Louisiana is getting a brand new corporations law, but to practitioners and businesses incorporated in other states, it might look strangely familiar. Act No. 328 of the Regular Legislative Session, signed into law earlier this year by Governor Jindal, will replace Louisiana’s current Business Corporations Law, La. R.S. 12:1 et seq., with a brand new chapter known as the “Business Corporation Act” that is expressly based on the Model Business Corporation Act. The act originated on the recommendation of the Louisiana State Law Institute as House Bill No. 319, and it will take effect on January 1, 2015.
Prepared and updated by the Corporate Laws Committee of the American Bar Association Business Law Section, the Model Business Corporation Act has provided legislators and policymakers with a model on which to base state laws and regulations governing corporations, and has been adopted in whole or substantial part as the corporation statute of over 30 U.S. states, with selected provisions being adopted by many others.
Although a complete overview of the important changes resulting from the new law is beyond the scope of this article, some of the more interesting features include: (i) an adjustment to the default shareholder voting requirements for major corporate actions, such as mergers or amendments to the corporation’s articles of incorporation; (ii) the implementation of automatic exculpation of directors and officers from liability for actions other than breaches of loyalty; (iii) the expansion of the rights of dissenters and oppressed shareholders; (iv) changes to the mechanics of a derivative suit; (v) allowing the issuance of shares for promissory consideration; and (vi) the introduction of written unanimous governance agreements. With respect to this last feature, these written governance agreements will allow a corporation’s shareholders to modify what would otherwise be mandatory (and in the case of smaller closely-held corporations, sometimes cumbersome) statutory rules concerning corporate governance, such as the requirement of maintaining a board of directors.
The legislature’s decision to overhaul Louisiana’s corporate statute represents an exciting development for both practitioners and businesses alike. For better or worse (and with varying degrees of truth), Louisiana has been perceived as a state where the legal regime governing corporations is materially different than the regimes existing in the other 49 states. This perceived (and in some cases real) uniqueness of Louisiana law may have driven business owners or entrepreneurs to incorporate elsewhere, or otherwise discouraged investors, lenders, or other sources of capital from doing business with Louisiana corporations. By replacing Louisiana’s Business Corporations Law with a statute based on the Model Business Corporation Act, this new law should improve the uniformity and predictability of Louisiana’s corporate statute and send a clear message to corporations and investors that Louisiana is open for business.
Joseph S. “Josh” Green is a New Orleans-based attorney with Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, where he focuses his practice in the areas of mergers and acquisitions, business transactions, finance and real estate. Mr. Green assists clients with a variety of corporate transactions, including drafting, negotiating and reviewing contracts, forming and advising business entities, and assisting with financing arrangements. He may be reached by email at firstname.lastname@example.org.