The Minnesota legislature has made several amendments to the Minnesota Business Corporation Act (“MBCA”) that have the potential to impact the governance structure of Minnesota corporations. Three amendments are of particular importance:
1. Appointment and Removal of Officers
Appointment and termination of corporate officers have historically been within the authority of a corporation’s board of directors only. Under the recent amendment, however, a board of directors may now delegate the authority to appoint and remove officers (except the CFO) to the corporation’s president or CEO. Minn. Stat § 302.311. This amendment allows corporations to tailor appointment and removal powers to their own individual circumstances and allows for quicker termination of an officer’s employment upon evidence of wrongdoing.
2. Cumulative Voting in Public Companies
Cumulative voting is a mechanism used to protect the interests of minority shareholders by permitting each voting shareholder to cast multiple votes based on the number of board seats open for election. For example, if there are ten directors to be elected, a holder of 10 shares with voting rights would be entitled to cast 100 votes, which could be allocated in favor of one or more candidates.
Historically, the MBCA required a very high super-majority vote for modification or elimination of cumulative voting, which was nearly impossible for a public corporation, with a large number of shareholder, to achieve.
Cumulative voting is a mechanism intended to protect the interests of shareholders in small corporations, but was never intended to frustrate shareholder action in public corporations. The 2010 amendments to the MBCA recognize this and have reduced the requirements for public corporations, now requiring an affirmative vote of a majority – rather than a supermajority – of shareholders in a public corporation in order to eliminate or modify cumulative voting rights.
This amendment does not affect private corporations.
3. Location of Corporate Books
Prior versions of the MBCA required that corporations keep certain books and records at their principal executive offices. However, this practice was impractical for smaller companies who traditionally housed their corporate minute books at the office of their attorney, accountant or other professional advisor. The recent amendments formalize this practice, allowing corporations to store required records offsite, as long as they are available for inspection within 10 days of valid inquiry.
