New Law: Has Your PA Corporation Updated its Bylaws?
June 20, 2016
It is now almost one year since the Associations Transaction Act came into effect in Pennsylvania on July 1, 2015. It is a good time to ask the question: Has your Pennsylvania corporation updated its Bylaws?
A major feature of the Act was to harmonize fundamental business transactions, but there was also an amendment to the Pennsylvania Business Corporation Law (the “Law”) that has a direct and important impact on many businesses’ Bylaws: a 10-day delay for actions.
Prior to the new Law of July 2015, when an action was taken by less than all the shareholders without a meeting and by written consent, the effectiveness of the action was delayed for 10 days. The old Law required it. Before a decision could become an effective action, a full 10 days’ notice was required to be given to the shareholders who did not consent and whose consent, in such cases, was not required.
We often see that it is very important for the primary owner/owners of a business to be able to put their decisions into action immediately. The 10-day rule had delayed these actions, even when the actions were a foregone conclusion.
As of July 1, 2015, this 10-day delay has been removed from the Law (except for mergers and other fundamental transactions), and modernized in Sections 1766(b) and (c).
The reason this needs attention is because a corporation’s Bylaws often ‘hardwire’ this old 10-day rule into the formal written language of the Bylaws. Therefore, even though the Law changed, outdated Bylaws can hold the corporation to the old version of the Law.
A simple Bylaw amendment can bring the corporation up to date with the new Law.