that the demand has been rejected by the corporation or unless the statute of limitations will expire within the ninety days or unless irreparable injury to the corporation would result by waiting for the expiration of the ninety day period.

§ 10-3633 Stay of proceedings

If the corporation commences an inquiry into the allegations made in the demand or complaint, the court may stay any derivative proceeding for such period as the court deems appropriate.

§ 10-3634 Dismissal

A. A derivative proceeding shall be dismissed by the court on motion by the corporation on any legal grounds, including if one of the groups specified in subsections B or F has determined in good faith after conducting a reasonable inquiry on which its conclusions are based that the maintenance of the derivative proceeding is not in the best interests of the corporation.

B. Unless a panel is appointed pursuant to subsection F, the determination in subsection A shall be made by either:

A majority vote of independent directors present at a meeting of the board of directors if the independent directors constitute a quorum.
A majority vote of a committee consisting of two or more independent directors appointed by majority vote of independent directors present at a meeting of the board of directors, whether or not such independent directors constitute a quorum.

C. None of the following shall by itself or collectively cause a director to be considered not independent for purposes of this section:

The nomination or election of the director by persons who are defendants in the derivative proceeding or against whom action is demanded.
The naming of the director as a defendant in the derivative proceeding or as a person against whom action is demanded.
The approval by the director of the act being challenged in the derivative proceeding or demand if the act resulted in no personal benefit to the director.

D. If a derivative proceeding is commenced after a determination has been made that rejects a demand by the complainants, the complaint shall allege with particularity facts that establish either:

That a majority of the board of directors did not consist of independent directors at the time the determination was made.
That the requirements of subsection A have not been met.

E. If a majority of the board of directors does not consist of independent directors at the time the determination is made, the corporation has the burden of proving that the requirements of subsection A have been met. If a majority of the board of directors consists of independent directors at the time the determination is made, the plaintiff has the burden of proving by clear and convincing evidence that the requirements of subsection A have not been met.

F. The court may appoint a panel of one or more independent persons on motion by the corporation to determine whether the maintenance of the derivative proceeding is in the best interests of the corporation. In that case, the plaintiff has the burden of proving by clear and convincing evidence that the requirements of subsection A have not been met. A person appointed by the court is not liable for a determination made pursuant to this section.

§ 10-3635 Discontinuance or settlement

No derivative proceeding may be discontinued or settled without the court's approval. If the court determines that a proposed discontinuance or settlement will substantially affect the interests of the corporation's members or a class of members, the court shall direct that notice be given to the affected members.

§ 10-3636 Payment of expenses

On termination of the derivative proceeding the court may either:

Order the corporation to pay the plaintiff's reasonable expenses, including attorney fees, incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation.
Order the plaintiff to pay any defendant's reasonable expenses, including attorney fees, incurred in defending the proceeding if it finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose.
Order a party to pay an opposing party's reasonable expenses, including attorney fees, incurred because of the filing of any pleading, motion or other paper, if it finds that the pleading, motion or other paper was not well grounded in fact, after reasonable inquiry, or warranted by existing law or a good faith argument for the extension, modification or reversal of existing law and was interposed for an improper purpose, including to harass or to cause unnecessary delay or needless increase in the cost of litigation.

§ 10-3637 Applicability to foreign corporations

Article 5 Delegates

§ 10-3640 Delegates

A. A corporation may provide in its articles of incorporation or bylaws for delegates that have some or all of the authority of members.

B. The articles of incorporation or bylaws may set forth provisions relating to:

The characteristics, qualifications, rights, limitations and obligations of delegates including the delegates' selection and removal.
Calling, noticing, holding and conducting meetings of delegates.
Carrying on corporate activities during and between meetings of delegates.

Chapter 30 Members' Meetings and Voting-Nonprofit Corporations

Article 1 Meetings and Action Without Meetings

§ 10-3701 Annual and regular meetings; exceptions

A. Unless otherwise provided in the articles of incorporation or bylaws, a corporation with members shall hold a membership meeting annually at a time stated in or fixed in accordance with the bylaws.

B. A corporation with members may hold regular membership meetings at the times stated in or fixed in accordance with the bylaws.

C. A corporation may hold annual and regular membership meetings in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, the corporation shall hold annual and regular meetings at the corporation's principal office.

D. At regular meetings the members shall consider and act on any matter raised and that is consistent with the notice requirements of section 10-3705.

E. The failure to hold an annual or regular meeting at a time stated in or fixed in accordance with a corporation's bylaws does not affect the validity of any corporate action.

F. Notwithstanding this chapter, a condominium association shall comply with title 33, chapter 9 and a planned community association shall comply with title 33, chapter 16 to the extent that this chapter is inconsistent with title 33, chapters 9 and 16.

§ 10-3702 Special meeting

A. A corporation with members shall hold a special meeting of members either:

On the call of its board or of the person or persons authorized to do so by the articles or bylaws.
Except as provided in the articles of incorporation or bylaws of a corporation organized primarily for religious purposes, if the holders of at least ten per cent of the voting power of any corporation sign, date and deliver to any corporate officer one or more written demands for the meeting describing the purpose or purposes for which it is to be held.

B. The close of business on the thirtieth day before delivery of the demand or demands for a special meeting to any corporate officer is the record date for the purpose of determining whether the ten per cent requirement of subsection A of this section has been met.

C. A corporation may hold a special meeting of members in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated or fixed in accordance with the bylaws, the corporation shall hold special meetings at the corporation's principal office.

D. Unless otherwise provided in the articles of incorporation or bylaws, the corporation may conduct only those matters at a special meeting of members that are within the purpose or purposes described in the meeting notice required by section 10-3705.

§ 10-3703 Court ordered meeting; costs; attorney fees

A. The court in the county where a corporation's principal office is located, or if the corporation has no principal office in this state, the court in the county where the corporation's known place of business is located, may summarily order a meeting to be held on application by any of the following:

Any member, if an annual meeting was not held within fifteen months after its last annual meeting.
Any member, if a regular meeting is not held within forty days after the date it was required to be held.
A member who signed a demand for a special meeting that is valid under section 10-3702 or a person or persons entitled to call a special meeting, if either:

(a) Notice of the special meeting was not given within thirty days after the date that the demand was delivered to a corporate officer.

(b) The special meeting was not held in accordance with the notice.

B. The court may:

Fix the time and place of the meeting.
Specify a record date for determining members entitled to notice of and to vote at the meeting.
Prescribe the form and content of the meeting notice.

C. If the court orders a meeting, it may also order the corporation to pay the member's costs, including reasonable attorney fees, incurred to obtain the order.

§ 10-3704 Action by written consent; definition

A. The members may approve any action that is required or permitted by chapters 24 through 40 of this title and that requires the members' approval without a meeting of members if the action is approved by members holding at least a majority of the voting power, unless the articles of incorporation, bylaws or chapters 24 through 40 of this title require a different amount of voting power. The action shall be evidenced by one or more written consents describing the action taken, signed by those members representing at least the requisite amount of the voting power, and delivered to the corporation for inclusion in the minutes or filing with the corporate records.

B. If not otherwise fixed under section 10-3703 or 10-3707, the record date for determining members entitled to take action without a meeting is the date the first member signs the consent under subsection A of this section.

C. The consent signed under this section has the effect of a meeting vote and may be described as such in any document.

D. Written notice of member approval pursuant to this section shall be given to all members who have not signed the written consent.

E. Unless otherwise specified in the consent or consents, the action is effective on the date that the consent or consents are signed by the last member whose signature results in the requisite amount of the voting power, except that if chapters 24 through 40 of this title require notice of proposed actions to members who are not entitled to vote in the action and the action is to be taken by unanimous consent of the members entitled to vote, the effective date is not before ten days after the corporation gives its members not entitled to vote written notice of the proposed action. The notice shall contain or be accompanied by the same material that under chapters 24 through 40 of this title would have been sent to members not entitled to vote in a notice of meeting at which the proposed action would have been submitted to the members for action.

F. Any member may revoke the member's consent by delivering a signed revocation of the consent to the president or secretary before the date that the consent or consents are signed by the last member whose signature results in the requisite amount of the voting power.

G. For the purposes of this section, "signature" includes an electronic signature as defined in section 44-7002.

§ 10-3705 Notice of meeting

A. Except as provided in section 33-2208, a corporation shall notify members of the date, time and place of each annual, regular and special members' meeting at least ten days but not more than sixty days before the meeting date. Unless chapters 24 through 40 of this title or the articles of incorporation or bylaws require otherwise, the corporation shall give notice only to members entitled to vote at the meeting.

B. Unless chapters 24 through 40 of this title or the articles of incorporation or bylaws require otherwise, the notice of an annual or regular meeting does not require a description of the purpose or purposes for which the meeting is called.

C. Notice of a special meeting shall include a description of the purpose or purposes for which the meeting is called.

D. If not otherwise fixed under section 10-3703 or 10-3707, the record date for determining members entitled to notice of and to vote at an annual, regular or special members' meeting is the day before the effective date of the first notice to the members.

E. Unless the bylaws require otherwise, if an annual, regular or special members' meeting is adjourned to a different date, time or place, a notice of the new date, time or place is not required if the new date, time or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed under section 10-3707, the corporation shall give notice of the adjourned meeting pursuant to this section to persons who are members as of the new record date.

§ 10-3706 Waiver of notice

A. A member may waive any notice required by chapters 24 through 40 of this title, the articles of incorporation or bylaws before or after the date and time stated in the notice. The waiver shall be in writing, be signed by the member entitled to the notice, and be delivered to the corporation for inclusion in the minutes or filing with the corporate records.

B. A member's attendance at a meeting:

Waives objection to lack of notice or defective notice of the meeting, unless the member at the beginning of the meeting objects to holding the meeting or transacting business at the meeting.
Waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the member objects to considering the matter at the time it is presented.

§ 10-3707 Record date; determining members entitled to notice and vote

A. The bylaws of a corporation may fix or provide the manner of fixing a date as the record date for determining the members entitled to notice of a members' meeting. If the bylaws do not fix or provide for fixing that record date, the board may fix a future date as that record date. If that record date is not fixed, members at the close of business on the business day before the day on which notice is given, or if notice is waived, at the close of business on the business day before the day on which the meeting is held, are entitled to notice of the meeting.

B. The bylaws of a corporation may fix or provide the manner of fixing a date as the record date for determining the members entitled to vote at a members' meeting. If the bylaws do not fix or provide for fixing that record date, the board may fix a future date as that record date. If that record date is not fixed, members on the date of the meeting who are otherwise eligible to vote are entitled to vote at the meeting.

C. The bylaws may fix or provide the manner for determining a date as the record date for the purpose of determining the members entitled to exercise any rights in respect of any other lawful action. If the bylaws do not fix or provide for fixing that record date, the board may fix in advance that record date. If that record date is not fixed, members at the close of business on the day on which the board adopts the resolution relating to that record date, or the sixtieth day before the date of other action, whichever is later, are entitled to exercise those rights.

D. The record date fixed under this section shall not be more than seventy days before the meeting or action requiring a determination of members.

E. A determination of members entitled to notice of or to vote at a membership meeting is effective for any adjournment of the meeting, unless the board fixed a new date for determining the right to notice or the right to vote. The board shall fix a new date for determining the right to notice or the right to vote if the meeting is adjourned to a date that is more than seventy days after the record date for determining members entitled to notice of the original meeting.

F. If a court orders a meeting adjourned to another date, the original record date for notice of voting continues in effect.

§ 10-3708 Action by written ballot; online voting

A. Unless prohibited or limited by the articles of incorporation or bylaws, any action that the corporation may take at any annual, regular or special meeting of members may be taken without a meeting if the corporation delivers a written ballot to every member entitled to vote on the matter.

B. A written ballot shall:

Set forth each proposed action.
Provide an opportunity to vote for or against each proposed action.

C. Approval by written ballot pursuant to this section is valid only if both:

The number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action.
The number of approvals equals or exceeds the number of votes that would be required to approve the matter at a meeting at which the total number of votes cast was the same as the number of votes cast by ballot.

D. All solicitations for votes by written ballot shall:

Indicate the number of responses needed to meet the quorum requirements.
State the percentage of approvals necessary to approve each matter other than election of directors.
Specify the time by which a ballot must be delivered to the corporation in order to be counted, which time shall not be less than three days after the date that the corporation delivers the ballot.

E. Except as otherwise provided in the articles of incorporation or bylaws, a written ballot shall not be revoked.

F. After providing notice that complies with subsection G of this section to members that a vote shall be conducted by electronic means, a written ballot may be delivered through an online voting system that does all of the following:

Authenticates the member's identity.
Authenticates the validity of each electronic vote to ensure that the vote is not altered in transit.
Transmits a receipt to each member who casts an electronic vote.
Stores electronic votes for recount, inspection and review purposes.

G. The notice prescribed by subsection F of this section shall include a reasonable procedure by which a member may obtain and cast a ballot through some other form of delivery, including United States mail delivery and fax transmission.

Article 2 Voting

§ 10-3720 Members' list for meeting

A. After fixing a record date for a meeting, a corporation shall prepare an alphabetical list of the names of all of its members who are entitled to notice of the meeting. The list shall show the address and number of votes each member is entitled to vote at the meeting. The corporation shall prepare on a current basis through the time of the membership meeting another list of members, if any, who are entitled to vote at the meeting, but not entitled to notice of the meeting and the corporation shall prepare that list on the same basis and make it a part of the list of members.

B. For the purpose of communication with other members concerning the meeting the corporation shall make the list of members available for inspection by any member at the corporation's principal office or at another place identified in the meeting notice in the city where the meeting will be held. On written demand a member, a member's agent or a member's attorney may inspect and, subject to the limitations of section 10-11602, subsection C, and section 10-11605, may copy the list, during regular business hours and at the member's expense, during the period it is available for inspection.

C. The corporation shall make the list of members available at the meeting, and any member, a member's agent or a member's attorney may inspect the list at any time during the meeting or during any adjournment.

D. If the corporation refuses to allow a member, a member's agent or a member's attorney to inspect the list of members before or at the meeting or copy the list as permitted by subsection B of this section, the court in the county where a corporation's principal office is located, or if no principal office is located in this state, the court in the county where a corporation's known place of business is located, on application of the member, may summarily order the inspection or copying at the corporation's expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete.

E. Refusal or failure to comply with this section does not affect the validity of any action taken at the meeting.

F. The articles of incorporation or bylaws of a corporation organized primarily for religious purposes may limit or abolish the rights of a member under this section to inspect and copy any corporate record.

§ 10-3721 Voting entitlement generally

A. Unless the articles of incorporation or bylaws provide otherwise, each member is entitled to one vote on each matter voted on by the members. A member is entitled to vote only on those matters expressly provided in the articles of incorporation or bylaws.

B. Unless the articles of incorporation or bylaws or written agreement signed by the subject members and delivered to the corporation provide otherwise, if a membership stands of record in the names of two or more persons, those persons' acts with respect to voting shall have the following effect:

If only one votes, the act binds all.
If more than one votes, the vote shall be divided on a pro rata basis.

§ 10-3722 Quorum requirements

Unless chapters 24 through 40 of this title or the articles of incorporation provide for a higher or lower quorum the bylaws may provide the number or percentage of members entitled to vote, present or represented by proxy, or the number or percentage of votes entitled to be cast by members present or represented by proxy, that shall constitute a quorum at a meeting of members. In the absence of that provision, members, present or represented by proxy, holding one-tenth of the votes entitled to be cast, shall constitute a quorum.

§ 10-3723 Voting requirements

Unless chapters 24 through 40 of this title provide otherwise, the articles of incorporation or the bylaws require a greater vote or voting by class, if a quorum is present, the affirmative vote of the votes represented and voting, for which affirmative votes also constitute a majority of the required quorum, is the act of the members.

§ 10-3724 Proxies

A. A member may vote the member's votes in person or by proxy.

B. Unless the articles of incorporation or bylaws prohibit or limit proxy voting, a member may appoint a proxy to vote or otherwise act for the member by signing an appointment form, either personally or by the member's attorney-in-fact.

C. An appointment of a proxy is effective on receipt by the secretary or other officer or agent authorized to tabulate votes. An appointment is valid for eleven months unless a different period is expressly provided in the appointment form.

D. An appointment of a proxy is revocable by the member unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. Appointments coupled with an interest include the appointment of any of the following:

A pledgee.
A person who purchased, agreed to purchase, holds an option to purchase or holds any other right to acquire the membership interest.
A creditor of the corporation who extended or continued credit to the corporation under terms requiring the appointment.
An employee of the corporation whose employment contract requires the appointment.
A party to a voting agreement created pursuant to section 10-3731.

E. The death or incapacity of the member who appoints a proxy does not affect the right of the corporation to accept the proxy's authority unless the secretary or other officer or agent authorized to tabulate votes receives written notice of the death or incapacity before the proxy exercises authority under the appointment.

F. Appointment of a proxy is revoked by the person who appoints the proxy by either:

Attending any meeting and voting in person.
Signing and delivering to the secretary or other officer or agent authorized to tabulate proxy votes either a writing stating that the appointment of the proxy is revoked or a subsequent appointment form.

G. An appointment made irrevocable under subsection D of this section is revoked if the interest with which it is coupled is extinguished.

H. A transferee for value of a membership interest subject to an irrevocable appointment may revoke the appointment if the transferee did not know of its existence at the time that the transferee acquired the membership interest and the existence of the irrevocable appointment was not noted conspicuously on the transfer documents.

I. Subject to section 10-3727 and to any express limitation on the proxy's authority that appears on the face of the appointment form, a corporation may accept the proxy's vote or other action as that of the member making the appointment.

§ 10-3725 Cumulative voting for directors

A. If the articles of incorporation or bylaws provide for cumulative voting by members, members may cumulate their votes for directors, by multiplying the number of votes the members are entitled to cast by the number of directors for whom they are entitled to vote and casting the product for a single candidate or by distributing the product among two or more candidates.

B. Cumulative voting is not authorized at a particular meeting unless either:

The meeting notice or statement accompanying the notice states conspicuously that cumulative voting is authorized.
A member who has the right to cumulate votes gives notice during the meeting and before the vote is taken of the member's intent to cumulate votes during the meeting, and if one member gives this notice all other members in the same voting group participating in the election are entitled to cumulate their votes without giving further notice.

C. A director elected by cumulative voting may be removed by the members without cause if the requirements of section 10-3808 are met unless the votes cast against removal, or those members not consenting in writing or by ballot to the removal, would be sufficient to elect that director if voted cumulatively at an election at which the same total number of votes were cast or, if the action is taken by written consent or ballot, all memberships entitled to vote were voted and the entire number of directors authorized at the time of the director's most recent election were then being elected.

§ 10-3726 Other methods of electing directors

A corporation may provide in its articles of incorporation or bylaws the process for election of directors by members or delegates by any of the following means:

On the basis of chapter or other organizational unit.
By region or other geographic unit.
By preferential voting.
By any other reasonable method.

§ 10-3727 Corporation's acceptance of votes

A. If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a member, the corporation if acting in good faith is entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the member.

B. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the record name of a member, the corporation if acting in good faith is entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the member if:

The member is an entity and the name signed purports to be that of an officer or agent of the entity.
The name signed purports to be that of an administrator, executor, guardian or conservator representing the member and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment.
The name signed purports to be that of a receiver or trustee in bankruptcy of the member, and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment.
The name signed purports to be that of a pledgee, beneficial owner or attorney-in-fact of the member and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the member has been presented with respect to the vote, consent, waiver or proxy appointment.
Two or more persons hold the membership as cotenants or fiduciaries and the name signed purports to be the name of at least one of the coholders and the person signing appears to be acting on behalf of all the coholders.

C. The corporation is entitled to reject a vote, consent, waiver or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the member.

D. The corporation and its officer or agent who accepts or rejects a vote, consent, waiver or proxy appointment in good faith and in accordance with the standards of this section are not liable in damages to the member for the consequences of the acceptance or rejection.

E. Corporate action based on the acceptance or rejection of a vote, consent, waiver or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.

Article 3 Voting Agreement and Trusts

§ 10-3730 Voting trusts

If and to the extent a membership is transferable as provided in section 10-3611, and unless otherwise provided in the articles of incorporation or bylaws, one or more members may create a voting trust, conferring on one or more trustees the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust and transferring their memberships to the trustee or trustees. The agreement may contain any lawful provision not inconsistent with the purposes of the trust.

§ 10-3731 Voting agreements

A. Two or more members may provide for the manner in which they will vote by signing an agreement for that purpose.

B. Unless otherwise provided in the voting agreement, a voting agreement created under this section is specifically enforceable.

§ 10-3732 Member agreements

A. An agreement among the members of a corporation that complies with this section is effective among the members and the corporation even though it is inconsistent with one or more other provisions of chapters 24 through 40 of this title if it meets any of the following conditions:

Restricts the discretion or powers of the board of directors.
Governs the authorization or making of distributions whether or not in proportion to ownership of memberships, subject to the limitations in sections 10-11301 and 10-11302.
Establishes who shall be directors or officers of the corporation, their terms and conditions of office or employment or their manner of selection or removal.
Governs, in general or in regard to specific matters, the exercise or division of voting power by or between the members and directors or by or among any of them, including use of weighted voting rights or director proxies.
Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any member, director, officer or employee of the corporation or among any of them.
Transfers to one or more members or other persons all or part of the authority to exercise the corporate powers or to manage the affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or members.
Requires dissolution of the corporation at the request of one or more of the members or on the occurrence of a specified event or contingency.
Establishes the terms and conditions of employment of members.
Addresses the use of arbitration or other forms of dispute resolution to resolve disputes among members.
Restricts the transfer of memberships.
Otherwise governs the exercise of the corporate powers or the management of the affairs of the corporation, its liquidation and dissolution or the relationship among the members, the directors and the corporation, or among any of them.

B. An agreement authorized by this section shall be:

Set forth either:

(a) In the articles of incorporation or bylaws and approved by all persons who are members at the time of the agreement.

(b) In a written agreement that is signed by all persons who are members at the time of the agreement and that is filed with the corporation.

Subject to amendment or termination only by all persons who are members at the time of the amendment, unless the agreement provides otherwise.
Valid for the duration of the corporation's existence, unless the agreement provides otherwise.

C. An agreement authorized by this section is enforceable by any party to the agreement against any other party to the agreement. The existence of an agreement authorized by this section shall be noted conspicuously in an information statement provided to any person who becomes a member and who was not a signatory of the agreement. The failure to note the existence of the agreement in the information statement does not affect the validity of the agreement or any action taken pursuant to it. Any transferee of a membership who at the time of transfer did not have knowledge of the existence of the agreement is entitled to rescission of the membership. A transferee shall be deemed to have knowledge of the existence of the agreement if its existence is noted in the information statement in compliance with this subsection and the information is delivered to the transferee at or before the time of transfer of the membership or the transferee has actual notice of the existence of the agreement at the time of transfer. An action to enforce the right of rescission authorized by this subsection must be commenced within the earlier of ninety days after discovery of the existence of the agreement or two years after the time of the transfer of the membership.

D. If the agreement ceases to be effective for any reason, the board of directors, if the agreement is contained or referred to in the corporation's articles of incorporation or bylaws, may adopt an amendment to the articles of incorporation or bylaws, without shareholder action, to delete the agreement and any references to it.

F. The existence or performance of an agreement authorized by this section is not a ground for imposing personal liability on any member for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were an unincorporated association or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.

G. Incorporators may act as members with respect to an agreement authorized by this section if no members have been admitted when the agreement is made.

H. This section does not apply to, limit or invalidate agreements that are otherwise valid or authorized without regard to this section, including without limitation member agreements between or among some or all of the members or agreements between or among the corporation and one or more members. The procedure set forth in this section is not the exclusive method of agreement among members or among members and the corporation with respect to any of the matters described in this section.

Chapter 31 Directors and Officers-Nonprofit Corporations

Article 1 Board of Directors

§ 10-3801 Requirement for and duties of board

A. Each corporation shall have a board of directors.

B. All corporate powers shall be exercised by or under the authority of and the affairs of the corporation shall be managed under the direction of its board of directors, subject to any limitation set forth in the articles of incorporation.

C. The articles of incorporation may authorize one or more members, delegates or other persons to exercise some or all of the powers which would otherwise be exercised by a board. To the extent so authorized the authorized person or persons shall have the duties and responsibilities of the directors, and the directors shall be relieved to that extent from those duties and responsibilities.

§ 10-3802 Qualifications of directors

The articles of incorporation or bylaws may prescribe qualifications for directors. A director need not be a resident of this state or a member of the corporation unless the articles of incorporation or bylaws so prescribe.

§ 10-3803 Number of directors

A. A board of directors shall consist of one or more individuals, with the number specified in or fixed in accordance with the articles of incorporation or bylaws.

B. The articles of incorporation or bylaws may establish a variable range for the size of the board of directors by fixing a minimum and maximum number of directors. If a variable range is established, the number of directors may be fixed or changed, from time to time, within the minimum and maximum, by the members or the board of directors.

§ 10-3804 Election, designation and appointment of directors

A. If the corporation has members, the members shall elect all the directors except the initial directors at the first annual meeting of members, and at each annual meeting after the first annual meeting, unless either:

The terms of the directors are staggered pursuant to section 10-3806.
The articles of incorporation or bylaws provide some other time or method of election.
The articles of incorporation or bylaws provide that some of the directors are appointed by some other person or some of the directors are designated.

B. If the corporation does not have members, all the directors except the initial directors shall be elected, appointed or designated as provided in the articles of incorporation or bylaws. If no method of designation or appointment is set forth in the articles of incorporation or bylaws, the board of directors shall elect the directors other than the initial directors.

§ 10-3805 Terms of directors generally

A. The terms of the initial directors of a corporation expire at the first election, appointment or designation of directors as provided in section 10-3804.

B. The articles of incorporation or bylaws shall specify the terms of directors. In the absence of any term specified in the articles of incorporation or bylaws, the term of each director is one year. Unless otherwise provided in the articles of incorporation or bylaws, directors may be elected for successive terms.

C. A decrease in the number of directors or term of office does not shorten the term of any incumbent director.

D. Except as provided in the articles of incorporation or bylaws:

The term of a director elected to fill a vacancy in the office of a director elected by members expires at the next election of directors by members.
The term of a director elected to fill any other vacancy expires at the end of the unexpired term that the director is filling.

E. Despite the expiration of a director's term, a director shall continue to hold office until the director's successor is elected, designated or appointed and qualifies, until the director's resignation or removal or until there is a decrease in the number of directors.

§ 10-3806 Staggered terms for directors

The articles of incorporation or bylaws may provide for staggering the directors' terms of office by dividing the total number of directors into two or more groups. The terms of office of the several groups need not be uniform.

§ 10-3807 Resignation of directors

A. A director may resign at any time by delivering written notice to the board of directors, its presiding officer or the corporation.

B. A resignation is effective when the notice is delivered unless the notice specifies a later effective date or event. If a resignation is made effective at a later date, the board may fill the pending vacancy before the effective date if the board provides that the successor does not take office until the effective date.

§ 10-3808 Removal of directors elected by members or directors

A. A director may be removed from office pursuant to any procedure provided in the articles of incorporation or bylaws.

B. If the articles of incorporation or bylaws do not provide a procedure for removal of a director from office:

The members may remove one or more directors elected by them with or without cause unless the articles of incorporation provide that directors may be removed only for cause.
If a director is elected by a class, chapter, region or other organizational or geographic unit or grouping only the members of that class, chapter, region, unit or grouping may participate in the vote to remove the director.
Except as provided in paragraph 9, a director may be removed under paragraph 1 or 2 only if the number of votes cast to remove the director would be sufficient to elect the director at a meeting to elect directors.
If cumulative voting is authorized, a director may not be removed if the number of votes, or if the director was elected by a class, chapter, region, unit or grouping of members, the number of votes of that class, chapter, region, unit or grouping, sufficient to elect the director under cumulative voting is voted against the director's removal.
A director elected by members may be removed by the members at a meeting by written consent or by written ballot of the members authorized to vote on such removal. If the removal is to occur at a meeting, the meeting notice shall state that the purpose or one of the purposes of the meeting is removal of the director.
In computing whether a director is protected from removal under paragraphs 2 through 4, it is assumed that the votes against removal are cast in an election for the number of directors of the class to which the director to be removed belonged on the date of that director's election.
An entire board of directors may be removed under paragraphs 1 through 5.
Except as provided in subsection C, a director elected by the board may be removed with or without cause by the vote of two-thirds of the directors then in office or any greater number as is set forth in the articles of incorporation or bylaws.
If, at the beginning of a director's term on the board of directors, the articles of incorporation or bylaws provide that the director may be removed for missing a specified number of meetings of the board of directors, the board of directors may remove the director for failing to attend the specified number of meetings. The director may be removed only if a majority of the directors then in office vote for the removal.

C. Notwithstanding subsection B, paragraph 8, a director elected by the board to fill the vacancy of a director elected by the members may be removed with or without cause by the members, but not by the board of directors.

§ 10-3809 Removal of designated or appointed directors

A. A designated director may be removed by an amendment to the articles of incorporation or bylaws deleting or changing the designation.

B. Except as otherwise provided in the articles of incorporation or bylaws, an appointed director may be removed with or without cause by the person appointing the director. The person removing the director shall give written notice of the removal to the director and either the board of directors, its presiding officer or the corporation. A removal is effective when the notice is delivered unless the notice specifies a later effective date or event.

§ 10-3810 Removal of directors by judicial proceeding

A. The court in the county where a corporation's known place of business or, if none in this state, its statutory agent is located may remove a director of the corporation from office in a proceeding commenced either by the corporation or by its members holding at least twenty-five per cent of the voting power of any class, if the court finds that both:

The director engaged in fraudulent conduct or intentional criminal conduct with respect to the corporation.
Removal is in the best interests of the corporation.

B. The court that removes a director may bar the director from serving on the board for a period prescribed by the court, but in no event may the period exceed five years.

C. If members commence a proceeding under subsection A, they shall make the corporation a party defendant, unless the corporation elects to become a party plaintiff.

D. The articles of incorporation or bylaws of a corporation organized for religious purposes may limit or prohibit the application of this section.

§ 10-3811 Vacancy on board

A. Unless the articles of incorporation or bylaws provide otherwise, and except as provided in subsections B and C of this section, if a vacancy occurs on a board of directors, including a vacancy resulting from an increase in the number of directors, either:

The members, if any, may fill the vacancy.
The board of directors may fill the vacancy.
If the directors remaining in office constitute fewer than a quorum of the board of directors, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.

B. Unless the articles of incorporation or bylaws provide otherwise, if the vacant office was held by a director elected by a class, chapter, region or other organizational or geographic unit or grouping, only members of the class, chapter, region, unit or grouping are entitled to vote to fill the vacancy if it is filled by the members.

C. Unless the articles of incorporation or bylaws provide otherwise, if a vacant office was held by an appointed director, only the person who appointed the director may fill the vacancy.

D. If a vacant office was held by a designated director, the vacancy shall be filled as provided in the articles of incorporation or bylaws. In the absence of an applicable article or bylaw provision, the vacancy may not be filled by the board.

E. A vacancy that will occur at a specific later date by reason of a resignation effective at a later date under section 10-3807, subsection B or otherwise may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs.

F. If at any time by reason of death or resignation or other cause a corporation has no directors in office, any officer or any member may call a special meeting of members.

§ 10-3812 Compensation of directors

Unless the articles of incorporation or bylaws provide otherwise, the board of directors may fix the compensation of directors.

Article 2 Meetings and Action of the Board

§ 10-3820 Regular and special meetings

A. If the time and place of a directors' meeting is fixed by the bylaws or the board of directors, the meeting is a regular meeting. All other meetings are special meetings.

B. A board of directors may hold regular or special meetings in or out of this state.

C. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by or conduct the meeting through the use of any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

§ 10-3821 Action without meeting

A. Unless the articles of incorporation or bylaws provide otherwise, action required or permitted by chapters 24 through 40 of this title to be taken at a directors' meeting may be taken without a meeting if the action is taken by all of the directors. The action must be evidenced by one or more written consents describing the action taken, signed by each director and included in the minutes filed with the corporate records reflecting the action taken.

B. Action taken under this section is effective when the last director signs the consent, unless the consent specifies a different effective date.

C. The consent signed under this section has the effect of a meeting vote and may be described as such in any document.

D. Any director may revoke a consent by delivering a signed revocation of the consent to the president or secretary before the date the last director signs the consent.

E. For the purposes of this section, a consent may be signed using an electronic signature as defined in section 44-7002.

§ 10-3822 Call and notice of meetings

A. Unless the articles of incorporation, bylaws or subsection C of this section provide otherwise, regular meetings of the board of directors may be held without notice of the date, time, place or purpose of the meeting.

B. Unless the articles of incorporation, bylaws or subsection C of this section provide otherwise, special meetings of the board of directors shall be preceded by at least two days' notice of the date, time and place of the meeting. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or bylaws.

C. In corporations without members any board action to remove a director or to approve a matter that would require approval by the members if the corporation had members is not valid unless each director is given at least two days' written notice that the matter will be voted on at a directors' meeting or unless notice is waived pursuant to section 10-3823.

D. Unless the articles of incorporation or bylaws provide otherwise, the presiding officer of the board of directors, the president or twenty per cent of the directors then in office may call and give notice of a meeting of the board.

§ 10-3823 Waiver of notice

A. A director may waive any notice required by chapters 24 through 40 of this title, the articles of incorporation or bylaws before or after the date and time stated in the notice. Except as provided in subsection B of this section, the waiver shall be in writing and signed by the director entitled to the notice, or by electronic transmission, and filed with the minutes or corporate records.

B. A director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting or promptly on the director's arrival at the meeting objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

C. For the purposes of this section, a waiver may be signed using an electronic signature as defined in section 44-7002.

§ 10-3824 Quorum and voting

A. Unless the articles of incorporation or bylaws require a different number, a quorum of a board of directors consists of either:

A majority of the fixed number of directors if the corporation has a fixed board size.
A majority of the number of directors prescribed, or if no number is prescribed, the number in office immediately before the meeting begins, if the corporation has a variable range size board.

C. The articles of incorporation or bylaws may specify that, if a quorum is present when a meeting is convened, the quorum shall be deemed to exist until the meeting is adjourned, notwithstanding the departure of one or more directors.

D. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless the articles of incorporation or bylaws require the vote of a greater number of directors.

E. A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken is deemed to have assented to the action taken unless either:

The director objects at the beginning of the meeting or promptly on the director's arrival to holding it or transacting business at the meeting.
The director's dissent or abstention from the action taken is entered in the minutes of the meeting.
The director delivers written notice of the director's dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation before 5:00 p.m. on the next business day after the meeting.

F. The right of dissent or abstention is not available to a director who votes in favor of the action taken.

G. The articles of incorporation or bylaws may authorize a director to vote in person or by proxy. The following provisions apply to voting by proxy:

A director may appoint a proxy to vote or otherwise act for the director by signing an appointment form, either personally or by the director's attorney-in-fact. The appointment does not relieve the director of liability for acts or omissions imposed by law on directors.
An appointment of a proxy is effective when received by the secretary. An appointment is valid for one month unless a different period is expressly provided in the appointment form.
An appointment of a proxy is revocable by the director.
The death or incapacity of the director appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless written notice of the death or incapacity is received by the secretary before the proxy exercises its authority under the appointment.
Subject to any express limitation on the proxy's authority appearing on the face of the appointment form, a corporation is entitled to accept the proxy's vote or other action as of the shareholder making the appointment.

§ 10-3825 Committees of the board

A. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may create one or more committees and appoint members of the board of directors to serve on them. Each committee shall have one or more members, and each member of a committee shall serve at the pleasure of the board of directors.

B. The creation of a committee and appointment of members of the board of directors to it must be approved by the greater of:

A majority of all the directors in office when the action is taken.
The number of directors required by the articles of incorporation or bylaws to take action under section 10-3824.

C. Sections 10-3820 through 10-3824 governing meetings, action without meetings and notice, waiver of notice, quorum and voting requirements of the board of directors also apply to committees and their members.

D. Subject to the limitations set forth in subsection E of this section, each committee of the board may exercise the authority of the board of directors under section 10-3801 to the extent specified by the board of directors or in the articles of incorporation or bylaws.

E. A committee shall not take any of the following actions:

Authorize distributions.
Approve or recommend to members any action that requires the members' approval under this chapter.
Fill vacancies on the board of directors or on any of its committees.
Adopt, amend or repeal bylaws.
Fix the compensation of directors for serving on the board of directors or any committee of the board of directors.

F. The creation of, delegation of authority to or action by a committee does not alone constitute compliance by a director with the standards of conduct described in section 10-3830.

G. The board of directors may designate one or more directors as alternate members of any committee who may replace any absent member at any meeting of the committee.

Article 3 Standards of Conduct

§ 10-3830 General standards for directors

A. A director's duties, including duties as a member of a committee, shall be discharged:

In good faith.
With the care an ordinarily prudent person in a like position would exercise under similar circumstances.
In a manner the director reasonably believes to be in the best interests of the corporation.

One or more officers or employees of the corporation whom the director reasonably believes are reliable and competent in the matters presented.
Legal counsel, public accountants or other person as to matters the director reasonably believes are within the person's professional or expert competence.
A committee of or appointed by the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.
In the case of corporations organized for religious purposes, religious authorities and ministers, priests, rabbis or other persons whose position or duties in the religious organization the director believes justify reliance and confidence and whom the director believes to be reliable and competent in the matters presented.

C. A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection B unwarranted.

D. A director is not liable for any action taken as a director or any failure to take any action if the director's duties were performed in compliance with this section. In any proceeding commenced under this section or any other provision of this chapter, a director has all of the defenses and presumptions ordinarily available to a director. A director is presumed in all cases to have acted, failed to act or otherwise discharged such director's duties in accordance with subsection A. The burden is on the party challenging a director's action, failure to act or other discharge of duties to establish by clear and convincing evidence facts rebutting the presumption.

E. A director shall not be deemed to be a trustee with respect to the corporation or with respect to any property held or administered by the corporation, including property that may be subject to restrictions imposed by the donor or transferor of that property.

§ 10-3833 Liability for unlawful distributions

A. A director who votes for or assents to a distribution made in violation of sections 10-11301 and 10-11302 or the articles of incorporation is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating sections 10-11301 and 10-11302 or the articles of incorporation if it is established that the director's duties were not performed in compliance with section 10-3830.

B. A director of a corporation who is present at a meeting of its board of directors at which action on any distribution in violation of section 10-11301 is taken is presumed to have assented to the action taken unless his dissent is entered in the minutes of the meeting or unless he files his written dissent to the action with the secretary of the meeting before the adjournment of the meeting or forwards the dissent by registered or certified mail to the secretary of the corporation before 5:00 p.m. of the next business day after the adjournment of the meeting. The right to dissent does not apply to a director who voted in favor of the action.

C. A director who is held liable under subsection A of this section for an unlawful distribution is entitled to contribution from:

Every other director who could be held liable under subsection A of this section for the unlawful distribution.
Each person who received an unlawful distribution for the amount of the distribution whether or not the person receiving the distribution knew it was made in violation of sections 10-11301 and 10-11302 or the articles of incorporation.

D. A proceeding under this section is barred unless it is commenced within two years after the date on which the distribution is made.

Article 4 Officers

§ 10-3840 Officers

A. A corporation shall have the officers described in its articles of incorporation or bylaws or appointed by the board of directors in accordance with the articles of incorporation or bylaws.

B. A duly appointed officer may appoint one or more officers or assistant officers if authorized by the bylaws or the board of directors.

C. The bylaws or the board of directors shall delegate to one of the officers responsibility for preparing minutes of the directors' and members' meetings and for authenticating records of the corporation.

D. The same individual may simultaneously hold more than one office in a corporation.

§ 10-3841 Duties and authority of officers

Each officer has the authority and shall perform the duties set forth in the bylaws or, to the extent consistent with the bylaws, the duties and authority prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties and authority of other officers.

§ 10-3842 Standards of conduct for officers

A. If an officer has discretionary authority with respect to any duties, an officer's duties shall be discharged under that authority:

In good faith.
With the care an ordinarily prudent person in a like position would exercise under similar circumstances.
In a manner the officer reasonably believes to be in the best interests of the corporation.

B. In discharging duties, an officer is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by either:

One or more officers or employees of the corporation whom the officer reasonably believes to be reliable and competent in the matters presented.
Legal counsel, public accountants or other persons as to matters the officer reasonably believes are within the person's professional or expert competence.
In the case of corporations organized for religious purposes, religious authorities and ministers, priests, rabbis or other persons whose position or duties in the religious organization the officer believes justify reliance and confidence and who the officer believes to be reliable and competent in the matters presented.

C. An officer is not acting in good faith if the officer has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection B unwarranted.

D. An officer is not liable for any action taken as an officer or any failure to take any action if the officer's duties were performed in compliance with this section. In any proceeding commenced under this section or any other provision of this chapter, an officer has all of the defenses and presumptions ordinarily available to an officer. An officer is presumed in all cases to have acted, failed to act or otherwise discharged such officer's duties in accordance with subsection A. The burden is on the party challenging an officer's action, failure to act or other discharge of duties to establish by clear and convincing evidence facts rebutting the presumption.

§ 10-3843 Resignation and removal of officers

A. An officer may resign at any time by delivering notice to the corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date or event. If a resignation is made effective at a later date or event and the corporation accepts the later effective date, its board of directors may fill the pending vacancy before the effective date if the board of directors provides that the successor does not take office until the effective date.

B. A board of directors may remove any officer at any time with or without cause.

§ 10-3844 Contract rights of officers

A. The appointment of an officer does not itself create contract rights.

§ 10-3845 Officers' authority to execute documents

Any contract or other instrument in writing executed or entered into between a corporation and any other person is not invalidated as to the corporation by any lack of authority of the signing officers in the absence of actual knowledge on the part of the other person that the signing officers had no authority to execute the contract or other instrument if it is signed by two individuals who are either:

Both the presiding officer of the board of directors and the president.
Either the presiding officer of the board of directors or the president, and one of the following:

(a) A vice-president.

(b) The secretary.

(d) The executive director.

Article 5 Indemnification

§ 10-3850 Definitions

In this article, unless the context otherwise requires:

"Corporation" includes any domestic or foreign predecessor entity of a corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction.
"Director" means an individual who is or was a director of a corporation or an individual who, while a director of a corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity. A director is considered to be serving an employee benefit plan at the corporation's request if the director's duties to the corporation also impose duties on or otherwise involve services by the director to the plan or to participants in or beneficiaries of the plan. Director includes the estate or personal representative of a director and includes ex officio members of the board.
"Expenses" include attorney fees and other costs and expenses reasonably related to a proceeding.
"Liability" means the obligation to pay a judgment, settlement, penalty or fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses actually incurred with respect to a proceeding and includes obligations and expenses that have not yet been paid by the indemnified persons but that have been or may be incurred.
"Officer" means an individual who is or was an officer of a corporation or an individual who, while an officer of a corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity. An officer is considered to be serving an employee benefit plan at the corporation's request if the officer's duties to the corporation also impose duties on or otherwise involve services by the officer to the plan or to participants in or beneficiaries of the plan. Officer includes the estate or personal representative of an officer.
"Official capacity" means if used with respect to a director, the office of director in a corporation and, if used with respect to an officer as contemplated in section 10-3856, the office in a corporation held by the officer. Official capacity does not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, employee benefit plan, or other entity.
"Outside director" means a director who, when serving as a director, is not or was not a compensated officer, employee or member holding more than ten per cent of the voting power of the corporation or any affiliate of the corporation or an officer, employee or holder of more than ten per cent of the voting power of such a member or any affiliate of that member.
"Party" includes an individual who was, is or is threatened to be made a named defendant or respondent in a proceeding.
"Proceeding" means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal.

§ 10-3851 Authority to indemnify

A. Except as provided in subsection D of this section, a corporation may indemnify an individual made a party to a proceeding because either:

The individual is or was a director against liability incurred in the proceeding if all of the following conditions exist:

(a) The individual's conduct was in good faith.

(b) The individual reasonably believed:

(i) In the case of conduct in an official capacity with the corporation, that the conduct was in its best interests.

(ii) In all other cases, that the conduct was at least not opposed to its best interests.

The director engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the articles of incorporation pursuant to section 10-3202, subsection B, paragraph 2.

D. A corporation may not indemnify a director under this section either:

In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation.
In connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in the director's official capacity, in which the director was adjudged liable on the basis that personal benefit was improperly received by the director.

E. Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.

§ 10-3852 Mandatory indemnification

§ 10-3853 Advance for expenses

The director furnishes to the corporation a written affirmation of the director's good faith belief that the director has met the standard of conduct described in section 10-3851 or that the proceeding involves conduct for which liability has been eliminated under a provision of the articles of incorporation pursuant to section 10-3202, subsection B, paragraph 1.
The director furnishes the corporation with a written undertaking, executed personally or on the director's behalf, to repay the advance if the director is not entitled to mandatory indemnification under section 10-3852 and it is ultimately determined that the director did not meet the standard of conduct.

C. Authorizations of payments under this section shall be made in a manner consistent with section 10-3830 or 10-3842.

D. This section does not apply to advancement of expenses to or for the benefit of an outside director. Advances to outside directors shall be made pursuant to section 10-3852.

§ 10-3854 Court ordered indemnification

The director is entitled to mandatory indemnification under section 10-3852, in which case the court shall also order the corporation to pay the director's reasonable expenses incurred to obtain court ordered indemnification.
The director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the director met the standard of conduct set forth in section 10-3851 or was adjudged liable as described in section 10-3851, subsection D, but if the director was adjudged liable under section 10-3851, subsection D, indemnification is limited to reasonable expenses incurred.

§ 10-3855 Determination and authorization of indemnification

A. A corporation may not indemnify a director under section 10-3851 unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because the director has met the standard of conduct set forth in section 10-3851.

B. The determination shall be made either:

By the board of directors by a majority vote of the directors not at the time parties to the proceeding.
By special legal counsel:

(a) Selected by majority vote of the disinterested directors.

(b) If there are no disinterested directors, selected by majority vote of the board of directors.

By the members, but directors who are at the time parties to the proceeding may not vote on the determination.

C. Neither special legal counsel nor any member has any liability whatsoever for a determination made pursuant to this section. In voting pursuant to subsection B of this section, directors shall discharge their duty in accordance with section 10-3830.

§ 10-3856 Indemnification of officers

To the same extent as a director.
If the individual is an officer but not a director, to the further extent as may be provided by the articles of incorporation, the bylaws, a resolution of the board of directors, or contract except for:

(a) Liability in connection with a proceeding by or in the right of the corporation other than for reasonable expenses incurred in connection with the proceeding.

(b) Liability arising out of conduct that constitutes:

(i) Receipt by the officer of a financial benefit to which the officer is not entitled.

(ii) An intentional infliction of harm on the corporation or the members.

(iii) An intentional violation of criminal law.

B. Subsection A, paragraph 2 of this section applies to an officer who is also director if the basis on which the officer is made a party to the proceeding is an act or omission solely as an officer.

C. An officer of a corporation who is not a director is entitled to mandatory indemnification under section 10-3852, subsection A and may apply to a court under section 10-3854 for indemnification or an advance for expenses, in each case to the same extent to which a director is entitled to indemnification or advance for expenses under those sections.

§ 10-3857 Insurance

A corporation may purchase and maintain insurance on behalf of an individual who is or was a director or officer of the corporation or who, while a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity, against liability asserted against or incurred by the individual in that capacity or arising from the individual's status as a director or officer, whether or not the corporation would have power to indemnify or advance expenses to the person against the same liability under this article.

§ 10-3858 Application of article

A. A provision treating a corporation's indemnification of or advance for expenses to directors that is contained in its articles of incorporation, bylaws, a resolution of its members or board of directors or a contract or otherwise is valid only if and to the extent the provision is consistent with this article. If the articles of incorporation limit indemnification or advances for expenses, indemnification and advances for expenses are valid only to the extent consistent with the articles of incorporation.

C. This article does not limit a corporation's power to indemnify, advance expenses or maintain insurance on behalf of an employee or agent.

Article 6 Director's Conflicting Interest Transactions

§ 10-3860 Definitions

In this article, unless the context otherwise requires:

"Conflicting interest" with respect to a corporation means the interest a director of the corporation has respecting a transaction effected or proposed to be effected by the corporation, by a subsidiary of the corporation or by any other entity in which the corporation has a controlling interest if either:

(a) Whether or not the transaction is brought before the board of directors of the corporation for action, the director knows at the time of commitment that the director or a related person either:

(i) Is a party to the transaction.

(i) An entity, other than the corporation, of which the director is a director, general partner, agent or employee.

(iii) An individual who is a general partner, principal or employer of the director.

"Director's conflicting interest transaction" with respect to a corporation means a transaction effected or proposed to be effected by the corporation, by a subsidiary of the corporation or by any other entity in which the corporation has a controlling interest respecting which a director of the corporation has a conflicting interest.
"Related person" of a director means either:

(b) A trust, estate, incompetent, conservatee or minor of which the director is a fiduciary.

"Required disclosure" means disclosure by the director who has a conflicting interest of both:

(a) The existence and nature of the conflicting interest.

"Time of commitment" respecting a transaction means the time when the transaction is consummated or, if made pursuant to contract, the time when the corporation, or its subsidiary or the entity in which it has a controlling interest, becomes contractually obligated so that its unilateral withdrawal from the transaction would entail significant loss, liability or other damage.

§ 10-3861 Judicial action

A. A transaction that is effected or proposed to be effected by a corporation, or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest, and that is not a director's conflicting interest transaction shall not be enjoined, be set aside or give rise to an award of damages or other sanctions in a proceeding by a member or by or in the right of the corporation, because a director of the corporation, or any person with whom or with which the director has a personal, economic or other association, has an interest in the transaction.

B. A director's conflicting interest transaction shall not be enjoined, be set aside or give rise to an award of damages or other sanctions in a proceeding by a member by or in the right of the corporation, because the director, or any person with whom or with which the director has a personal, economic or other association, has an interest in the transaction, if either:

Directors' action respecting the transaction was taken at any time in compliance with section 10-3862.
Members' action respecting the transaction was taken at any time in compliance with section 10-3863.
The transaction, judged according to the circumstances at the time of commitment, is established to have been fair to the corporation.

§ 10-3862 Directors' action; definition

A. Directors' action respecting a transaction is effective for purposes of section 10-3861, subsection B, paragraph 1 if the transaction received the affirmative vote of a majority, but at least two, of those qualified directors on the board of directors or on a duly empowered committee of the board who voted on the transaction after either required disclosure to them, to the extent the information was not known by them, or compliance with subsection B of this section. Action by a committee is effective under this section only if both:

All of its members are qualified directors.
Members are either all of the qualified directors on the board or are appointed by the affirmative vote of a majority of the qualified directors or the board.

B. If a director has a conflicting interest regarding a transaction but neither the director nor a related person of the director specified in section 10-3860, paragraph 3, subdivision (a) is a party to the transaction and if the director has a duty under law or professional canon or a duty of confidentiality to another person, respecting information relating to the transaction such that the director may not make the disclosure described in section 10-3860, paragraph 4, subdivision (b), disclosure is sufficient for purposes of subsection A of this section if the director both:

Discloses to the directors voting on the transaction the existence and nature of the conflicting interest and informs them of the character and limitations imposed by that duty before their vote on the transaction.
Plays no part, directly or indirectly, in their deliberations or vote.

D. For purposes of this section, "qualified director" means, with respect to a director's conflicting transaction, any director who does not have either:

A conflicting interest respecting the transaction.
A familial, financial, professional or employment relationship with a second director who does have a conflicting interest respecting the transaction, which relationship would, in the circumstances, reasonably be expected to exert an influence on the first director's judgment when voting on the transaction.

§ 10-3863 Members' action; definition

A. Members' action respecting a transaction is effective for purposes of section 10-3861, subsection B, paragraph 2 if a majority of the votes entitled to be cast by the holders of all qualified membership interests was cast in favor of the transaction after all of the following:

Notice to members describing the director's conflicting interest transaction.
Provision of the information referred to in subsection C of this section.
Required disclosure to the members who voted on the transaction, to the extent the information was not known by them.

B. A majority of the votes entitled to be cast by the holders of all qualified membership interests is a quorum for the purposes of action that complies with this section. Subject to subsections C and D of this section, members' action that otherwise complies with this section is not affected by the presence of members or the voting of membership interests that are not qualified membership interests.

C. For purposes of compliance with subsection A of this section, a director who has a conflicting interest respecting the transaction shall inform, before the members' vote, the secretary, or other officer or agent of the corporation authorized to tabulate votes, of the number and the identity of persons holding or controlling the vote of all membership interests that the director knows are beneficially owned, or the voting of which is controlled, by the director or by a related person of the director, or both.

D. If a member's vote does not comply with subsection A of this section solely because of a failure of a director to comply with subsection C of this section and if the director establishes that his failure did not determine and was not intended by him to influence the outcome of the vote, the court, with or without further proceedings respecting section 10-3861, subsection B, paragraph 3, may take such action, respecting the transaction and the director and give such effect, if any, to the members' vote, as it considers appropriate in the circumstances.

E. For purposes of this section, "qualified membership interests" means any membership interests entitled to vote with respect to the director's conflicting interest transaction except membership interests that, to the knowledge, before the vote, of the secretary or other officer or agent of the corporation authorized to tabulate votes, are beneficially owned, or the voting of which is controlled, by a director who has a conflicting interest respecting the transaction or by a related person of the director, or both.

§ 10-3864 Conflict of interest policy; exceptions

A. The board of directors of a corporation shall adopt a policy regarding transactions between the corporation and interested persons, including the sale, lease or exchange of property to or from interested persons and the corporation, the lending or borrowing of monies to or from interested persons by the corporation or the payment of compensation by the corporation for services provided by interested persons. For the purposes of this subsection, "interested person" means an officer or director of a corporation or any other corporation, firm, association or entity in which an officer or director of a corporation is a member, officer or director or has a financial interest.

B. The requirements of this section do not apply to any of the following:

A corporation that had assets at the end of its last fiscal year with a book value of less than ten million dollars, net of accumulated depreciation, or had gross receipts or revenues of less than two million dollars in its last fiscal year.
A corporation that offers goods or services only to members who are entitled to vote for its board of directors.
A corporation organized for religious purposes that does not have, as a substantial portion of its business, the offering of goods or services on a regular basis to the public for remuneration.
A corporation organized by or on behalf of the United States, this state, a political subdivision of this state or an agency or instrumentality of such a governmental entity.
A hospital, medical, dental or optometric service corporation licensed pursuant to title 20, chapter 4, article 3.

C. For the purposes of subsection B, paragraph 3:

Goods and services include medical, hospital, dental or counseling or social services offered on a regular basis to the public for remuneration.
A corporation organized for religious purposes includes a corporation or foreign corporation that controls or is controlled directly or indirectly by a corporation or foreign corporation organized for religious purposes.

D. The exemption provided by subsection B, paragraph 4 does not apply to a corporation that provides services to or operates assets of the governmental entity pursuant to a lease or contract.

Chapter 33 Amendment of Articles of Incorporation and Bylaws-Nonprofit Corporations

Article 1 Articles of Incorporation

§ 10-11001 Authority to amend

B. A member of the corporation does not have a vested property right resulting from any provision in the articles of incorporation, including provisions relating to management, control or purpose of duration of the corporation.

§ 10-11002 Amendment by board of directors

A. If a corporation has members who are otherwise entitled to vote on amendments to the corporation's articles, then unless the articles of incorporation provide otherwise, a corporation's board of directors may adopt one or more amendments to the corporation's articles without member approval to either:

Extend the duration of the corporation if it was incorporated at a time when limited duration was required by law.
Delete the names and addresses of the initial directors.
Delete the name and address of the initial statutory agent or known place of business, if a statement of change is on file with the commission.
Change the corporate name by substituting the word "corporation", "incorporated", "company", "limited", "association", "society", or the abbreviation "corp.", "inc.", "co.", "ltd.", "assn." or "socy." for a similar word or abbreviation in the name, or by adding, deleting or changing a geographical attribution to the name.
Make any other change expressly permitted by chapters 24 through 40 of this title or the articles of incorporation to be made by director action.

B. If a corporation has no members or if no members are entitled to vote on the proposed amendment, the board of directors may adopt one or more amendments to the corporation's articles of incorporation.

C. Adoption of an amendment pursuant to this section requires the approval in writing by any person or persons whose approval is required pursuant to section 10-11030 for an amendment to the articles of incorporation or bylaws.

§ 10-11003 Amendment by board of directors and members

A. The following apply to amendments to the articles of incorporation by the board of directors and the members, if there are members entitled to vote on the amendment:

A corporation's board of directors may propose one or more amendments to the articles of incorporation for submission to the members.
For the amendment to be adopted all of the following shall have occurred:

(a) The board of directors shall recommend the amendment to the members unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for that determination to the members with the amendment.

(b) The members entitled to vote on the amendment shall approve the amendment as provided by paragraph 5 of this subsection.

(c) Each person whose approval is required by the articles of incorporation as authorized by section 10-11030 for an amendment to the articles of incorporation or bylaws shall approve the amendment in writing.

The board of directors may condition its submission of the proposed amendment on any basis.
The corporation shall notify each member entitled to vote of the proposed members' meeting in accordance with section 10-3705. The notice of meeting shall also state that the purpose or one of the purposes of the meeting is to consider the proposed amendment and shall contain or be accompanied by a copy or summary of the amendment.
Unless chapters 24 through 40 of this title, the articles of incorporation or the board of directors acting pursuant to paragraph 3 of this subsection requires a greater vote or voting by class, the amendment to be adopted shall be approved by two-thirds of the votes cast or a majority of the voting power, whichever is less.

B. The following apply to amendments to the articles of incorporation by the members, if there are members:

If the articles of incorporation expressly permit, the members may propose amendments to the articles of incorporation. If so permitted, the articles of incorporation shall set forth procedures for adopting member initiated amendments, including the percentage of voting power and method of notice required to propose an amendment and the responsibility for calling a member meeting to consider the amendment.
For the amendment to be adopted, all of the following shall have occurred:

(a) The members entitled to vote on the amendment shall approve the amendment as provided in paragraph 4 of this subsection.

(b) The corporation shall notify each member in accordance with subsection A, paragraph 4 of this section.

The members may condition adoption of the proposed amendment on any basis.
Unless chapters 24 through 40 of this title, the articles of incorporation or the members acting pursuant to paragraph 3 of this subsection require a greater vote or voting by class, the amendment to be adopted shall be approved by two-thirds of the votes cast or a majority of the voting power, whichever is less.

§ 10-11004 Class voting by members on amendments

The members of a class of a corporation are entitled to vote as a class on a proposed amendment to the articles of incorporation only if a class vote is provided for in the articles of incorporation or bylaws.

§ 10-11006 Articles of amendment

A. A corporation amending its articles of incorporation shall deliver to the commission for filing articles of amendment setting forth:

The name of the corporation.
The text of each amendment adopted.
The date of each amendment's adoption.
A statement that the amendment was duly adopted by act of the members or act of the board of directors and, if applicable, with the approval required pursuant to section 10-11030.

B. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of amendment shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-11007 Restated articles of incorporation

A. A corporation's board of directors may restate its articles of incorporation at any time with or without approval by the members or any other person.

B. The restatement may include one or more amendments to the articles of incorporation. If the restatement includes an amendment requiring approval by the members or any other person, it shall be adopted as provided in section 10-11003.

C. If the board of directors submits a restatement for member action, the corporation shall notify each member entitled to vote of the proposed membership meeting in writing in accordance with section 10-3705. The notice shall also state that the purpose or one of the purposes of the meeting is to consider the proposed restatement and shall contain or be accompanied by a copy or summary of the restatement that identifies any amendment or other change it would make in the articles.

D. If the board of directors submits a restatement for member action by written ballot or written consent, the material that solicits the approval shall contain or be accompanied by a copy or summary of the restatement that also identifies any amendment or other change it would make in the articles of incorporation.

E. A corporation restating its articles of incorporation shall deliver to the commission for filing articles of restatement setting forth the name of the corporation and the text of the restated articles of incorporation together with a certificate setting forth:

Whether the restatement contains an amendment to the articles requiring approval by any other person other than the board of directors and, if it does not, that the board of directors adopted the restatement.
If the restatement contains an amendment to the articles requiring approval by the members, a statement that such approval was obtained.
If the restatement contains an amendment to the articles requiring approval by a person whose approval is required pursuant to section 10-11030, a statement that such approval was obtained.

F. Duly adopted restated articles of incorporation supersede the original articles of incorporation and all amendments to them.

G. The commission may certify restated articles of incorporation, as the articles of incorporation currently in effect, without including the certificate information required by subsection E of this section.

H. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of restatement shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-11008 Amendment pursuant to reorganization

A. A corporation's articles may be amended pursuant to this section without action by the board of directors or members or approval required pursuant to section 10-11030 to carry out a plan of reorganization ordered or decreed by a court of competent jurisdiction under a federal statute or a statute of this state if the articles of incorporation after amendment contain only provisions required or permitted by section 10-3202.

B. Before the date of entry of a final decree in the reorganization proceeding, the individual or individuals designated by the court plan shall deliver to the commission articles of amendment setting forth all of the following:

The name of the corporation.
The text of each amendment contained in the plan of reorganization.
The date of the court's order or decree confirming the plan of reorganization containing the articles of amendment.
The title of the reorganization proceeding in which the order or decree was entered.
A statement that the court had jurisdiction of the proceeding under federal or state statute.

C. This section does not apply after entry of a final decree in the reorganization proceeding even though the court retains jurisdiction of the proceeding for limited purposes unrelated to consummation of the reorganization plan.

D. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of amendment shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-11009 Effect of amendment and restatement

An amendment to the articles of incorporation does not affect a cause of action existing against or in favor of the corporation, a proceeding to which the corporation is a party, any requirement or limitation imposed on the corporation or any property held by it by virtue of any trust on which that property is held by the corporation or the existing rights of persons other than members of the corporation. An amendment changing a corporation's name does not abate a proceeding brought by or against the corporation in its former name.

Article 2 Bylaws

§ 10-11020 Amendment by board of directors

A. If a corporation has no members, its board of directors may adopt one or more amendments to the corporation's bylaws.

B. The adoption of an amendment pursuant to this section shall require the approval in writing by any person or persons whose approval is required pursuant to section 10-11030.

§ 10-11021 Amendment by board of directors or members

If the articles of incorporation or the bylaws require that an amendment to or repeal of the corporation's bylaws be submitted to the members, the procedures set forth in section 10-11003 shall apply.

§ 10-11022 Class voting by members on amendments

The members of a class of a corporation are entitled to vote as a class on a proposed amendment to the bylaws only if a class vote is provided for in the articles of incorporation or bylaws.

§ 10-11023 Bylaw increasing quorum or voting requirement for members

A. If authorized by the articles of incorporation, members may adopt or amend a bylaw that fixes a greater quorum or voting requirement for members, or of classes of members, than is required by chapters 24 through 40 of this title. The adoption or amendment of a bylaw that adds, changes or deletes a greater quorum or voting requirement for members shall meet the same quorum requirement and shall be adopted by the same vote and classes of members required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.

B. A bylaw that fixes a greater quorum or voting requirement for members under subsection A shall not be adopted, amended or repealed by the board of directors.

§ 10-11024 Bylaw increasing quorum or voting requirement for directors

A. A bylaw that fixes a greater quorum or voting requirement for the board of directors may be amended or repealed as follows:

If originally adopted by the members, only by the members.
If originally adopted by the board of directors, either by the members or by the board of directors.

B. A bylaw that is adopted or amended by the members and that fixes a greater quorum or voting requirement for the board of directors may provide that it may be amended or repealed only by a specified vote of either the members or the board of directors.

Article 3 Articles of Incorporation and Bylaws

§ 10-11030 Approval by third persons

The articles of incorporation may require a specified person or persons other than the board of directors to approve in writing any amendment to the articles of incorporation or bylaws and, unless the articles of incorporation or bylaws otherwise provide, that article provision may only be amended with the approval in writing of the specified person or persons.

§ 10-11031 Amendment terminating members or redeeming or canceling memberships

A. Any amendment to the articles of incorporation or bylaws of a corporation that terminates all members or any class of members or redeems or cancels all memberships or any class of memberships shall be adopted in accordance with section 10-11002, 10-11003, 10-11020 or 10-11021, as applicable, and this section.

B. The members shall approve any amendment described in subsection A of this section by two-thirds of the votes cast by each class.

C. The provisions of section 10-3621 do not apply to any amendment described in subsection A of this section.

Chapter 34 Mergers and Other Restructuring Transactions-Nonprofit Corporations

Article 1 General Provisions

§ 10-11101 Definitions

A. In this article, unless the context otherwise requires:

"Plan" means a plan of merger, interest exchange, conversion, domestication or division, as applicable.
"Transaction" means a merger, an interest exchange, a conversion, a domestication or a division, as applicable.

B. Except for terms defined in chapters 24 through 40 of this title or unless the context otherwise requires, terms used in this article have the same meanings prescribed in section 29-2102.

§ 10-11102 Entity restructuring transactions

A. If its board of directors adopts and, if required by section 10-11103, its members and other persons approve a plan, a domestic corporation may be a party to or otherwise undertake a transaction by adopting a plan and otherwise complying with this article and:

Title 29, chapter 6, article 2 for a merger.
Title 29, chapter 6, article 3 for an interest exchange.
Title 29, chapter 6, article 4 for a conversion.
Title 29, chapter 6, article 5 for a domestication.
Title 29, chapter 6, article 6 for a division.

C. This section does not limit the power of a corporation to acquire all or part of the interests of another entity through a voluntary exchange or otherwise.

§ 10-11103 Action on plan

A. If the members of a domestic corporation or other persons are entitled to vote on or approve the plan, except as provided in subsection G of this section, after adopting a plan, the board of directors of the corporation shall submit the plan for approval by its members and the other persons.

B. For a plan to be approved all of the following must occur:

The board of directors recommends the plan to the members, unless the board of directors determines that because of a conflict of interest or other special circumstances it should not make a recommendation and communicates the basis for its determination to the members with the plan.
The members entitled to vote on the plan approve the plan.
Each person whose approval is required by the articles of incorporation for a transaction of the kind contemplated by the plan approves the plan in writing.

C. The board of directors may condition its submission of the plan on any basis.

D. If the corporation submits the transaction for member action at a membership meeting, the corporation shall notify each member of the proposed membership meeting at which the plan is to be submitted for approval in accordance with section 10-3705. The notice shall state that the purpose or one of the purposes of the meeting is to consider the plan and shall contain or be accompanied by a copy or summary of the plan.

E. Unless chapters 24 through 40 of this title, the articles of incorporation or the board of directors acting pursuant to subsection C of this section requires a greater vote or voting by class, the plan to be authorized shall be approved by a majority of the votes cast or a majority of the voting power of the class, whichever is less.

F. Voting by a class of members is required on a plan if the plan contains a provision that, if contained in a proposed amendment to articles of incorporation or bylaws, would entitle the class of members to vote as a class on the proposed amendment under section 10-11004 or 10-11022. The plan is approved by a class of members by two-thirds of the votes cast by the class or a majority of the voting power of the class, whichever is less.

G. Unless the articles of incorporation otherwise require, action by the members of a domestic corporation that is the surviving corporation on a plan of merger is not required if all of the following conditions exist:

The articles of incorporation of the surviving corporation will not differ, except for amendments enumerated in section 10-11002, from its articles of incorporation before the merger.
Each member of the surviving corporation who was a member immediately before the effective date of merger will hold the same number of memberships with identical designations, preferences, limitations and relative rights immediately after the effective date of merger.
The number of voting members existing immediately after the merger, plus the number of voting memberships issuable as a result of the merger, will not exceed more than twenty per cent the total number of voting memberships of the surviving corporation existing immediately before the merger.
The number of memberships, if any, that entitle the holders of the memberships to participate without limitation in distributions existing immediately after the merger, plus the number of participating memberships issuable as a result of the merger, will not exceed the total number of participating memberships existing immediately before the merger by more than ninety per cent.

§ 10-11105 Statement of merger or interest exchange; publication or posting

Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the statement of merger or interest exchange shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

§ 10-11108 Requests, devises and gifts

Unless the will or other instrument otherwise specifically provides, any bequest, devise, gift, grant or promise that is contained in a will or other instrument of donation, subscription or conveyance, that is made to a domestic nonprofit corporation and that takes effect or remains payable after the transaction inures, as applicable, to the surviving entity in a merger, the acquiring entity in an interest exchange, the converted entity in a conversion, the domesticated entity in a domestication and, as specified in the statement of division, one or more of the resulting entities in a division.

Chapter 35 Sale of Assets-Nonprofit Corporations

Article 1 General Provisions

§ 10-11201 Sale of assets in regular course of activities and mortgage of assets

A. On the terms and conditions and for the consideration determined by the board of directors, a corporation may:

Sell, lease, exchange or otherwise dispose of all or substantially all of its property in the usual and regular course of its activities.
Mortgage, pledge, dedicate to the repayment of indebtedness, whether with or without recourse, or otherwise encumber any or all of its property whether or not in the usual and regular course of its activities.
Transfer any or all of its property to a corporation all the shares of memberships of which are owned by the corporation.

B. Unless the articles of incorporation require it, approval by the members or any other person of a transaction described in subsection A is not required.

§ 10-11202 Sale of assets other than in regular course of activities

B. For a proposed transaction to be approved, all of the following shall have occurred:

The board of directors shall approve the transaction. If the members of the corporation are entitled to vote on the proposed transaction, the board of directors shall submit the proposed transaction for approval by its members and shall recommend the proposed transaction to the members, unless the board of directors determines that because of a conflict of interest or other special circumstances it should not make a recommendation and communicates the basis for its determination to the members with the plan.
If the members of the corporation are entitled to vote on the proposed transaction, the members entitled to vote on the proposed transaction shall approve the proposed transaction.
Each person whose approval is required by the articles of incorporation for the sale, lease, exchange or other disposal shall approve the proposed transaction in writing.

C. The board of directors may condition its submission of the proposed transaction on any basis.

D. If the corporation submits the transaction for member action at a membership meeting, the corporation shall notify each member to which the proposed transaction is to be submitted for approval of the proposed membership meeting in accordance with section 10-3705. The notice shall state that the purpose or one of the purposes of the meeting is to consider the proposed transaction and shall contain or be accompanied by a copy or summary of a description of the transaction.

E. Unless chapters 24 through 40 of this title, the articles of incorporation or the board of directors acting pursuant to subsection C of this section requires a greater vote or voting by class, a majority of the votes cast or a majority of the voting power of the class, whichever is less, shall approve the proposed transaction to be authorized.

F. At any time before consummation of the sale, lease, exchange or other disposition of property, the transaction may be abandoned, subject to any contractual rights, without further action by the members or any other person who approved the transaction, in accordance with the procedure set forth in the resolution proposing the transaction or, if none is set forth, in the manner determined by the board of directors.

G. A transaction that constitutes a distribution is governed by sections 10-11301 and 10-11302 and not by this section.

H. Except as provided in subsection K of this section and chapter 35.1 of this title, any person who intends to purchase, lease or otherwise acquire all or substantially all of the assets of a tax-exempt corporation described in section 501(c)(3) of the internal revenue code of 1986, or all or substantially all of the assets located in this state of a tax-exempt foreign corporation described in section 501(c)(3) of the internal revenue code of 1986 and is conducting affairs in this state, shall comply with subsection B of this section before such a purchase, lease or acquisition if either:

The person is a tax-exempt organization described in section 501(c)(3) of the internal revenue code of 1986 but intends to use in an unrelated trade or business, determined by applying section 513(a) of the internal revenue code of 1986 to such organization, any substantial portion of the assets to be acquired which were not being used in an unrelated trade or business of the corporation or foreign corporation conveying the assets immediately before the proposed purchase, lease or acquisition.
The person is not a tax-exempt organization described in section 501(c)(3) of the internal revenue code of 1986.

I. A person subject to the requirements of subsection H of this section shall give public notice of the intended transaction in accordance with subsection J of this section and shall hold a public hearing on the intended transaction no less than ten days after the first publication of the notice and no less than ten days before the intended purchase, lease or acquisition occurs. The sole purpose of the public hearing is to receive public comment regarding the proposed transaction. The public hearing shall be held before at least two representatives of the person intending to purchase, lease or otherwise acquire the assets of the corporation or foreign corporation and at least two representatives of the corporation or foreign corporation.

J. Notice of the intended transaction shall include the time, date and place of the public hearing, the names of the parties to the transaction, a general summary of the intended transaction, a general description of the assets to be purchased, leased or otherwise acquired and a general description of the intended use of the assets after the completion of the transaction. The notice shall be published three consecutive times in a newspaper of general circulation in the county of the known place of business of the corporation or foreign corporation from which the assets are intended to be purchased, leased or otherwise acquired. The first notice shall be published no less than twenty days before the intended purchase, lease or acquisition occurs.

K. The requirements of subsections I and J of this section do not apply to the purchase, lease or other acquisition of assets under this section from a domestic or foreign corporation as provided in this section if any of the following applies:

The transaction involves assets having a book value at the time of the transaction, net of accumulated depreciation, of less than two million dollars.
The transaction is in the usual course of business of the transferor or in connection with the mortgage or pledge of any or all property and assets of the corporation or foreign corporation whether or not in its usual and regular course of business.
The transferor has assets immediately prior to such transaction, with a book value of more than ten million dollars, net of accumulated depreciation.
The transaction is to enable the transferor to finance the purchase of assets or to refinance assets already owned by it, or if, after the transaction has been completed, the transferor continues to have possession of the assets purchased, leased or otherwise acquired or used in the usual and regular course of its business.
The transferor offers goods or services only to members who are entitled to vote for its board of directors.
The transferor is organized for religious purposes and does not have, as a substantial portion of its business, the offering of goods or services on a regular basis to the public for remuneration.
The purchase, lease or sale of assets as described in subsection A of this section by the United States, this state, a political subdivision of this state or an agency or instrumentality of such a governmental entity.
The purchase, lease or sale of assets as described in subsection A of this section by a hospital, medical, dental or optometric service corporation licensed pursuant to title 20, chapter 4, article 3.

L. For the purposes of subsection K, paragraph 6 of this section:

Goods and services shall include, but are not limited to, medical, hospital, dental or counseling or social services offered on a regular basis to the public for remuneration.
A transferor organized for religious purposes includes a corporation or foreign corporation that controls or is controlled directly or indirectly by a corporation or foreign corporation organized for religious purposes.

M. The exemption provided by subsection K, paragraph 7 of this section does not apply to a corporation or foreign corporation that provides services to or operates assets of such a governmental entity pursuant to a lease or contract.

Chapter 35.1 Hospital and Community Health Center Mergers and Other Transactions

Article 1 General Provisions

§ 10-11251 Definitions

In this chapter, unless the context otherwise requires:

"Assets" means all real, personal, tangible and intangible property and rights in property, including cash, buildings, equipment, investments and contracts with other entities.
"Community benefit activity" means any activity furthering community benefit purposes including any health care activity that includes education, prevention, promotion of community health, indigent care or any other charitable purpose.
"Community benefit assets" means every asset that has been used in connection with community benefit activity during the previous year.
"Community benefit organization" means a nonprofit charitable organization that is tax-exempt under section 501(c)(3) of the internal revenue code and whose mission is solely to engage in community benefit activities.
"Community benefit purposes" means those purposes for which an entity may qualify for exemption pursuant to section 501(c)(3) of the internal revenue code, or for similar activity engaged in by a for profit organization.
"Community health center" means a primary care facility that provides medical care in medically underserved areas as designated in section 36-2352 or in medically underserved areas or medically underserved populations as designated by the United States department of health and human services.
"Nonprofit health care entity" means a licensed hospital or community health center that holds tax-exempt status pursuant to section 501(c)(3) of the internal revenue code.
"Notice of completion" means the written notice that is sent by the hearing officer to the chairman of the corporation commission after the hearing officer holds a public hearing and files a summary report pursuant to section 10-11253.

§ 10-11252 Scope; included transactions; excluded transactions

A. Except as provided in subsections B and C of this section, this chapter applies to any nonprofit health care entity that intends to sell, transfer, lease, exchange, option, convey, convert, give, merge or otherwise dispose of all or substantially all of its assets to or with another nonprofit health care entity or a for profit entity, including entering into a joint venture involving all or substantially all of its assets. The requirements of section 10-11202 do not apply to a nonprofit health care entity.

B. This chapter does not apply to any physician or licensed health care provider contract with a hospital or community health center. This chapter shall not affect any contract entered into between a physician or licensed health care provider or group of physicians or licensed health care providers and a licensed hospital.

C. This chapter does not apply to transactions:

Involving a transfer of community benefit assets of a licensed hospital or community health center with a book value of less than one million dollars, net of accumulated depreciation as of the date of the closing date of the intended transaction.
Enabling a party to finance the purchase of assets, refinance assets or mortgage or pledge assets already owned by the party, whether or not in its usual course of business.
Between or among a nonprofit health care entity and affiliated nonprofit entities that are part of a common line of ownership or control.

§ 10-11253 Public hearing; notice; requirements; summary report

A. No later than ninety days before the anticipated closing of the intended transaction, any nonprofit health care entity that intends to engage in any of the transactions described in section 10-11252, subsection A shall give written notice to the director of the department of health services and the attorney general. The written notice shall include all of the following information:

The names, addresses and telephone numbers of the parties to the intended transaction.
The names, addresses and telephone numbers of the attorneys or other persons who represent the parties in connection with the intended transaction.
A general summary of the intended transaction.
A general description of the assets involved in the intended transaction and the intended use of the assets after the closing of the intended transaction.
A general summary of all collateral transactions that relate to the intended transaction, including the names, addresses and telephone numbers of the parties involved in the collateral transactions.
The anticipated date of completion of the intended transaction.

B. The notice and information required pursuant to subsection A of this section and information submitted pursuant to subsection H of this section are public records.

C. Within thirty days after the nonprofit health care entity sends the written notice prescribed in subsection A of this section, the parties to the intended transaction shall:

Select a hearing officer to conduct the public hearing required by this section and determine a time and place within this state for the public hearing with the agreement of the director of the department of health services.
Publish a notice of the time and place for the public hearing at least three consecutive times in at least one newspaper of general circulation in the county in which the nonprofit health care entity has its principal place of business.

D. The hearing officer shall hold the public hearing within ten days after the last publication of the public notice.

E. The purpose of the public hearing is to provide the information described in subsection F of this section and to receive comments from the public and other interested parties.

F. The parties shall present written summary information at the public hearing that sets forth all of the following:

The extent to which the intended transaction impacts community benefit activities and is consistent with community benefit purposes, including a description of the resources that will be committed to community benefit purposes following the intended transaction.
Whether the intended transaction creates or has the likelihood of creating an adverse effect on the access to or availability or cost of health care services.
Whether any director, officer, agent or employee of the entity will receive any community benefit asset or will benefit directly or indirectly from the intended transaction, except for the receipt of compensation for professional services relating to the intended transaction for normal compensation for services rendered.
The extent to which the nonprofit health care entity used due diligence in the selection of the entity that will receive any community benefit asset and in the negotiation of the price and other terms and conditions of the transaction.
The extent to which the parties will continue to use the nonprofit health care entity's community benefit assets for community benefit purposes following the intended transaction, or, if applicable, the proceeds of the disposition of the assets will be deposited in a community benefit organization for community benefit purposes.
Whether any initial board of directors members of any entity changed or created by the intended transaction will reside in or near the communities affected by the intended transaction.
That any community benefit organization established to hold the proceeds of the disposition of assets is organized for community benefit purposes as required under federal and state law.

G. The attorney general may present information at the public hearing.

H. The hearing officer conducting the public hearing shall compile a summary report of the public hearing proceedings and shall transmit the summary report, a notice of completion and copies of all written information presented at the hearing to the director of the department of health services and the attorney general.

I. The parties to the intended transaction shall pay for all costs associated with the hearing officer, notice, publication of notice, public hearing and summary report.

§ 10-11254 Applicability

A. Nothing in this chapter:

Affects the provisions of chapters 24 through 35 and chapters 36 through 40 of this title regarding the corporation commission's acceptance or denial of new, restated or amended articles of incorporation.
Affects the operation of state or federal antitrust laws or the attorney general's enforcement of those laws.
Is intended to create any private or governmental right or cause of action relating to the transaction or related parties.

B. This chapter does not apply to any transactions for which a letter of intent or memorandum of understanding or similar documentation was executed on or before December 31, 1996.

Chapter 36 Distributions-Nonprofit Corporations

Article 1 General Provisions

§ 10-11301 Prohibited distributions

Except as authorized by section 10-11302, a corporation shall not make any distributions.

§ 10-11302 Authorized distributions

A. A corporation may purchase its memberships if after the purchase is completed both:

The corporation would be able to pay its debts as the debts become due in the usual course of its activities.
The corporation's total assets would at least equal the sum of its total liabilities.

B. A corporation may make distributions on dissolution that conform to chapter 37 of this title.

C. A corporation may make distributions to members who are domestic or foreign nonprofit corporations if after the distribution is made both:

The corporation would be able to pay its debts as the debts become due in the usual course of its activities.
The corporation's total assets would at least equal the sum of its total liabilities.

Chapter 37 Dissolution-Nonprofit Corporations

Article 1 Voluntary Dissolution

§ 10-11401 Dissolution by incorporators or directors and third persons

A. A majority of the incorporators or initial directors of a corporation that has not commenced activities or the board of directors of a corporation that has no members or has no members entitled to vote on dissolution or that has not commenced activities may dissolve the corporation by delivering to the commission for filing articles of dissolution. An incorporator or a director, whose signature shall be acknowledged, shall execute the articles of dissolution, and the articles shall set forth all of the following:

The name of the corporation.
The date of its incorporation.
Either:

(a) That the corporation has no members.

(b) That the corporation has no members entitled to vote on dissolution.

That the dissolution was duly authorized by act of the board of directors or a majority of the incorporators or initial directors and, if required by section 10-11030, act of any other persons.

B. The board of directors, incorporators or initial directors in approving the dissolution shall adopt a plan of dissolution indicating to whom the assets owned or held by the corporation will be distributed after all creditors have been paid.

C. Authorization of dissolution pursuant to this section shall require the approval in writing by any person or persons whose approval is required for dissolution.

§ 10-11402 Dissolution by directors and third persons

A. If the members of the corporation are entitled to vote on dissolution, a corporation's board of directors may propose dissolution for submission to the members.

B. For a proposal to dissolve to be adopted all of the following shall have occurred:

The board of directors shall recommend dissolution to the members, unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the members.
The members entitled to vote shall approve the proposal to dissolve as provided in subsection E or F of this section.
Each person whose approval is required by the articles of incorporation for dissolution shall approve the plan in writing.

C. The board of directors may condition its submission of the proposal for dissolution on any basis.

D. The corporation shall notify each member of the proposed membership meeting in accordance with section 10-3705. The notice shall also state that the purpose or one of the purposes of the meeting is to consider dissolving the corporation and shall contain or be accompanied by a copy or summary of the plan of dissolution.

E. Unless the articles of incorporation or the board of directors acting pursuant to subsection C of this section requires a greater vote or voting by class, in order to adopt the proposal to dissolve a majority of the votes cast or a majority of the voting power, whichever is less, shall approve the proposal to dissolve.

F. If the board of directors submits the dissolution for member action by written consent or written ballot, the material soliciting the approval shall contain or be accompanied by a copy or summary of the plan of dissolution.

G. The plan of dissolution shall indicate to whom the assets owned or held by the corporation will be distributed after all creditors have been paid.

§ 10-11403 Articles of dissolution

A. At any time after dissolution is authorized, the corporation may dissolve by delivering to the commission articles of dissolution setting forth all of the following:

The name of the corporation.
The date dissolution was authorized.
A statement that the dissolution was duly authorized by an act of the members or an act of the board of directors and, if applicable, with the approval required pursuant to section 10-11402.

B. A corporation is dissolved on the effective date of its articles of dissolution.

C. The articles of dissolution shall not be considered complete until all fees, penalties and costs required to be paid under this title have been paid.

D. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the articles of dissolution shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

E. The articles of dissolution are not complete until the commission has received a notice from the department of revenue that the tax levied under title 42, chapter 5, article 1 against the corporation has been paid, or until the department of revenue notifies the commission that the corporation is not subject to the tax and the commission has received from the department of revenue a certificate issued by the department of revenue pursuant to section 43-1151.

F. Notwithstanding subsection C of this section, if an annual report becomes due on or after the first date on which the articles of dissolution are delivered to the commission for filing, the annual report requirement prescribed in section 10-11622 is suspended for a period of six months after the first date on which the articles of dissolution are delivered to the commission for filing. On the expiration of the six-month suspension, if the articles of dissolution are not approved for filing or if the corporation is administratively dissolved pursuant to section 10-11420, paragraph 9, all past due annual reports required by section 10-11622, together with fees, are owed as if the suspension never occurred.

§ 10-11404 Revocation of dissolution

A. A corporation may revoke its dissolution within one hundred twenty days of its effective date.

The name of the corporation.
The effective date of the dissolution that was revoked.
The date that the revocation of dissolution was authorized.
If the corporation's board of directors, or its incorporators or initial directors, revoked the dissolution a statement to that effect.
If the corporation's board of directors revoked a dissolution authorized by the members alone or in conjunction with another person or persons, a statement that revocation was permitted by action by the board of directors alone pursuant to that authorization.
If member or third person action was required to revoke the dissolution, a statement that revocation was permitted by act of the members and act of each third person, as applicable.

D. Revocation of dissolution is effective on the effective date of the articles of revocation of dissolution.

E. When the revocation of dissolution is effective, it relates back to and takes effect as of the effective date of the dissolution and the corporation resumes carrying on its activities as if dissolution had never occurred.

§ 10-11405 Effect of dissolution

A. A dissolved corporation continues its corporate existence but shall not carry on any activities except that activity appropriate to wind up and liquidate its affairs, including:

Preserving and protecting its assets and minimizing its liabilities.
Discharging or making provision for discharging its liabilities and obligations.
Disposing of its properties that will not be distributed in kind.
Returning, transferring or conveying assets held by the corporation on a condition requiring return, transfer or conveyance, which condition occurs by reason of the dissolution, in accordance with such condition.
Transferring, subject to any contractual or legal requirements, its assets as provided in or authorized by its articles of incorporation or bylaws.
If no provision has been made in its articles of incorporation or bylaws for distribution of assets on dissolution and the corporation is organized for charitable, religious, eleemosynary, benevolent, educational or similar purposes, to one or more domestic or foreign corporations, societies or organizations engaged in activities substantially similar to those of the dissolving corporation.
If no provision has been made in its articles of incorporation or bylaws for distribution of assets on dissolution, transferring its assets to its members or, if it has no members, to those persons whom the corporation holds itself out as benefitting or serving.
Doing every other act necessary to wind up and liquidate its assets and affairs.

B. Dissolution of a corporation does not:

Transfer title to the corporation's property, except as provided in section 10-11421.
Subject its directors or officers to standards of conduct that are different from those prescribed in chapter 31 of this title.
Change quorum or voting requirements for its board of directors or members, change provisions for selection, resignation or removal of its directors or officers, or both, or change provisions for amending its bylaws.
Prevent commencement of a proceeding by or against the corporation in its corporate name or any officers, directors or members or affect applicable statutes of limitations.
Abate or suspend a proceeding pending by or against the corporation or any officers, directors or members on the effective date of dissolution.
Terminate the authority of the statutory agent of the corporation.

§ 10-11406 Known claims against dissolved corporation

A. A dissolved corporation may dispose of the known claims against it by following the procedure described in this section.

B. The dissolved corporation shall notify its known claimants in writing of the dissolution at any time and from time to time after its effective date. The written notice shall:

Describe information that shall be included in a claim.
Provide a mailing address where a claim may be sent.
State the deadline, which may not be fewer than one hundred twenty days from the effective date of the written notice, by which the dissolved corporation must receive the claim.
State that the claim will be barred if not received by the deadline.

C. A claim against the dissolved corporation is barred either:

If a claimant who was given written notice under subsection B of this section does not deliver the claim to the dissolved corporation by the deadline.
If a claimant whose claim was rejected by the dissolved corporation does not commence a proceeding to enforce the claim within ninety days from the effective date of the rejection notice.

D. For purposes of this section, claim does not include a contingent claim. Notwithstanding the foregoing, a claim that is contingent as of the effective date of dissolution but later ripens into a known claim or a claim based on an event occurring after the effective date of dissolution may be disposed of at such later time by the dissolved corporation by following the procedures described in subsections B and C.

§ 10-11407 Unknown claims against dissolved corporation

A. A dissolved corporation may also publish notice of its dissolution and request that persons with claims against the corporation present them in accordance with the notice.

B. The notice shall:

Be published one time in a newspaper of general circulation in the county where the dissolved corporation's known place of business is or was last located.
Describe the information that must be included in a claim and provide a mailing address where the claim may be sent.
State that a claim against the corporation will be barred unless a proceeding to enforce the claim is commenced within five years after the publication of the notice.

A claimant who did not receive written notice under section 10-11406.
A claimant whose claim was timely sent to the dissolved corporation but not acted on.
A claimant whose claim is contingent or based on an event occurring after the effective date of dissolution and is not disposed of in accordance with section 10-11406, subsection D.

D. If a claim, including a contingent claim or a claim based on an event occurring after the effective date of dissolution, is not barred by section 10-11406 or this section, the claim may be enforced either:

Against the dissolved corporation to the extent of its undistributed assets.
If the assets have been distributed in liquidation, against any person, other than a creditor of the corporation, to whom the corporation distributed its property to the extent of the distributee's pro rata share of the claim or the corporate assets distributed to that person in liquidation, whichever is less, but the distributee's total liability for all claims under this section shall not exceed the total amount of assets distributed to the distributee.

Article 2 Administrative Dissolution

§ 10-11420 Grounds for administrative dissolution

The commission may commence a proceeding under section 10-11421 to administratively dissolve a corporation if either:

The corporation does not pay within sixty days after they are due any fees or penalties imposed by chapters 24 through 40 of this title.
The corporation does not deliver its annual report to the commission within sixty days after it is due.
The corporation is without a statutory agent or known place of business in this state.
The corporation does not notify the commission within sixty days that its statutory agent or known place of business has been changed, that its statutory agent has resigned or that its known place of business has been discontinued.
The corporation has failed to make any publication required by this title, provided the commission has notified the corporation of the intent of the commission to commence a dissolution proceeding for that reason and the corporation has failed to file an affidavit or other appropriate evidence of publication within sixty days after that notice.
The corporation's period of duration stated in its articles of incorporation expires.
The corporation has failed to comply with section 10-3202, subsection F.
Any officer or other representative of the corporation has made any misrepresentation of a material matter in any application, report or other document submitted by the corporation pursuant to chapters 24 through 40 of this title.
The commission has not received the notice required by section 10-11403, subsection E within six months after filing articles of dissolution.
The corporation has failed to file a certificate of disclosure or answer interrogatories as prescribed in chapters 24 through 40 of this title.
The corporation failed to comply with section 10-11623, subsection A.

§ 10-11421 Procedure for and effect of administrative dissolution

A. If the commission determines that one or more grounds exist under section 10-11420 for dissolving a corporation, it shall serve the corporation with written notice of its determination under section 10-3504.

B. If the corporation does not correct each ground for dissolution or demonstrate to the reasonable satisfaction of the commission that each ground determined by the commission does not exist within sixty days after service of the notice is perfected under section 10-3504, the commission shall administratively dissolve the corporation by signing a certificate of dissolution that recites the ground or grounds for dissolution and its effective date. The commission shall file the original of the certificate and serve a copy on the corporation under section 10-3504. If the corporation that has been dissolved is a utility providing domestic water services or domestic wastewater services and the corporation has been dissolved for at least three years, after notice to interested parties, opportunity for objection and hearing before the commission, the assets of the corporation may be transferred by the commission to a domestic water improvement district or a domestic wastewater improvement district established pursuant to title 48, chapter 6 or to a municipality incorporated pursuant to title 9, chapter 1, on receipt by the commission of a written request from the governing body of the district or municipality.

C. Subject to the provisions of section 10-11422 regarding reinstatement, a corporation administratively dissolved continues its corporate existence but may not carry on any activities except those necessary to wind up and liquidate its affairs under section 10-11405 and notify its claimants under sections 10-11406 and 10-11407. If the corporation has not applied for reinstatement within six months after the effective date of the dissolution, the commission shall release the corporate name for use in accordance with chapters 24 through 40 of this title or by a person intending to register the name as a trade name pursuant to title 44, chapter 10, article 3.1.

D. The administrative dissolution of a corporation does not terminate the authority of its statutory agent.

§ 10-11422 Reinstatement following administrative dissolution

A. A corporation administratively dissolved under section 10-11421 may apply to the commission for reinstatement within six years after the effective date of dissolution unless the corporation is a utility providing domestic water services or domestic wastewater services and the assets of the corporation have been transferred to a domestic water improvement district or a domestic wastewater improvement district established pursuant to title 48, chapter 6 or to a municipality incorporated pursuant to title 9, chapter 1. The application shall both:

Recite the name of the corporation and the effective date of its administrative dissolution.
State that the ground or grounds for dissolution either did not exist or have been eliminated.

B. If the commission determines that the application contains the information required by subsection A of this section and that the information is correct, the commission shall cancel the certificate of dissolution and prepare a certificate of reinstatement that recites this determination and the effective date of reinstatement, file the original of the certificate and serve a copy on the corporation under section 10-3504.

C. When reinstatement is effective, it relates back to and takes effect as of the effective date of the administrative dissolution and the corporation shall resume carrying on its activities as if the administrative dissolution had never occurred.

D. If another corporation has adopted the name of the corporation or another person has adopted the name of the corporation as a trade name, the application shall be accompanied by articles of amendment that are in accordance with chapter 33, article 1 of this title and that adopt a new name for the corporation that complies with chapter 27, article 1 of this title.

Article 3 Judicial Dissolution

§ 10-11430 Grounds for judicial dissolution

A. The court may dissolve a corporation in a proceeding by the attorney general if it is established that either:

The corporation obtained its articles of incorporation through fraud.
The corporation has continued to exceed or abuse the authority conferred upon it by law.

B. Except as provided in the articles of incorporation or bylaws of a corporation organized primarily for religious purposes, the court may dissolve a corporation in a proceeding by fifty members or by members holding twenty-five per cent of the voting power, whichever is less, or by a director or any person specified in the articles of incorporation, if any of the following is established:

The directors are deadlocked in the management of the corporate affairs, the members, if any, are unable to breach the deadlock and irreparable injury to the corporation is threatened or being suffered or the affairs of the corporation cannot be conducted generally because of the deadlock.
The directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent.
The members are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates to elect successors to directors whose terms have or would otherwise have expired.
The corporate assets are being wasted, misapplied or diverted for noncorporate purposes.

C. The court may dissolve a corporation in a proceeding by a creditor if it is established that either:

The creditor's claim has been reduced to a judgment, the execution on the judgment has been returned unsatisfied and the corporation is insolvent.
The corporation has admitted in writing that the creditor's claim is due and owing and the corporation is insolvent.

D. The court may dissolve a corporation in a proceeding by the corporation to have its voluntary dissolution continued under court supervision.

§ 10-11431 Procedure for judicial dissolution

A. Venue for a proceeding by the attorney general to dissolve a corporation or for a proceeding brought by any other party named in section 10-11430 is in the county where a corporation's known place of business is or was last located.

B. It is not necessary to make directors or members parties to a proceeding to dissolve a corporation unless relief is sought against them personally.

C. A court in a proceeding brought to dissolve a corporation may issue injunctions, appoint a receiver with all powers and duties the court directs, take other action required to preserve the corporate assets wherever located and carry on the activities of the corporation until a full hearing can be held.

§ 10-11432 Receivership

A. A court in a judicial proceeding brought to dissolve a corporation may appoint one or more receivers to wind up and liquidate or manage the affairs of the corporation. After notifying all parties to the proceeding and any interested persons designated by the court, the court shall hold a hearing before appointing a receiver. The court appointing a receiver has exclusive jurisdiction over the corporation and all of its property wherever located.

B. The court may appoint an individual or a domestic or foreign business or nonprofit corporation authorized to transact business in this state as a receiver. The court may require the receiver to post bond, with or without sureties in an amount the court directs.

C. The court shall describe the powers and duties of the receiver in its appointing order, which may be amended from time to time. Among other powers, the receiver may exercise all of the powers of the corporation, through or in place of its board of directors, executive committee or officers, to the extent necessary to carry on the ordinary and necessary activities of the corporation and to manage the affairs of the corporation in the best interests of its members and creditors.

E. A receiver of a corporation may sue and defend in all courts in his own name as receiver of such corporation.

§ 10-11433 Decree of dissolution

A. If after a hearing the court determines that one or more of the grounds for judicial dissolution described in section 10-11430 exist, it may enter a decree that dissolves the corporation and specifies the effective date. The clerk of the court shall deliver a certified copy of the dissolution decree to the commission which shall file it.

B. After entering the decree of dissolution, the court shall direct the winding up and liquidation of the corporation's affairs in accordance with section 10-11405 and the notification of claimants in accordance with sections 10-11406 and 10-11407.

Article 4 Miscellaneous

§ 10-11440 Deposit with department of revenue

A. Assets of a dissolved corporation that should be transferred to a creditor, claimant or member of the corporation who cannot be found or who is not competent to receive them and does not have a legal representative who is legally competent to receive them shall be reduced to cash subject to known trust restrictions and deposited with the unclaimed property division of the department of revenue for safekeeping.

B. Notwithstanding subsection A, in the discretion of the unclaimed property division of the department of revenue property may be received and held in kind.

C. If the creditor, claimant, member or legal representative who is legally competent to receive the distributive portion furnishes satisfactory proof of entitlement to the amount deposited or property held in kind, the unclaimed property division of the department of revenue shall pay the creditor, member or legal representative that amount or property.

Chapter 38 Foreign Corporations-Nonprofit Corporations

Article 1 Grant of Authority

§ 10-11501 Authority to conduct affairs required

A. A foreign corporation shall not conduct affairs in this state until it is granted authority to transact business in this state as provided in this chapter from the commission.

B. The following activities, among others, do not constitute conducting affairs within the meaning of subsection A:

Maintaining, defending or settling any proceeding.
Holding meetings of the board of directors or members or carrying on other activities concerning internal corporate affairs.
Maintaining bank accounts.
Maintaining offices or agencies for the transfer, exchange and registration of memberships or securities or maintaining trustees or depositaries with respect to those securities.
Selling through independent contractors.
Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts.
Creating or acquiring indebtedness, mortgages and security interests in real or personal property.
Securing or collecting debts or enforcing mortgages and security interests in property securing the same.
Owning, without more, real or personal property.
Conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like nature.
Conducting affairs in interstate commerce.
Being a limited partner of a limited partnership or a member of a limited liability company.

C. The list of activities in subsection B is not exhaustive.

§ 10-11502 Consequences of conducting affairs without authority

A. A foreign corporation conducting affairs in this state without a grant of authority shall not be permitted to maintain a proceeding in any court in this state until it is authorized to transact business.

B. The successor to a foreign corporation that transacted business in this state without a grant of authority and the assignee of a cause of action arising out of that business may not maintain a proceeding on that cause of action in any court in this state until the foreign corporation or its successor obtains authority to transact business.

D. A foreign corporation that conducts affairs in this state without authority is liable to this state, for the years or portions of years during which it transacted business in this state without authority, in an amount equal to all fees that would have been imposed by chapters 24 through 40 of this title on the corporation if it had duly applied for and received authority to conduct business in this state as required by chapters 24 through 40 of this title and thereafter filed all reports required by chapters 24 through 40 of this title. In addition to all penalties imposed by chapters 24 through 40 of this title for failure to pay the fees, the corporation shall pay a penalty of up to one thousand dollars to this state for violating this section. The attorney general may bring proceedings to recover all amounts due this state under this section.

E. Notwithstanding subsections A and B of this section, the failure of a foreign corporation to obtain authority to transact business in this state does not impair the validity of its corporate acts or prevent it from defending any proceedings in this state.

F. The attorney general or any other person may bring and maintain an action to enjoin any foreign corporation from transacting business in this state without authority. On a foreign corporation obtaining authority, the action shall be dismissed, but the plaintiff shall recover its costs and reasonable attorney fees. A determination by a court of competent jurisdiction in this state that a party to the action is a foreign corporation that was required but failed to qualify as a foreign corporation under chapters 24 through 40 of this title is a prima facie evidence against the foreign corporation in any other action brought by or against it by any other person of the requirement to and failure to qualify.

§ 10-11503 Application for certificate of authority

A. A foreign corporation may apply for authority to conduct affairs in this state by delivering an application and a certificate of disclosure to the commission for filing. The certificate of disclosure shall contain the information set forth in section 10-3202, subsection D and is subject to the requirements of section 10-3202, subsection F. The application shall be executed by the corporation and shall set forth:

The name of the foreign corporation and, if its name is unavailable for use in this state, a corporate name that satisfies the requirements of section 10-11506.
The name of the state or country under whose law it is incorporated.
Its date of incorporation and period of duration.
The street address of its principal office in its state or country of incorporation.
The street address of the proposed known place of business of the corporation in this state and the name and street address of its proposed statutory agent in this state.
If its purpose or purposes are narrower than the transaction of any or all lawful affairs in which corporations may engage in the state or country under whose law it is incorporated, a statement of the limitations on its purpose.
The names and usual business addresses of its current directors and officers.
Whether the foreign corporation has members.
A brief statement of the character of business that the corporation initially intends actually to conduct in this state. This statement does not limit the character of business that the corporation ultimately conducts.

C. After determining that the application sets forth the information required by this section, does not use as the name of the corporation in this state a name that is in violation of section 10-11506 and appears in all other respects to conform to the requirements of this article, the commission shall file the application. The date of filing shall be the date on which the corporation is granted authority to transact business in this state.

D. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the application shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

E. A foreign corporation authorized to transact business in this state is subject to section 10-11623.

§ 10-11504 Delivery of changes; changes requiring amendment to application for authority

A. Whenever the articles of incorporation of a foreign corporation authorized to conduct affairs in this state are amended or restated by merger or otherwise, within sixty days after the amendment or restatement becomes effective, the foreign corporation shall deliver to the commission a copy of the amendment or restatement duly authenticated by the secretary of state or other official having custody of corporate records in the state or country where the foreign corporation is incorporated.

B. In addition to the requirement prescribed in subsection A of this section, a foreign corporation authorized to conduct affairs in this state shall amend its application for authority by filing with the commission articles of amendment to application for authority if any of the following occurs:

The foreign corporation changes its actual corporate name under which it has obtained authority to conduct affairs in this state pursuant to section 10-11503, subsection A, paragraph 1.
The foreign corporation changes its period of duration.
The foreign corporation changes its state or country of incorporation.
A statement in the application for authority was inaccurate when made.

§ 10-11505 Effect of grant of authority

A. A grant of authority to conduct affairs authorizes the foreign corporation to conduct affairs in this state subject to the right of the state to revoke the grant of authority as provided in chapters 24 through 40 of this title.

B. A foreign corporation with a valid grant of authority has the same but no greater rights and enjoys the same but no greater privileges as and except as otherwise provided by chapters 24 through 40 of this title and is subject to the same duties, restrictions, penalties and liabilities now or later imposed on a domestic corporation of like character.

C. Chapters 24 through 40 of this title do not authorize this state to regulate the organization or internal affairs of a foreign corporation authorized to conduct affairs in this state.

§ 10-11506 Corporate name of foreign corporation

A. If the corporate name of a foreign corporation does not satisfy the requirements of section 10-3401, to obtain or maintain a grant of authority to conduct affairs in this state the foreign corporation shall use a fictitious name that satisfies the requirements of section 10-3401 to conduct affairs in this state if its real name is unavailable and it delivers to the commission for filing a copy of the resolution of its board of directors, certified by a duly authorized officer, adopting the fictitious name. The foreign corporation shall not include language in its corporate name stating or implying that the foreign corporation is organized for a purpose other than that allowed by section 10-3301 and its articles of incorporation.

B. Except as authorized by subsections C and D of this section, the corporate name, including a fictitious name, of a foreign corporation shall be distinguishable from:

The corporate name of a corporation incorporated under this title or a foreign nonprofit, not for profit, business or close corporation authorized to transact business or conduct affairs in this state.
A corporate name reserved under section 10-402 or 10-3402 or registered under section 10-403 or 10-3403.
The fictitious name of another foreign business or nonprofit corporation.
The partnership name of a limited partnership organized and registered under the laws of this state or of a foreign limited partnership authorized to transact business in this state.
The name of a limited liability company organized under title 29 or a foreign limited liability company authorized to transact business in this state.
The name of a registered limited liability partnership registered under title 29, chapter 5, article 10 or a foreign registered limited liability partnership authorized to transact business in this state.
A trade name registered pursuant to title 44, chapter 10, article 3.1.

The other corporation consents to the use in writing and submits an undertaking in a form satisfactory to the commission to change its name to a name that is distinguishable from the name of the applying corporation.
The applicant delivers to the commission a certified copy of a final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this state.

Merged with the other corporation.
Been formed by reorganization of the other corporation.
Acquired all or substantially all of the assets, including the corporate name, of the other corporation.

E. Chapters 24 through 42 of this title do not control the use of fictitious names.

F. If a foreign corporation authorized to transact business in this state changes its corporate name to one that does not satisfy the requirements of section 10-3401, it may not transact business in this state under the changed name until it adopts a name satisfying the requirements of section 10-3401 and amends its application for authority under section 10-11504.

§ 10-11507 Known place of business and statutory agent of foreign corporation

Each foreign corporation authorized to conduct affairs in this state shall continuously maintain in this state both:

A known place of business that may be the address of its statutory agent.
A statutory agent who may be either:

(a) An individual who resides in this state.

(b) A domestic business or nonprofit corporation.

(d) A limited liability company formed under title 29.

(e) A limited liability company authorized to transact business in this state.

§ 10-11508 Change of known place of business or statutory agent of foreign corporation

A. A foreign corporation authorized to conduct affairs in this state may change its known place of business or statutory agent by delivering to the commission for filing a statement of change, which may be the annual report, that sets forth:

The name of the foreign corporation.
The street address of its current known place of business.
If the current known place of business is to be changed, the street address of the new known place of business.
The name and street address of its current statutory agent.
If the current statutory agent is to be changed, the name of its new statutory agent and the new agent's written consent to the appointment.

C. If a statutory agent changes its street address it shall give written notice to the foreign corporation of the change and shall sign, either manually or in facsimile, and deliver to the commission for filing a statement that complies with the requirements of subsection A and recites that the foreign corporation has been given written notice of the change. The change or changes are effective on delivery to the commission for filing.

§ 10-11509 Resignation of statutory agent of foreign corporation

A. The statutory agent of a foreign corporation may resign the agency appointment by delivering to the commission for filing an original signed statement of resignation. The statement of resignation may include a disclosure that the known place of business of the foreign corporation has changed or has been discontinued. The statutory agent shall give written notification of the resignation of the foreign corporation at its last known address, other than that of the resigning statutory agent.

B. After the receipt and filing of the statement of resignation, the commission shall mail one copy to the foreign corporation at its known place of business within the state, if not discontinued. The commission shall mail another copy of the statement of resignation to the foreign corporation at its last known office in the jurisdiction of incorporation.

§ 10-11510 Service on foreign corporation

B. If a foreign corporation fails to appoint or maintain a statutory agent at the address shown on the records of the commission, the commission is an agent of the foreign corporation on whom any process, notice or demand may be served. Pursuant to the Arizona rules of civil procedure, service on the commission of any process, notice or demand for an entity that is registered pursuant to this title shall be made by delivering to and leaving with the commission duplicate copies of the process, notice or demand, and the commission shall immediately cause one of the copies of the process, notice or demand to be forwarded by mail, addressed to the foreign corporation at its known place of business. Service made on the commission is returnable pursuant to applicable law relative to personal service on the foreign corporation. If service is made on the commission, whether under this chapter or a rule of court, the foreign corporation has thirty days to respond in addition to the time otherwise provided by law.

D. Notice required to be served on a foreign corporation pursuant to section 10-11531 may be served:

By mail addressed to the statutory agent of the foreign corporation or, if the foreign corporation fails to appoint and maintain a statutory agent, addressed to its known place of business in this state or its principal place of business in its state or country of incorporation.
By electronic transmission to the statutory agent or to the corporation, or both.
Pursuant to the rules for service of process authorized by the Arizona rules of civil procedure.

Article 2 Withdrawal

§ 10-11520 Withdrawal of foreign corporation

A. A foreign corporation authorized to conduct affairs in this state shall not withdraw from this state until the commission files its application for withdrawal.

B. A foreign corporation authorized to conduct affairs in this state may apply to surrender the authority by delivering an application to the commission for filing. The application shall set forth:

The name of the foreign corporation and the name of the state or country under whose law it is incorporated.
That it is not conducting affairs in this state and that it surrenders its authority to conduct affairs in this state.
That the foreign corporation revokes the authority of its statutory agent to accept service on its behalf and appoints the commission as its agent for service of process in any proceeding based on a cause of action arising during the time it was authorized to conduct affairs in this state.
A mailing address to which the commission may mail a copy of any process served on the commission pursuant to its appointment as the foreign corporation's agent for service of process.
A commitment to notify the commission in the future of any change in the foreign corporation's mailing address.

D. The application for withdrawal is not considered complete until all fees, penalties and costs required to be paid under this chapter have been paid.

E. After determining that the application appears in all respects to conform to the requirements of this chapter and when all fees have been paid as are prescribed in this chapter, the commission shall file the application in the manner provided in section 10-3120. On the filing of the application for withdrawal, the authority of the foreign corporation to transact business in this state ceases.

F. Within sixty days after the commission approves the filing, either of the following must occur:

A copy of the application for withdrawal shall be published. An affidavit evidencing the publication may be filed with the commission.
The commission shall input the information regarding the approval into the database as prescribed by section 10-130.

G. After the withdrawal of the corporation is effective, service of process on the commission under this section is service on the foreign corporation. On receipt of process, the commission shall mail a copy of the process to the foreign corporation at the mailing address set forth in its application for withdrawal.

H. Notwithstanding subsection D of this section, if an annual report becomes due on or after the first date on which an application for withdrawal is delivered to the commission for filing, the annual report requirement prescribed in section 10-11622 is suspended for a period of six months after the first date on which the application for withdrawal is delivered to the commission for filing. On expiration of the six-month suspension, if the application for withdrawal is not approved for filing or if the authority of the corporation to conduct affairs is revoked pursuant to section 10-11530, paragraph 10, all past due annual reports required by section 10-11622, together with fees, are owed as if the suspension never occurred.

§ 10-11521 Withdrawal by directors or members; foreign corporations

A. A majority of the directors or members of a foreign corporation that has not commenced conducting affairs in this state may withdraw the foreign corporation by delivering to the commission for filing an application for withdrawal that sets forth all of the following:

The name of the foreign corporation and the name of the state or country under whose laws it is incorporated.
That the foreign corporation revokes the authority of its statutory agent to accept service on its behalf and appoints the commission as its agent for service of process in any proceeding based on a cause of action arising during the time it was authorized to conduct affairs in this state.
A mailing address to which the commission may mail a copy of any process served on the commission pursuant to its appointment as the foreign corporation’s agent for service of process.
A commitment to notify the commission in the future of any change in the foreign corporation’s mailing address.
That the foreign corporation has not conducted affairs in this state and that it surrenders its authority to conduct affairs in this state.
That no debt of the foreign corporation acquired in this state remains unpaid.
That a majority of the directors or members authorized the withdrawal.

B. The application for withdrawal filed pursuant to this section must be executed pursuant to section 10-3120, subsection F.

C. After determining that the application appears in all respects to conform to the requirements of this chapter and when all fees have been paid as are prescribed by this chapter, the commission shall file the application in the manner provided in section 10-3120. On the filing of the application for withdrawal, the authority of the foreign corporation to conduct affairs in this state ceases.

Article 3 Revocation of Certificate of Authority

§ 10-11530 Grounds for revocation

The commission may commence a proceeding under section 10-11531 to revoke the authority of a foreign corporation to conduct affairs in this state if any of the following conditions exist:

The foreign corporation does not deliver the annual report to the commission within the time required by chapters 24 through 40 of this title.
The foreign corporation does not pay any fees or penalties imposed by chapters 24 through 40 of this title when they become due and payable.
The foreign corporation is without a statutory agent or known place of business in this state for sixty days or more.
The foreign corporation does not inform the commission that its statutory agent or its known place of business has changed or that its statutory agent has resigned within sixty days after the change or resignation.
The foreign corporation has failed to make any publication required by this title, provided the commission has notified the foreign corporation of the intent of the commission to commence a revocation proceeding for that reason and the foreign corporation has failed to file an affidavit or other appropriate evidence of publication within sixty days after that notice.
An incorporator, director, officer or agent of the foreign corporation signed a document such person knew was false in any material respect with intent that the document be delivered to the commission for filing.
The commission receives a duly authenticated certificate from the secretary of state or other official having custody of corporate records in the state or country under whose law the foreign corporation is incorporated stating that it has been dissolved or disappeared as the result of a merger.
The corporation has failed to file a certificate of disclosure or answer interrogatories as prescribed in chapters 24 through 40 of this title.
Any officer or other representative of the corporation has made any misrepresentation of a material matter in any application, report or other document submitted by the corporation pursuant to chapters 24 through 40 of this title.
The corporation has failed to pay fees, penalties and costs required under this chapter or to comply with section 10-11520, subsection F or the commission has not received the notice required by section 10-11520, subsection C within six months after filing the application for withdrawal.

§ 10-11531 Procedure for and effect of revocation; reinstatement

A. If the commission determines that one or more grounds exist under section 10-11530 for revocation of a grant of authority, the commission shall serve the foreign corporation with written notice of the determination under section 10-11510.

B. If the foreign corporation does not correct each ground for revocation or demonstrate to the reasonable satisfaction of the commission that each ground for revocation determined by the commission does not exist within sixty days after service of the notice is perfected under section 10-11510, the commission may revoke the foreign corporation's grant of authority by signing a certificate of revocation that recites the ground or grounds for revocation and its effective date. The commission shall file the original of the certificate and serve a copy on the foreign corporation under section 10-11510.

C. The authority of a foreign corporation to conduct affairs in this state ceases on the date shown on the certificate revoking its grant of authority.

D. The commission's revocation of a foreign corporation's grant of authority appoints the commission the foreign corporation's agent for service of process in any proceeding based on a cause of action that arose during the time the foreign corporation was authorized to conduct affairs in this state. Service of process on the commission under this subsection is service on the foreign corporation. On receipt of process, the commission shall mail a copy of the process to the secretary of the foreign corporation at its principal office shown in its most recent annual report or in any subsequent communication received from the foreign corporation stating the current mailing address of its principal office, or, if none is on file, in its application for authority.

E. Revocation of a foreign corporation's grant of authority does not terminate the authority of the statutory agent of the corporation.

F. A foreign corporation whose authority is revoked pursuant to this section may apply to the commission for reinstatement within six years after the effective date of the revocation. The application shall state both:

The name of the foreign corporation and the effective date of the foreign corporation's revocation of authority.
That the ground or grounds for the revocation either did not exist or have been eliminated.

Cancel the certificate of revocation.
Prepare a certificate of reinstatement that states the determination and the effective date of the reinstatement.
File the original of the certificate of reinstatement.
Serve a copy on the foreign corporation pursuant to section 10-11510.

H. After the reinstatement becomes effective, the reinstatement relates back to and takes effect as of the effective date of the revocation, and the foreign corporation shall resume its business as if the revocation had never occurred.

I. If the corporation has not applied for reinstatement within six months after the effective date of the dissolution, the commission shall release the corporation name pursuant to chapters 24 through 40 of this title or for use by a person intending to register the name as a trade name pursuant to title 44, chapter 10, article 3.1. If another corporation has adopted the name of the foreign corporation or another person has adopted the name of the foreign corporation as a trade name, the foreign corporation shall attach to the application for reinstatement articles of amendment to application for authority and shall adopt a fictitious name for use in this state that satisfies the requirements of sections 10-11504 and 10-11506.

Chapter 39 Records and Reports-Nonprofit Corporations

Article 1 Records

§ 10-11601 Corporate records

A. A corporation shall keep as permanent records minutes of all meetings of its members and board of directors, a record of all actions taken by the members or board of directors without a meeting and a record of all actions taken by a committee of the board of directors on behalf of the corporation.

B. A corporation shall maintain appropriate accounting records.

C. A corporation or its agent shall maintain a record of its members in a form that permits preparation of a list of the names and addresses of all members and in alphabetical order by class of membership showing the number of votes each member is entitled to cast and the class of memberships held by each member.

D. A corporation shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time.

E. A corporation shall keep a copy of all of the following records at its principal office, at its known place of business or at the office of its statutory agent:

Its articles or restated articles of incorporation and all amendments to them currently in effect.
Its bylaws or restated bylaws and all amendments to them currently in effect.
Resolutions adopted by its board of directors relating to the characteristics, qualifications, rights, limitations and obligations of members or any class or category of members.
The minutes of all members' meetings and records of all actions taken by members without a meeting for the past three years.
All written communications to members generally within the past three years, including the financial statements furnished for the past three years under section 10-11620.
A list of the names and business addresses of its current directors and officers.
Its most recent annual report delivered to the commission under section 10-11622.
An agreement among members under section 10-3732.

§ 10-11602 Inspection of records by members; applicability

A. Subject to subsections E and F of this section, any member who has been a member of record at least six months immediately preceding its demand is entitled to inspect and copy any of the records of the corporation described in section 10-11601, subsection E during regular business hours at the corporation's principal office, if the member gives the corporation written notice of its demand as provided in section 10-3141 at least five business days before the date on which the member wishes to inspect and copy.

B. Subject to subsections E and F of this section, a member who has been a member of record at least six months immediately preceding its demand is entitled to inspect and copy any of the following records of the corporation during regular business hours at a reasonable location specified by the corporation, if the member meets the requirements of subsection C of this section and gives the corporation written notice of its demand as provided in section 10-3141 at least five business days before the date on which the member wishes to inspect and copy the following:

Excerpts from any records required to be maintained under section 10-11601, subsection A, to the extent not subject to inspection under subsection A of this section.
Accounting records of the corporation.
Subject to section 10-11605, the membership list described in section 10-11601, subsection C.
The corporation's most recent financial statements showing in reasonable detail its assets and liabilities and the results of its operations.

C. A member may inspect and copy the records identified in subsection B of this section only if the following conditions are met:

The member's demand is made in good faith and for a proper purpose.
The member describes with reasonable particularity the member's purpose and the records the member desires to inspect.
The records are directly connected with the member's purpose.

D. This section does not affect either:

The right of a member to inspect records under section 10-3720 or, if the member is in litigation with the corporation, to the same extent as any other litigant.
The power of a court, independently of chapters 24 through 40 of this title, to compel the production of corporate records for examination on proof by a member of proper purpose.

E. The articles of incorporation or bylaws of a corporation organized primarily for religious purposes may limit or abolish the right of a member under this section to inspect and copy any corporate record.

F. Unless the board of directors has provided express permission to the member, a member of a corporation that is a rural electric cooperative is not entitled to inspect or copy any records, documents or other materials that are maintained by or in the possession of the corporation and that relate to any of the following:

Personnel matters or a person's medical records.
Communications between an attorney for the corporation and the corporation.
Pending or contemplated litigation.
Pending or contemplated matters relating to enforcement of the corporation's documents or rules.

G. This section does not apply to any corporation that is a condominium as defined in section 33-1202 or a planned community as defined in section 33-1802.

H. This section does not apply to timeshare plans or associations that are subject to title 33, chapter 20.

§ 10-11603 Scope of inspection rights; charge

A. A member's agent or attorney has the same inspection and copying rights as the member the agent or attorney represents.

B. The right to copy records under section 10-11602 includes, if reasonable, the right to receive copies made by photographic, xerographic or other means.

C. The corporation may impose a reasonable charge covering the costs of labor and material for copies of any documents provided to the member. The charge shall not exceed the estimated cost of production or reproduction of the records.

D. The corporation may comply with a member's demand to inspect the record of members under section 10-11602, subsection B, paragraph 3 by providing the member with a list of the corporation's members that was compiled no earlier than the date of the member's demand.

§ 10-11604 Court ordered inspection

A. If a corporation does not allow a member who complies with section 10-11602, subsection A to inspect and copy any records required by that subsection to be available for inspection, the court in the county where the corporation's known place of business is located may summarily order inspection and copying of the records demanded at the corporation's expense upon application of the member.

B. If a corporation does not allow within a reasonable time a member to inspect and copy any other record, the member who complies with section 10-11602, subsections B and C may apply to the court in the county where the corporation's known place of business is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis.

C. If the court orders inspection and copying of the records demanded, it shall also order the corporation to pay the member's costs, including reasonable attorney fees, incurred to obtain the order, unless the corporation proves that it refused inspection in good faith because it had a reasonable basis for doubt about the right of the member to inspect the records demanded. The court may order a member to pay all or a portion of the corporation's costs, including reasonable attorney fees, if the demand to inspect is denied in whole or in material part.

D. If the court orders inspection and copying of the records demanded, it may impose reasonable restrictions on the use or distribution of the records by the demanding member.

§ 10-11605 Limitations on use of membership list; applicability

A. Without the consent of the board of directors, no person may obtain or use a membership list or any part of the membership list for any purpose unrelated to a member's interest as a member.

B. Without the consent of the board of directors, the membership list or any part of the membership list shall not be:

Used to solicit money or property, unless the money or property will be used solely to solicit the votes of the members in an election to be held by the corporation.
Used for any commercial purpose.
Sold to or purchased by any person.

C. This section does not apply to timeshare plans or associations that are subject to title 33, chapter 20.

Article 2 Reports

§ 10-11620 Financial statements for members

A. Except as provided in the articles of incorporation or bylaws of a corporation organized primarily for religious purposes, a corporation on written demand from a member shall furnish that member its latest annual financial statements that may be consolidated or combined statements of the corporation and one or more of its subsidiaries or affiliates, as appropriate, and that include a balance sheet as of the end of the fiscal year and statement of operations for that year. If financial statements are prepared for the corporation on the basis of generally accepted accounting principles, the annual financial statements shall also be prepared on that basis.

Stating that person's reasonable belief whether the statements were prepared on the basis of generally accepted accounting principles and, if not, describing the basis of preparation.
Describing any respects in which the statements were not prepared on a basis of accounting consistent with the statements prepared for the preceding year.

§ 10-11621 Report of indemnification to members

If a corporation indemnifies or advances expenses to a director under sections 10-3851 through 10-3854, the corporation shall report the indemnification or advance in writing to the members with or before the notice of the next meeting of members. Failure to report under this section does not invalidate otherwise valid indemnification.

§ 10-11622 Annual report

A. Each domestic corporation and each foreign corporation authorized to conduct affairs in this state shall deliver to the commission for filing an annual report that sets forth all of the following:

The name of the corporation and the state or country under whose law it is incorporated.
The address of its known place of business and the name and address of its agent in this state.
The address of its principal office.
The names and business addresses of its directors and principal officers.
A brief description of the nature of its activities.
Whether or not it has members.
A certificate of disclosure containing the information set forth in section 10-3202, subsection D.
A statement that all corporate income tax returns required by title 43 have been filed with the department of revenue.

B. A unit owners' association that is subject to title 33, chapter 9 or a planned community association that is subject to title 33, chapter 16 shall attach to and submit with the annual report a separate statement containing the name of the designated agent or management company for the association, the address for the association and the telephone number, e-mail address and website if any and fax number if any of the association or its designated agent or management company. Unit owners' associations and planned community associations shall file an amended statement reflecting changes in designated agent or management company within thirty days of any change.

C. The information in the annual report and the separate statement that is prescribed by subsection B of this section shall be current as of the date the annual report and separate statement are executed on behalf of the corporation.

D. The annual report for all corporations shall be delivered to the commission for filing, and the annual fee shall be paid on or before the date assigned by the commission. The commission may stagger the annual report filing date for all corporations and adjust the annual fee on a pro rata basis. The corporation shall deliver the annual report to the commission for filing each subsequent year in the anniversary month on the date assigned by the commission. If a corporation is unable to file the annual report required by this section on or before the date prescribed by this section, the corporation may file, but only on or before this date, a written request with the commission for an extension of time, not to exceed six months, in which to file the annual report. The request for an extension of time shall be accompanied by the annual registration fee required by law. After filing the request for an extension of time and on receipt of the annual registration fee, the commission shall grant the request.

E. If an annual report does not contain the information requested by this section, the commission shall promptly notify the reporting domestic or foreign corporation in writing and shall return the report to it for correction. If the report is corrected to contain the information required by this section and delivered to the commission within thirty days after the effective date of notice, it is deemed to be timely filed.

F. Any corporation that is exempt from the requirement of filing an annual report shall deliver annually a certificate of disclosure that contains the information set forth in section 10-3202, subsection D and that is executed by any two executive officers or directors of the corporation on or before May 31. If the certificate is not delivered within ninety days after the due date of the annual report or within ninety days after May 31 in the case of any corporation that is exempt from the requirement of filing an annual report, the commission shall initiate administrative dissolution of that corporation or revoke the application for authority of that corporation pursuant to chapters 24 through 40 of this title.

§ 10-11623 Statement of bankruptcy or receivership; interrogatories before subsequent incorporation; violation; classification; definition

A. On the filing of a petition for bankruptcy or the appointment of a receiver for any corporation, the corporation shall deliver a statement to the commission listing:

All officers, directors and trustees of the corporation within one year of filing the petition for bankruptcy or the appointment of a receiver.
Whether any such person has been an officer, director or trustee of any other corporation within one year of the bankruptcy or receivership of the other corporation.
If the answer in paragraph 2 of this subsection is in the affirmative, for each such corporation the following information:

(a) Name and address.

(b) States in which it:

(i) Was incorporated.

(ii) Conducted affairs.

B. The commission shall maintain a suitably indexed list of all such persons. The index shall be a public record of the commission for purposes of title 39.

C. On receipt of the articles of incorporation of a new corporation or application for authority to conduct affairs by a foreign corporation, the commission shall determine whether any person, proposed as an officer, director, trustee or incorporator of the new or foreign corporation has been involved two or more times in a corporate bankruptcy, receivership, administrative dissolution, revocation or judicial dissolution commenced by any state. If so, the commission shall direct detailed interrogatories to those persons requiring any additional relevant information deemed necessary by the commission and at the same time provide public notice of the interrogatory procedure. Any person may request additional interrogatories or may provide additional information to the commission. The interrogatories shall be completely answered within thirty days after mailing. With respect to corporations incorporated or seeking authority to conduct affairs, articles of incorporation or application for authority shall not be filed until all outstanding interrogatories have been answered to the satisfaction of the commission.

D. Any applicant for filing articles of incorporation authority to conduct affairs who is dissatisfied with a determination of the commission or any other proceeding under this section may demand and the commission or its designee shall convene a public hearing at the county seat of the county of the corporate headquarters of the proposed corporation. The commission shall give public notice of the hearing at least twenty days before the hearing by publication in a newspaper of general circulation in any county in which a relevant prior bankruptcy or receivership occurred.

E. On a quarterly updated basis the commission shall provide the attorney general with a copy of statements furnished pursuant to subsection A and answers to interrogatories propounded pursuant to subsection C.

Article 3 Miscellaneous Provisions

§ 10-11630 Certificate of good standing; license and registration renewal

§ 10-11631 Civil liability for false statements

A. If any report, certificate or other statement made or public notice given by the officers or directors of a corporation is false in a material representation or if any book, record or account of the corporation is knowingly or wrongfully altered, the officers, directors or agents knowingly or wrongfully authorizing, signing or making the false report, certificate, other statement or notice or authorizing or making the wrongful alteration are jointly and severally personally liable to a person who has become a creditor or member of the corporation on the faith of the false material representation or alteration for all damages resulting.

§ 10-11632 Interrogatory or signature violations; corporate records; classification

§ 10-11633 Interrogatories by the commission

The commission may propound to any domestic or foreign corporation subject to chapters 24 through 40 of this title and to any officer or director of the corporation interrogatories as may be reasonably necessary and proper to enable it to ascertain whether the corporation complied with all of the provisions of chapters 24 through 40 of this title applicable to the corporation. The interrogatories shall be answered within thirty days after the mailing of the interrogatories or within an additional time fixed by the commission, and the answers to the interrogatories shall be full and complete and shall be made in writing and under oath. If the interrogatories are directed to an individual they shall be answered by the individual, and if directed to a corporation they shall be answered by the president, vice-president, secretary or assistant secretary of the corporation. The commission need not file any document to which the interrogatories relate until the interrogatories have been answered as provided in this section, and not then if the answers to the interrogatories disclose that the document is not in conformity with the provisions of chapters 24 through 40 of this title. The commission shall certify to the attorney general, for such action as the attorney general deems appropriate, all interrogatories and answers to the interrogatories that disclose a violation of any of the provisions of chapters 24 through 40 of this title.

§ 10-11634 Information disclosed by interrogatories

§ 10-11635 Certified copies received in evidence

All copies of documents delivered to and filed by the commission in accordance with chapters 24 through 40 of this title when certified by it shall be taken and received in all courts, public offices and official bodies as prima facie evidence of the facts stated in the documents. A certificate by the commission under seal as to the existence or nonexistence of the facts relating to corporations shall be taken and received in all courts, public offices and official bodies as prima facie evidence of the existence or nonexistence of the facts stated in the certificate.

§ 10-11636 Civil liability for false or misleading filings; exceptions

A. Except as provided in subsection C or D of this section, any person that authorizes or signs a report, certificate, notice or other document with respect to a corporation that is delivered for filing with the commission pursuant to this chapter and that has knowledge at the time of delivery to the commission for filing that the information contained in that report, certificate, notice or other document is materially false or misleading is liable to the corporation and its creditors for all damages resulting from the act. The prevailing party in an action for the liability imposed under this subsection is entitled to an award for the prevailing party's costs and reasonable attorney fees.

B. An action for the liability imposed by subsection A of this section must be commenced within two years after the discovery of the false or misleading statement or the time a reasonable person would have discovered it, but not later than six years after the report, certificate, notice or other document was filed or received by the commission.

C. Execution of a consent to serve as a statutory agent does not by itself constitute a certification of the truth or accuracy of the information contained in a report, certificate, notice or other document with respect to the corporation even if the consent is attached to another filing.

D. This section does not prevent the award of equitable remedies, if appropriate.

Chapter 40 Transition Provisions-Nonprofit Corporations

Article 1 General Provisions

§ 10-11701 Application to existing domestic corporations

A. Except as provided in subsection B, chapters 24 through 40 of this title apply to all Arizona corporations that were incorporated under or that were subject to chapter 22 of this title on December 31, 1998.

B. Any existing corporation that was originally organized under the laws of the territory of Arizona may elect to amend or restate its articles of incorporation and retain any previously valid provisions of its articles of incorporation, even if the previously valid provisions of its articles of incorporation are in conflict with any provisions of chapters 24 through 40 of this title. Upon such amendment or restatement, all of the provisions of chapters 24 through 40 of this title which are not specifically in conflict with the amended or restated articles of incorporation shall be applicable to the existing corporations that were originally organized under the laws of the territory of Arizona. The previously valid provisions of its articles of incorporation that are retained shall apply to the existing corporations originally organized under the laws of the territory of Arizona and to all persons contracting or in any manner dealing with the corporation, including its members, subscribers, affiliates, directors, officers and employees.

§ 10-11702 Application to qualified foreign corporations

A foreign corporation authorized to conduct affairs in this state on January 1, 1999 is subject to chapters 24 through 40 of this title but is not required to obtain a new grant of authority to conduct affairs under chapters 24 through 40 of this title, except as provided in section 10-11504.

Chapter 41 Management of Charitable Funds

Article 1 General Provisions

§ 10-11801 Definitions

In this chapter, unless the context otherwise requires:

"Endowment fund" means an institutional fund or part of an institutional fund that, under the terms of a gift instrument, is not wholly expendable by the institution on a current basis. Endowment fund does not include assets that an institution designates as an endowment fund for its own use.
"Gift instrument" means a record or records, including an institutional solicitation, under which property is granted to, transferred to or held by an institution as an institutional fund.
"Institution" means any of the following:

(a) A person, other than an individual, organized and operated exclusively for charitable purposes.

(b) A government or governmental subdivision, agency or instrumentality, to the extent that it holds monies exclusively for a charitable purpose.

"Institutional fund" means a fund held by an institution exclusively for charitable purposes. Institutional fund does not include program-related assets, a fund held for an institution by a trustee that is not an institution or a fund in which a beneficiary that is not an institution has an interest, other than an interest that could arise on violation or failure of the purposes of the fund.
"Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency or instrumentality or any other legal or commercial entity.
"Program-related asset" means an asset held by an institution primarily to accomplish a charitable purpose of the institution and not primarily for investment.
"Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and that is retrievable in perceivable form.

§ 10-11802 Managing and investing institutional funds; standard of conduct

A. Subject to the intent of a donor expressed in a gift instrument, an institution, in managing and investing an institutional fund, shall consider the charitable purposes of the institution and the purposes of the institutional fund.

B. In addition to complying with the duty of loyalty imposed by law other than in this chapter, each person responsible for managing and investing an institutional fund shall manage and invest the fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.

C. In managing and investing an institutional fund, an institution may incur only costs that are appropriate and reasonable in relation to the assets, the purposes of the institution and the skills available to the institution and shall make reasonable efforts to verify facts relevant to the management and investment of the fund.

D. An institution may pool two or more institutional funds for purposes of management and investment.

E. Except as otherwise provided by a gift instrument, the following apply:

In managing and investing an institutional fund, the following factors, if relevant, shall be considered:

(a) General economic conditions.

(b) The possible effect of inflation or deflation.

(d) The role that each investment or course of action plays in the overall investment portfolio of the fund.

(e) The expected total return from income and the appreciation of investments.

(f) Other resources of the institution.

(g) The needs of the institution and the fund to make distributions and to preserve capital.

(h) An asset's special relationship or special value, if any, to the charitable purposes of the institution.

Management and investment decisions about an individual asset shall not be made in isolation but shall be made in the context of the institutional fund's portfolio of investments as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund and to the institution.
Except as otherwise provided by law other than this chapter, an institution may invest in any kind of property or type of investment consistent with this section.
An institution shall diversify the investments of an institutional fund unless the institution reasonably determines that, because of special circumstances, the purposes of the fund are better served without diversification.
Within a reasonable time after receiving property, an institution shall make and carry out decisions concerning the retention or disposition of the property or to rebalance a portfolio in order to bring the institutional fund into compliance with the purposes, terms and distribution requirements of the institution as necessary to meet other circumstances of the institution and the requirements of this chapter.
A person that has special skills or expertise, or that is selected in reliance on the person’s representation that the person has special skills or expertise, has a duty to use those skills or that expertise in managing and investing institutional funds.

§ 10-11803 Appropriation for expenditure or accumulation of endowment fund; construction

A. Subject to the intent of a donor expressed in the gift instrument, an institution may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes and duration for which the endowment fund is established. Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution. In making a determination to appropriate or accumulate, the institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and shall consider, if relevant, the following factors:

The duration and preservation of the endowment fund.
The purposes of the institution and the endowment fund.
General economic conditions.
The possible effect of inflation or deflation.
The expected total return from income and the appreciation of investments.
Other resources of the institution.
The investment policy of the institution.

B. To limit the authority to appropriate for expenditure or accumulate under subsection A, a gift instrument must specifically state the limitation.

C. Terms in a gift instrument designating a gift as an endowment, or a direction or authorization in the gift instrument to use only income, interest, dividends or rents, issues, or profits, or to preserve the principal intact, or words of similar import:

Create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purpose of the fund.
Do not otherwise limit the authority to appropriate for expenditure or accumulate under subsection A.

§ 10-11804 Delegation of management and investment functions

A. Subject to any specific limitation set forth in a gift instrument or in law other than this chapter, an institution may delegate to an external agent the management and investment of an institutional fund to the extent that an institution could prudently delegate under the circumstances. An institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, in all of the following:

Selecting an agent.
Establishing the scope and terms of the delegation, consistent with the purposes of the institution and the institutional fund.
Periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the scope and terms of the delegation.

B. In performing a delegated function, an agent owes a duty to the institution to exercise reasonable care to comply with the scope and terms of the delegation.

C. An institution that complies with subsection A is not liable for the decisions or actions of an agent to which the function was delegated.

D. By accepting delegation of a management or investment function from an institution that is subject to the laws of this state, an agent submits to the jurisdiction of the courts of this state in all proceedings arising from or related to the delegation or the performance of the delegated function.

E. An institution may delegate management and investment functions to its committees, officers or employees as authorized by law of this state other than this chapter.

§ 10-11805 Release or modification of restrictions on management, investment or purpose

A. If the donor consents in a record, an institution may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment or purpose of an institutional fund. A release or modification may not allow a fund to be used for a purpose other than a charitable purpose of the institution.

B. On application of an institution, the court may modify a restriction contained in a gift instrument regarding the management or investment of an institutional fund if the restriction has become impracticable or wasteful, if it impairs the management or investment of the fund or if, because of circumstances not anticipated by the donor, a modification of a restriction will further the purposes of the fund. The institution shall notify the attorney general of the application, and the attorney general shall be given an opportunity to be heard. To the extent practicable, any modification shall be made in accordance with the donor's probable intention.

C. If a particular charitable purpose or a restriction contained in a gift instrument on the use of an institutional fund becomes unlawful, impracticable, impossible to achieve or wasteful, on application of an institution, the court may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument. The institution shall notify the attorney general of the application, and the attorney general shall be given an opportunity to be heard.

D. If an institution determines that a restriction contained in a gift instrument on the management, investment or purpose of an institutional fund is unlawful, impracticable, impossible to achieve or wasteful, the institution, after sixty days after notification to the attorney general, may release or modify the restriction, in whole or part, if all of the following apply:

The institutional fund subject to the restriction has a total value of less than fifty thousand dollars.
More than twenty years have elapsed since the fund was established.
The institution uses the property in a manner consistent with the charitable purposes expressed in the gift instrument.

§ 10-11806 Applicability

This chapter applies to institutional funds existing on or established after the effective date of this chapter. As applied to institutional funds existing on the effective date of this chapter, this chapter governs only decisions made or actions taken on or after that date.

Chapter 42 Corporations Sole

Article 1 General Provisions

§ 10-11901 Purposes for which corporation sole may be formed

Corporations may be formed to acquire, hold and dispose of church or religious society property for the benefit of religion, for works of charity and for public worship, and of property of scientific research institutions maintained solely for pure research and without expectation of pecuniary gain or profit, in the manner provided in this article.

§ 10-11902 Requirements for formation

A person vested with the legal title to property of a church or religious society in conformity with its constitution, canons, rites or regulations, and of a scientific research institution maintained solely for pure research and without expectation of pecuniary gain or profit, may make and subscribe to written articles of incorporation, acknowledge them as deeds are required to be acknowledged, file them in the office of the corporation commission and record a duplicate of the articles in the office of the county recorder of each county in which real property of the corporation is situated, together with an impression of the seal which it adopts.

§ 10-11903 Articles of incorporation; amendment

A. The articles of incorporation shall contain:

The name of the corporation.
The object of the corporation.
The estimated value of the property at the time of drawing the articles.
The title of the person executing the articles.

B. The corporation may amend its articles. The amendment shall be executed by the same person who executed the original articles, or by his successor in office, and shall be filed and recorded as required for the original articles.

§ 10-11904 Powers of corporation sole

Upon executing and filing for record articles of incorporation as provided in this article, the person subscribing thereto and his successor in office by the name or title specified in the articles, shall thereafter be deemed a corporation sole with perpetual succession, and may acquire and possess, by gift, bequest, devise or purchase, and hold property, sell, rent or otherwise dispose of such property, borrow money and give written security therefor, and secure payment thereof by mortgage or other lien.

§ 10-11905 Execution of instruments

All deeds and other instruments in writing shall be made and signed in the name of the corporation sole in the capacity designated in the articles.

§ 10-11906 Succession of title and authority

In the event of the death, resignation or removal of the person who is a corporation sole, his successor in office shall be vested with title to all property held by his predecessor as such corporation sole, with like power and authority over the property, and subject to all the liabilities and obligations with reference thereto. The successor shall file in the office of the corporation commission, and shall record in the office of the county recorder of each county in which any of the real property is situated, a certified copy of the commission, certificate or letter of election or appointment.

§ 10-11907 Succession of title to religious property held by person not incorporated as corporation sole

In case of the death, resignation or removal of a person who, at the time of his death, resignation or removal, was holding the title to property for the use or benefit of any church or religious society not incorporated as a corporation sole, the title to such property held by him shall not revert to the donor, nor vest in the heirs of the deceased person, but shall be deemed to be in abeyance after the death, resignation or removal until his successor is duly appointed to fill the vacancy. Upon appointment of a successor, the title to all property held by his predecessor shall at once, without any other act or deed, vest in the person appointed to fill the vacancy.

§ 10-11908 Officer; director; law applicable to corporations sole

A. The person comprising the corporation sole is the only director and officer for the corporation sole unless the articles or bylaws of the corporation sole contain a contrary designation.

B. Corporations sole that are organized pursuant to this article are subject to chapters 24 through 40 of this title except to the extent this article modifies or differs from the provisions of chapters 24 through 40, in which case this article prevails.

§ 10-11909 Merger, interest exchange, conversion, domestication or division; definitions

A. A domestic corporation sole may be a party to or otherwise undertake a merger, an interest exchange, a conversion, a domestication or a division by complying with chapter 34 of this title and title 29, chapter 6.

B. If a domestic corporation sole is to be created in a merger, a conversion, a domestication or a division:

The only member and director of the corporation must be the person comprising the corporation sole in accordance with sections 10-11901 and 10-11908.
The articles of incorporation must be recorded as provided by section 10-11902.

C. For the purposes of this section, references in chapter 34 of this title to "directors" or "members" are deemed references to the person who is a corporation sole and references to a "corporation" are deemed references to a corporation sole.

D. For the purposes of this section:

"Conversion" means a transaction authorized by title 29, chapter 6, article 4.
"Division" means a transaction authorized by title 29, chapter 6, article 6.
"Domestication" means a transaction authorized by title 29, chapter 6, article 5.
"Interest exchange" means a transaction authorized by title 29, chapter 6, article 3.
"Merger" means a transaction authorized by title 29, chapter 6, article 2.