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New Massachusetts Business Corporation Law

by Peter Moldave

From the Summer 2004 Issue of the Technology Law Bulletin

Massachusetts has enacted a new business corporation law (Chapter 156D) which takes effect on July 1, 2004, replacing Chapter 156B. In general, Massachusetts-incorporated companies are not required to take specific action in order to be compliant with the new law, but may wish to do so in order to take advantage of new flexibility enabled by the change. That being said, the changes in the new law will be of limited usefulness to most of our clients. The changes in the law are mostly cosmetic: for example, although shareholder action by written consent will no longer be required to be unanimous, there will still be a built-in delay (at least 7 days) as contrasted to the immediate effect under Delaware corporate law. Similarly, appraisal rights will continue to be available for amendments to the Articles of Organization in certain situations — as contrasted to Delaware corporate law where appraisal rights are limited to mergers and other business combination transactions. Accordingly, we continue to recommend that clients with plans for venture capital financing, or who anticipate significant stock-based compensation for employees, look to Delaware corporations as the entity of choice. On the other side of the spectrum, individuals desiring to “incorporate” themselves for liability protection reasons but who anticipate only a single shareholder (for example, consultants or other service providers) should seriously consider the benefits of a single-member Massachusetts LLC.

Back to Technology Law Bulletin Summer 2004