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Legislative updates

Senate Bill 477, effective in part September 29, 2023 and in part October 1, 2023, amends the corporation law regarding, among other things, the use of email to communicate with or provide notice to shareholders, actions taken by shareholders without a meeting, board amendments without shareholder approval, and class voting on amendments.

House Bill 320, effective September 20, 2021, amends the corporation law to provide that unless the articles of incorporation or bylaws prohibit holding shareholders' meetings solely by means of remote communication, the board of directors in its sole discretion may decide that a shareholders' meeting shall be held solely by means of remote communication, provided that the corporation has implemented reasonable measures to verify each participant's shareholder status and to provide each shareholder with a reasonable opportunity to participate in and vote on matters submitted to shareholders at the meeting. The bill also amends the nonprofit corporation law to provide that a nonprofit corporation may conduct a transaction by electronic means, except as limited by its articles of incorporation, bylaws, or by action of its board of directors, and to provide that unless member meetings held solely by means of remote communication are prohibited by the articles of incorporation or bylaws, the board of directors may, in its sole discretion, determine that any meeting of members shall be held solely by means of remote communication but only the members are given the opportunity to participate and vote to the same extent as they could if participating in person and the corporation has taken reasonable steps to verify that each remote participant is a member or a member's proxy.

Senate Bill 507, effective in part on August 16, 2021 and in part on October 1, 2021, amends various sections of the Business Corporation Law. The amendments effective August 16 modernize the provisions governing recordkeeping requirements and the inspection of records. The amendments effective October 1 deal with the voting entitlement of shares, director compensation, quorums, and change of name.

Executive Order 136, authorizes and encourages remote nonprofit corporation member and board meetings during the COVID-19 emergency.

Executive Order 125, effective April 1, 2020, authorizes and encourages remote shareholder meetings by North Carolina corporations during the COVID-19 state of emergency.

Case summaries

Nonprofit Corporation
Farmer v. Troy University, 2022 NSC 107, decided November 4, 2022. The North Carolina Supreme Court held that the defendant, a university that was an Alabama state institution, that received a certificate of authority to do business under the North Carolina Nonprofit Corporation Act, entered North Carolina and conducted business there, waived its sovereign immunity. The court noted that the defendant knew it was subject to suit because the Nonprofit Corporation Act states that foreign nonprofits can sue and be sued in North Carolina. The court thus reversed the decision of the court of appeals, which had affirmed the trial court’s dismissal on sovereign immunity grounds.

Personal Jurisdiction in Suit by Remote Worker
In the Court of Appeals v. Singlecare Holdings, No. COA 20-427, decided June 15, 2021. The North Carolina Court of Appeals held that North Carolina lacked personal jurisdiction over non-resident Delaware LLCs in the plaintiff’s suit arising out of his termination of employment. The plaintiff was a resident of California when he was hired and later moved to North Carolina and performed most of his work for the LLC from North Carolina. Among other arguments, the plaintiff alleged jurisdiction existed because the LLC facilitated his move to North Carolina, sent a letter to his mortgage lender, mailed tax documents to him, reimbursed his travel and office expenses in the state, paid him in North Carolina, and that he corresponded with his employer on a regular basis via telephone and email while working in North Carolina. However, as the court noted, the plaintiff relocated of his own accord. He was not asked to do so. The defendants’ acquiescence with the move and subsequent communications with the plaintiff in North Carolina did not create personal jurisdiction.

Other notices

Reminder – Pursuant to the North Carolina Assumed Business Name Act, which went into effect on December 1, 2017, assumed business names filed before December 1, 2017 expire on December 1, 2022. Entities that filed for an assumed business name before December 1, 2017 must re-file their assumed name business certificate by December 1, 2022 in order to keep their assumed business name designation active.

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