Law reviews.

- For article, "The Acquisition Process and the Closely-Held Corporation: Selected Legal Aspects," see 36 Mercer L. Rev. 567 (1985).

COMMENT

Source: Model Act, Section 10.02. This section, permitting the board to amend the articles of incorporation without shareholder approval, represents a departure from prior law, § 14-2-191. The only possible case in which board action might have been considered to amend the articles of incorporation under prior law involved the filing of a certificate designating the rights and preferences of a series of "blank" preferred stock under former § 14-2-81(c). That filing is clearly designated as an amendment of the articles under Section14-2-602(d) of the Code. Code Section14-2-631(d) provides authority for the board to amend the articles of incorporation to provide that reacquired shares become treasury shares.

The amendments described in clauses (1) through (6) are so routine and "housekeeping" in nature as not to require action by shareholders. None affects substantive rights in any meaningful way. For example, Section 14-2-1002(1) authorizes amendments by the board of directors to extend the duration of a corporation that was formed at a time when limited during was required by law. The extension normally will be in the form of an amendment to delete all reference to duration of the corporation, which automatically makes the duration perpetual. Similarly, subsection (a)(4) authorizes the board of directors to change each issued and unissued share of an outstanding class of shares into a greater number of whole shares if the corporation has only that class of shares outstanding. All shares of the class being changed must be treated identically under this clause. Subsection (4) permits increases in the authorized shares of a corporation to accommodate a stock split. Thus, if a corporation with 90% of its authorized shares outstanding wishes to engage in a two for one stock split, it may do so through an amendment approved by the board increasing its authorized capital stock. Such a change, under the circumstances described in the subsection, does not change the substantial rights of any investor.

Subsection (5) is a Code addition to the Model Act provisions, designed to permit elimination of par value in corporations that had par value for shares prior to the adoption of the Code. Since substantial rights may be attached to par value where more than one class of stock is outstanding, this power is limited to those cases where only one class is outstanding. If more than one class exists, shareholder approval will be required. In some instances this will trigger voting by voting groups under Section 14-2-1004, and in others may trigger dissenters' rights under Section 14-2-1302.

Subsection (6) varies from the Model Act by giving the board of directors full power to change the corporate name in whole or in part, rather than the narrower power to make minor changes originally granted.

Subsection (a)(7) recognizes that other sections of the Model Act expressly permit other amendments to be made by the board of directors without prior shareholder approval. Examples of these include Section 14-2-602 (creation of series of shares pursuant to authority already granted in the articles) and Section 14-2-631 (cancellation of reacquired shares if the articles provide they are not to be reissued).

Amendments provided for in this section may be included in restated articles of incorporation under Section 14-2-1007 or in articles of merger under Article 11.

Note to 1996 Amendment Subsections (4) and (5) were added in 1996. Like the other sections, these amendments are regarded as so routine in nature as to amount to housekeeping, and thus do not justify a requirement of shareholder approval. This restores similar provisions in former law, O.C.G.A. § 14-2-196(e) (1981), which permitted such an amendment in restating articles of incorporation.

Cross-References Action by board of directors, see § 14-2-820 et seq. Amendment by filing certificate designating rights and preferences of preferred stock, see § 14-2-602. Amendment by board of directors to provide that reacquired shares become treasury shares, see § 14-2-631. Articles of amendment, see § 14-2-1006. Classes and series of shares, see §§ 14-2-601 &14-2-602. Duration of corporate existence, see § 14-2-302. Effective date of amendment, see § 14-2-123. Initial directors, see §§ 14-2-202 &14-2-205. Merger, see Articles 11 and 11A. Name of corporation, see Article 4. Reacquisition of shares, see § 14-2-631. Reduction of authorized shares, see § 14-2-631. Registered office and agent, see Article 5. Restatement of articles, see § 14-2-1007.

JUDICIAL DECISIONS

RESEARCH REFERENCES