In the final moments of his governorship on January 16, 2018, Governor Chris Christie signed into law three bills that amend and/or supplement certain provisions of the New Jersey Business Corporation Act (the “NJBCA”). Generally, these new laws bring New Jersey’s corporate law into closer alignment with the Delaware General Corporation Law. Each law is summarized below and takes effect immediately.
Assembly Bill No. 2162 – now P.L. 2017, c. 356: Scope of Bylaws and Inclusion of Forum Selection Clause
This law clarifies the scope of a corporation’s bylaws and allows for the bylaws to include a forum selection requirement. As amended, N.J.S.A.14A:2-9 provides that the bylaws of a New Jersey corporation may contain (a) “any provision, not inconsistent with law or the certificate of incorporation, relating to the business of the corporation, the conduct of its affairs, and its rights or power or the rights or power of its shareholders, directors, officers, or employees,” and (b) a forum selection clause requiring that the following types of cases be litigated solely in federal or state courts in New Jersey:
- shareholder derivative suits;
- shareholder actions claiming that a current or former director or officer breached his/her fiduciary duties or the corporation’s certificate of incorporation or bylaws;
- shareholder actions against current or former directors or officers arising under the certificate of incorporation or the NJBCA;
- any other state law claim, including a class action asserting a breach of a duty to disclose, by shareholders against the corporation or its current or former directors or officers; and
- any other shareholder claim governed by the internal affairs doctrine (i.e., one governed by the NJBCA).
In addition, this law provides that a New Jersey corporation may include in its bylaws provisions requiring any shareholder who files an action in breach of the corporation’s forum selection requirement to be liable for all reasonable costs, including reasonable attorney’s fees of the corporation, incurred by the corporation in enforcing the requirement. Further, if the bylaws contain an exclusive forum provision, the current and former directors and officers are deemed to consent to the personal jurisdiction of the selected forum.
Assembly Bill No. 2971 – now P.L. 2017, c. 363: Approval of Corporate Action by Electronic Transmission
This law amends N.J.S.A.14A:6-7.1 to allow corporate directors to utilize “electronic transmission” in approving any corporate action that may be taken by unanimous consent without a formal board meeting. Under the NJBCA, “electronic transmission” is any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient, and that may be directly reproduced in paper form by that recipient through an automated process. Under the prior law, a director’s approval of any such corporate action outside of a formal meeting was required to be in “writing.” This new law clarifies what many already believed – that electronic transmission, such as email or some other form of electronic voting, is sufficient to satisfy the unanimous written consent requirement.
Senate Bill No. 2239 – now P.L. 2017, c. 299: Proxy Solicitation Materials
This law allows a New Jersey corporation to establish in its bylaws procedures or conditions – including perhaps significant limitations – for including materials relating to shareholder-nominated individuals in its proxy solicitation materials. Those procedures or conditions may include, but need not be limited to, the following:
- “A condition requiring a minimum level of beneficial ownership of shares of the corporation’s voting stock by the nominating shareholder or a minimum duration of ownership of those shares;
- Conditions limiting nominations of directors who have been previously nominated to the board;
- A provision limiting the number of shareholder-nominated directors for each shareholder meeting at which directors are to be elected;
- Procedures requiring the nominating shareholder to submit specified information concerning the shareholder and the shareholder’s nominees, including information concerning ownership by those persons of shares of the corporation’s capital stock;
- A provision limiting nominations to shareholders, or any affiliate of those shareholders, who have not, and whose nominee has not, within a specified time period, publicly proposed to acquire shares constituting a specified percentage of the voting power of the corporation’s outstanding voting stock; and
- A provision requiring that the nominating shareholder undertake to indemnify the corporation in respect of any loss arising as a result of any false or misleading information or statement submitted by the nominating shareholder in connection with a nomination.”