Law reviews.

- For article, "Some Distinctive Features of the Georgia Business Corporation Code," 28 Ga. St. B. J. 101 (1991). For survey article on business associations, see 60 Mercer L. Rev. 35 (2008).

COMMENT

Source: Model Act, Section 10.21. This replaces former §§ 14-2-116 &14-2-118.

This section permits "supermajority" provisions relating to shareholder meetings to appear in the bylaws if approved by the shareholders. Unlike the Model Act, subsection (a) permits the adoption of such supermajority voting or quorum requirements by the voting and quorum rules in effect at the time of adoption. The Model Act language only allowed supermajority provisions in bylaws if expressly authorized by the articles of incorporation. This was deleted as unduly restrictive. Subsection (a) preserves the approach of former Georgia law, § 14-2-116(a).

The Code rejects the Model Act rule, which requires, as a minimum, that such a bylaw must be approved by the greater of: (1) the plurality vote required by Section 14-2-725; (2) any supermajority voting requirements already in place; or (3) the higher supermajority proposed for the bylaw. Instead, the Code permits adoption of supermajority bylaws by the plurality vote required by Section 14-2-725 or any supermajority vote already in place.

Supermajority voting may also be provided in the articles of incorporation, under Section14-2-727. Section14-2-727(b) provides that both bylaw and articles of incorporation provisions setting supermajority quorum and voting requirements may only be altered pursuant to the quorum and voting requirements prescribed in the provision being amended. This preserves the approach of former § 14-2-118(b).

Subsection (b) prohibits board alteration of the Code's rules or shareholder-approved bylaws concerning voting and quorum rules, except that it also provides authorization for director-approved bylaws imposing supermajority requirements for shareholder approval of business combinations with interested shareholders under Section 14-2-1113.

Note to 1989 Amendment The 1989 amendment changed subsection (b) to add a reference to Code Section 14-2-1133 to make it consistent with the business combination provisions of Part 3 of Article 11. Section 14-2-1133(a) provides that the provisions of Part 3 of Article 11 shall not apply unless the bylaws of the corporation specifically provide for its application. It further states that "Such a bylaw may be adopted . . . in the manner provided in this chapter. . . ." Since this subsection generally provides that bylaws increasing quorum or voting requirements may not be adopted by the board, a special reference is required to eliminate business combination bylaws from this rule.

Note to 1990 Amendment The 1990 amendment provides that bylaws relating to voting requirements which were adopted prior to the new Georgia Business Corporation Code remain valid until amended or repealed. Section14-2-725(c) of the new Code provides that shareholder action requires only a plurality of affirmative votes over negative votes unless the articles or a bylaw adopted by the shareholders requires a greater vote. In contrast, § 14-2-116(b) of the old Code required a majority of the votes represented at the meeting to effect shareholder action unless the articles or bylaws provided otherwise. Of course, some Georgia corporations have articles or bylaws adopted under the old Code reflecting the previous requirement of a majority of votes represented at the meeting. Amendment of a bylaw requiring action by majority vote may not be accomplished by action of the board of directors, but is subject to amendment only by the requisite vote of the shareholders. The transition provisions of § 14-2-1703(a) arguably preserve the validity of the old bylaws notwithstanding the adoption of the new Code. However, in order to avoid any question as to the effect of the new Code and its transition provision on any such old bylaws, this section was amended to make explicit the continuing validity of the voting requirements of bylaws and articles existing on July 1, 1989, the effective date of the new Code.

Note to 1993 Amendment The 1993 amendment includes a new cross-reference to Section 14-2-1020, which was added to provide for amendments by incorporators or boards of directors before the issuance of shares.

Note to 2008 Amendment The 2008 amendment to subsection (a) of Code Section 14-2-1021 conforms this Code Section to subsection (b) of Code Section 14-2-1020, which provides that the shareholders may not adopt a bylaw changing the plurality standard for the election of directors set forth in subsection (a) of Code Section 14-2-728, unless the articles of incorporation provide otherwise.

Cross-References Bylaws: amendment, see § 14-2-1020; generally, see § 14-2-206. Director supermajority requirements, see § 14-2-1022. Quorum and voting of shareholders: normal, see §§ 14-2-725 &14-2-726; supermajority requirements, see § 14-2-727. "Voting group" defined, see § 14-2-140.

RESEARCH REFERENCES