HB 1187-1_ Filed 03/12/2008, 17:29
Adopted 3/13/2008
CONFERENCE COMMITTEE REPORT
DIGEST FOR EHB 1187
Citations Affected: IC 9-14-3; IC 23-17; IC 26-2-8; IC 23-17-13-2.
Synopsis: Nonprofit corporations. Conference committee report for EHB 1187. Provides that
notice given by a nonprofit corporation (corporation) is fair and reasonable if the corporation
provides notice by: (1) communicating in person; (2) mail or other method of delivery; or (3)
other electronic means capable of verification. Requires a corporation to maintain a notice in a
record unless the notice was given orally. Establishes when notice is effective. Requires a
corporation to retain ballots for a certain period. Establishes circumstances under which contracts
or transactions that involve conflicting interests of members, directors, members of a designated
body, or officers are not void or voidable. (Current law establishes the circumstances under
which contracts or transactions that involve conflicting interests of directors are not void or
voidable.) Amends provisions that restrict certain actions by committees of directors. Allows:
(1) boards of directors; and (2) members present at a committee meeting; to appoint alternate
members of a committee. Allows corporations to create or authorize the creation of advisory
committees. Provides that a constituent of a business entity and the business entity are presumed
to have agreed to conduct certain actions electronically unless conducting the actions
electronically is prohibited by the governing documents of the business entity or an express
statement by the business entity. Establishes certain guidelines for the use of electronic records
or electronic signatures. Makes other changes and conforming amendments. Repeals a provision
that is replaced concerning conflicting interest contracts or transactions. (This conference
committee report: (1) removes certain definitions, allows notice to be given by any
electronic means capable of verification, and removes a provision permitting notice to be
given by radio, television, or public broadcast; (2) relocates certain provisions dealing with
notice; (3) adds certain definitions to the Uniform Electronic Transactions Act, and
provides that a constituent of a business entity and the business entity are presumed to have
agreed to conduct certain actions electronically unless conducting the actions electronically
is prohibited by the governing documents of the business entity or by an express statement
by the business entity; (4) establishes certain guidelines for the use of electronic records or
electronic signatures; and (5) makes conforming amendments.)
Effective: July 1, 2008.
CONFERENCE COMMITTEE REPORT
MADAM PRESIDENT:
Your Conference Committee appointed to confer with a like committee from the House
upon Engrossed Senate Amendments to Engrossed House Bill No. 1187 respectfully reports
that said two committees have conferred and agreed as follows to wit:
that the House recede from its dissent from all Senate amendments and that
the House now concur in all Senate amendments to the bill and that the bill
be further amended as follows:
Delete everything after the enacting clause and insert the following:
SOURCE: IC 9-14-3-0.5; (08)CC118703.1.1. -->
SECTION 1. IC 9-14-3-0.5 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 0.5. As used in this
chapter, "electronic record" has the meaning set forth in
IC 26-2-8-102(7). IC 26-2-8-102.
SOURCE: IC 9-14-3-0.8; (08)CC118703.1.2. -->
SECTION 2. IC 9-14-3-0.8 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 0.8. As used in this
chapter, "electronic signature" has the meaning set forth in
IC 26-2-8-102(8). IC 26-2-8-102.
SOURCE: IC 23-17-2-27; (08)CC118703.1.3. -->
SECTION 3. IC 23-17-2-27 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 27. (a) "Vote" includes
authorization by written ballot, and "voting" or "casting a vote"
includes the giving of written consent.
(b) Even if a person entitled to vote characterizes the conduct as
voting or casting a vote, the term does not include:
(1) recording the fact of abstention or failing to vote for a
candidate; or
(2) approving or disapproving of a matter.
SOURCE: IC 23-17-10-5; (08)CC118703.1.4. -->
SECTION 4. IC 23-17-10-5 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 5. (a) A corporation
shall give notice consistent with the corporation's bylaws of meetings
of members in a fair and reasonable manner.
(b) A notice that conforms to the requirements of subsection (c) is
fair and reasonable. However, other means of giving notice may also
be fair and reasonable when all the circumstances are considered if
notice of matters referred to in subsection (c)(2) is given as provided
in subsection (c).
(c) Unless fair and reasonable notice is otherwise specified in a
corporation's bylaws, notice is fair and reasonable if the following
occur:
(1) The corporation notifies the corporation's members of the
place, date, and time of each annual, regular, and special meeting
of members not less than ten (10) days, or, if notice is mailed by
other than first class or registered mail, thirty (30) days to sixty
(60) days, before the meeting date.
(2) Notice of an annual or a regular meeting includes a
description of any matter or matters to be considered at the
meeting that must be approved by the members under
IC 23-17-13-2, IC 23-17-13-2.5, IC 23-17-16-13, IC 23-17-17-5,
IC 23-17-19-4, IC 23-17-20-2, or IC 23-17-22-2.
(3) Notice of a special meeting includes a description of the
purpose for which the meeting is called.
(4) A corporation provides notice by:
(A) communicating in person;
(B) mail or other method of delivery; or
(C) other electronic means capable of verification.
(4) (5) For a corporation, other than a veteran's organization,
having more than one thousand (1,000) members, notice of the
place, date, and time of an annual, a regular, or a special meeting,
and in the case of a special meeting, the purpose of the special
meeting, may be given by one (1) publication in a newspaper of
general circulation, printed in English, in the county in which the
corporation has the corporation's principal office if the publication
is made not less than ten (10) days and not more than thirty (30)
days before the meeting date.
(d) Unless the bylaws require otherwise, if an annual, a regular, or
a special meeting of members is adjourned to a different date, time, or
place, notice is not required to be given of the new date, time, or place
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 7 of this chapter, however, notice of the
adjourned meeting must be given under this section to persons who are
members as of the new record date.
SOURCE: IC 23-17-13-1; (08)CC118703.1.6. -->
SECTION 6. IC 23-17-13-1 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 1. (a) A director shall,
based on facts then known to the director, discharge duties as a
director, including the director's duties as a member of a committee, as
follows:
(1) In good faith.
(2) With the care an ordinarily prudent person in a like position
would exercise under similar circumstances.
(3) In a manner the director reasonably believes to be in the best
interests of the corporation.
(b) In discharging the director's duties, a director may rely on
information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by one (1)
of the following:
(1) An officer or employee of the corporation whom the director
reasonably believes to be reliable and competent in the matters
presented.
(2) Legal counsel, certified public accountants, or other persons
as to matters the director reasonably believes are within the
person's professional or expert competence.
(3) A committee of the board of directors of which the director is
not a member if the director reasonably believes the committee
merits confidence.
(4) In the case of religious corporations, 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 a matter in question that makes reliance
otherwise permitted by subsection (b) unwarranted.
(d) A director is not liable for an action taken as a director, or failure
to take an action, unless the: following conditions exist:
(1) The director has breached or failed to perform the duties of the
director's office in compliance with this section; and
(2) The breach or failure to perform constitutes willful
misconduct or recklessness.
(e) A director is not considered to be a trustee with respect to a
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 the property.
SOURCE: IC 23-17-13-2.5; (08)CC118703.1.7. -->
SECTION 7. IC 23-17-13-2.5 IS ADDED TO THE INDIANA
CODE AS A
NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2008]:
Sec. 2.5. (a) This section applies unless
the articles of incorporation or bylaws of a corporation provide
otherwise.
(b) Subject to subsection (c), a contract or transaction between:
(1) a corporation and one (1) or more of the corporation's
members, directors, members of a designated body, or
officers; or
(2) a corporation and any other corporation, partnership,
association, or entity in which one (1) or more of the
corporation's members, directors, officers, or members of a
designated body:
(A) are members, directors, members of a designated body,
or officers;
(B) hold a similar position; or
(C) have a financial interest;
is not void or voidable solely because of the relationship or interest,
solely because the member, director, member of a designated body,
or officer is present at or participates in the meeting of the board
of directors that authorizes the contract or transaction, or solely
because the vote of the member, director, member of a designated
body, or officer is counted for authorizing the contract or
transaction.
(c) A contract or transaction described under subsection (b) is
not void or voidable as provided under subsection (b) if one (1) or
more of the following apply:
(1) The:
(A) material facts as to the:
(i) relationship or interest of a member, a director, a
member of a designated body, or an officer; and
(ii) contract or transaction;
are disclosed or known to the board of directors; and
(B) board of directors in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the
disinterested directors even if the disinterested directors
are less than a quorum.
(2) The:
(A) material facts as to the:
(i) relationship or interest of the member, director,
member of a designated body, or officer; and
(ii) contract or transaction;
are disclosed or known to the members who are entitled to
vote on the contract or transaction; and
(B) contract or transaction is specifically approved in good
faith by a vote of the members who are entitled to vote on
the contract or transaction.
(3) The contract or transaction is fair as to the corporation at
the time the contract or transaction is authorized, approved,
or ratified by the board of directors or the members.
(d) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board
that authorizes a contract or transaction described under
subsection (b).
SOURCE: IC 23-17-15-6; (08)CC118703.1.8. -->
SECTION 8. IC 23-17-15-6 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 6. (a) Unless
this
article, the articles of incorporation, or bylaws provide otherwise, a
board of directors may create
at least one (1)
committee and appoint at
least two (2) or more committees that consist of one (1) or more
members of the board of directors.
to serve on the committees.
(b)
Unless otherwise provided under this article, the creation of
a committee and appointment of members to the committee must be
approved by the greater of:
the following:
(1) a majority of all the directors in office when the action is
taken;
or
(2) the number of directors required by articles of incorporation
or bylaws to take action under section 5 of this chapter.
(c) Sections 1 through 5 of this chapter apply to committees of the
board of directors and the members of committees.
(d) To the extent specified by the board of directors or in articles of
incorporation or bylaws, a committee may exercise the authority of the
board of directors under IC 23-17-12-1.
(e) A committee may not do the following:
(1) Authorize distributions.
(2) Approve or recommend to members action required to be
approved by members under this article.
(A) dissolution;
(B) merger;
(C) sale;
(D) pledge; or
(E) transfer;
of all or substantially all of a corporation's assets.
(3) Elect, appoint, or remove directors or Subject to subsection
(g), fill vacancies on the board of directors or on a committee.
(4) Adopt, amend, or repeal articles of incorporation or bylaws.
(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 under IC 23-17-13-1.
(g) The board of directors may appoint one (1) or more
directors as alternate members of a committee to replace an absent
or a disqualified member during the member's absence or
disqualification. Unless the articles of incorporation, bylaws, or the
resolution creating the committee provides otherwise, in the event
of the absence or disqualification of a member of a committee, the
members present at a meeting and not disqualified from voting
may unanimously appoint another director to act in place of the
absent or disqualified member.
(h) A corporation may create or authorize the creation of one
(1) or more advisory committees whose members need not be
directors.
SOURCE: IC 23-17-27-1; (08)CC118703.1.9. -->
SECTION 9. IC 23-17-27-1 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 1. (a) A corporation
shall keep as permanent records a record of the following:
(1) Minutes of meetings of the corporation's members and board
of directors.
(2) A record of actions taken by the members or directors without
a meeting.
(3) A record of actions taken by committees of the board of
directors as authorized under IC 23-17-15-6(d).
(b) A corporation shall maintain appropriate accounting records.
(c) A corporation or the corporation's agent shall maintain a record
of the corporation's members in a form that permits preparation of a list
of the names and addresses of all members, in alphabetical order by
class, showing the number of votes each member is entitled to cast.
(d) A corporation shall maintain the corporation's 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 the following records at the
corporation's principal office:
(1) The corporation's articles of incorporation or restated articles
of incorporation and all amendments to the articles of
incorporation currently in effect.
(2) The corporation's bylaws or restated bylaws and all
amendments to the bylaws currently in effect.
(3) Resolutions adopted by the corporation's board of directors
relating to the characteristics, qualifications, rights, limitations,
and obligations of members or a class or category of members.
(4) The minutes of all meetings of members and records of all
actions approved by the members for the past three (3) years.
(5) Written communications to members generally within the past
three (3) years, including the financial statements furnished for
the past three (3) years under section 6 of this chapter.
(6) A list of the names and business or home addresses of the
corporation's current directors and officers.
(7) The corporation's most recent annual report delivered to the
secretary of state under section 8 of this chapter.
(f) Except as otherwise provided in articles of incorporation or
bylaws, ballots must be retained by a corporation until the earlier
of the following:
(1) The date of the next annual meeting.
(2) One (1) year after the date the ballot was received.
SOURCE: IC 23-17-28-5; (08)CC118703.1.10. -->
SECTION 10. IC 23-17-28-5 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 5. Except as provided
in section 3 of this chapter or other applicable law, written notice is
effective at the earliest of the following:
(1) When received.
(2) Five (5) days after the notice is mailed, as evidenced by the
postmark or private carrier receipt, if mailed correctly addressed
to the address listed in the most current records of the corporation.
(3) On the date shown on the return receipt, if sent by registered
or certified United States mail, return receipt requested, and the
receipt is signed by or on behalf of the addressee.
(4) Thirty (30) days after the notice is deposited with another
method of the United States Postal Service other than first class,
registered, or certified postage affixed, as evidenced by the
postmark, if mailed correctly addressed to the address listed in the
most current records of the corporation.
SOURCE: IC 26-2-8-102; (08)CC118703.1.11. -->
SECTION 11. IC 26-2-8-102 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 102. As used in this
chapter:
(1) "Agreement" means the bargain of the parties in fact, as found
in their language or inferred from other circumstances and from
rules, regulations, and procedures given the effect of agreements
under laws otherwise applicable to a particular transaction.
(2) "Automated transaction" means a transaction conducted or
performed, in whole or in part, by electronic means or electronic
records in which the acts or records of one (1) or both parties are
not reviewed by an individual in the ordinary course in forming
a contract, performing under an existing contract, or fulfilling an
obligation required by the transaction.
(3)
"Business entity" means a corporation, nonprofit
corporation, limited liability company, limited liability
partnership, limited partnership, business trust, real estate
investment trust, or any other entity that is formed under the
requirements of applicable Indiana law.
(4) "Computer program" means a set of statements or instructions
to be used directly or indirectly in an information processing
system in order to bring about a certain result.
(5) "Constituent" means a person who holds a position
defined in the business entity's organic law that permits the
person, directly or indirectly, to own, manage, or operate a
business entity either alone or with others. The term includes
officers, directors, shareholders, members, managers, general
partners, limited partners, partners, and persons occupying
a similar status or performing similar functions for a business
entity.
(4) (6)"Contract" means the total legal obligation resulting from
the parties' agreement as affected by this chapter and other
applicable law.
(5) (7) "Electronic" means relating to technology having
electrical, digital, magnetic, wireless, optical, electromagnetic, or
similar capabilities.
(6) (8) "Electronic agent" means a computer program or an
electronic or other automated means used to initiate an action or
respond to electronic records or performances in whole or in part
without review by an individual at the time of the action or
response.
(7) (9) "Electronic record" means a record created, generated,
sent, communicated, received, or stored by electronic means.
(8) (10) "Electronic signature" means an electronic sound,
symbol, or process attached to or logically associated with an
electronic record and executed or adopted by a person with the
intent to sign the electronic record.
(11) "Governing documents" means the publicly filed and
nonpublicly filed organic documents of a business entity.
(9) (12) "Governmental agency" means an executive, legislative,
or judicial agency, department, board, commission, authority,
institution, instrumentality, or other political subdivision of the
state.
(10) (13) "Information" means data, text, images, sounds, codes,
computer programs, software, databases, or the like.
(11) (14) "Information processing system" means an electronic
system for creating, generating, sending, receiving, storing,
displaying, or processing information.
(15) "Organic actions" means actions, notices, consents, and
signatures relating to the operation of a business entity that
are undertaken among constituents of that business entity or
among constituents of a business entity and that business
entity. The term does not include the service of process or the
service of a summons, subpoena, or other service
contemplated by rules or statutes governing trial procedure,
civil procedure, or comparable provisions.
(12) (16) "Person" means an individual, corporation, business
trust, estate, trust, partnership, limited liability company,
association, joint venture, governmental agency, public
corporation, or any other legal or commercial entity.
(13) (17) "Record" means information that is inscribed on a
tangible medium or that is stored in an electronic or other medium
and is retrievable in perceivable form. The term includes
records transmitted in the course of organic actions.
(14) (18) "Security procedure" means a procedure employed for
the purpose of verifying that an electronic signature, record, or
performance is that of a specific person or for detecting changes
or errors in the information in an electronic record. The term
includes a procedure that requires the use of algorithms or other
codes, identifying words or numbers, encryption, or callback or
other acknowledgment procedures.
(15) (19) "Transaction" means an action or set of actions relating
to the conduct of business, commercial, or governmental affairs
and occurring between two (2) or more persons. The term
includes an organic action.
SOURCE: IC 26-2-8-104; (08)CC118703.1.12. -->
SECTION 12. IC 26-2-8-104 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 104. (a) This chapter
does not require that a record or signature be created, generated, sent,
communicated, received, stored, or otherwise processed or used by
electronic means or in electronic form.
(b) This chapter only applies to transactions between parties each of
which has agreed to conduct transactions electronically. An agreement
to conduct transactions electronically is determined from the context
and surrounding circumstances, including the parties' conduct.
A
constituent of a business entity and a business entity are presumed
to have agreed to conduct organic actions electronically unless and
to the extent:
(1) the governing documents of the business entity limit or
prohibit, in whole or in part, the use of electronic signatures,
electronic records, or both; or
(2) the business entity expressly states the method, means, or
requirement by which a constituent may respond to or
participate in any organic action, including imposing a
requirement that participants use a specific form of writing,
record, or signature.
Unless and to the extent limited or prohibited, any electronic
record or electronic signature to be sent to a constituent is properly
sent if sent in the manner and to the electronic address or other
means of receipt designated by the constituent to receive the
electronic record or electronic signature as shown in the current
records of the business entity. If the electronic record is a notice,
it is effective when sent. Unless and to the extent limited or
prohibited, any electronic record or electronic signature sent by a
constituent to a business entity shall be considered properly sent if
it is sent in a manner designated by the business entity to an
electronic address or other location designated by the business
entity in a publication or notice provided by the business entity to
the constituent. If the electronic record is a notice, it is effective
upon receipt. The publication or notice may be included in the
governing documents of the business entity, may be communicated
to the constituent in writing, or may be transmitted by any other
means selected by the business entity that is reasonably likely to
convey the information to the constituent. A constituent or business
entity may revoke or change any instruction regarding the manner,
electronic address, or means of receipt the person requires for
electronic records or electronic signatures by sending notice of the
change and the corresponding new information.
(c) If a party agrees to conduct a transaction electronically, this
chapter does not prohibit the party from refusing to conduct other
transactions electronically. This subsection may not be varied by
agreement.
(d) Except as otherwise provided in this chapter, the effect of any
provision of this chapter may be varied by agreement. The presence in
certain provisions of this chapter of the words "unless otherwise
agreed", or words of similar import, does not imply that the effect of
other provisions may not be varied by agreement.
(e) Whether an electronic record or electronic signature has legal
consequences is determined by this chapter, if applicable, and
otherwise by other applicable law.
SOURCE: IC 26-2-8-106; (08)CC118703.1.13. -->
SECTION 13. IC 26-2-8-106 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2008]: Sec. 106. (a) A record or
signature may not be denied legal effect or enforceability solely
because it is in electronic form.
(b) A contract may not be denied legal effect or enforceability solely
because an electronic record or electronic signature was used in its
formation.
(c) If a law requires a record to be in writing, or provides
consequences if it is not, an electronic record satisfies the law.
(d) If a law requires a signature, or provides consequences in the
absence of a signature, the law is satisfied with respect to an electronic
record if the electronic record includes an electronic signature.
SOURCE: IC 23-17-13-2; (08)CC118703.1.16. -->
SECTION 16. IC 23-17-13-2 IS REPEALED [EFFECTIVE JULY
1, 2008].
(Reference is to EHB 1187 as printed February 22, 2008.)
Conference Committee Report
on
Engrossed House
Bill 1187
Text Box
S
igned by:
____________________________ ____________________________
Representative Lawson L Senator Lawson C
Chairperson
____________________________ ____________________________
Representative Koch Senator Arnold
House Conferees Senate Conferees