New Montana Corporation Law
ComplianceMay 20, 2020

Montana Enacts a New Corporation Law

On June 1, 2020 a new business corporation law goes into effect in Montana. Below is a summary of some of the new law’s provision - with an emphasis on the provisions governing various corporate transactions and in how the new law differs from the old law.

Incorporation 

A corporation is incorporated under the new law by filing articles of incorporation with the Secretary of State. The corporation must appoint and maintain a registered office and a registered agent located at that office. The corporation’s name must be distinguishable in the records of the Secretary of State from the names of other domestic and registered foreign corporations and unincorporated entities.

Articles of incorporation

The articles of incorporation may grant shareholders preemptive rights and the right to cumulate their votes for directors. This is a reversal of the default rule that existed under the previous law – in which shareholders had these rights unless they were denied in the articles of incorporation. The new law also allows corporations to include a forum selection clause for internal corporate claims in the articles of incorporation or bylaws.

Ratification of defective acts

The new law contains a procedure by which a corporation can ratify defective corporate acts. A defective corporate act is defined as an overissue or any corporate action purportedly taken that at the time taken would have been within the power of the corporation but is void or voidable due to a failure of authorization. The old law did not contain a similar procedure.

Conversions and domestications

The new law contains provisions under which a domestic corporation can convert to a domestic or foreign unincorporated entity and a domestic or foreign unincorporated entity can convert to a domestic corporation. The new law also provides a procedure whereby a domestic corporation can become a foreign corporation and a foreign corporation can become a domestic corporation. The previous law did not provide for conversions or domestications.

Mergers

Under the new law, one or more domestic corporations can merge with one or more domestic or foreign corporations or unincorporated entities. The default rule is that a merger must be approved by a majority of the shares entitled to vote on the merger. Under the law in effect before June 1, a corporation could merge with another corporation but the law did not provide for mergers with unincorporated entities. Also, the default rule was approval by two-thirds of the shares entitled to vote.

Dissolution

A corporation may dissolve by the board of directors proposing to dissolve and the shareholders approving the proposal. The default vote for approval under the new law is a majority of the shares entitled to vote on dissolution. Under the previous law, the default vote was two-thirds of the shares entitled to vote.

Foreign corporations

A foreign corporation may not do business in the state until it registers with the Secretary of State. A foreign corporation may not maintain a proceeding in a court of the state until it registers. A foreign corporation registers by delivering a registration statement. If its name does not comply with the statute it must adopt an alternate name that does comply. A foreign corporation must appoint a registered office and registered agent.

For details on these transactions and all other provisions of the new law, see Sec. 35-1-101 et seq. of the Montana Code, where the new corporation law is codified.

Sandra Feldman
Publications Attorney
Sandra (Sandy) Feldman has been with CT Corporation since 1985 and has been the Publications Attorney since 1988. Sandy stays on top of the most pressing and pertinent business entity law issues that impact CT customers of all sizes and segments.
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