Changes in the Model Business Corporation Act—Proposed Amendments to Section 7.23, Definitions in Section 1.40 and Related Sections

The Corporate Laws Committee of the ABA Section of Business Law (the Committee) develops, and from time to time proposes changes in, the Model Business Corporation Act (the Act or Model Act). The Committee has approved the changes described in this report on second reading and invites comments from interested persons. Section 7.23 of the Act authorizes a corporation to establish a procedure for recognition of "beneficial owners" (the term currently used in the Act) of its shares. Although the Committee is not aware of the procedure authorized by section 7.23 being used much in practice, and recognizes that the relationship between a public corporation and the beneficial owners of its shares is addressed as a matter of federal securities law, the Committee nevertheless believes that it is useful for state corporation law to continue to allow for recognition of beneficial owners. The proposed amendments are set forth in this article.