wa-law.org > bill > 2025-26 > SB 5006 > Original Bill

SB 5006 - Making updates to Washington's corporation acts. ¶

Section 1 ¶

Unless the articles of incorporation provide otherwise, a corporation may issue rights, options, or warrants for the purchase of shares or other securities of the corporation. The board of directors must determine the terms and conditions upon which the rights, options, or warrants are issuedand may become exercisable, exchangeable, or convertible, including the consideration for which the shares or other securities are to be issued. The authorization by the board of directors for the corporation to issue such rights, options, or warrants constitutes authorization of the issuance of the shares or other securities for which the rights, options, or warrants are exercisable.
The terms and conditions of such rights, options, or warrantsmay include restrictions or conditions that:
1. Preclude or limit the exercise, transfer, or receipt of such rights, options, or warrants by any person or persons owning or offering to acquire any number or percentage of the outstanding shares or other securities of the corporation or by any transferee or transferees of any such person or persons;
2. Invalidate or void any rights, options, or warrants held by any person or persons or any such transferee or transferees; or
3. Are dependent upon facts ascertainable outside the documents evidencing them or outside the resolution or resolutions adopted by the board of directors creating such rights, options, or warrants if the manner in which those facts operate on the rights, options, or warrants or the holders thereof is clearly set forth in the documents or the resolutions. For purposes of this section, "facts ascertainable outside the documents evidencing them or outside the resolution or resolutions adopted by the board of directors creating such rights, options, or warrants" includes, but is not limited to, the existence of any condition or the occurrence of any event, including, without limitation, a determination or action by any person or body, including the corporation, its board of directors, or an officer, employee, or agent of the corporation.
The board of directors may authorize one or more officers to: (a) Designate the recipients of rights, options, warrants, or other equity awards that involve the issuance of shares of the corporation; and (b) determine, within an amount and subject to other limitations established by the board of directors and, if applicable, the shareholders, the number of such rights, options, warrants, or other equity awards, and the terms and conditions of such rights, options, warrants, or other equity awards to be received by the recipients. An officer may not use such authority to designate himself or herself or any other persons as the board of directors may specify as a recipient of such rights, options, warrants, or other equity awards.

Section 2 ¶

Unless this title, the articles of incorporation, or the bylaws provide otherwise, a board of directors may establish one or more board committees composed exclusively of one or more directors to perform functions of the board of directors.
The establishment of a board committee and appointment of members to it must be approved by the greater of (a) a majority of all the directors in office when this corporate action is taken or (b) the number of directors required by the articles of incorporation or bylaws to take corporate action under RCW 23B.08.240, unless, in either case, this title or the articles of incorporation provide otherwise.
RCW 23B.08.200 through 23B.08.240apply to board committees and their members.

A board committee may exercise the powers of the board of directors under RCW 23B.08.010, to the extent specified by the board of directors or in the articles of incorporation or bylaws, except that a board committee may not:

a. Authorize or approve distributions, except according to a  formula or method, or within limits, prescribed by the board of directors;

b. Approve or propose to shareholders corporate action that this title requires be approved by shareholders;

c. Fill vacancies on the board of directors or, subject to subsection (5) of this section, on any board committees; or

d.

Adopt, amend, or repeal bylaws

The board of directors may appoint one or more directors as alternate members of any board committee to replace any absent or disqualified member during the member's absence or disqualification. If the articles of incorporation, the bylaws, or the resolution creating the board committee so provide, the member or members present at any board committee meeting and not disqualified from voting may, by unanimous action, appoint another director to act in place of an absent or disqualified member during that member's absence or disqualification.

Section 3 ¶

When a merger becomes effective:
1. The domestic corporation or other entity that is designated in the plan of merger as the surviving entity continues;
2. The separate existence of every domestic corporation or other entity that is merged into the surviving entity ceases;
3. All property owned by, and every contract right possessed by, each domestic corporation or other entity that is merged into the surviving entity are the property and contract rights of the surviving entity without transfer, reversion, or impairment;
4. All debts, obligations, and other liabilities of each domestic corporation or other entity that is merged into the surviving entity are debts, obligations, or liabilities of the surviving entity;
5. The name of the surviving entity may, but need not be, substituted in any pending proceeding for the name of any party to the merger whose separate existence ceased in the merger;
6. If the surviving entity is a domestic entity, the articles of incorporation and bylaws or the organic rules of the surviving entity are amended, or amended and restated, to the extent provided in the plan of merger;
7. The shares of or interests in each entity that is a party to the merger that are to be converted in accordance with the terms of the merger into shares or other securities, interests, obligations, rights to acquire shares, other securities, or interests, cash, other property, or any combination of the foregoing, are converted, and the former holders of such shares or interests are entitled only to the rights provided to them by those terms or to any rights they may have under chapter 23B.13 RCW or the organic law governing the other entity;
8. Except as provided by law or the plan of merger, all the rights, privileges, franchises, and immunities of each entity that is merged into the surviving entity, are the rights, privileges, franchises, and immunities of the surviving entity;
  1. All the property and contract rights of the surviving entity remain its property and contract rights without transfer, reversion, or impairment;
9. The surviving entity remains subject to all its debts, obligations, and other liabilities; and
10. Except as provided by law or the plan of merger, the surviving entity continues to hold all of its rights, privileges, franchises, and immunities.
When a share exchange becomes effective, the shares in the acquired entity that are to be exchanged for shares or other securities, obligations, rights to acquire shares, other securities, cash, other property, or any combination of the foregoing, are exchanged, and the former holders of such shares are entitled only to the rights provided to them in the plan of share exchange or to any rights they may have under chapter 23B.13 RCW.
Except as provided otherwise in the articles of incorporation of a domestic corporation or the organic law governing or organic rules of an other entity, the effect of a merger or share exchange on owner liability is as follows:
1. A person who becomes subject to new owner liability in respect of an entity as a result of a merger or share exchange will have that new owner liability only in respect of owner liabilities that arise after the merger or share exchange becomes effective;
2. If a person had owner liability with respect to a party to the merger or the acquired entity before the merger or share exchange becomes effective with respect to shares or interests of such party or acquired entity which were exchanged in the merger or share exchange, which were canceled in the merger, or the terms and conditions of which relating to owner liability were amended under the terms of the merger:
  1. The merger or share exchange does not discharge that prior owner liability with respect to any owner liabilities that arose before the merger or share exchange becomes effective;
  2. The provisions of the organic law governing any entity for which the person had that prior owner liability will continue to apply to the collection or discharge of any owner liabilities preserved by (b)(i) of this subsection (3), as if the merger or share exchange had not occurred;
  3. The person will have such rights of contribution from other persons as are provided by the organic law governing the entity for which the person had that prior owner liability with respect to any owner liabilities preserved by (b)(i) of this subsection (3), as if the merger or share exchange had not occurred; and
  4. The person will not, by reason of such prior owner liability, have owner liability with respect to any owner liabilities that arise after the merger or share exchange becomes effective;
3. If a person has owner liability both before and after a merger becomes effective with unchanged terms and conditions with respect to the entity that is the surviving entity by reason of owning the same shares or interests before and after the merger becomes effective, the merger has no effect on such owner liability; and
4. A share exchange has no effect on owner liability related to shares of the acquired entity that were not exchanged in the share exchange.
Upon a merger becoming effective, a foreign other entity that is the surviving entity of the merger is deemed to:
1. Appoint the secretary of state as its agent for service of process in a proceeding to enforce the rights of shareholders of each domestic corporation that is a party to the merger who are entitled to and exercise dissenters' rights under chapter 23B.13 RCW; and
2. Agree that it will promptly pay the amount, if any, to which such shareholders are entitled under chapter 23B.13 RCW.
Except as provided in the organic law governing a party to a merger or in its articles of incorporation or organic rules, the merger does not give rise to any rights that a shareholder, interest holder, governor, or third party would have upon a dissolution, liquidation, or winding up of that party. The merger does not require a party to the merger to wind up its affairs and does not constitute or cause its dissolution or termination.

Section 4 ¶

A shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholder's shares in the event of, any of the following corporate actions:
1. Consummation of a merger to which the corporation is a party (i) if shareholder approval is required for the merger by RCW 23B.11A.040 or the articles of incorporation, or would be required but for the provisions of RCW 23B.11A.045, and the shareholder is, or but for the provisions of RCW 23B.11A.045 would be, entitled to vote on the merger, except that the right to dissent will not be available to any shareholder of the corporation with respect to shares of any class or series that remain outstanding after consummation of the merger; or (ii) if the corporation is a subsidiary and the merger is governed by RCW 23B.11A.050;
2. A plan of share exchange, which has become effective, to which the corporation is a party as the corporation whose shares have been acquired, if the shareholder was entitled to vote on the plan;
3. A sale, lease, exchange, or other disposition, which has become effective, of all, or substantially all, of the property and assets of the corporation other than in the usual and regular course of business, if the shareholder was entitled to vote on the sale, lease, exchange, or other disposition, including a disposition in dissolution, but not including a disposition pursuant to court order or a disposition for cash pursuant to a plan by which all or substantially all of the net proceeds of the disposition will be distributed to the shareholders within one year after the date of the disposition;
4. An amendment of the articles of incorporation, whether or not the shareholder was entitled to vote on the amendment, if the amendment effects a redemption or cancellation of all of the shareholder's shares in exchange for cash or other consideration other than shares of the corporation;
5. Any action described in RCW 23B.25.120;
6. Any corporate action approved pursuant to a shareholder vote to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares;
7. A plan of entity conversion in the case of a conversion of a domestic corporation to a foreign corporation, which has become effective, to which the domestic corporation is a party as the converting entity, if: (i) The shareholder was entitled to vote on the plan; and (ii) the shareholder does not receive shares in the surviving entity that have terms as favorable to the shareholder in all material respects and that represent at least the same percentage interest of the total voting rights of the outstanding shares of the surviving entity as the shares held by the shareholder before the conversion; or
8. Consummation of a conversion of the corporation to another entity which is not a foreign corporation pursuant to RCW 23B.09.010.
A shareholder entitled to dissent and obtain payment for the shareholder's shares under this chapter may not challenge the corporate action creating the shareholder's entitlement unless the action fails to comply with the procedural requirements imposed by this title, RCW 25.10.831 through 25.10.886, the articles of incorporation, or the bylaws, or is fraudulent with respect to the shareholder or the corporation.
The right of a dissenting shareholder to obtain payment of the fair value of the shareholder's shares shall terminate upon the occurrence of any one of the following events:
1. The proposed corporate action is abandoned or rescinded;
2. A court having jurisdiction permanently enjoins or sets aside the corporate action; or
3. The shareholder's demand for payment is withdrawn with the written consent of the corporation.

Section 5 ¶

A corporation's board of directors may propose dissolution for submission to the shareholders.
For a proposal to dissolve to be approved:
1. The board of directors must recommend dissolution to the shareholders unless (i) the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation or (ii) RCW 23B.08.245 applies, and in either case the board of directors communicates the basis for so proceeding to the shareholders; and
2. The shareholders entitled to vote must approve the proposal to dissolve as provided in subsection (5) of this section.
The board of directors may condition its submission of the proposal for dissolution on any basis, including the affirmative vote of holders of a specified percentage of shares held by any group of shareholders not otherwise entitled under this title or the articles of incorporation to vote as a separate voting group on the proposed dissolution.
The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed dissolution either (a) by giving notice of a shareholders' meeting in accordance with RCW 23B.07.050 and stating that the purpose or one of the purposes of the meeting is to consider dissolving the corporation, or (b) in accordance with the requirements of RCW 23B.07.040 for approving the proposed dissolution without a meeting.

(a) With respect to a corporation formed before August 1, 2024:

 i. Unless the articles of incorporation, or the board of directors acting in accordance with subsection (3) of this section, requires a different vote, shareholder approval of the proposed dissolution requires:

(A) The approval of two-thirds of the votes entitled to be cast on the proposed dissolution; and

(B) The approval of two-thirds of the votes entitled to be cast on the proposed dissolutionby each other voting group entitled under the articles of incorporation to vote separately on the proposed dissolution.

    ii. The articles of incorporation may require a different vote than that provided in this subsection (5)(a), or a different vote by  separate voting groups , so long as the required vote is not less than a majority of all the votes entitled to be cast on the proposed dissolution and of each other voting group entitled to vote separately on the proposed dissolution.

b. With respect to a corporation formed on or after August 1, 2024, unless the articles of incorporation, or the board of directors acting in accordance with subsection (3) of this section, requires a greater vote, shareholder approval of the proposed dissolution requires:

    i. The approval of a majority of the votes entitled to be cast on the proposed dissolution; and

    ii. The approval of a majority of the votes entitled to be cast on the proposed dissolution by each other voting group entitled under the articles of incorporation to vote separately on the proposed dissolution.

Section 6 ¶

Unless this chapter, the articles, or the bylaws provide otherwise, a board may create one or more committees of the board that consist of one or more directors. A committee of the board shall not include as voting members persons who are not directors, except:
1. As provided in Title 48 RCW or the regulations promulgated thereunder;
2. If the only powers delegated to the committee are those necessary for the committee to serve in any fiduciary capacity with respect to one or more employee benefit plans established under the federal employee retirement income security act of 1974, or any successor statute; or
3. Unless without the inclusion of persons who are not directors it is impossible or impracticable for the corporation to comply with applicable law other than this chapter.
Unless this chapter otherwise provides, the creation of a committee of the board and appointment of directors to it shall be approved by the greater of:
1. A majority of all the directors in office when the action is taken; or
2. The number of directors required by the articles or bylaws to take action under RCW 24.03A.565.
RCW 24.03A.550 through 24.03A.570 apply to both committees of the board and their members to the greatest practicable extent.
To the extent specified by the board or in the articles or bylaws, each committee of the board may exercise the powers of the board granted through RCW 24.03A.490(2), except as limited by subsection (5) of this section.
A committee of the board may not:
1. Authorize distributions;
2. Adopt, amend, alter, or repeal bylaws;
3. In the case of a membership corporation, approve or propose to members action that must be approved by members under the articles or bylaws;
4. Elect, appoint, or remove any member of any committee of the board or any director or officer of the corporation;
5. Amend the articles;
6. Adopt a plan of merger with another corporation;
7. Adopt a plan of domestication, for-profit conversion, or entity conversion;
8. Authorize the sale, lease, or exchange of all or substantially all of the property and assets of the corporation not in the ordinary course of business;
  1. Authorize the voluntary dissolution of the corporation or revoke proceedings therefor;
9. Adopt a plan for the distribution of the assets of the corporation; or
10. Amend, alter, or repeal any resolution of the board, unless the resolution provides by its terms that it may be amended, altered, or repealed by a committee.
The creation of, delegation of authority to, or action by a committee of the board does not alone constitute compliance by a director with the standards of conduct described in RCW 24.03A.495.
A nonprofit corporation may create or authorize the creation of one or more advisory committees whose members need not be directors or meet the qualification requirements for directors. The board shall not delegate any of its authority to an advisory committee. An advisory committee:
1. Is not a committee of the board; and
2. May not exercise any of the powers of the board.

Section 7 ¶

If the articles of incorporation or the bylaws so provide, the board of directors, by resolution adopted by a majority of the directors in office, may designate and appoint one or more committees each of which shall consist of one or more directors, which committees, to the extent provided in such resolution, in the articles of incorporation, or in the bylaws of the corporation, shall have and exercise the authority of the board of directors in the management of the corporation: PROVIDED, That no such committee shall have the authority of the board of directors in reference to:

Amending, altering, or repealing the bylaws;
Electing, appointing, or removing any member of any such committee or any director or officer of the corporation;
Amending the articles of incorporation;
Adopting a plan of merger or a plan of consolidation with another corporation;
Authorizing the sale, lease, exchange, or mortgage, of all or substantially all of the property and assets of the corporation;
Authorizing the voluntary dissolution of the corporation or revoking proceedings therefor; or
Amending, altering, or repealing any resolution of the board of directors which by its terms provides that it shall not be amended, altered, or repealed by such committee.

The designation and appointment of any such committee and the delegation thereto of authority shall not operate to relieve the board of directors, or any individual director of any responsibility imposed upon it or him or her by law.

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