35-14-145. Definitions -- ratification of defective corporate actions. In 35-14-145 through 35-14-152, the following definitions apply:

(1) "Corporate action" means any action taken by or on behalf of the corporation, including any action taken by the incorporator, the board of directors, a committee of the board of directors, an officer or agent of the corporation, or the shareholders.

(2) "Date of the defective corporate action" means the date, or the approximate date if the exact date is unknown, the defective corporate action was purported to have been taken.

(3) "Defective corporate action" means:

(a) any corporate action purportedly taken that is, and at the time the corporate action was purportedly taken would have been, within the power of the corporation but is void or voidable due to a failure of authorization; and

(b) an overissue.

(4) "Failure of authorization" means the failure to authorize, approve, or otherwise effect a corporate action in compliance with the provisions of this chapter, the articles of incorporation or bylaws, a corporate resolution, or any plan or agreement to which the corporation is a party if and to the extent the failure would render the corporate action void or voidable.

(5) "Overissue" means the purported issuance of:

(a) shares of a class or series in excess of the number of shares of a class or series the corporation has the power to issue under 35-14-601 at the time of the issuance; or

(b) shares of any class or series that is not then authorized for issuance by the articles of incorporation.

(6) "Putative shares" means the shares of any class or series (including shares issued upon exercise of rights, options, warrants, or other securities convertible into shares of the corporation or interests with respect to those shares) that were created or issued as a result of a defective corporate action and that:

(a) but for any failure of authorization would constitute valid shares; or

(b) cannot be determined by the board of directors to be valid shares.

(7) "Valid shares" means the shares of any class or series that have been duly authorized and validly issued in accordance with this chapter, including as a result of ratification or validation under 35-14-145 through 35-14-152.

(8) (a) "Validation effective time", with respect to any defective corporate action ratified under 35-14-145 through 35-14-152, means the later of:

(i) the time at which the ratification of the defective corporate action is approved by the shareholders or, if approval of shareholders is not required, the time at which the notice required by 35-14-149 becomes effective in accordance with 35-14-141; or

(ii) the time at which any articles of validation filed in accordance with 35-14-151 become effective.

(b) The validation effective time is not affected by the filing or pendency of a judicial proceeding under 35-14-152 or otherwise unless ordered by the court.

History: En. Sec. 19, Ch. 271, L. 2019.