During its 438th session, the Maryland General Assembly passed four bills that affect the Maryland General Corporation Law (the “MGCL”), all of which were supported by the Business Law Section of the Maryland State Bar Association. This update is intended to identify (i) bills that were passed affecting the MGCL in the last legislative session, and (ii) laws that will take effect on October 1, 2018.

In the 2018 legislative session, the Maryland General Assembly:

• repealed the provision requiring articles of transfer;
• limited Maryland corporations to a single resident agent;
• repealed the requirement for a $5.00 processing fee for a return of an original document; and
• clarified conversion laws pertaining to nonstock corporations.

Elimination of Articles of Transfer Effective October 1, 2018

The most significant change to the MGCL this session was the elimination of articles of transfer through Senate Bill 659. This bill eliminates the need for a Maryland corporation to file articles of transfer when selling all or substantially all of its assets. In the past, if a Maryland corporation sold all or substantially all of its assets, the Maryland corporation needed to obtain stockholder approval and file articles of transfer with the State Department of Assessments and Taxation (“SDAT”). Effective October 1, 2018, instead of the previously required articles of transfer, the transaction will be governed by an agreement between the parties without the need for articles of transfer. While stockholder approval is still required for the sale of all or substantially all of a corporation’s assets, certain circumstances requiring multiple stockholder approvals have been eliminated. Notably, the bill also states that a transfer of assets before October 1, 2018, is not invalid if articles of transfer are not filed with SDAT.

Additional Changes to the MGCL Laws Effective October 1, 2018

The two other bills passed this session, Senate Bill 82 and Senate Bill 9, are more technical in nature. Senate Bill 82 amends the resident agent rules of the MGCL to state that a Maryland corporation, limited liability partnership, limited partnership, or statutory trust shall have a resident agent rather than at least one resident agent. The bill also includes changes to the resident agent resignation process. The amended resignation sections provide that once the resignation is signed and filed with SDAT, either the entity appoints a successor and the resignation is effective at the time of filing, or the entity does not appoint a successor and the resignation is effective ten (10) days after the filing. Senate Bill 9 repeals Section 1 203(b)(10) of the MGCL and therefore eliminates the $5.00 processing fee for the return of an original document to SDAT. Both changes take effect October 1, 2018.

New MGCL Laws Currently in Effect

Senate Bill 41 simplifies Section 5-207 of the MGCL concerning the conversion of nonstock corporations. The amendment clarifies that a Maryland nonstock corporation may convert to a foreign corporation as long as the foreign corporation does not have the authority to issue stock. Similarly, a foreign corporation without the authority to issue stock may convert to a Maryland nonstock corporation, but not a Maryland corporation with the authority to issue stock. On April 10, 2018, Governor Hogan signed Senate Bill 41 into law, and these changes took effect July 1, 2018.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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