Model Business Corporation Act as Adopted in Louisiana

Author:Glenn G. Morris
Position::J. Dawson Gasquet Professor of Law and Vinson & Elkins Professor of Law, LSU Paul M. Hebert Law Center.
Pages:983-1069
 
FREE EXCERPT
Model Business Corporation Act as Adopted in
Louisiana
Glenn G. Morris*
INTRODUCTION
Effective January 1, 2015, Louisiana adopted a customized
version of the Model Business Corporation Act.1 The new Act
replaces the former Louisiana Business Corporation Law (LBCL)2
and makes several coordinating changes in other areas of the law.3
The author served as the Reporter and Chair of the Corporations
Committee of the Louisiana State Law Institute, the Committee that
considered and modified the Model Act for adoption in Louisiana.
Louisiana’s modifications to the Model Act were designed to do
three things: (1) to adapt the Model Act to Louisiana’s legal system
and terminology, (2) to retain some of the desirable features of
existing law, and (3) to make what the Committee judged to be
corrections or improvements in the Model Act provisions.
This Article summarizes the ways in which the new Act changes
the law as well as those in which the law remains largely unchanged.
This Article also points out the areas in which the Louisiana version
of the Act differs from the Model Act, either by retaining the earlier
Louisiana law on the subject, or by offering some new solution to
the problem.
Louisiana’s adoption of the Model Act returns it to the
mainstream of American corporation law, much as the LBCL did
when it was adopted in 1968.4 The Model Act is the foundation of
Copyright 2015, by GLENN G. MORRIS.
J. Dawson Gasquet Professor of Law and Vinson & Elkins Professor of
Law, LSU Paul M. Hebert Law Center.
1. Act No. 328, §§ 1, 7, 2014 La. Acts.
2. Id. § 5.
3. T he other changes affected provisions concerning the prescriptive periods
applicable to business organizations, see LA. REV. STAT. ANN. §§ 12:1501–1502
(Supp. 2015); the conversion of business organizations, id. §§ 12:1601–1604;
filing methods and secretary-of-state-records provisions, id. §§ 12:1701–1704;
filing fees chargeable by the secretary of state, id. § 49:222; and the derivative
action provisions of the Code of Civil Procedure, LA. CODE CIV. PROC. art. 611
(2015).
4. As one of my Committee colleagues noted, Louisiana’s corporation law
has been designed to fit into the mainstream of American corporate law since at
least 1928. Louisiana’s 1928 corporation statute was based on a then-proposed
Uniform Business Corporation Act, which influenced the Model Business
Corporation Act that later took its place. The 1968 statute was designed to
combine the best features of the 1928 statute with the best features of the
corporate laws of many other states, and it included some provisions from the
984 LOUISIANA LAW REVIEW [Vol. 75
the corporation law of 30 other states, including all southern states
east of the Mississippi River.5 The Model Act is the product of the
Committee on Corporate Laws of the Section of Business Law of
the American Bar Association and is subject to continuous revision
by that body to deal with developments in corporate law and
practice as they occur.6
The new Act goes a step further in the direction of mainstream
law than did the LBCL. Unlike the LBCL, the new Act adopts not
just the substance of mainstream American corporation law, but
the leading mainstream law itself, by name.7 This approach should
make it easier to explain Louisiana’s position on corporation law to
lawyers and business executives in other states. Louisiana is not just
similar in its corporate law to a Model Act state; it is a Model Act
state. This simple point should save Louisiana lawyers and business
owners many hours of detailed explanation and reassurance to their
out-of-state colleagues and clients. Of course, some differences will
still exist between Louisiana’s version of the Model Act and the
versions enacted in other states. However, these differences will
operate as exceptions rather than the rule.
Louisiana’s adoption of the Model Act will also make it easier
to find persuasive authority on interpretive issues that have not yet
been addressed by Louisiana courts and to keep up with future
developments in the law.8 When Louisiana had its own unique
corporation statute, the corporate law decisions rendered in other
states were less likely to be relevant. Earlier efforts to update the
LBCL by inserting Model Act provisions sometimes created
Model Act as it existed at the ti me. See Richard P. Wolfe, The Fiduciary Duty of
Directors and Officers Under the Louisiana Business Corporation Act of 2014,
60 LOY. L. REV. 523, 528–30 (2014).
5. MODEL BUS. CORP. ACT ix (2011). Including the District of Columbia,
the count is 31 other jurisdictions. Of those 31 jurisdictions, Alaska, New
Mexico, and the District of Columbia have statutes based on the 1969 version of
the Model Act, rather than the more modern version that was first promulgated
in 1984. Id. at n.2.
6. Id. at ix–x.
7. Ironically, the last time that Louisiana took that step, when it adopted
the Uniform Business Corporation Act in 1928, it was apparently too far ahead
of the curve in modernizing its law. Only two other states adopted the Uniform
Act. Id. at xi.
8. The Reporter for the Committee on Corporate Laws oversees the
publication of an annotated version of the Model Act, and the Committee has
appointed state liaisons that report regularly on corporate law developments in
their state. At the time this article was written, the author was serving as the
liaison for Louisiana.
2015] MODEL BUSINESS CORPORATION ACT 985
unintended technical problems and interpretative issues.9 That will
no longer be true. When the Model Act is amended at the national
level, Louisiana will be able to easily adopt those changes in a way
that works technically with its existing corporation statute.
The Committee that worked on the new Act included
representatives of the secretary of state’s office,10 corporate law
practitioners from various regions of the state,11 and four law
professors in the field of corporation law, one from each of the
state’s four law schools.12 Working with the Committee was one of
the highlights of the author’s professional career. Committee
members knew the existing law, took great care in reviewing the
proposed new law, expressed their views candidly but also
respectfully and fairly, and worked cooperatively to find
constructive solutions to the problems at hand.
The Committee did not expect its work to be perfect or final.
Drafting errors are nearly inevitable in a statute as long and complex
as the new Act, and the legal issues faced by corporations will almost
surely continue to evolve. Hence, the Committee plans to remain
active and make proposals for corrections and improvements to the
new Act as needed.
The remainder of this Article provides a summarized comparison
between the new Act and the LBCL, taking up issues in the order in
which they are covered in the new Act.
9. Louisiana copied an Indiana anti-takeover provision in the late 1980s
that utilized an important Model Act term, “voting group,” that had no meaning
under the Louisiana statute. See GLENN G. MORRIS & WENDELL H. HOLMES,
BUSINESS ORGANIZATIONS § 39.04, in 8 LOUISIANA CIVIL LAW TREATISE 365
n.29 (West 1999). In 2005, modified versions of the share certificate provisions
of the Model Act were enacted but in a way that combined a limited Louisiana
version of the Model Act rule with another, unmodified, Model Act provision
that effectively undercut the effects of the earlier, limited provision. Id. § 10.13,
at 30 n.1. The certificate provisions also failed to take account of the fact that
Louisiana law, unlike the Model Act, still retained the par-value system of
corporate capital. Id. at n.3.
10. Steve Windham served when Jay Dardenne was Secretary of State. He
was replaced on the committee by Carla Bonaventure after Tom Schedl er
became Secretary of State. The Committee was assisted by two other staff
members in the secretary’s office, Steve Hawkland and Mandy Hamilton.
11. The practitioners were Virginia Boulet, James C. Crigler, Jr., Joshua A.
Decuir, Maureen Brennan Gershanik, Regina N. Hamilton, Lee Kantrow, Rick J.
Norman, Robert M. Walmsley, Jr., Charles S. Weems, III, and Richard P .
Wolfe.
12. The professors were Onnig Dombalagi an, of Tulane University Law
School; Lloyd “Trey” Drury, III, of Loyola University New Orleans College of
Law; Glenn G. Morris, of the LSU Paul M. Hebert Law Center; and Roederick
White, of the Sout hern University Law Center.

To continue reading

FREE SIGN UP