2021 Amendments to Statutes Governing Colorado Entities: Expanding the Ability to Conduct Business Activities Electronically, 0921 COBJ, Vol. 50, No. 8 Pg. 24

PositionVol. 50, 8 [Page 24]

50 Colo.Law. 24

2021 Amendments to Statutes Governing Colorado Entities: Expanding the Ability to Conduct Business Activities Electronically

Vol. 50, No. 8 [Page 24]

Colorado Lawyer

September, 2021

August, 2021



This article discusses HB 21-1124, which amended the Colorado Corporations and Associations Act and the Colorado Business Corporation Act.

In anticipation of Colorado's 2021 legislative session, the Business Entities Drafting Committee of the CBA's Business Law Section (Committee) proposed changes to the Colorado Corporations and Associations Act[1] (CCAA) and the Colorado Business Corporation Act2 (CBCA). The proposed changes, which permit electronic communications and recordkeeping and virtual meetings, were submitted to and approved by both the House and Senate in the form of HB 21-1124.3 The bill became effective on the Governor's signature4 on April 19, 2021, and "applies to conduct occurring on or after the effective date of this act."5

Summary of HB 21-1124

The changes to the CCAA and the CBCA that were included in HB 21-1124 are intended to

■ update and expand electronic recordkeeping and notice requirements in the CCAA for all covered Colorado entities; and

■ permit Colorado corporations to hold virtual shareholders' meetings by eliminating the "at a place" requirement.

While these amendments modernize the CCAA and CBCA, updates to statutes affecting other business entities, such as Colorado nonprofits, limited liability companies, partnerships, and cooperatives, maybe warranted Suggestions for further work in this regard are discussed below.

CCAA Amendments

The CCAA is an overarching act containing provisions that apply to different entities. As stated in its definitions section, the CCAA is intended to apply to all entities described in CRS Tide 7, which include, for example, partnerships and cooperatives, "unless the context otherwise requires."6 Accordingly, the Committee precisely drafted HB 21-1124 with the CCAA's broad application in mind.

Historically, when considering amendments to the CCAA (and the CBCA), the Business Law Section committees have always looked to the Model Business Corporation Act7 (MBCA) and Delaware General Corporation Law (DGCL) for guidance. However, the MBCA and DGCL are stand-alone statutes, so they do not draw from a central source for definitions and other provisions that impact other entities. For example, the MBCA addresses solely for-profit corporations (but now has a new chapter 17 for benefit corporations).8

In the mid-1990s, Colorado business lawyers recognized that many provisions in the various entity statutes were common to all business entities in Colorado. For example, the Colorado Secretary of State (Secretary) requires each entity registered with that office to file periodic reports with the Secretary. Before the CCAA's enactment, each entity statute addressed this periodic reporting requirement,9 and this redundancy made little sense. Thus, the periodic reporting requirements for all entities are now housed in the CCAA.10 Specifically:

■ Part 3 discusses the procedures for and effectiveness of filings with the Secretary.

■ Part 4 discusses the powers of the Secretary that are applicable to all entities.

■ Part 6 discusses the Secretary's requirements for all entity names, including the basic requirement that entity names be distinguishable from every other entity name and name reserved with the Secretary for another person as an entity name.11

■ Part 7 discusses the requirements for registered agents of domestic entities registered with the Secretary and foreign entities qualified to do business in Colorado.12

■ Part 8 discusses the Secretary's filing requirements for non-Colorado entities to qualify to do business in Colorado.

The CCAA also has various provisions that apply to all Colorado entities formed under Title 7 for mergers and conversions,13 delinquencies and dissolution,14 and reinstatement of dissolved entities.15

Thus, when considering changes to the various entity statutes in Colorado, the threshold consideration is whether amendments should be made to the broadly applicable CCAA provisions (and therefore affect all Tide 7 entities) or only to the underlying entity statute itself. For example:

■ For SB 19-086,16 the Committee concluded that many of the merger and conversion provisions applicable to corporations under the CBCA should be included with the merger and conversion provisions applicable to all Colorado entities. As a result, the CBCA now has numerous cross-references to the CCAA.17

■ TheCommitteeconcludeddiatHB20-1013 (Ratification of Defective Acts) was not necessary for entities generally, so only the CBCA should be so modified.

■ In HB 21-1124, the Committee moved the provisions for "notice" under the CBCA from CRS § 7-101-402 to the CCAA (CRS § 7-90-105) and expanded the provisions to be applicable to all entities and to include notices by electronic transmission.18 This was done because "notice" addresses the important question of when a notice is effective; CRS § 7-90-105(5) provides that notice by electronic transmission is considered to be delivered19 on the date the electronic transmission is sent.20

UETA and E-Sign

Colorado adopted the Uniform Electronic Transactions Act (UETA),21 which works in conjunction with the federal Electronic Signatures in Global and National Commerce Act (E-Sign)22 to govern the handling of personal information in electronic records.

“ HB 21-1124 is aimed at facilitating business practices for all Colorado entities in the digital age. To allow Colorado business entities to use rapidly evolving new technology for their governance matters, HB 21-1124 updates the definitions of important terms used throughout the CCAA.”

HB 21-1124 added CRS §7-90-106 to the CCAA to tie electronic notices under Tide 7 to E-Sign. But as stated in CRS § 7-90-106, the Colorado statute does not modify, limit, or supersede E-Sign § 101(c),[23] which governs consumer disclosures and requires, among other things, affirmative consent from a consumer to electronic delivery of transactional disclosures that are required by state law to be in writing. The Colorado statute also does not authorize electronic delivery of any of the notices described in E-Sign § 103(b), which contains exceptions to the § 101 requirements.24

Under E-Sign and UETA, when a state adopts UETA in substantially the same form as the Uniform Act (as occurred in Colorado), UETA controls over E-Sign, with some exceptions.25 Colorado's version of UETA specifically states that it is not intended to limit, modify, or supersede the requirements of E-Sign sections 101(d), 101(e), 102(c), 103(a), or 103(b), and the consumer disclosures contained in section 101(c) are incorporated by reference and also apply to intrastate transactions.26

Thus, with some exceptions, UETA and E-Sign continue to control electronic commerce in Colorado, including under the HB 21-1124 CCAA amendments.27

Bringing Entities into the Digital Age

HB 21-1124 is aimed at facilitating business practices for all Colorado entities in the digital age. To allow Colorado business entities to use rapidly evolving new technology for their governance matters, HB 21-1124 updates the definitions of important terms used throughout the CCAA. For example, in the digital world, even the simple term "address" needed expansion, so CRS § 7-90-102(1) now includes "an address for delivery of an electronic transmission." And subsection (10.5) provides that "deliver" includes mail, "hand delivery by courier or otherwise," and "electronic transmission."

HB 21-1124 also added a number of new definitions to the CCAA to address new concepts, including:

■ an electronic "document" (a term fundamental to digital exchanges), which includes "any tangible medium on which information is inscribed" and "an electronic record"28; and

■ an "electronic record," which is defined broadly to include "information that is stored in an electronic or other nontangible medium and is retrievable in paper form through an automated process used in conventional commercial practice, unless otherwise authorized in accordance with section 7-90-105."29

Further, CRS § 7-90-105(2) now provides that an electronic record need not "be directly reproduced in paper form by the recipient through an automated process ... if the electronic transmission is otherwise retrievable in perceivable form" and "the sender and the recipient have consented in writing to the use of that form of electronic transmission."

Definitions were also added for "electronic mail" and "e-mail,"30 and for "electronic transmission."31 CRS § 7-90-105(2) gives further substance to the definition of notice and provides that notice can be given in person, or by telephone, electronic transmission, mail, or private carrier. The definitions of "sign" and "signature" were changed to be more general and applicable to electronic documents.32 The CCAA's new electronic technology provisions align, in all material respects, with the terminology and...

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