The corporate landscape in the United States is constantly changing. Each year, legislation is enacted at the state and federal levels that directly impacts Oklahoma businesses. Transactional lawyers are tasked with the difficult challenge of keeping abreast of these changes. This article will cover recent developments affecting Oklahoma practitioners in 2024.

At the state level, new legislation amends the Professional Entity Act[1] (PEA), the Oklahoma General Corporation Act[2] (OGCA) and the Oklahoma Limited Liability Company Act[3] (OLLCA). During the first regular session of the 59th Oklahoma Legislature, the Legislature considered Senate Bill 620[4] (SB 620) and Senate Bill 649[5] (SB 649, and with SB 620, they are referred to as “the bills”) authored by Sen. John Michael Montgomery, Rep. Jon Echols and Rep. Kevin McDugle. These bills were passed by the Oklahoma Senate in March 2023.[6] The bills were not voted on by the House in 2023, however, and were carried over to the second regular session of the Legislature (the 2024 session). During the 2024 session on April 17, the bills were passed by the Oklahoma House of Representatives.[7] On April 23, Gov. Stitt signed the bills, which will take effect Nov. 1.

At the federal level, Congress passed the Corporate Transparency Act (CTA),[8] which became effective Jan. 1. Under the CTA, most existing and newly formed corporations, LLCs and other legal entities must report their beneficial ownership and management to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network.[9] The CTA is intended to make it more onerous for domestic and foreign individuals to operate shell companies for illicit purposes.[10] The reporting will impose a new and dramatic step in the formation of legal entities and may require lawyers who assist in the formation of legal entities to report personally as company applicants.

PENDING CHANGES TO THE OKLAHOMA ACTS

The Professional Entity Act

The Professional Entity Act, previously called the Professional Corporation Act, was adopted in 1961. At that time, few, if any, professionals practiced beyond their chosen state jurisdictional boundaries. That was still largely true in 1995 when the Professional Corporation Act became the PEA with the inclusion of professional limited liability companies and limited partnerships. As a result, there was little need to accommodate foreign professional entities that might seek to qualify to do business in Oklahoma. Circumstances have since changed, and many professional entities are operating on a multijurisdictional basis. SB 620 addressed this need. It amended the PEA to account for foreign professional entities providing professional services in the state of Oklahoma.[11]

Changes in definitions. SB 620 expands the definition of “professional entity” to include a qualified foreign professional entity.[12] The bill also makes technical changes to correct a cross-reference to the Uniform Limited Partnership Act of 2010 and to clarify that a professional entity includes an entity formed for the purpose of owning a professional entity.[13]

Formation and qualification of professional entities. SB 620 retains the requirement that the individual or individuals forming a domestic professional entity must be managers[14] who are licensed or otherwise qualified to render professional services and applies this requirement to a foreign professional entity qualifying to practice in Oklahoma.[15] The qualifying document must include a certificate by the applicable regulatory board of the profession that the persons who will become the managers of the foreign professional entity and who will be responsible for the practice of the profession in Oklahoma are duly licensed or otherwise permitted in accordance with the provisions of Oklahoma’s licensing laws to practice the profession.[16]

Restrictions on ownership and management of domestic or foreign professional entities. SB 620 continues the requirement that every manager of a domestic professional entity responsible for the professional services rendered by the entity must be duly licensed or otherwise permitted to provide professional services in Oklahoma.[17] The owners of a domestic professional entity must also be duly licensed or otherwise permitted to practice law in Oklahoma. For a foreign professional entity, an unlicensed person may be an owner or manager if the person is not practicing in Oklahoma.[18]

Oklahoma General Corporation Act

Oklahoma modeled its OGCA upon the Delaware General Corporation Law (DGCL) to foster reliance on the large body of Delaware case law, which offers persuasive guidance to Oklahoma courts and practitioners.[19] The amendments in SB 620 track earlier Delaware amendments to ensure continued guidance from the Delaware case law. SB 620 amends the OGCA to 1) permit a corporation by its charter to protect its corporate officers from certain monetary damages for breach of fiduciary duty, 2) expand certain rights of directors and offices regarding indemnification by the corporation, 3) authorize a corporation to purchase and maintain insurance through a captive insurance company, 4) clarify a variety of items relating to notice of meetings, consents of shareholders in lieu of meetings, mergers, consolidations, conversions and dissolutions and 5) expand the procedures relating to shareholder appraisal rights.

Exculpation of officers and indemnification. Since 1987, the OGCA, as in the DGCL, has permitted a corporation’s certificate of incorporation to include an exculpatory provision that eliminates or limits the personal liability of its directors to the corporation or its shareholders for breach of their fiduciary duties.[20] The exculpatory provision may not, however, eliminate or limit the directors’ liability for 1) any breach of their duty of loyalty, 2) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, 3) unlawful dividends or share redemptions or 4) transactions from which the directors derived improper personal benefits.[21] The statute did not extend the liability limitation to officers, even though officers are subject to the same fiduciary duties as directors.[22]

Following a 2022 DGCL amendment, SB 620 amends Section 1006.B.7 of the OGCA to permit a corporation to extend the exculpatory provisions in its certificate of incorporation to protect its officers as well as directors.[23] The provision could eliminate or limit the personal liability of corporate officers for monetary damages for breach of their fiduciary duties. As with directors, the exculpatory provision may not protect officers 1) from any breach of their duty of loyalty to the corporation or its shareholders, 2) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law or 3) for any transaction from which the officers derived improper personal benefits.[24] Officers also cannot be protected from derivative suits or claims brought by the board or shareholders on the corporation’s behalf.[25] The exculpation provision will only protect them from direct claims brought by shareholders. The director’s liability for unlawful dividends or share redemptions does not apply to officers since they have no role in authorizing dividends or redemptions.[26]

SB 620 extends the indemnification provisions of the OGCA. Section 1031 currently provides current and former directors and officers a right to indemnification if they are successful (on the merits or otherwise) in defending claims brought against them by reason of their conduct as directors and/or officers.[27] The amendment permits a corporation to indemnify other persons who are not current or former directors or officers if they are successful in defense of a proceeding referenced in subsections A and B of Section 1031.[28] Subsection F prohibits the elimination or impairment of a right to indemnification or advancement by amendment to the certificate of incorporation or the bylaws after the act or omission has occurred.[29] An amendment to Subsection F clarifies that such prohibition applies in the case of any subsequent repeal or elimination of the certificate of incorporation or the bylaws.[30]

Insurance. Section 1031.G of the OGCA permits a corporation to purchase and maintain insurance on behalf of its directors, officers, employees and other indemnifiable persons.[31] An amendment clarifies that the insurance may be provided through a captive insurance company.[32] The captive insurance may be procured under any “fronting” or other reinsurance arrangement, such as when a corporation obtains insurance from a third-party insurer but, through a reinsurance policy, all or part of the risk of loss is transferred to a captive insurer.[33]

The SB 620 amendments apply certain exclusions from coverage.[34] The captive insurer may not cover losses arising from 1) any personal profit or financial advantage to which the covered person was not legally entitled or 2) any deliberate criminal or deliberate fraudulent act if the proscribed conduct has been established in a final, nonappealable adjudication in the underlying proceeding in respect of the claim.[35] To address possible conflicts that may arise in determining coverage, the amendments require the captive insurance policy to provide that any determination to make a payment under a captive insurance policy must be made either by an independent claims administrator or in accordance with the statutory procedures for determining indemnification.[36]

The amendments require captive insurance policies to provide that if any payment is to be made under the policy in connection with the dismissal or compromise of any action, suit or proceeding by or in the right of the corporation as to which notice is required to be given to shareholders under Title 12, Section 2023.1 of the Oklahoma Statutes, the corporation must include in the notice that a payment is proposed to be made under the captive insurance policy in connection with the dismissal or compromise.[37] This requirement affords the reviewing court and shareholders an opportunity to consider the use of assets of the captive insurance company in connection with a compromise of such actions, suits or proceedings.[38]

The amendments to Section 1031.G of the OGCA are not intended to prohibit other forms of insurance that would have been permitted under the provisions of Section 1031.G that predate SB 620.

Electronic communications under the OGCA.

Signing and delivering corporate documents electronically: Section 1014.3 of the OGCA was adopted in 2021 to broaden the use of electronic communication under the OGCA.[39] It provides that documents in certain transactions could be signed and delivered manually or electronically.[40] The terminology in Section 1014.3 is based on analogous provisions in Section 1075.2 and the Oklahoma Uniform Electronic Transactions Act.[41]

SB 620 amends Section 1014.3 to allow persons to use electronic signatures to document director, shareholder, member and incorporator consents and for signing and delivering those documents by electronic means.[42] This amendment supplements provisions that currently permit these consents by electronic means. A conforming amendment to Section 1014.3.A.3 requires that the electronic delivery of shareholder or member consents, and the electronic delivery of documents evidencing a proxy granted by a shareholder or member, must satisfy additional requirements set forth in Section 1073.C (with respect to consents) and Section 1057.C (with respect to proxies).[43]

Director written consents: To clarify the use of electronic communication, SB 620 amends Section 1027.F of the OGCA to permit a director to rely on Section 1014.3 of the OGCA, which confirms that electronic documents are writings for purposes of the OGCA, as a basis to document, sign and deliver a consent by electronic means.[44]

Notice of meetings and adjourned meetings: To address issues related to virtual meetings held via remote communication, SB 620 amends Section 1067.A of the OGCA to provide that a notice of a shareholder meeting may be given in any manner permitted by Section 1075.2 of the OGCA and Section 1067.C of the OGCA to provide that a virtual meeting via remote communication of shareholders may be adjourned due to technical failures during the meeting.[45] In such event, notice of when the meeting will reconvene need not be given to shareholders if the electronic network for the meeting, such as the website that shareholders and proxy holders visit to join the meeting, displays the information required by Section 1067.C about when and how the meeting will reconvene or if such information regarding the adjourned meeting is provided for in the notice of meeting.[46]

Consent of shareholders in lieu of meetings: Section 1073 is amended to expand the methods of delivery of consents given by electronic transmission.[47] The amendments provide that a consent need not bear the date of signature of the shareholder or member signing the consent.[48] The amendments also provide that the 60-day period for the delivery of consents starts on the first date a consent is delivered to the corporation.[49] The amendments also eliminate redundant terms, including references to consents given by telegram or cablegram because those methods of giving consents are included in the definition of electronic transmission.[50]

Mergers and conversions.

Holding company reorganization mergers: Section 1081.G of the OGCA currently provides that no shareholder vote is required for holding company reorganization mergers if certain conditions are met.[51] These are mergers in which a new holding company is created for an operating company, and shareholders of the former operating company become shareholders of the new holding company.[52] One present condition is that the new holding company’s organizational documents and board composition must be identical to those of the premerger company.[53] Requiring identical organizational documents makes little sense when the holding company is a large, publicly held company or when the operating company is an LLC rather than a corporation. The SB 620 amendment relaxes this condition to require a shareholder vote only when the surviving company’s organizational documents contain a provision that would have required shareholder approval if adopted immediately before the merger.[54] The board composition may be changed without a shareholder vote if the surviving company would be managed by a board owing fiduciary duties, which may be a board composed of corporate directors or LLC managers.[55]

Conversions:  

• Conversions to Domestic Corporations: Section 1090.4 of the OGCA currently provides that before a certificate of conversion to a domestic corporation may be filed, it must be approved in the manner set for in the entity’s governing documents.[56] SB 620 amends Section 1090.4 of the OGCA to relax this requirement by providing that requisite approval shall be required before the time a certificate of conversion becomes effective.[57]
• Conversions of Domestic Corporations: Section 1090.5 of the OGCA currently requires the approval of the holders of all outstanding stock of a corporation before a corporation can be converted into another type of entity.[58] SB 620 amends Section 1090.5 of the OGCA to lower the voting requirement to approve a conversion to the holders of a majority of the outstanding stock entitled to vote on a conversion.[59]

Appraisal rights. SB 620 amends Section 1091 dealing with appraisal rights: 1) to permit a beneficial owner of stock to demand appraisal directly rather than requiring the record holder of the stock to make the demand on behalf of the beneficial owner;[60] 2) to provide appraisal rights to shareholders in connection with a conversion of the corporation to a foreign corporation or any other entity unless appraisal rights are denied under the “market out” exception set forth in amended Section 1091.B;[61] 3) to deny appraisal rights for shareholders in connection with mergers, consolidations or conversions adopted by shareholder consent to the same extent that appraisal rights are denied to such holders if one of those transactions is adopted at a shareholder meeting;[62] 4) to provide that, in lieu of including in a notice of appraisal rights, a copy of Section 1091 (and a copy of Section 1004.1, if one of the constituent corporations or the converting corporation is a nonstock corporation), a corporation may instead include in the notice information directing the persons entitled to appraisal to a publicly available electronic resource to access Section 1091 (and Section 1004.1, if applicable);[63] and 5) to clarify how the expenses of a shareholder or beneficial owner who participated in an appraisal proceeding may be charged pro rata against the value of all the shares entitled to an appraisal award.[64]

Dissolution: The OGCA currently permits corporations to limit the duration of a corporation’s corporate existence by including a specified duration in its certificate of incorporation.[65] SB 620 amends sections 1096.F., 1096.G. and 1097.C. of the OGCA to provide that if a corporation includes a provision in its certificate of incorporation limiting the duration of the corporation’s existence to a specific date, the corporation must file a certificate of dissolution within 90 days of such date.[66]

Oklahoma Limited Liability Company Act

SB 649 amends the OLLCA to 1) provide for the formation of registered series LLCs and 2) permit the divisions of LLCs.[67]

Registered series LLCs. Series LLCs, while a unique form of LLC, have been permitted in Oklahoma since 2004.[68] Currently, the OLLCA permits the formation of distinct series within an LLC that designates itself as a series LLC within its articles of organization filed with the secretary of state.[69] Each series may have its own assets and liabilities, management and ownership, which is distinct from any other series within the series LLC.[70] Each series is shielded from the obligations of any other series.[71] After the series LLC’s initial filing with the secretary of state, the separate series are formed by contract, and no secretary of state filing is required.[72]This lack of formal registration for protected series has led to problems in secured financing transactions and transfers of titled property.

SB 649 amends Section 2054.4 of the OLLCA to designate the existing series as a “protected” series, and they would continue without a separate secretary of state filing.[73] SB 649 adds Section 2054.5 to create “registered” series LLCs.[74] These series can be formed with a secretary of state filing that names the series LLC and the registered series and identifies its principal place of business and the name and address of its registered agent for service of process.[75] By filing with the secretary of state, the “registered series” will constitute a “registered organization” under Article 9 of the Oklahoma Uniform Commercial Code, which facilitates the recording of secured transactions.[76] The filing by the registered series also gives notice of its legal name, which will facilitate the conveyancing of titled property. Other provisions of the OLLCA are amended to authorize each registered series to be 1) dissolved independently, 2) merged with another entity, 3) converted into another entity and 4) revived.[77] Like LLCs, generally, a registered series would file an annual report and pay an annual fee.[78]

Division of LLCs. Currently, the OLLCA does not permit domestic LLCs to conduct division transactions.[79] Division statutes have been commonplace in states such as Texas and recently have become part of Delaware’s statutory scheme.[80] SB 649 adds Section 2054.9 to the OLLCA to enable LLCs to conduct division transactions.[81] The LLC undertaking the division (termed “the dividing company”) may, but need not, survive the division.[82] If it does not survive, the dividing company is not deemed by default to have dissolved because of the division but instead simply ceases to exist as a separate entity.[83] The terms of the division must be set forth in a “plan of division,” which includes any terms under which interests in the dividing company will be canceled or converted into interests in another entity or the right to receive cash and how the assets and liabilities of the dividing company will be allocated in the division.[84] A division is effectuated by the dividing company’s filing of articles of division with the secretary of state and the simultaneous filing of articles of organization with the secretary of state for each LLC formed in the division.[85]

Responsibilities Under the New Corporate Transparency Act

Beginning this year, most existing legal entities in the U.S. and entities formed after 2023 must report their beneficial ownership and management to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) under the CTA.

Defining a reporting company and exemptions. Reporting companies: Subject to a few exemptions, legal entities formed with a secretary of state filing must report.[86] In addition, legal entities operating in the U.S., regardless of when or where they were formed, must also report.[87] This will include all domestic corporations, LLCs and limited partnerships and foreign entities doing business in the U.S.[88] FinCEN estimates that there are approximately 30 million entities currently operating within the U.S. that will be subject to reporting, and over three million new entities are formed annually that will be subject to reporting.[89]

The definition does not include general partnerships, the formation of which does not require a secretary of state filing but does include limited partnerships, limited liability partnerships and limited liability limited partnerships. It is unclear whether the definition would include entities such as business trusts, which are not formed by a secretary of state filing.[90] A separate series within a series LLC, unless a registered series, is not formed by a secretary of state filing.

Reporting company exemptions: Exempt from the definition of reporting company are 23 types of entities, most of which are currently subject to extensive regulation or are otherwise required to report their beneficial ownership information.[91] Those exemptions include, among others, Securities and Exchange Commission reporting companies, government authorities, public utilities, investment companies and advisors, banks, bank holding companies, credit unions, insurance companies and tax-exempt entities.[92] Three exemptions are of particular note: “large operating compan[ies],” “inactive entit[ies],” and wholly-owned subsidiaries of exempt entities.[93]

Defining “beneficial owner” and a “company applicant.” Every reporting company will have at least one “beneficial owner” and “company applicant” whose personal information must be submitted to FinCEN along with that of the reporting company.

Beneficial owner (including managers): Every reporting company is required to report certain information about each of its beneficial owners.[94] Subject to a few exceptions,[95] a beneficial owner is defined as any individual who either 1) exercises substantial control[96] over the reporting company or 2) owns or controls at least 25%[97] of the reporting company’s ownership interests.[98]

Company applicant: Every reporting company is also required to report certain information about each of its company applicants.[99] A company applicant is defined as any individual who files an application to form an entity or registers an entity to do business in the U.S.[100] Under the rules, an applicant also includes “any individual who is primarily responsible for directing or controlling the formation document.[101] As defined, a company applicant may include the lawyer who prepared the governing documents for the entity.[102]

Required disclosures. A reporting company must disclose information about itself, its beneficial owners, its management and the company applicants to FinCEN.[103] The reporting is to be done through an online, secured portal.[104] If the filer anticipates multiple filings, it can obtain a FinCEN identifier number (FIN) by providing the required information and simply submit the FIN in lieu of the more extensive reporting.[105]

Reporting company: For reporting companies, the following information concerning the reporting company must be included in the beneficial ownership report filed by the reporting company to the FinCEN database: 1) the full name of the reporting company, 2) any trade name or “doing business as” name, 3) the business street address, 4) the state or tribal jurisdiction of formation[106] and 5) the IRS-issued taxpayer identification number (TIN) (including the reporting company’s employer identification number or EIN).[107]

Beneficial owners, management and company applicants: Each individual who is a beneficial owner of such reporting company, management (if exercising substantial control) or a company applicant must submit an initial report to FinCEN that includes:

 

• the full legal name of the individual;
• the date of birth of the individual;
• the complete current address consisting of:
  • in the case of a company applicant, the company applicant’s business street address of such business or
  • in the case of a beneficial owner or management, the residential street address the individual uses for tax residency purposes;
• a unique identifying number from one of the following documents:
  • a passport,
  • a state driver’s license or
  • other identification issued to the individual by a state, local government or Indian tribe; and
• an image of the document showing the unique identifying number.[108]

Due dates for reporting information.

Initial reporting requirements: Reporting companies formed or registered within one year after the effective date must submit the required beneficial ownership report within 90 calendar days of its formation date.[109] Reporting companies formed or registered after Jan. 1, 2025, must submit the required beneficial ownership report within 30 calendar days of its formation date.[110] Reporting companies formed or registered before the effective date must submit to FinCEN the required beneficial ownership report not later than two years after the effective date.[111] Exempt entities are required to submit the beneficial ownership report when such entity no longer meets such exemption criteria.[112]

Continuing reporting requirements: Reporting companies are required to update any beneficial ownership changes within 30 days after the change.[113]

Access to the reported information. FinCEN will store the information collected under the CTA in a secure private database.[114] This database will not be publicly available. The beneficial ownership information will be available from a request only by 1) a federal law enforcement agency, 2) a state, local or tribal law enforcement agency (if authorized by a court order), 3) a federal agency on behalf of a foreign country (if the request is under an international agreement) or 4) a financial institution for customer due diligence purposes, but only if authorized by the reporting company.[115] The information in the database of beneficial owners will be available to members of law enforcement without the requirement of a warrant or other Fourth Amendment protections.[116] Since banks and other financial institutions rely on the database to satisfy their “know your customer” requirements, one should anticipate that they will require their customer’s consent.

Penalties for noncompliance. The CTA applies civil penalties of not more than $500 for each day a violation continues, fines of up to $10,000 and imprisonment of up to two years for willful or fraudulent violations.[117] The CTA contains a safe harbor provision allowing any person who submits inaccurate beneficial ownership information to file a correct beneficial ownership report within 14 calendar days after the date the reporting company becomes aware of the inaccuracy if that person 1) was not trying to evade the reporting requirement, 2) had no knowledge of the inaccuracy and 3) corrects the inaccuracy within 90 calendar days after the report is submitted.[118]

Litigation against the CTA. Given the wide impact of the CTA, it is not surprising that it has attracted litigants seeking to stop its implementation. The first shot came March 1, 2024, when the U.S. District Court for the Northern District of Alabama ruled that the CTA was unconstitutional.[119] The case was brought by the National Small Business Association (NSBA) and one of its individual members. Plaintiffs asserted that the beneficial ownership reporting requirements exceeded congressional authority under Article I of the U.S. Constitution and violated the First, Fourth, Fifth, Ninth and 10th amendments. The court agreed generally, rejecting the defendant’s arguments that the CTA is authorized under the foreign affairs powers, the commerce clause and the taxing powers. The court did not rule specifically whether the CTA violates one or more of the enumerated amendments. In connection with the ruling, the court enjoined the federal government from enforcing the CTA as to the plaintiffs in the case, NSBA members as of March 1, 2024, and reporting companies and company applicants within the Northern District. The injunction does not extend beyond the plaintiffs or the Northern District. The defendant has appealed.

FinCEN responded that it suspended enforcement against the plaintiffs and members of the NSBA as of March 1.[120] It will continue to enforce the CTA for all other reporting companies and company applicants.[121] While several other cases are pending, no other court has yet ruled on the allegations.

Reporting companies not covered by the NSBA injunction, formed in 2024 and subject to the 90-day filing window, should presume they must file. Reporting companies formed before 2024 have until Dec. 31 to file and may wish to wait and see how these matters are resolved.

CONCLUSION

The years 2022 and 2023 saw several critical pieces of legislation at the state and federal levels that will change the way Oklahoma businesses operate. Practitioners, as a result, are challenged to respond to this changing corporate landscape. In preparation for SB 620 and SB 649 taking effect and the new obligations of reporting companies under the CTA, practitioners will want to ensure they are proactively addressing the proposed amendments to the OGCA and OLLCA and can adequately respond to the upcoming requirements imposed by the CTA.

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ABOUT THE AUTHORS

Gary W. Derrick is a partner in the Oklahoma City law firm of Derrick & Briggs LLP. He received a Bachelor of Arts degree in 1976 from OSU and a J.D. in 1979 from the OU College of Law.

 

 

 

 

 

Jacob L. Fanning is an associate in the Oklahoma City law firm of Hartzog Conger Cason LLP. He received a Bachelor of Science degree in 2018 from OSU and a J.D. in 2021 from the OCU School of Law.

 

 

 

 

 

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ENDNOTES

[1]      18 O.S. §§800 et seq.

[2]      Id. at §§1001 et seq.

[3]      Id. at §§2000 et seq.

[4]      SB 620, 2023 Leg., 1st Sess. (Okla. 2023).

[5]      SB 649, 2023 Leg., 1st Sess. (Okla. 2023).

[6]      SB 620 passed the Senate with 40 yes votes, three no votes and five abstentions. SB 649 passed the Senate with 47 yes votes and one abstention.

[7]      SB 620 passed the House with 90 yes votes, four no votes and seven abstentions. SB 649 passed the House with 88 yes votes, three no votes and 10 abstentions.

[8]      National Defense Authorization Act for Fiscal Year 2021 (NDAA), https://bit.ly/4gq6weY.

[9]      NDAA §6403(a).

[10]    See Final Rule Summary.

[11]    Professional services are defined in the PEA to include personal services rendered by: physicians, surgeons or doctors of medicine, osteopathic physicians or surgeons, chiropractic physicians, podiatric physicians, optometrists, veterinarians, architects, attorneys, dentists, certified public accountants, psychologists, physical therapists, registered nurses, professional engineers, land surveyors, occupational therapists, speech pathologists, audiologists, registered pharmacists, licensed perfusionists, licensed professional counselors, licensed marital and family therapists, dietitians, social workers, licensed alcohol and drug counselors, licensed behavioral practitioners and certified real estate appraisers. 18 O.S. §803.6.

[12]    S.B. 620, 2023 Leg., 1st Sess. §1 (Okla. 2023).

[13]    Id.

[14]    The term “manager” is generic and includes a director or officer in the case of a corporation, the general partner in the case of a limited partnership, a manager in the case of a limited liability company. 18 O.S. §803.4.

[15]    S.B. 620, 2023 Leg., 1st Sess. §2 (Okla. 2023).

[16]    Id.

[17]    Id. at §6. An officer without managerial authority for the professional services, such as a corporate secretary, need not be licensed.

[18]    Id. at §5.

[19]    See Woolf v. Universal Fidelity Life Insurance Company, 849 P.2d 1093, 1095 (Okla. Ct. App. 1992) (holding that since the OGCA is based on the DGCL, the OGCA should be interpreted in accordance with Delaware decisions); see also, Price v. Southwestern Bell Tel. Co., 812 P.2d 1355 (Okla. 1991) (holding that when one state adopts the uniform laws or statutes of another state, the latter state’s decisions are persuasive in the former state’s construction of such laws).

[20]    18 O.S. §1006.B.7. By requiring the exculpatory provisions, if any, to be in the certificate of incorporation, the statute ensures that the shareholders have approved the liability limitation since the shareholders must adopt the original certificate of incorporation with the limitation or approve any amendment adding the limitation.

[21]    Id.

[22]    Gantler v. Stephens, 965 A.2d 695, 709 (Del. 2009) (holding that officers are subject to identical duties as directors).

[23]    S.B. 620, 2023 Leg., 1st Sess. §10 (Okla. 2023).

[24]    Id.

[25]    Id.

[26]    Id. The exculpatory provision would not apply to any actions or omissions of officers of a corporation occurring before the adoption of the exculpatory provision.

[27]    18 O.S. §1031.C.

[28]    S.B. 620, 2023 Leg., 1st Sess. §17 (Okla. 2023). A corporation may rely on Section 1031.F to make this permissive indemnification a mandatory right for these other persons, such as under a provision in the certificate of incorporation, the bylaws, an agreement or vote of shareholders or disinterested directors. See Cochran v. Stifel Financial Corp., Del. Ch. C.A. No. 17350 (Dec. 13, 2000), aff’d in part and reversed in part, both on unrelated grounds, 809 A.2d 555 (Del. 2002).

[29]    18 O.S. §1031.F.

[30]    S.B. 620, 2023 Leg., 1st Sess. §17 (Okla. 2023).

[31]    18 O.S. §1031.G.

[32]    S.B. 620, 2023 Leg., 1st Sess. §17 (Okla. 2023). A “captive insurance company” is an insurer directly or indirectly owned, controlled and funded by the parent corporation.

[33]    S.B. 620, 2023 Leg., 1st Sess. §17 (Okla. 2023).

[34]    Id.

[35]    Id. The proscribed conduct in the amendment to 18 O.S. §1031.G is narrower than the proscribed conduct under the exculpatory provisions of Section 1006.B.7. The amendments to Section 1031.G affirm that directors and officers may be covered under a captive insurance policy for certain liabilities that are not exculpable under Section 1006.B.7. The policies could include coverage for nonexculpated liabilities stemming from so-called Caremark or oversight claims if there is not otherwise a finding that the directors or officers knowingly caused the corporation to violate the law.

[36]    S.B. 620, 2023 Leg., 1st Sess. §17 (Okla. 2023). The procedures are set forth in paragraphs 1 through 4 of Subsection D of 18 O.S. §1031.

[37]    S.B. 620, 2023 Leg., 1st Sess. §17 (Okla. 2023).

[38]    Id.

[39]    See 18 O.S. §1014.3.

[40]    Id.

[41]    12A O.S. §§15-101 et seq.

[42]    S.B. 620, 2023 Leg., 1st Sess. §13 (Okla. 2023).

[43]    Id.

[44]    Id. at §16; 18 O.S. §1014.3.

[45]    S.B. 620, 2023 Leg., 1st Sess. §27 (Okla. 2023).

[46]    Id.

[47]    Id. at §28.

[48]    Id.

[49]    Id.

[50]    Id.

[51]    18 O.S. §1081.G.

[52]    Id.

[53]    Id.

[54]    S.B. 620, 2023 Leg., 1st Sess. §30 (Okla. 2023).

[55]    Id. at §30.

[56]    18 O.S. §1090.4.

[57]    S.B. 620, 2023 Leg., 1st Sess. §31 (Okla. 2023).

[58]    18 O.S. §1090.5.

[59]    S.B. 620, 2023 Leg., 1st Sess. §32 (Okla. 2023). If the conversion is to a partnership with one or more general partners, approval of each shareholder who will become a general partner will be required. Id.

[60]    Id. at §33. A beneficial owner must comply with the requirements of 18 O.S. §1091.D(3) to demand appraisal, including its requirement that the beneficial owner who demanded appraisal directly, not the record owner, continuously maintains beneficial ownership of the shares.

[61]    Id.

[62]    Id.

[63]    Id. An electronic resource would include the website maintained on behalf of the state of Oklahoma on which those statutes are posted.

[64]    Id.

[65]    18 O.S. §1006.B(5).

[66]    S.B. 620, 2023 Leg., 1st Sess. §§34, 35 (Okla. 2023); 18 O.S. §§1096.F., 1096.G., 1097.C.

[67]    S.B. 649, 2023 Leg., 1st Sess. (Okla. 2023).

[68]    18 O.S. §2054.4.

[69]    Id. at §2005.B.

[70]    Id. at §2054.4.

[71]    Id.

[72]    Id.

[73]    S.B. 649, 2023 Leg., 1st Sess. §13 (Okla. 2023).

[74]    Id. at §14.

[75]    Id.

[76]    See 12A O.S. 1-9-102(a)(71).

[77]    S.B. 649, 2023 Leg., 1st Sess. §13 (Okla. 2023).

[78]    An annual fee of $25 must be paid to the secretary of state for each registered series LLC. 18 O.S. §2055.2.

[79]    A division transaction permits companies a simple mechanism to “divide” into multiple LLCs and to allocate its assets and liabilities among those LLCs without effecting a transfer for purposes of Oklahoma law.

[80]    See Tex. Bus. Org. Code. §101.633(a)(1)(A); Del. C. 6 §18-217.

[81]    S.B. 649, 2023 Leg., 1st Sess. §18 (Okla. 2023).

[82]    Id.

[83]    Id.

[84]    Id.

[85]    Id.

[86]    NDAA §6403(a)(11)(A); 31 C.F.R. §1010.380(c)(1). The definition includes legal entities formed or operating under Tribal authority.

[87]    NDAA §6403(a)(11)(A); 31 C.F.R. §1010.380(c)(1).

[88]    NDAA 6403(a)(11)(A); 31 C.F.R. §1010.380(c)(1).

[89]    See Notice of Proposed Rulemaking (NPRM), Section IV.D.i.

[90]    The NPRM indicates that business trusts (aka statutory trusts) would be included, apparently on the assumption that business trusts are created by statute and a secretary of state filing. See NPRM, Section IV.D.i. That is true in Delaware but not in many other states, including Oklahoma. An Oklahoma business trust is formed by the filing of the trust instrument (or a memorandum of trust) with the county clerk of the county in which the trust is located and a duplicate filing with the Oklahoma Tax Commission. See 68 O.S §1211.

[91]    NDAA §6403(a)(11)(B); 31 C.F.R. §1010.380(c)(2).

[92]    NDAA §6403(a)(11)(B); 31 C.F.R. §1010.380(c)(2). The CTA also includes an option for the secretary of the treasury, with the written concurrence of the attorney general and the secretary of homeland security, to exclude by regulation additional types of entities. NDAA §6403(a)(11)(B)(xxiv). FinCEN stated in the NPRM that it does not anticipate additional exemptions beyond those specified by the CTA. NPRM, Section III.

[93]    NDAA §6403(a)(11)(B); 31 C.F.R. §1010.380(c)(2). A large operating company is defined as an entity that 1) employs more than 20 full-time employees in the United States, 2) has an operating presence at a physical office in the United States and 3) filed in the previous year federal income tax returns demonstrating more than $5 million in gross receipts or sales (net of returns and allowances) on the entity’s annual income tax returns, excluding gross receipts or sales from sources outside the United States, as determined under federal income tax principles. Id. The large operating company exemption will not apply to newly formed companies. It will provide relief for some existing companies. Id.

Inactive entities are defined as those that 1) were in existence before Jan. 1, 2020, 2) are no longer engaged in active business, 3) do not hold any assets (including ownership interests in other entities), 4) are not owned by a foreign person, 5) whose ownership has not changed during the immediately preceding 12-month period and 6) has not sent or received more than $1,000 in the immediately preceding 12-month period. Id.

[94]    Lawyers should note that in most instances, their client is the reporting company and not its owners, officers or managers. See 5 O.S. Ch.1, App. 3-A, Oklahoma Rules of Professional Conduct, 1.13(a) (Duty to the Organization). The distinction is important because the lawyers’ duties, such as the duty of confidentiality, are owed to the company, not the individuals.

[95]    The regulations also provide five exceptions to the definition of beneficial owners: relating to minor children, nominees or other intermediaries, employees, inheritors and creditors. NDAA §6403(a)(3)(B); 31 C.F.R. §1010.380(d)(3).

[96]    Anyone who exercises direct or indirect substantial control over a reporting company is classified as a beneficial owner. NDAA §6403(a)(3)(A)(i); 31 C.F.R. §1010.380(d)(1)(i). A beneficial owner exercises direct or indirect substantial control over a reporting company by undertaking any of the following actions or retaining the following rights: 1) majority ownership of the reporting company, 2) substantial control rights in conjunction with certain financing arrangements, 3) controls intermediaries that retain the ability to exercise substantial control over the reporting company, 4) serving as a senior officer or board member, 5) the authority to appoint or remove the reporting company’s senior officers or a majority or dominant minority of the reporting company’s Board of Directors (or similar body), 6) the ability to direct, determine, decide or exercise substantial influence over important matters affecting the reporting company or 7) exercising any other form of substantial control over the reporting company whether through financial or business relationship or any other contract, understanding or relationship. 31 C.F.R. §1010.380(d)(1)(ii).

[97]    Anyone who owns or controls at least 25% of the reporting company’s ownership interests is classified as a beneficial owner. NDAA §6403(a)(3)(A)(ii); 31 C.F.R. §1010.380(d). The percentage of such ownership interests that an individual owns or controls is determined by aggregating all of the individual’s ownership interests in comparison to the undiluted ownership interests of the company. 31 C.F.R. §1010.380(d)(2)(iii). The rules do not provide ways to calculate beneficial ownership on a pass-through basis for entities with multiple layers of investors.

[98]    The scope of ownership interests is broad and includes all ownership interests of any class or type, including traditional equity, such as shares in a corporation or interests in an LLC, and instruments that give rise to equity, such as profits interests, convertible debt, warrants or rights, or other options or privileges to acquire equity, capital or other interests in a reporting company. Id. at §1010.380(d)(2). The regulations give a nonexhaustive list of examples to further emphasize that an individual can own or control ownership interests through a variety of means. Id. at §1010.380(d)(2)(ii). For example, in the context of trust ownership, an individual may own or control ownership interests by way of the individual’s position as a grantor or settlor, beneficiary, trustee or another individual with authority to dispose of trust assets. Id.

[99]    NDAA §6403(b)(2)(A); 31 C.F.R. §1010.380(b)(ii).

[100]   NDAA §6403(a)(2); 31 C.F.R. §1010.380(e).

[101]   31 C.F.R. §1010.380(e)(3). This definition may include employees of business formation services, law firms or associates, agents or family members who file formation documentation on behalf of another individual.

[102]   The lawyers assisting in entity formation must decide who will file the information: the reporting company or the lawyers. If the lawyers file, they should retain supporting documentation for the information reported to FinCEN.

[103]   NDAA §6403(b)(2)(A); 31 C.F.R. §1010.380(b).

[104]   The portal is located at https://boiefiling.fincen.gov.

[105]   NDAA §6403(b)(3)(A); 31 C.F.R. §1010.380(b)(1)(ii). Updates to the initial submission should apply to all reports by the FIN filer, which would avoid the filing of multiple updated reports.

[106]   For a foreign reporting company, the state or tribal jurisdiction where such company first registers. 31 C.F.R. §1010.380(b)(1)(i)(E).

[107]   Id. at §1010.380(b)(1)(i).

[108]   Id. at §1010.380(b)(1)(ii).

[109]   Id. at §1010.380(a)(1)(i)(A).

[110]   Id. at §1010.380(a)(1)(i)(B).

[111]   Id. at §1010.380(a)(1)(iii).

[112]   Id. at §1010.380(a)(2).

[113]   Id. at §1010.380(a)(2)(i). Such changes include 1) qualifying for an exemption subsequent to the filing, 2) changes to address for existing beneficial owners or company applicants and 3) adding new beneficial owners or company applicants.

[114]   NDAA §6403(c)(3); see also Beneficial Ownership Information, Frequently Asked Questions, A.3. (Jan. 4, 2024), www.fincen.gov/boi.

[115]   Id at §6403(c)(2)(B).

[116]   Id. at §6403(c)(2)(B).

[117]   Id. at §6403(h)(3)(A).

[118]   Id. at §6403(h)(3)(C); see also 31 C.F.R. §1010.380(a)(3). A corrected report filed within this 14-day period shall be deemed to satisfy 31 U.S.C. 5336(h)(3)(C)(i)(I)(bb) if filed within 90 calendar days after the date on which an inaccurate report is filed. 31 C.F.R. §1010.380(a)(3).

[119]   National Small Business United v. Yellen, Case No. 5:22 cv-1448-LCB (E. Div., N. D., Ala.). Other cases against the CTA include Gargasz v. Yellen, Case No. 1:23-cv-02468 (N.D. Ohio); Boyle v. Yellen, Case No. 2:24-cv-00081-LE (W.D. Maine); Small Business Ass’n of Michigan v. Yellen, Case No. 1:24-cv-00314 (W.D. Mich.); Black Economic Council of Mass. v. Yellen, Case No. 1:24-cv-11411 (D.Mass.); and Texas Top Cop Shop, Inc. v. Garland, Case No. 4:24-cv-00078 (E.D. Texas). Three bills have been introduced to Congress that would amend or abolish the CTA: H.R. 4035, the “Protecting Small Business Information Act of 2023”; H.R. 5119, the “Protect Small Business and Prevent Illicit Financial Activity Act”; and H.R. 8147/S. 4297, the “Repealing Big Brother Overreach Act.”

[120]   Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.) (March 11, 2024), https://bit.ly/3XDXjIq.

[121]   Id.