Effective January 1, 2015, Louisiana adopted the Louisiana Business Corporation Act (“Louisiana BCA”), which was drafted by Louisiana Law Institute’s Corporations Committee and replaces Louisiana’s Business Corporation Law. The Louisiana BCA is based on the Model Business Corporation Act (“MBCA”), a model act originally drafted fifty years ago by the American Bar Association Business Law Section Corporate Laws Committee. The MBCA is constantly evolving as the American Bar Association Business Law Section Corporate Laws Committee continuously considers the need for possible amendments or additions in light of developments in corporate and securities laws, judicial decisions and regulatory actions. Currently, thirty-three (33) states, including Louisiana, as well as the District of Columbia, base their corporate statutes on the MBCA.
The previous Louisiana corporate act was enacted effective January 1, 1969 as a result of Louisiana losing corporations to other states for income tax and corporate law reasons. The Louisiana BCA was adopted to further modernize Louisiana’s corporate law. As of January 1, 2015, the Louisiana BCA applies to all Louisiana corporations for profit, not just Louisiana corporations for profit formed on or after January 1, 2015.
The Louisiana Law Institute’s Corporations Committee adopted most of the provisions of the MBCA but made certain revisions designed to integrate with other Louisiana laws. Some of the changes under the Louisiana BCA include:
- Allowing the issuance of stock in exchange for a promissory note from a shareholder;
- Changing the solvency test for distributions to shareholders;
- Changing the default percentage for votes by shareholders;
- Changing the statutory indemnification provisions for directors and officers;
- Providing for a statutory withdrawal right with buy-out for oppressed shareholders;
- Eliminating shareholder liability for certain forms of dissolution; and
- Changing the percentage stock ownership for the statutory inspection right of shareholders.
All corporations incorporating after January 1, 2015 will need to account for the changes reflected in the Louisiana BCA in their formation documents. In addition, because the Louisiana BCA applies to corporations formed before January 1, 2015, existing corporations should review their Articles of Incorporation and other organizational documents to determine whether the change in the law necessitates any revisions to those or other organizational documents.