State Laws Governing Shareholder Rights

Since the majority of states have adopted the Model Business Corporation Act, shareholder rights are generally consistent from one state to the next. State statutes should be consulted to determine whether an individual state has granted any specific rights to shareholders of businesses incorporated in that state.

ALABAMA: Alabama statute is based on the Model Business Corporation Act. Shareholders are granted preemptive rights in the statute. Shareholders may bring derivative actions for fraud, dishonesty, or gross abuse on the part of the directors. Holders of 10 percent of the votes may call a special meeting.

ALASKA: A shareholder may bring a derivative action on behalf of the corporation. Each record shareholder is entitled to written notice of meetings.

ARIZONA: Arizona statute is based on the Model Business Corporation Act. Corporations must provide shareholders with a stock certificate upon request. Shareholders may petition for a special meeting.

ARKANSAS: Arkansas statute is based on the Model Business Corporation Act. Shareholders are entitled to notice of annual and special shareholder meetings. The statute grants preemptive rights to shareholders.

CALIFORNIA: The statute provides special rights to shareholders who dissent to corporate reorganization or merger.

COLORADO: Colorado statute is based on the Model Business Corporation Act. Statute provides special rules regarding entitlement to voting with respect to fractional shares. The statute provides specific rules regarding derivative actions.

CONNECTICUT: The articles of incorporation of a corporation must provide preemptive rights. The statute governs derivative suits brought by shareholders.

DELAWARE: The statute provides specific rules regarding derivative actions. The statute prescribes specific rules shareholder meetings and voting, including voting agreements and voting by proxy.

DISTRICT OF COLUMBIA: The statute is based on the Model Business Corporation Act. The statute permits derivative actions brought by shareholders, and prescribes specific rules for such actions.

FLORIDA: Florida statute is based on the Model Business Corporation Act. The statute permits derivative actions and prescribes specific rules for such actions. The statute prescribes specific rules for voting by shareholders, including voting trusts and voting agreements.

GEORGIA: Georgia statute is based on the Model Business Corporation Act. The statute does not provide preemptive rights to shareholders, except those in close corporations or in those corporations in existence prior to July 1, 1989. The statute permits derivative actions by shareholders.

HAWAII: Hawaii statute is based on the Model Business Corporation Act. The statute provides preemptive rights to shareholders. The statute permits derivative actions by shareholders and prescribes specific rules for such.

IDAHO: Idaho statute is based on the Model Business Corporation Act.

ILLINOIS: The statute permits derivative actions by shareholders. The statute requires vote of shareholders to approve mergers, acquisitions, and other significant and fundamental changes in the corporate structure.

INDIANA: Indiana statute is based on the Model Business Corporation Act. The statute restricts preemptive rights, except those provided under prior law. Shareholder derivative action is permitted, subject to some restrictions. The statute permits the creation of a disinterested committee of the corporation to consider a derivative action.

IOWA: The statute does not provide preemptive rights, which may only be granted by the articles of incorporation. The statute provides specific rules regarding shareholder meetings and shareholder voting.

KANSAS: The statute provides specific rules regarding derivative actions. The statute prescribes specific rules shareholder meetings and voting, including voting agreements and voting by proxy.

KENTUCKY: Kentucky statute is based on the Model Business Corporation Act. The statute permits derivative actions by shareholders and provides specific rules regarding representation of the corporation’s rights.

LOUISIANA: The statute does not provide preemptive rights, which may only be granted in the articles of incorporation. The statute provides specific rules regarding shareholder meetings and voting, including the creation of voting trusts.

MAINE: Maine statute is based on the 1960 version of the Model Business Corporation Act. The statute grants limited preemptive rights in some circumstances. The statute permits derivative actions and prescribes specific rules regarding such actions.

MARYLAND: Maryland statute is based on the Model Business Corporation Act. The statute prescribes specific rules regarding shareholder meeting and voting, including voting by proxy.

MASSACHUSETTS: The statute does not provide preemptive rights to shareholders. The statute permits derivative suits by shareholders under appropriate circumstances.

MICHIGAN: Shareholders are permitted to bring an action to establish that the acts of directors or other managers are illegal, fraudulent, or willfully unfair or oppressive to the shareholders or corporation. The statute sets forth detailed rules regarding shareholder meetings and voting, including voting without a meeting and voting trusts.

MINNESOTA: The statute sets forth detailed rules regarding shareholder meetings and voting and the rights of shareholders to inspect the books and records of the corporation.

MISSISSIPPI: Mississippi statute is based on the Model Business Corporation Act.

MISSOURI: The statute permits shareholders to bring suit to enjoin ultra vires acts. The statute pro-vides detailed rules regarding shareholder meetings and voting, including voting trusts.

MONTANA: Montana statute is based on the Model Business Corporation Act. The statute provides specific rules regarding shareholder meetings and voting, including a provision that permits shareholders to participate by telephone if the corporation consists of 50 or fewer shareholders.

NEBRASKA: Nebraska’s statute is based on the Model Business Corporation Act.

NEVADA: The statute provides specific rules regarding shareholder meetings and voting, including voting trusts.

NEW HAMPSHIRE: New Hampshire statute is based on the Model Business Corporation Act.

NEW JERSEY: Statute does not provide preemptive rights for shareholders. The statute permits derivative suits subject to some restrictions, and provides specific rules regarding shareholder meetings and voting, including voting trusts and voting by proxy.

NEW MEXICO: New Mexico statute is based on the Model Business Corporation Act. The statute permits shareholder derivative suits, subject to some restrictions.

NEW YORK: In some limited circumstances, majority shareholders may incur personal liability for corporation’s debts. The statute provides detailed rules regarding shareholder meetings and voting, including voting trusts.

NORTH CAROLINA: North Carolina statute is based on the Model Business Corporation Act. Shareholders under current statute do not have preemptive rights. The statute provides detailed rules regarding shareholder meetings and voting, including voting trusts and voting by proxy.

NORTH DAKOTA: Shareholder meetings are held on an annual or other periodic basis, but do not need to be held unless required by the articles of incorporation or the by-laws. A shareholder with more than 5 percent of voting power may demand a meeting.

OHIO: The statute permits derivative actions brought by shareholders. Shareholders provide detailed rules regarding shareholder meetings and voting, including voting trusts.

OKLAHOMA: The statute permits derivative actions brought by shareholders. Statute and provides detailed rules regarding shareholder meetings and voting, including voting trusts.

OREGON: Oregon statute is based on the Model Business Corporation Act. The statute provides detailed rules regarding shareholder meetings and voting, including voting trusts.

PENNSYLVANIA: The statute permits derivative actions brought by shareholder and provides detailed rules regarding these actions. The statute provides detailed rules regarding shareholder meetings and voting, including voting trusts.

RHODE ISLAND: Rhode Island statute is based on Model Business Corporation Act. The statute permits derivative actions brought by shareholders and provides some limitation for voting trusts and shareholder agreements.

SOUTH CAROLINA: South Carolina statute is based on the Model Business Corporation Act. The statute provides detailed rules on shareholder meetings and voting, including voting trusts and voting by proxy.

SOUTH DAKOTA: South Dakota statute is based on the Model Business Corporation Act.

TENNESSEE: The statute contains special rules regarding derivative actions brought by shareholders.

TEXAS: The statute permits shareholder agreements, subject to a number of restrictions and provides detailed rules regarding shareholder meetings and voting, including voting trusts.

UTAH: Utah statute is based on the Model Business Corporation Act. The statute provides detailed rules regarding shareholder meetings and voting, including voting entitlement, voting trusts, voting agreements, and other shareholder agreements.

VERMONT: The statute does not provide preemptive rights to shareholders. The statute provides specific rules regarding voting trusts and voting by proxy and permits derivative actions brought by shareholders.

VIRGINIA: Virginia statute is based partially on the Model Business Corporations Act. The statute provides preemptive rights to shareholder by default. Statute and permits derivative actions brought by shareholders.

WASHINGTON: Washington statute is based on the Model Business Corporations Act. The statute provides preemptive rights to shareholders by default.

WEST VIRGINIA: The West Virginia statute is based primarily on the Model Business Corporation Act. The statute provides detailed rules regarding shareholder meetings and voting, including voting trusts.

WISCONSIN: The statute does not provide preemptive rights to shareholders. Statute and provides detailed rules regarding shareholder meetings and voting, including voting by proxy and voting trusts.

WYOMING: Wyoming’s statute is based on the Model Business Corporations Act.


Inside State Laws Governing Shareholder Rights