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H.B. 53 Enrolled
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7 LONG TITLE
8 General Description:
9 This bill modifies provisions for assessing corporate shares.
10 Highlighted Provisions:
11 This bill:
12 . defines terms;
13 . describes how shares may be assessed;
14 . provides rules for assessing shares; and
15 . allows enforcement of assessments by various methods, including sale of shares
16 with unpaid assessments.
17 Monies Appropriated in this Bill:
18 None
19 Other Special Clauses:
20 None
21 Utah Code Sections Affected:
22 ENACTS:
23 16-4-101, Utah Code Annotated 1953
24 16-4-102, Utah Code Annotated 1953
25 16-4-201, Utah Code Annotated 1953
26 16-4-202, Utah Code Annotated 1953
27 16-4-203, Utah Code Annotated 1953
28 16-4-204, Utah Code Annotated 1953
29 16-4-205, Utah Code Annotated 1953
30 16-4-206, Utah Code Annotated 1953
31 16-4-301, Utah Code Annotated 1953
32 16-4-302, Utah Code Annotated 1953
33 16-4-303, Utah Code Annotated 1953
34 16-4-304, Utah Code Annotated 1953
35 16-4-305, Utah Code Annotated 1953
36 16-4-306, Utah Code Annotated 1953
37 16-4-307, Utah Code Annotated 1953
38 16-4-308, Utah Code Annotated 1953
39 16-4-309, Utah Code Annotated 1953
40 16-4-310, Utah Code Annotated 1953
41 16-4-311, Utah Code Annotated 1953
42 16-4-312, Utah Code Annotated 1953
43 REPEALS:
44 16-4-4, as last amended by Chapter 29, Laws of Utah 1961
45 16-4-5, as last amended by Chapter 29, Laws of Utah 1961
46 16-4-6, as last amended by Chapter 29, Laws of Utah 1961
47 16-4-7, as last amended by Chapter 29, Laws of Utah 1961
48 16-4-8, as last amended by Chapter 29, Laws of Utah 1961
49 16-4-9, as last amended by Chapter 29, Laws of Utah 1961
50 16-4-10, as last amended by Chapter 29, Laws of Utah 1961
51 16-4-12, as last amended by Chapter 9, Laws of Utah 2001
52 16-4-13, Utah Code Annotated 1953
53 16-4-14, Utah Code Annotated 1953
54 16-4-15, as last amended by Chapter 29, Laws of Utah 1961
55 16-4-16, as last amended by Chapter 29, Laws of Utah 1961
56 16-4-17, as last amended by Chapter 29, Laws of Utah 1961
57 16-4-18, as last amended by Chapter 29, Laws of Utah 1961
58 16-4-19, as last amended by Chapter 6, Laws of Utah 1992, Third Special Session
59 16-4-20, as last amended by Chapter 29, Laws of Utah 1961
60 16-4-21, as last amended by Chapter 29, Laws of Utah 1961
61 16-4-22, as last amended by Chapter 29, Laws of Utah 1961
62 16-4-23, as last amended by Chapter 29, Laws of Utah 1961
63 16-4-24, Utah Code Annotated 1953
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65 Be it enacted by the Legislature of the state of Utah:
66 Section 1. Section 16-4-101 is enacted to read:
67
68
69 16-4-101. Title.
70 This chapter is known as the "Share Assessment Act."
71 Section 2. Section 16-4-102 is enacted to read:
72 16-4-102. Definitions.
73 As used in this chapter:
74 (1) "Corporation" means a nonprofit corporation or a profit corporation.
75 (2) "Nonprofit corporation" means a nonprofit corporation as defined in Section
76 16-6a-102 .
77 (3) "Profit corporation" means a corporation as defined in Section 16-10a-102 .
78 (4) "Shares" means shares as defined in:
79 (a) Section 16-6a-102 for a nonprofit corporation; and
80 (b) Section 16-10a-102 for a profit corporation.
81 (5) "Water company" means a corporation in which a shareholder has the right, based
82 on the shareholders shares, to receive a proportionate share of water delivered by the
83 corporation.
84 Section 3. Section 16-4-201 is enacted to read:
85
86 16-4-201. Assessments.
87 (1) The shares of a nonprofit corporation are subject to assessment for any corporate
88 purpose, except to the extent proscribed by the articles of incorporation.
89 (2) The shares of a profit corporation are subject to assessment if:
90 (a) those shares were subject to assessment before May 1, 2007; and
91 (b) the assessment is not proscribed by the corporation's articles of incorporation.
92 Section 4. Section 16-4-202 is enacted to read:
93 16-4-202. Procedure for assessment in absence of provisions in articles or bylaws.
94 (1) An assessment shall be levied in the manner this chapter provides, unless other
95 commercially reasonable procedures are provided in the articles of incorporation or bylaws.
96 (2) Each assessment shall comply with the requirements of Section 16-4-203 .
97 Section 5. Section 16-4-203 is enacted to read:
98 16-4-203. Equitable assessment.
99 (1) (a) Subject to Subsection (2), all shares subject to assessment shall be assessed
100 equitably.
101 (b) Different classes of shares, and shares with different rights or benefits, may be
102 subject to differing assessments.
103 (2) Shares may also be assessed on any basis required by:
104 (a) any existing or future contract between:
105 (i) the United States and a water company;
106 (ii) the United States and the shareholders of a water company; or
107 (iii) a water company and one or more shareholders of the water company; or
108 (b) any contract of subscription for shares in a water company contracting with the
109 United States.
110 (3) For purposes of Subsection (2), "contract" does not include the articles of
111 incorporation or the bylaws.
112 Section 6. Section 16-4-204 is enacted to read:
113 16-4-204. Order levying assessment -- Contents.
114 (1) An assessment may be levied by order of the board of directors.
115 (2) An order levying an assessment shall:
116 (a) specify the amount of the levy on each share;
117 (b) specify when, to whom, and where the assessment is payable; and
118 (c) identify the day on which an unpaid assessment becomes delinquent.
119 (3) The date on which an unpaid assessment is considered delinquent shall be at least
120 30 days after notice of assessment is given as provided in Section 16-4-206 .
121 (4) If assessments are not levied on an equal basis for all shares, the order shall state
122 the equitable basis for the differing assessments.
123 Section 7. Section 16-4-205 is enacted to read:
124 16-4-205. Notice of assessment -- Form and contents.
125 When the board of directors levies an assessment, the secretary shall prepare a notice of
126 assessment, including:
127 (1) the name of the corporation;
128 (2) the location of the corporation's principal place of business;
129 (3) the date of the meeting at which the board of directors adopted the order levying the
130 assessment;
131 (4) a description of the class or classes of shares assessed, and the amount of
132 assessment per share;
133 (5) the time, place, and manner of payment;
134 (6) the day on which payment is considered delinquent;
135 (7) if assessments are not levied on an equal basis, a statement that the equitable basis
136 for the assessments is set forth in the order; and
137 (8) a general statement that the board of directors may elect various remedies to
138 enforce payment, including the auctioning of shares.
139 Section 8. Section 16-4-206 is enacted to read:
140 16-4-206. Service and publication of notice of assessment.
141 (1) The notice of assessment required by Section 16-4-205 shall be:
142 (a) personally served on each shareholder; or
143 (b) sent by first-class mail to each shareholder at the address shown on the
144 corporation's records.
145 (2) A shareholder is responsible for providing the shareholder's current mailing address
146 to the corporation for purposes of Subsection (1).
147 (3) (a) Except as provided in Subsection (3)(b), a notice of assessment shall be
148 published once a week for two weeks in a newspaper of general circulation in the location of
149 the corporation's principal place of business.
150 (b) A water company may elect not to publish notice under Subsection (3)(a).
151 Section 9. Section 16-4-301 is enacted to read:
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153 16-4-301. Enforcement of assessment.
154 (1) Payment of a delinquent assessment may be enforced by a corporation in one or
155 more of the following ways:
156 (a) imposition of a late charge, penalty, or interest;
157 (b) suspension of one or more benefits of share ownership, including the right to vote,
158 to transfer shares, or to delivery of water in the case of a water company;
159 (c) sale at public auction of the shares on which payment is delinquent; and
160 (d) any other enforcement method specified in the corporation's articles of
161 incorporation.
162 (2) In an enforcement action, the corporation may recover the delinquent assessment,
163 any late charge, penalty, or interest, and all costs of collection, including attorney fees.
164 (3) (a) The board of directors shall follow enforcement procedures:
165 (i) as set forth in the articles of incorporation or bylaws; or
166 (ii) as determined by the board of directors in a manner consistent with the board of
167 directors' fiduciary duty to shareholders.
168 (b) If the board of directors determines to sell shares at public auction, the board shall
169 follow the procedures required by Sections 16-4-302 through 16-4-312 .
170 Section 10. Section 16-4-302 is enacted to read:
171 16-4-302. Notice of sale -- Form.
172 Upon a determination by the board of directors to sell shares on which payment of an
173 assessment is delinquent and the adoption of an order to sell the shares, the secretary shall
174 prepare a notice of sale, including:
175 (1) the name of the corporation;
176 (2) the location of the corporation's principal place of business;
177 (3) the date on which the assessment order was adopted;
178 (4) a description of the shares on which an assessment is delinquent, including the
179 name of any owner, certificate numbers if share certificates exist, and the number of shares
180 represented by any certificate;
181 (5) a description of the amount due and payable with respect to each share on which an
182 assessment is delinquent, including the assessment, any late charge, penalty, or interest, and the
183 estimated costs and expenses of collection;
184 (6) a statement of the date, time, and place of the sale of shares to pay the amount
185 payable if the amount is not paid before the identified date; and
186 (7) a statement that if shares are purchased at the auction by the corporation, or a
187 director or officer of the corporation for the benefit of the officer or director, the shares may be
188 redeemed by the shareholder for a period of 30 days after the day on which the shares are sold.
189 Section 11. Section 16-4-303 is enacted to read:
190 16-4-303. Service and publication of notice of sale.
191 (1) The notice of sale required by Section 16-4-302 shall be:
192 (a) personally served on each shareholder whose share is subject to sale; or
193 (b) sent by certified mail, return-receipt requested, to each shareholder whose share is
194 subject to sale at the address shown on the corporation's records.
195 (2) A shareholder is responsible for providing the shareholder's current mailing address
196 to the corporation for purposes of Subsection (1).
197 (3) The notice required by Subsection (1) shall be served or mailed at least 15 days, but
198 not more than 30 days before the day on which the sale is to occur.
199 (4) A notice of sale shall be published once a week for two weeks in a newspaper of
200 general circulation in the location of the corporation's principal place of business beginning at
201 least 15 days but no more than 45 days before the day on which the sale is to occur.
202 Section 12. Section 16-4-304 is enacted to read:
203 16-4-304. Power of sale.
204 The service or mailing and publication of the notice of sale required under Section
205 16-4-303 gives a corporation power to sell and convey all the shares described in the notice of
206 sale upon which any delinquent assessment or other amount remains unpaid at the time
207 appointed for the sale.
208 Section 13. Section 16-4-305 is enacted to read:
209 16-4-305. Number of shares to be sold.
210 (1) On the day, at the time and place appointed for a sale under this part, the secretary
211 or other officer shall sell at public auction to the highest bidder for cash the number of shares
212 necessary to pay all amounts due on an overdue assessment.
213 (2) Shares shall be sold in the smallest fraction as authorized in the articles of
214 incorporation or the bylaws.
215 (3) The public auction shall be conducted by open bid, sealed bid, or by other means
216 provided in the articles of incorporation or bylaws that reasonably protects the delinquent
217 shareholder's interest.
218 (4) Proceeds of a sale in excess of the assessment and other amounts due shall be
219 promptly paid to the shareholder whose shares were sold.
220 Section 14. Section 16-4-306 is enacted to read:
221 16-4-306. Determining the highest bidder -- Transfer to highest bidder.
222 (1) (a) The person offering at a sale to pay the highest amount for the smallest number
223 or fraction of shares, which may not be less than the delinquent assessment and all other
224 amounts payable, is the highest bidder.
225 (b) Whether the bid is for the smallest number or fraction of shares is determined by
226 the articles of incorporation.
227 (2) The shares purchased shall be transferred to the highest bidder on the share books
228 of the corporation upon payment of the bid amount.
229 Section 15. Section 16-4-307 is enacted to read:
230 16-4-307. Purchase by corporation, officer, or director -- Redemption.
231 (1) (a) If at the sale of shares, no bidder offers the amount of the delinquent assessment
232 and all other amounts payable, the shares may be bid on and purchased by the corporation
233 through the secretary, president, or any director for the amount of the delinquent assessment
234 and all other amounts payable.
235 (b) If a corporation purchases shares under Subsection (1), the delinquent assessment
236 and all other amounts payable shall be credited as paid in full on the books of the corporation.
237 (2) If purchased under Subsection (1), entry of the transfer of the shares to the
238 corporation shall be made on the corporation's books.
239 (3) Any shares acquired by a corporation under this section, or purchased by an officer
240 or director for the officer's or director's own benefit, are subject to redemption by the
241 shareholder for a period of 30 days following the day on which the shares are sold at auction.
242 (4) (a) Shares subject to redemption under Subsection (3) may be redeemed at a price
243 equal to the amount of the delinquent assessment and all other amounts payable on the day of
244 the sale, plus interest through the day on which the shares are redeemed.
245 (b) The amount of interest under Subsection (4)(a) is the amount determined under
246 Section 15-1-4 .
247 Section 16. Section 16-4-308 is enacted to read:
248 16-4-308. Status of shares purchased by corporation, officer, or director.
249 (1) (a) Title to any shares purchased by a corporation under Section 16-4-307 vests in
250 the corporation upon expiration of the 30-day redemption period if the right of redemption is
251 not exercised.
252 (b) Shares purchased by a corporation under Section 16-4-307 are treated as treasury
253 shares and shall be held and disposed of in a manner expressly provided for in Title 16,
254 Chapter 10a, Utah Revised Business Corporation Act.
255 (c) Any shares held by a corporation under this section are not assessable.
256 (d) No dividends or distributions may be made on shares held by the corporation.
257 (2) (a) Title to any shares purchased by an officer or director of the corporation for the
258 officer's or director's own benefit vest in the officer or director upon expiration of the 30-day
259 redemption period if the right of redemption is not exercised.
260 (b) Shares purchased by an officer or director for the officer's or director's own benefit
261 are subject to all assessments levied by the corporation after the assessment that was the basis
262 for the sale at which the officer or director purchased the shares.
263 Section 17. Section 16-4-309 is enacted to read:
264 16-4-309. Extension of time specified in notices.
265 (1) The dates fixed in any notice of assessment or notice of sale may be extended for
266 up to six months by order of the board of directors entered on the corporation's records.
267 (2) No order extending the time for the performance of any act specified in any notice
268 under this chapter is effective unless notice of the extension is published and served in the
269 same manner as the original notice.
270 Section 18. Section 16-4-310 is enacted to read:
271 16-4-310. Error or omission in proceedings -- Effect.
272 (1) No assessment is invalidated by:
273 (a) a failure to serve, mail, or publish the notice of sale;
274 (b) the omission of any information required to be contained in the notice; or
275 (c) the nonperformance of any act otherwise required to be performed in connection
276 with the sale of shares to enforce payment of an assessment.
277 (2) No sale is valid unless proper notice is given and any material acts of
278 nonperformance are corrected.
279 Section 19. Section 16-4-311 is enacted to read:
280 16-4-311. Action to recover shares sold -- Tender -- Limitation of action.
281 (1) No action may be brought to recover shares sold for a delinquent assessment based
282 on irregularity or defect in the notice of sale or the sale unless the person bringing the action
283 first pays or tenders payment to the corporation or to the person holding the shares sold:
284 (a) the amount for which the shares were sold;
285 (b) the amount of all subsequent assessments levied on the shares; and
286 (c) interest on the amounts identified in Subsections (1)(a) and (b) from the time the
287 amounts were paid by the person purchasing the shares.
288 (2) No action may be brought to recover shares sold under this part more than six
289 months after the sale of the shares at auction.
290 Section 20. Section 16-4-312 is enacted to read:
291 16-4-312. Affidavit and posting of notice -- Evidence.
292 (1) An affidavit made by the secretary of a corporation of the mailing of a notice
293 required by this chapter is prima facie evidence of the existence and mailing of the notice.
294 (2) The publication of a notice under this chapter may be proved by the affidavit of the
295 printer foreman or principal clerk of the newspaper in which the notice was published.
296 (3) The affidavit of the secretary of the corporation or the auctioneer responsible for
297 selling shares is prima facie evidence of:
298 (a) the time and place of sale;
299 (b) the quantity and particular description of the shares sold;
300 (c) to whom and for what price the shares were sold; and
301 (d) the fact of the purchase money being paid.
302 (4) The affidavits referenced in this section shall be filed in the corporation's office.
303 (5) A copy of an affidavit referenced in this section is prima facie evidence of the facts
304 contained in the affidavit if the affidavit is certified by the secretary.
305 Section 21. Repealer.
306 This bill repeals:
307 Section 16-4-4, Assessments -- Provision by statute or in articles of incorporation
308 necessary.
309 Section 16-4-5, Procedure applicable in absence of provision in articles or bylaws.
310 Section 16-4-6, Limit on right to levy assessments.
311 Section 16-4-7, Equal assessments required.
312 Section 16-4-8, Order levying assessment -- Contents.
313 Section 16-4-9, Notice of order of assessment -- Form and contents.
314 Section 16-4-10, Service and publication of notice of order.
315 Section 16-4-12, Notice of delinquency -- Form.
316 Section 16-4-13, Delinquency notice -- Contents.
317 Section 16-4-14, Publication of notice of delinquency.
318 Section 16-4-15, Jurisdiction acquired by publication.
319 Section 16-4-16, Amount of stock to be sold.
320 Section 16-4-17,"Highest bidder" defined.
321 Section 16-4-18, Purchase by corporation.
322 Section 16-4-19, Status of stock purchased by corporation.
323 Section 16-4-20, Extension of time specified in notices.
324 Section 16-4-21, Errors or omissions in proceedings -- Effect.
325 Section 16-4-22, Actions to recover stock sold -- Tender -- Limitation of action.
326 Section 16-4-23, Affidavit of posting notice -- Who may make -- Evidence.
327 Section 16-4-24, Irrigation companies -- Assessments -- Other than pro rata basis.
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