Amendments to the Arizona corporation LLC and partnership laws effective August 6, 2016 will afford clients greater flexibility in online meetings, correct common problems business clients have experienced under prior law, and help avoid litigation and corporate noncompliance. In summary, under the new law:

  • Shareholders and directors are legally authorized to conduct meetings and other business electronically (including online by text, or "chat"). Proxies and shareholder agreements may now last as long as the parties agree.
  • Shareholders may agree in writing (including electronically) without meeting face-to-face or by telephone, as long as written consents are received from the same number of voting shares as would be required at a face-to-face meeting, which is usually a majority.

    Previously, Arizona law required unanimous written consent if the shareholders did not actually have a meeting where all participants can hear each other, thereby forcing shareholders to hold an actual meeting just to achieve a valid majority vote if there is even one holdout.

    Note: Public companies and corporations existing at the date the legislation becomes effective are "grandfathered" – unanimous written consent is still required for consent without a meeting – unless they affirmatively amend their articles or bylaws to "opt in." So, existing corporations should consider amending their articles or bylaws to take advantage of the new law.
  • Arizona businesses – and those who deal with them – are protected against false or unauthorized corporate filings and false statements by persons pretending to act for corporations that do not exist. Persons who file with the Arizona Corporation Commission materially false, misleading reports relating to an Arizona corporation or LLC, or who falsely state that they are acting for a corporation or LLC that doesn't exist, or who sign documents they are not authorized to sign, are subject to civil liability to those who are harmed.
  • Arizona businesses formed in other states are no longer subject to unreasonable requirements that change applicable laws relating to where they may be served with lawsuits.
  • References to the Arizona Benefit Corporations Act (passed three years ago) are corrected to avoid any "negative inference" that a corporation must be a benefit corporation in order to have the legal "power" to make donations to charity or take actions benefitting the community. This allows directors to consider (if they choose to consider) the effect of the corporation's acts on the welfare of the community when determining what is in the corporation's best interest.

    Directors of all for-profit corporations, not only benefit corporations, are not personally liable for monetary damages based on their good faith decision to take (or not take) actions in pursuit of purpose other than maximizing profits of the corporation (such as support for charities, buying from U.S. or local suppliers, supporting veterans or charities). Of course, veiled self-interest posing as charity is not "good faith."
  • Corporations may now want to consider including a statement of purpose in the articles, bylaws or formal resolutions approved by its directors or shareholders, because doing so will give clear guidance to the directors and officers in considering whether proposed corporate actions further that purpose.

    For example, if shareholders or directors want to include one or more purposes for a corporation other than to maximize profits for shareholders – or even if they wish to limit the corporation's purpose to only maximize profits – directors, in determining what is in the best interests of the corporation will be expressly authorized to consider that purpose as long as the purpose is included in the articles, bylaws or a formal resolution of the directors or shareholders.
  • The Benefit Corporation Act is also corrected so that the directors and officers of benefit corporations are entitled to the same strong "business judgment rule" presumption – the presumption that directors have acted in accordance with their duties unless proven otherwise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.