Act of Congress Corporate Law and Shareholder Protections Act

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Hong Kong 101

Citizen
Representative
Construction & Transport Department
Hong_Kong_101
Hong_Kong_101
constructor
A
BILL
TO


Establish Corporate Law and Shareholder Protections

The people of Democracy Craft, through their elected Representatives in the Congress and the force of law ordained to that Congress by the people through the constitution, do hereby enact the following provisions into law:



1 - Short Title and Enactment
(1) This Act may be cited as the Corporate Law Act
(2) This Act shall be enacted immediately upon its signage.
(3) This Act is proposed by Representative Hong_Kong_101
(4) This Act is co-sponsored by Senator f6rn
(5) This Act was drafted by Representative Hong_Kong_101, with input and editing from: Aezal, xEndeavour, Trentrick_Lamar, Deadwax, BlogWorldExpo, xeu100, and others.
(6) This Act holds the support of Department of Education and Commerce Secretary Trentrick_Lamar

2 - Reasons
(1) DC needs clearer laws regulating the structures and actions of businesses.
(2) DC needs laws protecting shareholders from fraud or dishonest business practices.

3 - Section 1: Regulations of the Structures of Public Companies
(1) The term Public Company will be defined as a company of which shares are being publicly bought and sold in a securities exchange
(2)The term Officer for the purposes of this Act, will mean any staff employed by a company with the power to significantly influence the business decisions of the company.
(a) Common positions in a company considered to be occupied by Officers of a company shall include, but not be limited to:
(i) CEO (Chief Executive Officer)
(ii) President
(iii) COO (Chief Operating Officer)
(iv) CFO (Chief Financial Officer)
(v) CLO (Chief Legal Officer)
(3) All Public Companies will be required to create publicly viewable policies for their internal governance. All company policies must specify the internal structure of the company and the methods of appointment of its officers and other employees.
(a) Upon the promulgation of this Act, existing Public Companies will be given a time of thirty days from the date of the promulgation of this Act to establish such policies. For the purposes of this section only, policies will be drafted by the management of existing Public Companies, and approved by the holders of a majority of the company’s shares.
(b) All companies that newly become Public Companies will have policies established and approved by their management. These policies will be subject to later amendment by the holders of a majority of the company’s future shares.
(c) Company policies created under this Act may not conflict with any portion of this Act.
(4) The following actions by a company will require the approval of the holders of a simple majority of the shares of the company.
(a) Appointing and dismissing the CEO of the company, or the holder of any such analogous position in the company if no CEO position exists
(b) Obtaining and publishing any information about the operations and finances of the company that may be of interest to shareholders, including monthly profits and losses
(i) This provision will not be interpreted to require that the officers and employees of a company produce reports for shareholders except at the request of a majority of the shareholders.
(c) Approving the issuance of any new stock in the company
(d) Approving any splitting or combining stock in the company
(e) Determining the amount of company profits paid out to shareholders in the form of dividends
(i) This provision will not be interpreted to require that company employees or officers issue dividends to shareholders.
(f) Approving the relisting or delisting of the company from any stock exchange
(i) If a company is delisted under this provision, it will remain a Public Company, and be required to relist upon the same or any other securities exchange within 30 days of delisting.
(ii) If the company fails to relist in accordance with (i), the Department of Education and Commerce may forcibly order it to be relisted upon the securities exchange on which its shares were traded before delisting.
(g) Determining the permissions and level of access of company shareholders on the Discord server of the company
(5) The officers of a company, may, with the security of the company in mind, challenge any such decision, whereupon it will take the approval of the holders of ⅔ or any greater proportion of the shares, to enforce the previous majority decision.
(6) The approval of any merger with any other company, or acquisition of any other company, or acquisition by another company, will require the consent of the holders of ⅔ or any greater proportion of the shares.
(7) The employees, officers, and other such decision-making personnel of a company will have a fiduciary duty to the shareholders of the company to maximise the long-term profits and increases in value of the shares of the company.
(a) Any person with such a fiduciary duty who willingly and intentionally engages in activity that undermines their duty or the integrity of the company whose shareholders they serve will be convicted for violation of this Act, fined an amount not less than 20,000 Redmont Dollars, and be required to pay full restitution to shareholders of the approximate loss of potential value that their actions caused to shareholders.
(8) All shares in a Public Company hold the same voting power for any decisions relating to the company that require the approval of shareholders.
(9) For a company to be privatised, the consent of the holders of no fewer than two thirds of all shares must be obtained by the purchaser of the company to the purchase of all shares of the company by the buyers of the company at a predetermined price.
(a) Should the privatisation of a company be approved, all shareholders must sell their shares to the purchase of the company at said predetermined price.

4 - Section 2: Regulations of the Operations of Securities Exchanges
(1) The definition of a Securities Exchange will be a company that exists for the purpose of facilitating the buying and selling of securities by members of the public, the government, financial institutions, and companies, which is registered with the Department of Education and Commerce.
(2) The Department of Education and Commerce will be entitled to full access to and knowledge of the operations of any securities exchange.
(a) Any DEC employee engaged in the regulation of securities exchanges may not hold a security for a length of time shorter than 30 days.
(3) Securities Exchanges will be prohibited from calculating the market prices of shares in Public Companies using any factors other than the market supply of and demand for said shares. They will be responsible for updating these prices without requiring further input from the companies of which the shares grant ownership in.
(a) Securities Exchanges must provide consistent updates to the market prices of company shares. Each company listed on an exchange must have its stock price updated at least once every 30 days.
(b) Legal entities holding more than 20% of the stock in any public company must report their holdings to the Department of Education and Commerce.
(4) The Department of Education and Commerce will be empowered to create any additional regulations for the operations of securities exchanges. Such regulations must be for the purpose of preserving the stability of securities exchanges, and must not conflict with any section of this Act.

5 - Section 3: Protections for Partial Owners of non-Public Companies
(1) The definition of a Partial Owner of a non-Public Company will be a legal entity sharing ownership in a non-Public Company with any other legal entity(ies).
(2) For non-Public Companies with ownership distributed among multiple partial owners, the following decisions must require the consent of the owner(s) of a simple majority of the company’s equity.
(a) Hiring and dismissing any company officers
(b) Converting the company into a Public Company and listing it on an exchange
(c) Distribution of company profits in the form of dividends to partial owners
(3) The Partial Owners of a company will have the responsibility to act and make decisions for their common profit. No Partial Owner of a company, no matter the proportion of the company’s equity they hold, may make a decision regarding the company that enriches themselves at the expense of another Partial Owner.

6 - Section 4: Additional Rights Granted to Companies
(1) The term company for the purposes of this Act will be defined as a company registered with the Department of Education and Commerce, in the Business Portal of the DemocracyCraft forum. This term will include Public Companies as well as companies that are not Public Companies.
(2) All companies will be considered to be legal entities distinct from their shareholders, board members, or management.
(a) The shareholders of a Public Company, and the owners of a non-Public Company will not be liable for any damages incurred by the business decisions of the company they hold shares or ownership in. This provision will not apply to any shareholders or owners who assume management positions in the company.
(3) All companies will be able to own any asset in their own capacity, with the asset being treated as solely the property of the company, subject to the decisions of the company’s management and/or board.
(a) For the purposes of companies owning plots of land, companies may deputise any citizen to own the land in-game on their behalf. For any such citizen, ordinary plot limits and regulations will apply to plots held on behalf of a company, with plots held on behalf of a company counting towards their plot limits.
(i) The responsibility for abiding by plot regulations will be on the individual citizen deputised by the company. However, companies and citizens holding plots for them may form binding contracts between them to ensure that the company pays for all efforts made to comply with regulations on company-owned plots. Companies may also be obligated in such an agreement to make reimbursements for plot taxes levied on the in-game owners of plots they legally own.
(ii) For all legal purposes other than compliance with property regulations, company-owned plots will be considered to be exclusively the asset of the company.
(b) The officers and employees of a company and its board will be prohibited from transferring any company property in a manner not designed to bring the company profit to their private possession, or to any entity outside the company, or to any company shareholders, except in the case of compensating themselves as shareholders or owners in the course of the liquidation of a company.
(i) The violation of this provision will be a criminal offence, and carry a minimum penalty of a 20,000 Redmont Dollar fine.
(ii) Additionally to provision (i), the owners or shareholders of a company that have seen a reduction in the value of shares due to such a criminal act may sue violators of provision (a) for compensation of their lost share value.
(c) No quantity of shareholders, unless they collectively own the entirety of a Public Company, may make the decision to transfer any company property to the private possession of any individual except in the execution of a business deal designed to bring profit to the company.
(i) Shareholders who have suffered lost share value due to a violation of provision (b) may sue in court for compensation.
(ii) Any transfer of company property in violation of this provision will be considered legally void, and the receiving party will be obligated to return the illegally transferred property back to the control of the company.
(d) No quantity of Partial Owners, unless they collectively own the entirety of a non-Public Company, may make the decision to transfer any company property to the private possession of any individual except in the execution of a business deal designed to bring profit to the company.
(i) Partial Owners who have suffered lost share value due to a violation of provision (b) may sue in court for compensation.
(ii) Any transfer of company property in violation of this provision will be considered legally void, and the receiving party will be obligated to return the illegally transferred property back to the control of the company.
(e) Provisions (a), (b), and (c) will also apply to methods of avoiding these provisions, including, but not limited to, the sale of company assets to any individual at a trivial price.
(f) All company balances, from the promulgation of this Act, will automatically become company property of the companies that utilise them. All companies must register the company balances they use and own with the Department of Education and Commerce. The Department of Education and Commerce, in enforcing this provision, will ensure that any such register remains classified information within the Department, in order to protect the privacy of all companies.
(i) All existing companies from the date of the promulgation of this Act, will be given 30 days to register their company balances with the Department of Education and Commerce.
(ii) The use of an unregistered company balance by a company will result in a fine of not greater than 50,000 Redmont Dollars, and the permanent confiscation by the Department of Education and Commerce of all funds inside that balance.
(g) The use of privileged access to permissions in the Discord server of a company may not be used by any shareholder to pass information on to, or in any other way provide a business advantage to an outside entity.
(i) Violation of this provision will result in a minimum fine of 10,000 Redmont Dollars to both the shareholder and the outside entity, or if both be the same, a minimum 20,000 Redmont Dollar fine to the single entity. Additionally, violators will be required to pay full restitution to shareholders who have lost value as a result of their violation of this provision.


7 - Section 5: Regulations for the Liquidation of Companies
(1) The term Liquidation of a company will be defined as a company liquidating all of its assets, paying off all debts owed to external parties, and compensating owners or shareholders their proportional share of the company’s equity value after repayment of all external debts.
(2) A Public Company may be liquidated at the request of the holders of three-fourths or any greater proportion of the shares of the company.
(3) A non-Public Company may be liquidated at the request of the partial owners of three-fourths or any greater proportion of the company’s equity.

8 - Section 6: Additional Provisions
(1) The Department of Education and Commerce, at the request of the Commonwealth Reserve Bank, will be empowered to set limits on interest rates paid out by banks and other deposit-taking institutions to depositors and interest rates of the loans given out by financial institutions.
(2) No company may take on greater than 20% of its equity value in debt in any one instance except by the consent of its owners, or if it is a Public Company, the consent of its Board of Directors. Any contracts agreed to by the management of a company that do not comply with this provision will be unenforceable.
(3) No Partial Owner or Shareholder in any company, public or non-public, may be deprived of the value of their equity or shares by any means. In the case that a company is merged into another, acquired by another, becomes a Public Company, or becomes a non-Public Company, any Partial Owners or Shareholders will have the right to full compensation of lost value of their equity or shares in the case that they are deprived of any part of their their equity or shares.
(4) In cases where the violation of a provision of this act will result in a fine and restitution paid to victims by violators, the restitution of victims will take precedence over the fine. If the violator is unable to completely pay both restitution and a fine, even with the liquidation of all their assets, they will only be required to pay full restitution and use their remaining assets to pay off any part of the fine that they may afford.
(5) In the case of the sudden closure or collapse of a securities exchange, or any such other major event that undermines the value of a significant amount of the securities market and causes public concern, the Commonwealth Reserve Bank will be empowered to mint funds that the Department of Education and Commerce may utilise to restore public trust in the securities markets and to compensate any losses by shareholders or the holders of any other security.

9 - Section 7: Enforcement
(1) Starting on the date of the promulgation of this Act, any provisions of previously passed Acts of Congress conflicting with the provisions of this Act will be considered void.
(a) This provision should be interpreted to mean that should in future court cases, a provision from this Act be challenged with a provision from a previously passed Act, the provision from this Act will prevail.
(b) This provision will not apply to any Acts passed after the promulgation of this Act.
 

LilDigiVert

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Mayor
Construction & Transport Department
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LilDigiVert
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Presidential Assent

This bill has been granted assent and is hereby signed into law.

 
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