When is shareholder approval required
Businesses incorporated in Pennsylvania must abide by the Pennsylvania Business Corporations Law (BCL). The BCL sets out certain business activities that may not be carried out lawfully without shareholder consent.
The general rule is that a corporation may require shareholder approval for any specific action by setting out the requirement in the by-laws or articles of incorporation. Likewise, a corporation may set out certain activities that may be carried out without shareholder approval. However, under Pennsylvania law, certain activities must be approved by shareholders, even if the corporation’s governing documents do not require shareholder approval.
Pennsylvania law requires shareholder approval for the following actions:
- Amendments to the articles of incorporation (BCL §§ 1911-1916).
- The sale of all or substantially all of a corporation’s property or assets, other than in the regular course of business (BCL § 1932).
- A merger, share exchange or consolidation (BCL §§ 1921-1931).
- The division of a corporation into two or more corporations (BCL §§ 1951-1957).
- Dissolution of the corporation (BCL §§ 1971-1980).
Pennsylvania’s Business Corporations Law (BCL) requires majority shareholder approval to implement the fundamental corporate changes listed above. In the event the corporation’s governing documents also proscribe these activities absent shareholder approval, the governing documents will rule if the percentage vote required for approval is greater than that required by the BCL.
In other words, for the activities listed above, a corporation can require a greater percentage of shareholder approval, but it cannot negate the requirement for shareholder approval.
For more information about legal matters related to your business, the attorneys at the Scolieri Law Group, P.C. can help. Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can take care of the details for you every step of the way. Contact us today at (412) 765-0546 or via email at info@scolierilaw.com.