10-01.1-01. Citation.

This chapter may be cited as the “North Dakota Registered Agents Act”.

10-01.1-02. Definitions.

For purposes of this chapter, unless the context otherwise requires:

1. “Appointment of agent” means a statement appointing an agent for service of process filed by a domestic entity that is not a filing entity or a nonqualified foreign entity under section 10-01.1-12.
2. “Commercial registered agent” means a person that is listed under section 10-01.1-06 that serves in this state as the agent for service of process for another entity and that is:
   1. An individual residing in this state; or
   2. A domestic or foreign corporation or limited liability company.
3. “Domestic corporation” means a corporation, other than a foreign corporation, incorporated under any chapter of this code.
4. “Domestic entity” means an entity whose internal affairs are governed by the laws of this state.
5. “Domestic limited liability company” means a limited liability company, other than a foreign limited liability company, organized under chapter 10-32.1.
6. “Electronic communication” means any form of communication, not directly involving the physical transmission of paper:
   1. That creates a record that may be retained, retrieved, and reviewed by a recipient of the communication; and
   2. That may be directly reproduced in paper form by the recipient through an automated process.
7. “Entity” means a person that has a separate legal existence or has the power to acquire an interest in real property in its own name other than:
   1. An individual;
   2. A testamentary, inter vivos, or charitable trust, with the exception of a business trust, statutory trust, or similar trust;
   3. An association or relationship that is not a partnership by reason of section 45-14-02 or a similar provision of the law of any other jurisdiction;
   4. A decedent’s estate; or
   5. A government or governmental subdivision, agency, or instrumentality, or a quasi-governmental instrumentality.
8. “Filed with the secretary of state” means, except as otherwise permitted by rule or law:
   1. That a record meeting the applicable requirements of this chapter, together with the fees provided in section 10-01.1-03, was delivered or communicated to the secretary of state by a method or medium of communication acceptable by the secretary of state and was determined by the secretary of state to conform to law.
   2. That the secretary of state did then:
      1. Record the actual date on which the record was filed, and if different, the effective date of filing; and
      2. Record the record in the office of the secretary of state.
9. “Filing entity” means an entity that is created by the filing of a public organic document.
10. “Foreign corporation” means a corporation:
    1. That is incorporated under laws other than the laws of this state; and
    2. That is a qualified foreign entity.
11. “Foreign entity” means an entity other than a domestic entity.
12. “Foreign limited liability company” means a limited liability company:
    1. That is organized under laws other than the laws of this state for a purpose for which a limited liability company may be organized under chapter 10-32.1; and
    2. That is a qualified foreign entity.
13. “Foreign qualification document” means an application for a certificate of authority or other foreign qualification filing with the secretary of state by a foreign entity.
14. “Governance interest” means the right under the organic law or organic rules of an entity, other than as a governor, agent, assignee, or proxy, to:
    1. Receive or demand access to information concerning, or the books and records of, the entity;
    2. Vote for the election of the governors of the entity; or
    3. Receive notice of or vote on any or all issues involving the internal affairs of the entity.
15. “Governor” means a person by or under whose authority the powers of an entity are exercised and under whose direction the business and affairs of the entity are managed pursuant to the organic law and organic rules of the entity.
16. “Interest” means:
    1. A governance interest in an unincorporated entity;
    2. A transferable interest in an unincorporated entity; or
    3. A share or membership in a corporation.
17. “Interest holder” means a direct holder of an interest.
18. “Jurisdiction of organization”, with respect to an entity, means the jurisdiction whose law includes the organic law of the entity.
19. “Noncommercial registered agent” means a person that is not listed as a commercial registered agent under section 10-01.1-06 that serves in this state as the agent for service of process for another entity and that is:
    1. An individual residing in this state; or
    2. A domestic or foreign corporation or a domestic or foreign limited liability company.
20. “Nonqualified foreign entity” means a foreign entity that is not authorized to transact business in this state pursuant to a filing with the secretary of state.
21. “Nonresident LLP statement” means a registration as provided in subsection 23 of section 45-22-01 and is:
    1. A registration of a domestic limited liability partnership that does not have an office in this state; or
    2. A registration of a foreign limited liability partnership that does not have an office in this state.
22. “Organic law” means the statutes, if any, other than this chapter, governing the internal affairs of an entity.
23. “Organic rules” means the public organic document and private organic rules of an entity.
24. “Person” means an individual, corporation, estate, trust, partnership, limited liability company, business or similar trust, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.
25. “Principal executive office” means:
    1. If the entity has one or more elected or appointed governors, then an office where one or more of the governors has an office; or
    2. If the entity has no elected or appointed governors, then the office of the registered agent of the entity.
26. “Private organic rules” means the rules, whether or not in a record, that:
    1. Govern the internal affairs of an entity;
    2. Are binding on all of its interest holders; and
    3. Are not part of its public organic document, if any.
27. “Public organic document” means the public record the filing of which creates an entity, and any amendment to or restatement of that record.
28. “Qualified foreign entity” means a foreign entity that is authorized to transact business in this state pursuant to a filing with the secretary of state.
29. “Record” means information is inscribed on a tangible medium or is stored in an electronic or other medium and is retrievable in perceivable form.
30. “Registered agent” means:
    1. A commercial registered agent; or
    2. A noncommercial registered agent.
31. “Registered agent filing” means:
    1. The public organic document of a domestic filing entity;
    2. A nonresident LLP statement;
    3. A foreign qualification document; or
    4. An appointment of agent.
32. “Registered office” means the address in this state of a registered agent as provided in this chapter and need not be the same as the principal place of business or principal executive office of the represented entity.
33. “Represented entity” means:
    1. A domestic filing entity;
    2. A domestic or qualified foreign limited liability partnership that does not have an office in this state;
    3. A qualified foreign entity;
    4. A domestic or foreign unincorporated nonprofit association for which an appointment of agent has been filed;
    5. A domestic entity that is not a filing entity for which an appointment of agent has been filed; or
    6. A nonqualified foreign entity for which an appointment of agent has been filed.
34. “Signed” means:
    1. That the signature of a person, which may be a facsimile affixed, engraved, printed, placed, stamped with indelible ink, transmitted by facsimile telecommunication or electronically, or in any other manner reproduced on the record with the present intention to authenticate that record; and
    2. With respect to a record required by this chapter to be filed with the secretary of state, that:
       1. The record is signed by a person authorized to do so by the organic rules of the entity; and
       2. The signature and the record are communicated by a method or medium of communication acceptable by the secretary of state.
35. “Transferable interest” means the right under an entity’s organic law to receive distributions from the entity.
36. “Type”, with respect to an entity, means a generic form of entity:
    1. Recognized at common law; or
    2. Organized under an organic law, whether or not some entities organized under that organic law are subject to provisions of that law that create different categories of the form of entity.

10-01.1-03. Fees.

1. The secretary of state shall collect the following fees when a filing is made under this chapter:
   1. Commercial registered agent listing, one thousand dollars;
   2. Commercial registered agent termination statement, five hundred dollars;
   3. Statement of change, ten dollars except when the change is a change of address and in the secretary of state’s opinion that change results from rezoning or postal reassignment;
   4. Statement appointing an agent for service of process, ten dollars; and
   5. Any process, notice, or demand for service, twenty-five dollars.
2. The secretary of state shall collect the following fees for copying and certifying a copy of any document filed under this chapter:
   1. The fee provided in section 54-09-04 for copying a record;
   2. Fifteen dollars for furnishing a certificate; and
   3. Five dollars for a search of records when supplying copies, certification, or written verification of facts.
3. The secretary of state may not collect a fee to file a statement of resignation.

10-01.1-04. Addresses in filings.

Whenever a provision of this chapter, other than subdivision d of subsection 1 of section 10-01.1-11 requires that a filing state an address, the filing must state:

1. An actual street address or rural route box number in this state; and
2. A mailing address in this state if different from the address under subsection 1.

10-01.1-05. Appointment of registered agent.

1. A registered agent filing must state:
   1. The name of the commercial registered agent of the represented entity; or
   2. If the entity does not have a commercial registered agent, then the name and address of the noncommercial registered agent of the entity.
2. The appointment of a registered agent pursuant to subsection 1 is an affirmation by the represented entity that the agent has consented to serve as such.
3. Upon request and as soon as practicable, the secretary of state shall make available in a record a list of filings that contain the name of a registered agent. The list must:
   1. List in alphabetical order the names of the registered agents; and
   2. State:
      1. The type of filing;
      2. The name of the represented entity making the filing; and
      3. The address of the principal executive office if disclosed in the record filed by the represented entity.

10-01.1-06. Listing of commercial registered agent.

1. An individual residing in this state or a domestic or foreign corporation or limited liability company may become listed as a commercial registered agent by filing with the secretary of state a commercial registered agent listing statement signed by or on behalf of the person which states:
   1. The name of the individual or the name, type, and jurisdiction of organization of the entity;
   2. That the person is in the business of serving as a commercial registered agent in this state; and
   3. The address of a place of business of the person in this state to which service of process and other notice and documents being served on or sent to entities represented by it may be delivered.
2. An individual residing in this state or a domestic or foreign corporation or limited liability company may file additional listings as a commercial registered agent if filed with trade names registered under chapter 47-25. The filing must be in the same manner as provided in subsection 1 and disclose the trade name being used. A listing with a trade name may provide an alternate address of a place of business of the person in this state to which service of process and other notice and documents being served on or sent to entities represented by it may be delivered.
3. If the name of a person filing a commercial registered agent listing statement is not distinguishable on the records of the secretary of state from the name of another commercial registered agent listed under this section, the person must adopt and register a trade name that is so distinguishable and use that name in its statement and when it does business in this state as a commercial registered agent.
4. A commercial registered agent listing statement takes effect on filing.
5. The secretary of state shall note the filing of the commercial registered agent listing statement in the record of the represented entity and in the index of filings maintained by the secretary of state for each entity represented by the registered agent at the time of the filing. The statement has the effect of deleting the address of the registered agent from the registered agent filing of each of those entities.
6. The secretary of state may make minor modifications to the name of a registered agent in a previously filed record in order to cause the modified name to be consistent with the correct name of a proposed commercial registered agent when it can be concluded from the previously filed record that the name of the proposed commercial registered agent was intended.

10-01.1-07. Termination of listing of commercial registered agent.

1. A commercial registered agent may terminate its listing as a commercial registered agent by filing with the secretary of state a commercial registered agent termination statement signed by or on behalf of the agent which states:
   1. The name of the agent as currently listed under section 10-01.1-06; and
   2. That the agent is no longer in the business of serving as a commercial registered agent in this state.
2. A commercial registered agent termination statement takes effect on the thirty-first day after the day on which it is filed.
3. The commercial registered agent shall promptly furnish each entity represented by it with notice in a record of the filing of the commercial registered agent termination statement.
4. When a commercial registered agent termination statement takes effect, the registered agent ceases to be an agent for service of process on each entity formerly represented by it.
   1. Until an entity formerly represented by a terminated commercial registered agent appoints a new registered agent, service of process may be made on the entity as provided in section 10-01.1-13.
   2. Termination of the listing of a commercial registered agent under this section does not affect any contractual rights a represented entity may have against the agent or that the agent may have against the entity.

10-01.1-08. Change of registered agent by entity.

1. A represented entity may change the information currently on file under subsection 1 of section 10-01.1-05 by filing with the secretary of state a statement of change on forms prescribed by the secretary of state and signed on behalf of the entity which states:
   1. The name of the entity; and
   2. The information that is to be in effect as a result of the filing of the statement of change.
2. The interest holders or governors of a domestic entity need not approve the filing of:
   1. A statement of change under this section; or
   2. A similar filing changing the registered agent or registered office of the entity in any other jurisdiction.
3. The appointment of a registered agent pursuant to subsection 1 is an affirmation by the represented entity that the agent has consented to serve as such.
4. A statement of change filed under this section takes effect on filing.
5. Instead of using the procedures in this section, a represented entity may change the information currently on file under subsection 1 of section 10-01.1-05 by amending its most recent registered agent filing as provided by the laws of this state other than this chapter for amending that filing.

10-01.1-09. Change of name or address by noncommercial registered agent.

1. If a noncommercial registered agent changes its name or its address as currently in effect with respect to a represented entity pursuant to subsection 1 of section 10-01.1-05, the agent shall file with the secretary of state, with respect to each entity represented by the agent, a statement of change signed by or on behalf of the agent which states:
   1. The name of the entity;
   2. If the name of the agent has changed, its new name; and
   3. If the address of the agent has changed, its new address.
2. A statement of change filed under this section takes effect on filing.
3. A noncommercial registered agent shall promptly furnish the represented entity with notice in a record of the filing of a statement of change and the changes made by the filing.

10-01.1-10. Change of name, address, or type of organization by commercial registered agent.

1. If a commercial registered agent changes its name as a result of a merger, conversion, exchange, sale, reorganization, or amendment, its address as currently listed under subsection 1 of section 10-01.1-06, or its type of jurisdiction of organization, the agent shall file with the secretary of state a statement of change signed by or on behalf of the agent which states:
   1. The name of the agent as currently listed under subsection 1 of section 10-01.1-06;
   2. If the name of the agent has changed, its new name;
   3. If the address of the agent has changed, its new address; and
   4. If the type or jurisdiction of organization of the agent has changed, then its new type or jurisdiction of organization.
2. The filing of a statement of change under subsection 1 is effective to change the information regarding the commercial registered agent with respect to each entity represented by the agent.
3. A statement of change filed under this section takes effect on filing.
4. A commercial registered agent shall promptly furnish each entity represented by it with notice in a record of the filing of a statement or change relating to the name or address of the agent and the changes made by the filing.
5. If a commercial registered agent changes its address without filing a statement of change as required by this section, then the secretary of state may cancel the listing of the agent under section 10-01.1-06. A cancellation under this subsection has the same effect as a termination under section 10-01.1-07. Promptly after canceling the listing of an agent, the secretary of state shall notify:
   1. Each entity represented by the agent, stating that the agent has ceased to be an agent for service of process on the entity and that, until the entity appoints a new registered agent, service of process may be made on the entity as provided in section 10-01.1-13; and
   2. The agent, stating that the listing of the agent has been canceled under this section.
6. The secretary of state shall note the filing of the commercial registered agent change statement in the index of filings maintained by the secretary of state for each entity represented by the commercial registered agent at the time of the filing.

10-01.1-11. Resignation of registered agent — Removal of agent appointed without consent.

1. Until the legal existence of a represented entity ceases, or until the authority of a foreign entity is withdrawn or revoked, a registered agent may resign at any time with respect to a represented entity by filing with the secretary of state a statement of resignation signed by or on behalf of the registered agent which states:
   1. The name of the entity;
   2. The name of the registered agent;
   3. That the registered agent resigns from serving as agent for service of process for the entity; and
   4. The name and address of the person to which the registered agent will send the notice required by subsection 3.
2. A statement of resignation takes effect on the earlier of the thirty-first day after the day on which it is filed or the appointment of a new registered agent for the represented entity.
3. The registered agent shall promptly furnish the represented entity with notice in a record of the date on which a statement of resignation was filed.
4. When a statement of resignation takes effect, the registered agent ceases to have responsibility for any matter tendered to it as agent for the represented entity. A resignation under this section does not affect any contractual rights the entity may have against the registered agent or that the registered agent may have against the entity.
5. A registered agent may resign with respect to a represented entity whether or not the entity is in good standing but not after the legal existence of the represented entity has ceased or, in the case of a foreign entity, after its authority has been withdrawn or revoked.
6. If a person becomes aware of having been named as a registered agent without the person’s prior consent, the appointed person shall notify the secretary of state in writing of the nonconsensual appointment. Upon notification, the secretary of state shall remove the appointed person as registered agent in the published record and notify the entity that it fails to maintain a registered agent. The entity that filed a document with the secretary of state evidencing a nonconsensual appointment of registered agent is subject to the provisions related to failure to maintain a registered agent as provided in the laws of this state which govern the entity and the documents filed.

10-01.1-12. Appointment of agent by nonfiling or nonqualified foreign entity.

1. A domestic entity that is not a filing entity or a nonqualified foreign entity may file with the secretary of state a statement appointing an agent for service of process signed on behalf of the entity which states:
   1. The name, type, and jurisdiction of organization of the entity; and
   2. The information required by subsection 1 of section 10-01.1-05.
2. A statement appointing an agent for service of process takes effect on filing.
3. The appointment of a registered agent under this section does not qualify a nonqualified foreign entity to do business in this state and is not sufficient alone to create personal jurisdiction over the nonqualified foreign entity in this state.
4. A statement appointing an agent for service of process may not be rejected for filing because the name of the entity filing the statement is not distinguishable on the records of the secretary of state from the name of another entity appearing in those records. The filing of a statement appointing an agent for service of process does not make the name of the entity filing the statement unavailable for use by another entity.
5. An entity that has filed a statement appointing an agent for service of process may cancel the statement by filing a statement of cancellation, which shall take effect upon filing, and must state the name of the entity and that the entity is canceling its appointment of an agent for service of process in this state. A statement appointing an agent for service of process, which has not been canceled earlier, is effective for a period of five years after the date of filing. The secretary of state may destroy a statement provided for in this section after the statement has been on file for six years.
6. A statement appointing an agent for service of process for a nonqualified foreign entity terminates automatically on the date the entity becomes a qualified foreign entity.

10-01.1-13. Service of process on entities, nonresident governors, and the secretary of state.

1. Until the legal existence of an entity ceases, or until the authority of a foreign entity is withdrawn or revoked, service of any process, notice, or demand on the entity or nonresident governor may be served on:
   1. A registered agent;
   2. A governor of the entity, whether resident in this state or not;
   3. Any responsible person found at the registered office or at the principal executive office if located in this state; or
   4. On the secretary of state as provided in this section.
2. Service is perfected under this section pursuant to North Dakota Rules of Civil Procedure or applicable law.
3. The secretary of state is the agent for service of process:
   1. When a foreign entity transacts business without a certificate of authority;
   2. When a domestic entity has been dissolved;
   3. If an entity that previously filed a registered agent filing with the secretary of state no longer has a registered agent; or
   4. If the registered agent, governor, or responsible person cannot with reasonable diligence be served.
4. Service of process, notice, or demand on a registered agent must be in the form of a written document.
5. Service on the secretary of state:
   1. Shall be made by registered mail or personal delivery to the secretary of state and not by electronic communication.
   2. Shall include the return of the sheriff, or the affidavit of an individual who is not a party, verifying that neither the registered agent nor a responsible person can be found at the registered office or at the principal executive office.
   3. Is deemed personal service upon the entity and must be made by filing with the secretary of state:
      1. Three copies of the process, notice, or demand; and
      2. The fees provided in section 10-01.1-03.
   4. Is returnable in not less than thirty days notwithstanding a shorter period specified in the process, notice, or demand.
6. The secretary of state shall immediately forward, by registered mail, a copy of the process, notice, or demand addressed to:
   1. The entity at the principal executive office address of record;
   2. Any address provided by any serving party; or
   3. To any forwarding address provided by the United States postal service.
7. The secretary of state shall maintain a record of every process, notice, and demand served on the secretary of state under this section, including the date of service and the action taken with reference to the process, notice, or demand.
8. Service of process, notice, or demand may be perfected by any other means provided by law other than this chapter.
9. The court shall determine if service is proper.

10-01.1-14. Duties of registered agent.

The only duties under this chapter of a registered agent who has complied with this chapter are:

1. To forward to the represented entity at the address most recently supplied to the agent by the entity any process, notice, or demand that is served on the agent;
2. To provide the notices required by this chapter to the entity at the address most recently supplied to the agent by the entity; and
3. If the agent is:
   1. A noncommercial registered agent, then to keep current the information required by subsection 1 of section 10-01.1-05 in the most recent registered agent filing for the entity; or
   2. A commercial registered agent, then to keep current the information listed for it under subsection 1 of section 10-01.1-06.

10-01.1-15. Jurisdiction and venue.

The appointment or maintenance in this state of a registered agent does not by itself create the basis for personal jurisdiction over the represented entity in this state. The address of the agent does not determine venue in an action or proceeding involving the entity.

10-01.1-16. Relation to Electronic Signatures in Global and National Commerce Act.

This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act [15 U.S.C. 7001 et seq.], but does not modify, limit, or supersede section 101(c) of that Act [15 U.S.C. 7001(c)] or authorize delivery of any of the notices described in section 103(b) of that Act [15 U.S.C. 7003(b)].

10-01.1-17. Savings clause.

This chapter does not affect an action or proceeding commenced or right accrued before the effective date of this chapter.

10-04-01. Title.

This chapter shall be known as the Securities Act of 1951.

10-04-02. Definitions.

When used in this chapter, unless the context or subject matter otherwise requires:

1. “Agent” means an individual, other than a broker-dealer, who represents a broker-dealer or an issuer or is self-employed in effecting or attempting to effect purchases or sales of securities. However, a partner, officer, or director of a broker-dealer, or an individual having a similar status or performing similar functions is an agent only if the individual otherwise comes within the term.
2. “Bank” means:
   1. A bank institution organized under the laws of the United States;
   2. A member bank of the federal reserve system;
   3. Any other banking institution, whether or not incorporated, doing business under the laws of a state or of the United States, a substantial portion of the business of which consists of receiving deposits or exercising fiduciary powers similar to those permitted to be exercised by national banks under the authority of the comptroller of the currency pursuant to section 1 of Public Law 87-722, and which is supervised and examined by a state or federal agency having supervision over banks, and which is not operated for the purpose of evading this chapter; and
   4. A receiver, conservator, or other liquidating agent of any institution or firm included in subdivision a, b, or c.
3. “Broker-dealer” means a person engaged in the business of effecting transactions in securities issued by another person or by such person for the account of others or for the person’s own account. The term does not include:
   1. An agent;
   2. A bank or savings institution if its activities as a broker-dealer are limited to those specified in subsections 3(a)(4)(B)(i) through (vi), (viii) through (x), and (xi) if limited to unsolicited transactions; 3(a)(5)(B) and 3(a)(5)(C) of the Securities Exchange Act of 1934 or a bank that satisfies the conditions described in subsection 3(a)(4)(E) of the Securities Exchange Act of 1934; or
   3. An issuer, including an officer, director, employee, or trustee of, or member or manager of, or partner in, or a general partner of, an issuer, that sells, offers for sale, or does any act in furtherance of the sale of a security that represents an economic interest in that issuer, provided no commission, fee, or other similar remuneration is paid to or received by the issuer for the sale.
4. “Commissioner” means the securities commissioner of this state.
5. “Department” means the state securities department.
6. “Depository institution” means:
   1. A bank; or
   2. A savings institution, trust company, credit union, or similar institution that is organized or chartered under the laws of a state or of the United States, authorized to receive deposits, and supervised and examined by an official or agency of a state or the United States if its deposits or share accounts are insured to the maximum amount authorized by statute by the federal deposit insurance corporation, the national credit union shares insurance fund, or a successor authorized by federal law. The term does not include:
      1. An insurance company or other organization primarily engaged in the business of insurance;
      2. A Morris plan bank; or
      3. An industrial loan company.
7. “Federal covered adviser” means a person who is registered under section 203 of the Investment Advisers Act of 1940.
8. “Federal covered security” means a security that is, or upon completion of a transaction will be, a covered security pursuant to section 18(b) of the Securities Act of 1933 or rules or regulations adopted under that Act.
9. “Institutional investor” means any of the following, whether acting for itself or for others in a fiduciary capacity:
   1. A depository institution or international banking institution;
   2. An insurance company;
   3. A separate account of an insurance company;
   4. An investment company as defined in the Investment Company Act of 1940;
   5. A broker-dealer under the Securities Exchange Act of 1934;
   6. An employee pension, profit-sharing, or benefit plan if the plan has total assets in excess of ten million dollars or its investment decisions are made by a named fiduciary, as defined in the Employee Retirement Income Security Act of 1974, that is a broker-dealer registered under the Securities Exchange Act of 1934, an investment adviser registered or exempt from registration under the Investment Advisers Act of 1940, an investment adviser registered under this Act, a depository institution, or an insurance company;
   7. A plan established and maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or a political subdivision of a state for the benefit of its employees, if the plan has total assets in excess of ten million dollars or its investment decisions are made by a duly designated public official or by a named fiduciary, as defined in the Employee Retirement Income Security Act of 1974, that is a broker-dealer registered under the Securities Exchange Act of 1934, an investment adviser registered or exempt from registration under the Investment Advisers Act of 1940, an investment adviser registered under this chapter, a depository institution, or an insurance company;
   8. A trust, if it has total assets in excess of ten million dollars, its trustee is a depository institution, and its participants are exclusively plans of the types identified in subdivision f or g, regardless of the size of their assets, except a trust that includes as participants self-directed individual retirement accounts or similar self-directed plans;
   9. An organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts trust or similar business trust, limited liability company, or partnership, not formed for specific purpose of acquiring the securities offered, with total assets in excess of ten million dollars;
   10. A small business investment company licensed by the small business administration under section 301(c) of the Small Business Investment Act of 1958 with total assets in excess of ten million dollars;
   11. A private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940 with total assets in excess of ten million dollars;
   12. A federal covered investment adviser acting for its own account;
   13. A qualified institutional buyer as defined in rule 144A(a)(1), other than rule 144A(a)(1)(i)(H), adopted under the Securities Act of 1933;
   14. A major United States institutional investor as defined in rule 15a-6(b)(4)(i) adopted under the Securities Exchange Act of 1934; or
   15. Any other person, other than an individual, of institutional character with total assets in excess of ten million dollars not organized for the specific purpose of evading this chapter.
10. “Investment adviser” means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities. The term includes financial planners and other persons who, as an integral component of other financially related services, provide the foregoing investment advisory services to others for compensation and as part of a business or who hold themselves out as providing the foregoing investment advisory services to others for compensation. The term does not include:
    1. An investment adviser representative.
    2. A bank, savings institution, or trust company.
    3. A lawyer, accountant, engineer, or teacher whose performance of these services is solely incidental to the practice of the person’s profession.
    4. A broker-dealer or its agent whose performance of these services is solely incidental to the conduct of business as a broker-dealer and who receives no special compensation for them.
    5. A publisher of any bona fide newspaper, news column, newsletter, news magazine, or business or financial publication or service, whether communicated in hard copy form, or by electronic means, or otherwise, that does not consist of the rendering of advice on the basis of the specific investment situation of each client.
    6. A federal covered adviser.
    7. A person who is excluded by the Investment Advisers Act of 1940 from the definition of investment adviser.
    8. Such other persons not within the intent of this subsection as the commissioner may by rule or order designate.
11. 1. “Investment adviser representative” means an individual employed by or associated with an investment adviser or federal covered adviser and who:
       1. Makes any recommendations or otherwise renders advice regarding securities directly to advisory clients;
       2. Manages the accounts or portfolios of clients;
       3. Determines which recommendations or advice regarding securities should be given;
       4. Provides investment advice or holds out as providing investment advice, receives compensation to solicit, offer, or negotiate for the sale of or sells investment advisory services; or
       5. Immediately supervises employees in the performance of any of the foregoing.
    2. The term does not include an individual who:
       1. Is employed by or associated with a federal covered investment adviser, unless the individual has a “place of business” in this state, as that term is defined by the securities and exchange commission pursuant to section 203A of the Investment Advisers Act of 1940.
       2. Is an agent whose performance of investment advice is solely incidental to the individual acting as an agent and who does not receive special compensation for investment advisory services.
       3. Performs only clerical or ministerial acts.
12. “Issuer” means every person who issues or proposes to issue any security, except that:
    1. With respect to certificates of deposit, voting-trust certificates, collateral trust certificates, or shares in an unincorporated investment trust, issuer means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which such securities are issued.
    2. With respect to equipment trust certificates or like securities serving the same purpose, issuer means the person by whom the equipment or property is or will be used or to which the property or equipment is or will be leased or conditionally sold or that is otherwise contractually responsible for assuring payment of the certificate.
    3. With respect to fractional interests in an oil, gas, or other mineral lease or in payments out of production under a lease, right, or royalty, issuer means the owner of any such right or any interest in such lease or in payments out of production under a lease, right, or royalty, whether whole or fractional, that creates fractional interests for the purpose of sale.
    4. With respect to a fractional or pooled interest in a viatical settlement contract, issuer means the person who creates, for the purpose of sale, the fractional or pooled interest. The issuer of a viatical settlement contract that is not fractionalized or pooled means the person effecting the transactions with the investors in such contracts.
13. “Offer for sale” or “offer to sell” means every attempt or offer to dispose of, or solicitation of an order or offer to buy, a security or interest in a security for value.
14. “Person” means an individual, corporation, limited liability company, partnership, association, joint venture, trust, government, governmental subdivision, agency, or instrumentality or any other legal or commercial entity.
15. “Place of business” of a broker-dealer, an investment adviser, or a federal covered investment adviser means:
    1. An office at which the broker-dealer, investment adviser, or federal covered investment adviser regularly provides brokerage or investment advice or solicits, meets with, or otherwise communicates with customers or clients; or
    2. Any other location that is held out to the general public as a location at which the broker-dealer, investment adviser, or federal covered investment adviser provides brokerage or investment advice or solicits, meets with, or otherwise communicates with customers or clients.
16. “Principal place of business” of a broker-dealer or an investment adviser means the executive office of the broker-dealer or investment adviser from which the officers, partners, or managers of the broker-dealer or investment adviser direct, control, and coordinate the activities of the broker-dealer or investment adviser.
17. “Record” except in phrases “of record”, “official record”, and “public record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
18. “Sale” or “sell” means every sale, contract to sell, or disposition of a security or interest in a security for value, and every contract to make any such sale or disposition. The term includes:
    1. Any security given or delivered with, or as a bonus on account of any purchase of securities or any other thing, must be conclusively presumed to constitute a part of the subject of such purchase and to have been sold for value.
    2. A sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer and a sale or offer of a security that gives the holder a present or future right or privilege to convert the security into another security of the same or another issuer, including an offer of the other security.
19. “Security” means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; certificate of interest or participation in an oil, gas, or mining title or lease or in payments out of production under such a title or lease; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; viatical or life settlement contract or a fractionalized or pooled interest therein; program, contract, or other arrangement in which persons invest in a common enterprise the returns of which depend to any extent upon inducing other persons to participate or invest in the enterprise; investment of money or money’s worth including goods furnished or services performed in the risk capital of a venture with the expectation of profit or some other form of benefit to the investor when the investor has no direct control over the investment or policy decisions of the venture; voting-trust certificate; certificate of deposit for a security; foreign currency commodity contract, as used in chapter 51-23; or beneficial interest in title to property, profits, or earnings; or, in general, any interest or instrument commonly known as a “security”; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.
20. “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
21. “Viatical or life settlement contract” means an agreement for the purchase, sale, assignment, transfer, devise, or bequest of any portion of the death benefit or ownership of a life insurance policy or certificate, for consideration that is less than the expected death benefit of the life insurance policy or certificate. “Viatical or life settlement contract” does not include:
    1. The assignment, transfer, sale, devise, or bequest of a death benefit, life insurance policy, or certificate of insurance by the owner to the provider pursuant to chapter 26.1-33.4;
    2. The assignment of a life insurance policy to a bank or depository institution; or
    3. The exercise of accelerated benefits pursuant to the terms of a life insurance policy issued in accordance with the insurance laws of this state.

10-04-03. Administration of chapter.

1. The state securities department is under the supervision of a chief officer designated as the securities commissioner. The securities commissioner must be appointed by the governor and confirmed by the senate and shall hold office for a term of four years, beginning on the first day of July following a national presidential election and continuing until a successor has been appointed, confirmed by the senate, and has qualified, unless removed as herein provided. If the senate is not in session, the governor may make an interim appointment, and the interim appointee may hold office until the senate confirms or rejects the appointment. The commissioner may not own or control any security required to be registered under this chapter, or any security which is exempt based on the approval of the securities department. The commissioner may not be an officer, director, or employee of any broker-dealer, agent, investment adviser, or investment adviser representative required to be registered under this chapter, or of a federal covered adviser required to be notice-filed under this chapter. The governor may remove from office any commissioner who fails to discharge faithfully the duties of office or who becomes disqualified under the provisions of this section.
2. The commissioner shall have authority to administer oaths in, and to prescribe forms for, all matters arising under this chapter. The commissioner may from time to time make, amend, and rescind such rules, forms, and orders as are necessary under this chapter, including rules and forms governing registration statements, applications and reports, and defining any terms, whether or not used in this chapter, if the definitions are consistent with this chapter. The commissioner shall cooperate with the administrators of the securities laws of other states and of the United States with a view toward achieving maximum uniformity in the interpretation of like provisions of the laws administered by them and in the forms which are required to be filed under such law.
3. In addition to their regular compensation, the commissioner and the commissioner’s employees shall be paid travel expenses necessary and actually incurred in the performance of their duties.
4. A special fund is established in the state treasury and designated as the investor education and technology fund. The commissioner may deposit the following moneys into the investor education and technology fund:
   1. Payments for tuition or other costs associated with educational services or materials provided by the department.
   2. Grants or donations for the purpose of investor education received by the commissioner from any public or private source.
   3. Civil penalties assessed by the commissioner under the Securities Act of 1951, if the commissioner finds that:
      1. The violations or alleged violations underlying the assessment of civil penalties involve repeat violations, involve numerous investors, or appear to have been perpetrated on a systematic basis; and
      2. The violations or alleged violations underlying the assessment of civil penalties could have been prevented or significantly curtailed had the individual investors involved in the matter been more knowledgeable about financial concepts in general, or about any specific laws, practices, or procedures relating to the securities industry.
5. A special fund is established in the state treasury and designated as the securities department special fund. All fees, civil penalties, or other moneys collected under this chapter must be deposited in the securities department special fund, except funds permitted to be deposited into the investor education and technology fund under subsection 4 or civil penalties collected from enforcement actions for the purpose of distribution to aggrieved investors, which may be deposited in the investor restitution fund. Funds in the investor restitution fund are appropriated to the securities commissioner on a continuing basis for distribution to aggrieved investors.
   1. The moneys deposited in the securities department special fund are reserved for use by the securities department to defray the expenses of the department in the discharge of administrative and regulatory powers and duties of the department as prescribed by law. Deposits under this subdivision are subject to the applicable laws relating to the appropriations of state funds and to the deposit and expenditure of state moneys. The securities commissioner is responsible for the proper expenditure of these moneys as provided by law.
   2. The office of management and budget shall transfer any balance in the securities department special fund in excess of the amounts necessary for department expenditures pursuant to the department’s biennial appropriation to the general fund.
6. The commissioner may honor requests from interested persons for the issuance of a statement or opinion concerning the applicability of this chapter or the rules adopted under this chapter to any transaction or proposed transaction which may be subject to this chapter. Any such request must be accompanied by a nonrefundable fee of one hundred fifty dollars.

It is the prime duty of the commissioner to administer the provisions of this chapter. The commissioner shall receive a salary within the amount appropriated for salaries by the legislative assembly. The commissioner shall use a seal with the words “securities commissioner, North Dakota” and such design as the commissioner may prescribe engraved thereon by which seal the commissioner may authenticate documents used in the administration of this chapter. The commissioner may employ such employees as are necessary for the administration of this chapter. In the absence or disability of the commissioner, the deputy or designee of the commissioner may administer the provisions of this chapter as acting commissioner.

The commissioner shall maintain and administer the investor education and technology fund. The moneys in the fund are appropriated to provide education services to the public relating to any of the financial services industries, including the securities industry, and to provide for the technology needs of the department, including the purchase or rental of equipment or software, servicing of the equipment or software, and training the commissioner’s staff in the use of the equipment or software.

10-04-04. Registration of securities.

It is unlawful for any person to sell, or offer for sale, any security in this state unless it is registered under this chapter or the security or transaction is exempt under section 10-04-05 or 10-04-06 or it is a federal covered security.

10-04-04.1. Agent or investment adviser representative records — Exempt record.

The home address of an agent or investment adviser representative received by the commissioner is an exempt record as defined in section 44-04-17.1.

10-04-05. Exempt securities.

Sections 10-04-04, 10-04-07.1, 10-04-07.2, 10-04-08, and 10-04-08.4 do not apply to any of the following securities:

1. A security, including a revenue obligation or a separate security as defined in rule 131 adopted under the Securities Act of 1933, issued, insured, or guaranteed by the United States, by a state, by a political subdivision of a state, by a public authority, agency, or instrumentality of one or more states, by a political subdivision of one or more states, or by a person controlled or supervised by and acting as an instrumentality of the United States under authority granted by the Congress, or a certificate of deposit for any of the foregoing, except that this exemption does not include a municipal security with respect to the offer or sale in this state if the security is payable solely from revenues to be received from a nongovernmental industrial or commercial enterprise, unless such payments are made or unconditionally guaranteed by a person whose securities are exempt from registration or the issuer first files a notice in a record specifying the terms of the proposed offer or sale and pays a nonrefundable filing fee of one hundred dollars.
2. Securities issued by and representing or that will represent an interest in or a direct obligation of, or be guaranteed by a banking institution organized under the laws of the United States, a member bank of the federal reserve system, or a depository institution a substantial portion of the business of which consists or will consist of receiving deposits or share accounts that are insured to the maximum amount authorized by statute by the federal deposit insurance corporation, the national credit union share insurance fund, or a successor authorized by federal law or exercising fiduciary powers that are similar to those permitted for national banks under the authority of the comptroller of currency pursuant to section 1 of Public Law 87-722 or issued or guaranteed as to both principal and interest by an international bank of which the United States is a member.
3. Securities issued by a building and loan association subject to supervision by an agency of the state of North Dakota, or policy contracts, including variable annuity contracts, of an insurance company subject to supervision by an agency of the state of North Dakota.
4. Securities issued or guaranteed by a railroad, other common carrier, public utility, or public utility holding company that is regulated in respect to its rates and charges by the United States or a state, regulated in respect to the issuance or guarantee of the security by the United States, a state, Canada, or a Canadian province or territory, or a public utility holding company registered under the Public Utility Holding Company Act of 1935 or a subsidiary of such a registered holding company within the meaning of that Act.
5. Any security issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, fraternal, charitable, social, or reformatory purposes; provided that prior to any offer of such security each person must meet the following conditions:
   1. Apply for and obtain the written approval of the commissioner.
   2. File an application, offering disclosure document, and pay a nonrefundable filing fee of one hundred fifty dollars, which document and fee must accompany the application.
   3. File a notice identifying the basis of its qualification under this exemption with such additional information as the commissioner may require.
   4. Provide a copy of the offering disclosure document to each person to whom an offer to sell or sale is made.
6. Any note, draft, bill of exchange, or bankers’ acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, is not the subject of a public offering, is prime quality negotiable commercial paper which has at the time of issuance a definite maturity of not exceeding nine months, is payable in cash only, and is not convertible into and does not carry an option or right to receive payment or any bonus in any other security.
7. Securities, other than common stock, providing for a fixed return, which have been outstanding and in the hands of the public for not less than five years and upon which no default has occurred during the five years next preceding the date of sale.
8. Securities, including patronage dividends or refunds, issued by any cooperative organized under the statutes of this state.
9. An equipment trust certificate with respect to equipment leased or conditionally sold to, a person, if any security issued by the person would be exempt under this section or would be a federal covered security under section 18(b)(1) of the Securities Act of 1933.
10. Any bond, note, or other evidence of debt issued by a holding corporation or limited liability company and secured by collateral consisting of any of the securities described in subsections 4 and 9, if the collateral securities equal in fair value at least one hundred twenty-five percent of the par value of the bonds, notes, or other evidences of debts secured thereby.
11. The execution of orders for purchase of securities by a registered broker-dealer provided such broker-dealer acts as agent for the purchaser, has made no solicitation of the order to purchase such securities, has no direct material interest in the sale or distribution of the securities ordered, receives no commission, profit, or other compensation other than the commissions involved in the purchase and sale of the securities and delivery to the purchaser of written confirmation of the order which clearly itemizes the commissions paid to the registered broker-dealer. Clear and complete records of all transactions exempted under this subsection shall be maintained by the registered broker-dealer.
12. Any security issued, insured, or guaranteed by a foreign government with which the United States currently maintains diplomatic relations, or any of its political subdivisions, if the security is recognized as a valid obligation by the issuer, insurer, or guarantor.
13. 1. A federal covered security specified in section 18(b)(1) of the Securities Act of 1933 or by rule adopted under that provision or a security listed or approved for listing on:
       1. The New York stock exchange;
       2. The American stock exchange;
       3. The national association of securities dealers automated quotation national market system;
       4. Tier I of the Philadelphia stock exchange, incorporated;
       5. Tier I of the Pacific exchange, incorporated;
       6. Chicago board options exchange, incorporated; or
       7. Any other stock exchange or automated quotation system which the securities and exchange commission approves by rule.
    2. A put or call option contract; a warrant; a subscription right on or with respect to such securities; or an option or similar derivative security on a security or an index of securities or foreign currencies issued by a clearing agency registered under the Securities Exchange Act of 1934 and listed or designated for trading on a national securities exchange, a facility of a national securities exchange, or a facility of a national securities association registered under the Securities Exchange Act of 1934 or an offer or sale, of the underlying security in connection with the offer, sale, or exercise of an option or other security that was exempt when the option or other security was written or issued; or an option or a derivative security designated by the securities and exchange commission under section 9(b) of the Securities Exchange Act of 1934.
14. Securities issued by North Dakota united dues credit trust to members of North Dakota united.
15. A security of a foreign issuer that is a margin security defined in regulations or rules adopted by the board of governors of the federal reserve system.

The approval is effective for a period of one year from the date of approval. At least thirty days prior to the expiration date, there must be filed an application, offering disclosure document, and a nonrefundable fee of one hundred dollars for the renewal of the filing for additional periods of one year.

10-04-06. Exempt transactions.

Except as hereinafter in this section expressly provided, sections 10-04-04, 10-04-07.1, 10-04-07.2, 10-04-08, 10-04-08.4, and 10-04-10 do not apply to any of the following transactions:

1. A transaction by an executor, administrator of an estate, sheriff, marshal, receiver, guardian, conservator, or trustee in bankruptcy.
2. The sale, in good faith and not for the purpose of avoiding the provisions of this chapter, by a pledgee of securities pledged for a bona fide debt.
3. An isolated sale of any security made by or on behalf of a bona fide owner for the owner’s account, such owner not being an issuer, underwriter, broker-dealer, or agent and such sale not being made in the course of repeated and successive transactions of a like character. This subsection shall not exempt any broker-dealer or agent participating in an isolated sale from registering in accordance with section 10-04-10.
4. A transaction by an issuer for:
   1. Securities dividends or other distributions by a corporation, cooperative, limited partnership, limited liability limited partnership, or limited liability company out of its earnings or surplus; or
   2. The sale or distribution of additional capital stock of a corporation or cooperative, interest of a partnership, or membership interest of a limited liability company to or among its own stockholders, partners, or members.
5. A sale or offer to sell to:
   1. An institutional investor;
   2. A federal covered investment adviser; or
   3. Any other person exempted by rule adopted or order issued by the commissioner.
6. Any transaction incident to a vote by stockholders, partners, or members pursuant to the articles of incorporation, bylaws, partnership agreement, articles of organization, member-control agreement, or the applicable corporation, partnership, or limited liability company statute on a merger, consolidation, exchange of securities, or sale of corporate, partnership, or limited liability company assets in consideration of the issuance of securities of another corporation, partnership, or limited liability company, other reorganization to which the issuer, or its parent or subsidiary and the other person or its parent or subsidiary, are parties, or any transaction incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding securities, claims, or property interests, or partly in such exchange and partly for cash, or the solicitation of tenders of securities by an offeror in a tender offer in compliance with rule 162 adopted under the Securities Act of 1933.
7. A transaction under an offer to existing securityholders of the issuer, including persons that at the date of the transaction are holders of convertible securities, options, or warrants, if a commission or other remuneration, other than a standby commission, is not paid or given, directly or indirectly, for soliciting a securityholder in this state.
8. A nonissuer transaction by or through a broker-dealer and agent, both of which are registered or exempt from registration under this chapter, or a resale transaction by a sponsor of a unit investment trust registered under the Investment Company Act of 1940, in a security of a class that has been outstanding in the hands of the public for at least ninety days, if, at the date of the transaction:
   1. The issuer of the security is engaged in business, the issuer is not in the organizational stage or in bankruptcy or receivership, and the issuer is not a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person;
   2. Such securities are sold at prices reasonably related to the current market price;
   3. Such securities do not constitute the whole or part of an unsold allotment to, or subscription or participation by, the broker-dealer as an underwriter of the security or a redistribution;
   4. Such securities are listed in Mergent’s Industrial Manual, Mergent’s Bank and Finance Manual, Mergent’s Transportation Manual, Mergent’s Public Utility Manual, or Fitch investor service, incorporated, are on the OTCQX or OTCQB markets operated by OTC Markets Group Incorporated, or are filed under section 13 or 15(d) of the Securities Exchange Act of 1934 [ch. 404, title I, sec. 1; 48 Stat. 881; 15 U.S.C. 78 et seq.]; and
   5. Any one of the following requirements is met:
      1. The issuer of the security has a class of equity securities listed on a national securities exchange registered under section 6 of the Securities Exchange Act of 1934 or designated for trading on the national association of securities dealers automated quotation system;
      2. The issuer of the security is a unit investment trust registered under the Investment Company Act of 1940;
      3. The issuer of the security, including its predecessors, has been engaged in continuous business for at least three years; or
      4. The issuer of the security has total assets of at least two million dollars based on an audited balance sheet as of a date within eighteen months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had the audited balance sheet, a pro forma balance sheet for the combined organization.
9. 1. Any transaction pursuant to an offer directed by the offeror to not more than thirty-five persons, other than those designated in subsection 5, in this state during any period of twelve consecutive months, whether or not the offeror or any of the offerees is then present in this state, if all of the following conditions are met:
      1. The seller reasonably believes that all the buyers in this state, other than those designated in subsection 5, are purchasing for investment.
      2. Except for offers or sales with respect to persons designated in subsection 5, no security may be offered or sold under this subdivision except through or by a broker-dealer and agent registered in accordance with section 10-04-10, unless it is offered and sold through an officer, director, governor, or partner of the issuer and no commission or other remuneration is paid, either directly or indirectly.
      3. The offeror applies for and obtains the written approval of the commissioner prior to making any offers in this state and pays a nonrefundable filing fee of one hundred fifty dollars, which fee must accompany the application for approval.
   2. Any offer or sale in this state of common stock, preferred stock, limited liability company membership interests, or limited partnership interests of an issuer during any period of twelve consecutive months if all of the following conditions are met:
      1. The issuer reasonably believes that all the buyers in this state, other than those designated in subsection 5, are purchasing for investment.
      2. Except with respect to offers and sales made to persons designated in subsection 5, no security may be sold under this subdivision except through or by a broker-dealer and agent registered in accordance with section 10-04-10, unless it is offered and sold through an officer, director, governor, or partner of the issuer and no commission or other remuneration is paid, either directly or indirectly.
      3. The issuer is both organized under the laws of this state and has its principal place of business in this state.
      4. No public advertising matter or general solicitation, except tombstone advertisements approved by the commissioner, is used in connection with any offers or sales.
      5. An offering disclosure document in the form approved by the commissioner must be delivered to each offeree prior to the sale of the security.
      6. The gross proceeds of the offering may not exceed five million dollars.
      7. The issuer must apply for and obtain the written approval of the commissioner prior to making any offer or sale in this state by filing an application prescribed by the commissioner, a copy of the offering disclosure document, and any other information or documents the commissioner may require, together with a nonrefundable filing fee of one hundred fifty dollars.
      8. All funds raised in the offering are placed in an escrow account until the total offering amount has been sold.
   3. The issuer must file a report of all offers and sales made in this state pursuant to subdivision a or b on a form prescribed by the commissioner within thirty days after the completion of the offering or expiration of the twelve-month approval period, whichever occurs first.
   4. The exemptions provided under subdivisions a and b may not be combined.
   5. An exemption under this subsection is not available for the securities of any issuer if the issuer or any promoter, officer, director, manager, partner, or underwriter of the issuer:
      1. Has filed a registration statement that is the subject of a currently effective registration stop order entered pursuant to any federal or state securities law within five years prior to the filing of the application required under this exemption.
      2. Has been convicted within five years prior to the filing of the application required under this exemption of any felony or misdemeanor in connection with the offer, purchase, or sale of any security or any felony involving fraud or deceit, including forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to defraud.
      3. Is currently subject to any state administrative enforcement order or judgment entered by any state securities administrator or the securities and exchange commission within five years prior to the filing of the application required under this exemption or is subject to any federal or state administrative enforcement order or judgment in which fraud or deceit, including making untrue statements of material facts, was found and the order of judgment was entered within five years prior to the filing of the application required under this exemption.
      4. Is subject to any federal or state administrative enforcement order or judgment which prohibits, denies, or revokes the use of any exemption from registration in connection with the offer, purchase, or sale of securities.
      5. Is currently subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to any order, judgment, or decree of any court of competent jurisdiction, permanently restraining or enjoining, such part from engaging in or continuing any conduct or practice in connection with the purchase or sale of a security or involving the making of any false filing with any state or with the securities and exchange commission entered within five years prior to the filing of the application required under this exemption.
      6. Has been or is the subject of any order issued by the United States postal service that was entered within five years prior to reliance on this exemption and alleged any fraudulent or unlawful conduct.
   6. Subdivision e does not apply if the commissioner determines, upon a showing of good cause, that it is not necessary under the circumstances that the exemption should not be denied.
10. The sale of capital stock of a corporation or membership interests of a limited liability company if the corporation or limited liability company is organized under the statutes of this state or the sale of memberships, including dues, in a nonprofit corporation incorporated in North Dakota if the corporation or limited liability company is organized and operated for the primary purpose of promoting community development.
11. Any security issued in connection with an employees’ stock purchase, savings, option, profit-sharing, pension, or similar employees’ benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majority-owned subsidiaries, or the majority-owned subsidiaries of the issuer’s parent for the participation of their employees, including offers or sales of such securities to:
    1. Directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisers;
    2. Family members who acquire such securities from those persons through gifts or domestic relations orders;
    3. Former employees, directors, general partners, trustees, officers, consultants, and advisers if those individuals were employed by or providing services to the issuer when the securities were offered; and
    4. Insurance agents who are exclusive insurance agents of the issuer, or the issuer’s subsidiaries or parents, or who derive more than fifty percent of their annual income from those organizations.
12. The sale of a security issued by the United States, or the state of North Dakota, or any political subdivision or instrumentality of the state of North Dakota; provided, that the offer for sale and sale are made by an official or employee of the issuer or of the Bank of North Dakota acting in an official capacity and not for personal pecuniary profit, or by a bank or similar financial association or institution or an official or employee thereof solely as an accommodation to customers of such association or institution and without asking or receiving a commission or remuneration other than an accommodation fee not to exceed one hundred dollars in connection with the transaction.
13. Any offer or sale of shares of capital stock issued by a professional corporation, professional limited liability company, or professional limited liability partnership which is organized and operated pursuant to chapter 10-31.
14. The offer or sale of a security issued by North Dakota united dues credit trust to members of North Dakota united.
15. 1. An offer, but not a sale, of a security made by or on behalf of an issuer for the sole purpose of soliciting an indication of interest in receiving a prospectus or similar disclosure document for the security if all of the following conditions are satisfied:
       1. The issuer is or will be a business entity organized under the laws of one of the states or possessions of the United States or one of the provinces or territories of Canada; is engaged in or proposes to engage in a business other than petroleum exploration or production, mining, or other extractive industries; and is not a blind pool offering or other offering for which the specific business or properties cannot now be described.
       2. The issuer may solicit indications of interest in a project or business only within a period of twelve months after receiving approval from the commissioner and does not pay a commission or fee to any person for soliciting a potential investor or prospective purchaser in this state unless the person who receives the commission or fee is registered as a broker-dealer or agent in this state.
       3. The issuer intends to register securities in this state, rely upon subsection 8 of section 10-04-05 for the issuance of a security, or receive approval for an exemption under subsection 5 of section 10-04-05 or subsection 9 of this section.
       4. The issuer files a solicitation of interest form and copies of any advertising or marketing materials, including scripts for use in telephone, television, electronic, or computer publications, for approval by the commissioner at least ten business days before the issuer begins soliciting indications of interest from potential purchasers and at least ten business days before publishing or distributing any materials or information to any person.
       5. The issuer obtains approval of the commissioner for any amendments or changes in filed forms, marketing materials, or advertisements at least ten business days before distributing the amended marketing materials or amended advertising information to any person.
       6. The issuer does not use any solicitation of interest form, script, advertisement, or other material which the issuer has been notified by the commissioner not to distribute, to solicit indications of interest.
       7. Except for scripted broadcasts and published notices, the issuer does not communicate with any offeree about the contemplated offering unless the offeree is provided with the most current solicitation of interest form at or before the time of the communication or within five days from the communication.
       8. The issuer stops all communications with prospective investors made in reliance on this exemption immediately after filing an application to register or qualify the securities with the commissioner or with the securities and exchange commission.
       9. The issuer does not accept money or sign completed contracts for sales of securities with any person while soliciting indications of interest and does not complete any sales of securities until at least ten business days after completing a securities registration or approval to offer and sell securities in this state.
       10. The issuer does not make a sale until three days after delivery to the purchaser of a prospectus or similar disclosure document.
       11. The issuer does not know, and in the exercise of reasonable care could not know, that the issuer or any officer, director, manager, ten percent shareholder, promoter, partner, or agent of the issuer:
           1. Has been the subject of or filed a registration statement that is the subject of a stop order, administrative enforcement order, judgment, injunction, or restraining order issued by any federal or state securities agency, any court of competent jurisdiction, or the United States postal service and which prohibits, denies, or revokes the registration or use of any exemption from registration in connection with the offer, sale, or purchase of a security, franchise, commodity, or other financial transaction or which involves fraud, deceit, misstatements of material facts, forgery, embezzlement, obtaining money under false pretenses, larceny, conspiracy to defraud, or similar deceptive acts within five years prior to the filing of the solicitation of interest form; or
           2. Has been convicted of any felony or misdemeanor involving the offer, purchase, or sale of a security, franchise, commodity, or financial transaction, or any felony or misdemeanor involving fraud, deceit, forgery, embezzlement, conspiracy to defraud, or a similar financial crime.
    2. The issuer shall comply with the requirements set forth below. Failure to comply will not result in the loss of the exemption from the requirements of section 10-04-04, but is a violation of this chapter, is actionable by the commissioner under section 10-04-16, and constitutes grounds for denying or revoking the exemption as to a specific security or transaction.
       1. Any published notice must contain at least the identity of the chief executive officer of the issuer, a brief and general description of its business and products, and the following legends:
          1. NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED AND NONE WILL BE ACCEPTED;
          2. NO SALES OF THE SECURITIES WILL BE MADE OR COMMITMENT TO PURCHASE ACCEPTED UNTIL DELIVERY OF A PROSPECTUS OR SIMILAR DISCLOSURE DOCUMENT THAT INCLUDES COMPLETE INFORMATION ABOUT THE ISSUER AND THE OFFERING;
          3. AN INDICATION OF INTEREST MADE BY A PROSPECTIVE INVESTOR INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND; and
          4. THIS OFFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE FEDERAL AND STATE SECURITIES LAWS. NO SALE MAY BE MADE UNTIL THE OFFERING STATEMENT IS QUALIFIED BY THE SECURITIES AND EXCHANGE COMMISSION AND IS REGISTERED OR APPROVED IN THIS STATE.
       2. Any script for broadcast must contain at least the identity of the chief executive of the issuer, a brief description of its business and products, its address and telephone number, and the following legends:
          1. THIS IS FOR AN INDICATION OF INTEREST ONLY AND INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND UPON A PROSPECTIVE INVESTOR;
          2. NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED; and
          3. THIS OFFER IS MADE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS.
          4. Is currently subject to any order, judgment, or decree of any court of competent jurisdiction, entered within the last five years, temporarily, preliminarily, or permanently restraining or enjoining such party from engaging in or continuing to engage in any conduct or practice involving fraud or deceit in connection with the purchase or sale of any security.
    3. Offers made on reliance of this exemption will not result in a violation of section 10-04-04 by virtue of being integrated with subsequent offers or sales of securities unless such subsequent offers and sales would be integrated under federal securities laws.
16. An offer or sale of common stock, limited liability company membership interests, or limited partnership interests by a person to a person or other subscribers, not exceeding ten in number, for the sole purpose of organization in this state, if the securities are not acquired for the purpose of resale to others for a period of twelve months, advertising has not been published or circulated in connection with the offer or sale, and all sales are consummated within ten days after the date of organization.
17. Any offer or sale of a security by an issuer in a transaction provided all of the following conditions are met:
    1. Sales of securities may be made only to persons who are, or the issuer reasonably believes are, accredited investors as defined in 17 CFR 230.501(a) promulgated by the securities and exchange commission.
    2. The exemption is not available to an issuer that is in the development stage that either has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person.
    3. The issuer reasonably believes that all purchasers are purchasing for investment and not with the view to, or for, sale in connection with a distribution of the security. Any resale of a security sold in reliance of this exemption within twelve months of sale must be presumed to be with a view to distribution and not for investment, except a resale pursuant to a registration statement effective under section 10-04-04 or to an accredited investor pursuant to an exemption available under subsection 5.
    4. 1. The exemption is not available to an issuer if the issuer, any of the issuer’s predecessors, any affiliated issuer, any of the issuer’s directors, officers, general partners, beneficial owners of ten percent or more of any class of its equity securities, any of the issuer’s promoters presently connected with the issuer in any capacity, any underwriter of the securities to be offered, or any partner, director, or officer of such underwriter:
       2. Paragraph 1 does not apply if:
          1. The party subject to the disqualification is licensed or registered to conduct securities-related business in the state in which the order, judgment, or decree creating the disqualification was entered against such party;
          2. Before the first offer under this exemption, the state securities administrator, or the court or regulatory authority that entered the order, judgment, or decree, waives the disqualification; or
          3. The issuer establishes that it did not know and in the exercise of reasonable care, based on a factual inquiry, could not have known that a disqualification existed under this subdivision.
    5. 1. A general announcement of the proposed offering may be made by any means.
       2. The general announcement must include only the following information, unless additional information is specifically permitted by the commissioner:
          1. The name, address, and telephone number of the issuer of the securities;
          2. The name, a brief description, and price, if known, of any security to be issued;
          3. A brief description of the business of the issuer in twenty-five words or less;
          4. The type, number, and aggregate amount of securities being offered;
          5. The name, address, and telephone number of the person to contact for additional information; and
          6. A statement that:
             1. Sales will only be made to accredited investors;
             2. No money or other consideration is being solicited or will be accepted by way of this general announcement; and
             3. The securities have not been registered with or approved by any state securities agency or the securities and exchange commission and are being offered and sold pursuant to an exemption from registration.
    6. The issuer, in connection with an offer, may provide information in addition to the general announcement under subdivision e, if such information:
       1. Is delivered through an electronic database that is restricted to persons who have been prequalified as accredited investors; or
       2. Is delivered after the issuer reasonably believes that the prospective purchaser is an accredited investor.
    7. Telephone solicitation is not permitted unless prior to placing the call, the issuer reasonably believes that the prospective purchaser to be solicited is an accredited investor.
    8. Dissemination of the general announcement of the proposed offering to persons who are not accredited investors does not disqualify the issuer from claiming the exemption.
    9. The issuer shall file with the department a notice of transaction, a consent to service of process, a copy of the general announcement, and a nonrefundable filing fee of one hundred dollars within fifteen days after the first sale in this state.
    10. The security offered or sold under this subsection is offered or sold by a broker-dealer and agent registered in accordance with section 10-04-10, or offered and sold through an officer, director, governor, or partner of the issuer and no commission or other remuneration is paid.
18. The offer or sale of a security issued by an organization organized under and operated in compliance with chapter 10-06.1.
19. Any offer or sale of an agricultural-related cooperative security by or on behalf of an agricultural producer, as defined by section 32-44-01, to a person for the purpose of producing and selling agricultural products, as defined by section 32-44-01, to the cooperative. Commissions or other remuneration may not be paid or given directly or indirectly for soliciting any prospective buyer in this state, except to a broker-dealer or agent registered in this state, to an agent of a bank or a commercial trust department, to a licensed real estate agent, or to a licensed auctioneer if the sale is made at a bona fide public auction.
20. A transaction in a note, bond, debenture, or other evidence of indebtedness secured by a mortgage or other security agreement if:
    1. The note, bond, debenture, or other evidence of indebtedness is offered and sold with the mortgage or other security agreement as a unit;
    2. A general solicitation or general advertisement of the transaction is not made; and
    3. A commission or other remuneration is not paid or given, directly or indirectly, to a person not registered under this chapter as a broker-dealer or as an agent.
21. A nonissuer transaction by a federal covered investment adviser with investments under management in excess of one hundred million dollars acting in the exercise of discretionary authority in a signed record for the account of others.

The commissioner may, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption, or increase or decrease the number of offerees permitted, or waive the condition in paragraph 1.

The commissioner may withdraw or further condition this exemption or waive the conditions in paragraphs 5 and 6.

The prohibitions listed above shall not apply if the person subject to the disqualification is duly licensed or registered to conduct securities-related business in the state in which the administrative order or judgment was entered against such person or if the broker-dealer employing such party is licensed or registered in this state and the form B-D filed with this state discloses the order, conviction, judgment, or decree relating to such person. A person disqualified under this subsection may not act in a capacity other than that for which the person is licensed or registered. Any disqualification caused by this section is automatically waived if the agency, which created the basis for disqualification, determines upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied.

(a) Within the last five years, has filed a registration statement that is the subject of a currently effective registration stop order entered by any state securities administrator or the securities and exchange commission;

(b) Within the last five years, has been convicted of any criminal offense in connection with the offer, purchase, or sale of any security, or involving fraud or deceit;

(c) Is currently subject to any state or federal administrative enforcement order or judgment, entered within the last five years, finding fraud or deceit in connection with the purchase or sale of any security; or

10-04-06.1. Suspension and revocation of exemptions.

The commissioner may by order or regulation suspend or revoke any exemption under section 10-04-05 or 10-04-06 with respect to any specific security or transaction or may require with respect to any specific security or transaction, prior to the making of any offers or sales, such information with respect thereto or the security to be offered or sold thereunder or such reports after the making of such sales, as the commissioner may deem necessary to enable the commissioner to determine whether or not to suspend or revoke the exemption. No such order may be entered without appropriate prior notice to all interested parties, opportunity for hearing, and written findings of fact and conclusions of law, except that the commissioner may by order summarily suspend any of the specified exemptions pending final determination of any proceeding under this section. Upon the entry of a summary order, the commissioner shall promptly notify all interested parties that it has been entered and the reasons therefor and that within fifteen days of the receipt of a written request the matter will be set down for hearing. If no hearing is requested and none is ordered by the commissioner, the order will remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner, after notice of and opportunity for a hearing to all interested parties, may modify or vacate the order or extend it until final determination.

10-04-06.2. Legacy fund investments — Notice filing.

1. Within thirty days of completion of the transaction, any issuer of securities in receipt of an investment from the legacy fund under paragraph 3 of subdivision a of subsection 3 of section 21-10-11 or under subdivision b of subsection 3 of section 21-10-11, shall file electronically a notice on a form prescribed by the commissioner and containing information as required by the commissioner.
2. The notice filing requirement under this section does not exempt the issuer from or supersede any other provision of this chapter.

10-04-07. Registration by description. [Repealed]

Repealed by S.L. 2005, ch. 97, § 22.

10-04-07.1. Registration by announcement — Secondary.

1. Securities that have been outstanding and in the hands of the public for not less than one year as the result of prior original registration in North Dakota or through securities and exchange commission registration, by the issuer, or by the underwriter on behalf of an issuer, are entitled to registration by announcement in the manner and subject to the conditions provided by this section.
   1. A balance sheet and an earnings statement showing statutory net earnings after all dividends (returned premiums) to policyholders and after all expenses including state and federal income taxes for the fiscal period ended not more than twelve months prior to the filing date upon which either an unqualified or a qualified opinion has been expressed by a certified public accountant; provided, however, that any qualification of opinion relates only to generally accepted principles of accounting which may have been modified to meet the reporting requirements of the various state insurance departments.
   2. Such balance sheet separates the surplus account into its component parts and shows a positive balance in the accumulated unrestricted retained earnings account, on statutory basis.
   3. Earnings statements for the four fiscal years immediately preceding the beginning date of the earnings statement required in subdivision a prepared by the same certified public accountant showing statutory net earnings after the deductions enumerated in subdivision a for each fiscal year; provided, however, that these statements need not be accompanied by an unqualified or a qualified opinion of the certified public accountant unless such certified public accountant did actually perform an audit of the company for any year or years covered by the earnings statements in which case the requirements of subdivision a apply for the year or years so audited.
   4. A statement prepared by a certified public accountant or actuary showing a net gain in insurance in force for each of the last five fiscal years.
2. Securities entitled to registration by announcement may be registered only by a broker-dealer registered with the department as provided for in section 10-04-10 by filing with the department a written announcement of intention to trade in the securities containing the following:
   1. Name of issuer and location of the headquarters or principal office.
   2. A brief description of the security, including price and current earnings.
   3. A statement that the securities have been outstanding and in the hands of the public not less than one year as aforesaid.
   4. A balance sheet not more than twelve months old.
   5. A statement that the security has been registered in North Dakota or by the securities and exchange commission.
3. The filing of such announcement with the department constitutes the registration of the security, unless advised to the contrary within forty-eight hours or advised to furnish additional information, and such broker-dealer shall pay to the commissioner a filing fee of twenty-five dollars. Upon registration, such securities may be sold in this state for a period of one year from date of registration by registered broker-dealers at a price or prices reasonably related to the current market price of such security at the time of sale, subject, however, to any and all rights and authority granted the commissioner and to any person or purchaser under chapter 10-04, in respect of securities registered by the commissioner by coordination or qualification. No security registered under this section shall be sold directly or indirectly for the benefit of the issuer, or an underwriter of such securities, or for the promotion of any scheme or enterprise with the intent of violating or evading any provision of this chapter; provided, that no security, the registration of which has been revoked by the commissioner, or application for registration of which has been denied by the commissioner, or withdrawn by the applicant, shall be registered under this section.
4. Securities registered pursuant to section 10-04-07.2 or 10-04-08 become eligible for trading in the secondary market at current market prices upon completion of the original offering when said securities are outstanding and in the hands of the public and remain so until the end of the registration year when renewal for secondary is permissible. Notification of completion of initial offering should be sent to the commissioner when the offering is completed requesting change to secondary.

In addition to the foregoing, stock, having equal voting rights with other classes, of life insurance companies may also qualify for registration under this section provided the company has been in continuous operation for twenty years immediately preceding the date of filing for registration and provided further that in addition to supplying the information required by subdivisions a through c of subsection 2 the applicant can supply all of the following:

10-04-07.2. Registration by coordination.

1. A security for which a registration statement has been filed under the federal Securities Act of 1933 [15 U.S.C. 77a et seq.] in connection with the same offering may be registered by coordination under this section. Only the issuer of the security or a broker-dealer registered under section 10-04-10 may make an application for registration of securities by coordination.
2. A registration statement and accompanying records under this section must contain or be accompanied by all of the following records in addition to the information specified in section 10-04-08, a payment of an initial filing fee in the amount as set forth in subsection 2 of section 10-04-08, and a consent to service of process conforming to the requirements of section 10-04-14:
   1. A copy of the latest form of prospectus filed under the federal Securities Act of 1933 [15 U.S.C. 77a et seq.].
   2. A copy of the articles of incorporation and bylaws, or substantial equivalents, currently in effect; a copy of any agreement with or among underwriters; a copy of any indenture or other instrument governing the issuance of the security to be registered; and a specimen, copy, or description of the security that is required by rule adopted or order issued under this chapter.
   3. Copies of any other information or any other records filed by the issuer under the federal Securities Act of 1933 [15 U.S.C. 77a et seq.] requested by the commissioner.
   4. An undertaking to forward each amendment to the federal prospectus, other than an amendment that delays the effective date of the registration statement, promptly after filing with the federal securities and exchange commission.
3. A registration statement under this section becomes effective simultaneously with or subsequent to the federal registration statement if all the following conditions are satisfied.
   1. A stop order under subsection 4 or issued by the federal securities and exchange commission is not in effect and a proceeding is not pending against the issuer under section 10-04-09.
   2. The registration statement has been on file for at least twenty days or a shorter period provided by rule adopted or order issued under this chapter.
4. The registrant promptly shall notify the commissioner in a record of the date the federal registration statement becomes effective and the content of any price amendment and promptly shall file a record containing the price amendment. If the notice is not timely received, the commissioner may issue a stop order, without prior notice or hearing, retroactively denying effectiveness to the registration statement or suspending the registration statement’s effectiveness until compliance with this section. The commissioner promptly shall notify the registrant of an order by sending a copy of the order to the registrant and if the registrant subsequently complies with the notice requirements of this section, the stop order is void as of the date of issuance.
5. If the federal registration statement becomes effective before each of the conditions in this section is satisfied or is waived by the commissioner, the registration statement is automatically effective under this chapter at the time all the conditions are satisfied or waived. If the registrant notifies the commissioner of the date the federal registration statement is expected to become effective, the commissioner promptly shall notify the registrant and promptly confirm this notice by a record, indicating whether all the conditions are satisfied or waived and whether the commissioner intends the institution of a proceeding under section 10-04-09. The notice by the commissioner does not preclude the institution of such a proceeding.
6. Registration under this section is effective for a period of one year. A renewal fee of one hundred fifty dollars must be paid for the renewal of the registration of the securities for additional periods of one year.

10-04-08. Registration by qualification.

Securities required to be registered by qualification under this chapter before they may be sold in this state must be registered as provided in this section. Application for registration of securities by qualification must be made by the issuer of the securities or by a registered broker-dealer by filing with the department:

1. An application for registration, which must be made in writing or on forms prescribed by the commissioner, must contain the following information and be accompanied by the following documents:
   1. With respect to the applicant or issuer and any significant subsidiary:
      1. Its name, address, and form of organization;
      2. The state of foreign jurisdiction and date of its organization;
      3. The general character and location of its business;
      4. A general description of its physical properties and equipment; and
      5. A statement of the general competitive conditions in the industry or business in which it is or will be engaged.
   2. With respect to every director and officer of the issuer, or person occupying a similar status or performing similar functions:
      1. The person’s name, address, and principal occupation for the past five years;
      2. The amount of securities of the issuer held by the person as of a specified date within thirty days of the filing of the application for registration;
      3. The amount of the securities covered by the application for registration to which the person has indicated an intention to subscribe; and
      4. A description of any material interest in any transaction with the issuer or any subsidiary effected within the past three years or proposed to be effected.
   3. With respect to persons covered by subdivision b, the remuneration paid during the past twelve months and estimated to be paid during the next twelve months, directly or indirectly, by the issuer to all those persons in the aggregate.
   4. With respect to any person owning of record, or beneficially if known, ten percent or more of the outstanding shares of any class of equity security of the issuer, the information specified in subdivision b other than the person’s occupation.
   5. With respect to every promoter if the issuer was organized within the past three years, the information specified in subdivision b, any amount paid to the promoter within that period or intended to be paid to the promoter, and the consideration for any such payment.
   6. With respect to any person on whose behalf any part of the offering is to be made in a nonissuer distribution:
      1. The person’s name and address;
      2. The amount of securities of the issuer held by the person as of the date of the filing of the application for registration;
      3. A description of any material interest in any transaction with the issuer or any subsidiary effected within the past three years or proposed to be effected; and
      4. A statement of the person’s reasons for making the offering.
   7. The title, kind, classes, and amount of securities to be offered in this state; the proposed offering price to the public or the method by which it is to be computed; any variation therefrom at which any proportion of the offering is to be made to any person or class of persons other than the underwriters, with a specification of any such person or class; the basis upon which the offering is to be made if otherwise than for cash; the maximum amount of commission or other form of remuneration to be paid in cash or otherwise, directly or indirectly, for or in connection with the sale or offering for sale of such securities; the estimated aggregate underwriting and selling discounts or commissions and finders’ fees, including separately cash, securities, contracts, or anything else of value to accrue to the underwriters or finders in connection with the offering, or, if the selling discounts or commissions are variable, the basis of determining them and their maximum and minimum amounts; the estimated amounts of other selling expenses, including legal, engineering, and accounting charges and a statement as to what person, corporation, or limited liability company shall be responsible for payment of the same; the name and address of every underwriter and every recipient of a finder’s fee; a copy of any underwriting or selling-group agreement pursuant to which the distribution is to be made, or the proposed form of any such agreement whose terms have not yet been determined; and a description of the plan of distribution of any securities which are to be offered otherwise than through an underwriter.
   8. The estimated cash proceeds to be received by the issuer from the offering; the purposes for which the proceeds are to be used by the issuer; the amount to be used for each purpose; the amounts of any funds to be raised from other sources to achieve the purposes stated; the sources of any such funds; and, if any part of the proceeds is to be used to acquire any property, including goodwill, otherwise than in the ordinary course of business, the names and addresses of the vendors, the purchase price, the names of any persons who have received commissions in connection with the acquisition, and the amounts of any such commissions and any other expense in connection with the acquisition.
   9. A description of each and every stock option or other security option outstanding, or to be created in connection with the offering, including the price at which such options may be exercised together with the amount of any such options held or to be held by every person.
   10. The capitalization and long-term debt of the issuer and any subsidiary, including a description of each security outstanding or being registered or otherwise offered, and a statement of the amount and kind of consideration for which the issuer or any subsidiary has issued any of its securities within the past two years or is obligated to issue any of its securities.
   11. The dates of, parties to, and general effect concisely stated of, every management or other material contract made or to be made otherwise than in the ordinary course of business if it is to be performed in whole or in part at or after the filing of the application for registration or was made within the past two years, together with a copy of every such contract; and a description of any pending litigation or proceeding to which the issuer is a party and which affects its business or assets.
   12. A detailed statement showing the items of cash, property, services, patents, goodwill, and any other consideration for which any securities of the issuer have been within two years or are to be issued in payment.
   13. A copy of any prospectus, pamphlet, circular, form letter, advertisement, or other sales literature intended as of the effective date to be used in connection with the offering.
   14. A specimen or copy of the security being registered; a copy of the issuer’s articles of incorporation and bylaws, as currently in effect; and a copy of any indenture or other instrument covering the security to be registered.
   15. A balance sheet of the issuer as of a date within four months prior to the filing of the application for registration; a profit and loss statement and analysis of surplus for each of the three fiscal years preceding the date of the balance sheet and for any period between the close of the last fiscal year and the date of the balance sheet, or for the period of the issuer’s and any predecessor’s existence if less than three years; and, if any part of the proceeds of the offering is to be applied to the purchase of any business, the same financial statements which would be required if the business were the registrant.
   16. Other states in which it is proposed to offer the securities for sale to the public; other states in which the securities are eligible for sale to the public; states which have refused, by order or otherwise, to render the securities eligible for sale to the public or have revoked or suspended the right to sell the securities, or in which an application for registration has been withdrawn; and, if application has been made to register the securities under the federal Securities Act of 1933, the date upon which the application to register the securities was first filed, and a statement as to whether registration under that Act is effective, and if so, the effective date.
   17. Such additional information as the commissioner requires by rule or order or may subsequently request.
2. Payment of a filing fee for each security or class of security to be registered as follows:
   1. For an initial filing, one-tenth of one percent of the aggregate amount of each security or class of security to be registered but not more than two thousand five hundred dollars.
   2. In no event may an initial filing fee be less than one hundred fifty dollars for each security or class of security to be registered.
   3. An applicant may increase the aggregate amount of each security or class of security to be registered by filing a notice of the additional aggregate dollar amount to be registered and payment of a filing fee of one-tenth of one percent of the additional aggregate dollar amount but not more than five hundred dollars.
   4. No application shall be deemed to be filed or pending and no securities covered by such application shall be deemed to be registered unless a filing fee has been paid. The filing fee shall be retained even if the filing is withdrawn, denied, suspended, revoked, or abandoned.
   5. For the renewal of the registration of securities for additional periods of one year, there must be paid a renewal fee of one hundred fifty dollars.
3. If the applicant is not domiciled in this state and is not a corporation or limited liability company organized or authorized to transact business under the laws of this state, a consent to service of process conforming to the requirements of section 10-04-14.
4. The commissioner may by rule or order require as a part of the application for registration under this section that a prospectus containing any designated part of the information specified in subsection 1 be submitted to the commissioner and the same prospectus must be sent or given to each person to whom a sale or an offer to sell is made. The commissioner may by rule or otherwise permit the omission of any item of information or document from any application for registration. In all cases in which an application is filed to register securities and a registration statement covering the same securities has been filed with the federal securities and exchange commission, a copy of the registration statement so filed must be accepted by the commissioner in lieu of the information specified in subdivisions a through q of subsection 1, except that it must be accompanied by a statement of the amount of such securities to be offered in this state. All of the statements, exhibits, or documents of every kind required under this section must be certified by the applicant or the issuer or any person having knowledge of the facts. An applicant may, with the consent of the commissioner, amend or withdraw an application and any or all statements, exhibits, or documents filed therewith under this section at any time prior to the registration or prior to any offering and sale of the securities sought to be registered or the entry of an order denying the registration of such securities, but in no event may the fee be returned.

Registration under this section is effective for a period of one year.

10-04-08.1. Authority of commissioner.

1. The right to sell securities in this state shall not be granted in any case when it appears to the commissioner that the sale of such securities would work a fraud or deception on purchasers or the public, or that the proposed disposal of the securities is on unfair terms, or if the proposed plan of business of the applicant appears to be unfair, unjust, or inequitable. When the commissioner deems it necessary the commissioner has power, in connection with pending applications and at the expense of the applicant, to require the applicant to furnish additional information, to order appraisals, audits, or other examinations and reports, and, when the applicant is the issuer of the securities, or the proposed sale is to be on behalf of the issuer, to make an investigation of the books, records, property, business, and affairs of such issuer.
2. Upon compliance with all the provisions of this chapter relating to applications for approval or registration by announcement, coordination, or qualification and the requirements of the commissioner, the commissioner shall either approve or register such securities or if the commissioner is of the opinion that sale of the securities would be contrary to the provisions of this section, the commissioner shall deny the application. The commissioner has power to place such conditions, limitations, and restrictions on any approval or registration as may be necessary to carry out the purposes of this chapter. Registration or approval must be by entry in the register of securities, which entry must show the securities approved or registered and for whom approved or registered, and the conditions, limitations, and restrictions, if any, or shall make proper reference to a formal order of the commissioner on file showing such conditions, limitations, and restrictions. Included among any other reasonable conditions, limitations, and restrictions which the commissioner may deem necessary are the following:
   1. The commissioner may by rule, order, or directive require that any security issued or to be issued to a promoter for a consideration different from the public offering price, or to any person for a consideration other than cash, be deposited in escrow with the commissioner or some other depository satisfactory to the commissioner under an escrow agreement that the owners of such securities shall not be entitled to sell or transfer such securities or to withdraw such securities from escrow until all other stockholders who have paid for their stock in cash shall have been paid a dividend or dividends aggregating not less than six percent of the initial offering price shown to the satisfaction of the commissioner to have been held actually earned on the investment in any common stock as held. In case of dissolution or insolvency during the time such securities are held in escrow, the owners of such securities shall not participate in the assets until after the owners of all other securities have been paid in full.
   2. The commissioner may by rule, order, or directive require that all the proceeds from the sale of the approved or registered security be impounded until the issuer receives a specified amount of funds, which amount shall be determined by the commissioner.
   3. The commissioner may refuse to allow the granting of any stock options to any person, but if such an option is allowed, the commissioner may prescribe that the price at which the option can be exercised shall be increased each year in which it is not exercised in an amount to be determined by the commissioner and that the option shall lapse altogether after a specified period to be set by the commissioner.
   4. If any stock is given for past services or consideration, the commissioner may require that the issuer submit to the commissioner a strict and comprehensive evaluation of such past services or consideration and may limit the amount of stock so given in order that it is commensurate with the value of the past services and in no case shall the commissioner allow stock to be given for future services.
   5. The commissioner may limit the price at which the securities, either of par or no par value, may be sold, and if such securities are quoted by a recognized quotation list, such price shall be limited to an amount not unreasonably in excess of the amount quoted.
   6. The commissioner may by rule, order, or directive limit compensation, and all other expenses paid or incurred, directly or indirectly, in connection with the organization, approval, registration, or sale of securities, to an amount not in excess of compensation paid or expenses incurred in connection with the organization, approval, registration, or sale of similar securities.
   7. If more than one class of stock is issued and one class of stock is issued for the purpose of giving preference as to dividends, the commissioner may require that a greater consideration, commensurate with the value of the dividend preference, be paid per share for such stock.
   8. The commissioner may by rule, order, or directive require that any security approved or registered be sold only on a specified form of subscription or sale contract, and that a signed or conformed copy of each contract be filed with the commissioner or preserved by the corporation, partnership, or limited liability company for any period up to three years specified in the rule, order, or directive.
   9. So long as the approval or registration is effective, the commissioner may by rule or order require the person who filed for approval or registration to file reports, not more often than quarterly, to provide reasonably current information upon the matters contained in the application or registration statement, and to disclose the progress of the offering.
   10. The commissioner has the authority to disapprove an application for approval or registration of any security when it is established that one or more of the promoters are not of good business reputation or character.
3. The provisions of this section do not apply to a federal covered security.

10-04-08.2. Advertising matter — Regulations.

1. No circular, prospectus, advertisement, form or market letter, report, document, pamphlet, leaflet, script, or other written or printed matter, or any communication by radio, television, or similar communications media, hereinafter referred to as advertising matter, used in connection with the offer, sale, or rendering investment advice with respect to any security in this state shall be published, circulated, distributed, broadcast, or caused to be published, circulated, distributed, or broadcast in any manner unless and until such advertising matter shall have been filed with the commissioner at least five business days prior to its first publication, circulation, distribution, or broadcast, unless such advertising matter pertains to a security or transaction exempted in section 10-04-05 or 10-04-06, relates to a federal covered security, or is used by a federal covered adviser.
2. The commissioner may by rule or order and subject to such terms and conditions as may be prescribed therein exempt any advertising matter from the filing requirement imposed under subsection 1 if the commissioner finds that the imposition of the filing requirement is not necessary or appropriate in the public interest or for the protection of investors.
3. The commissioner has the power to disapprove any advertising matter filed pursuant to subsection 1 which the commissioner deems in conflict with the purposes of this chapter.
4. Nothing in this section or section 10-04-04 shall be construed to prohibit the publication or distribution to the public of a preliminary prospectus, provided that no solicitation is made or order or conditional order accepted prior to registration in this state, and provided also that, unless the preliminary prospectus relates to a federal covered security, the following legend appears on each such prospectus or preliminary prospectus:

A registration statement relating to these securities has been filed but has not yet become effective. Information contained herein is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or approval under the securities laws of any such state.

10-04-08.3. Unlawful representations concerning registration or exemption.

1. Neither the fact that an application for approval under section 10-04-05 or 10-04-06 or registration under section 10-04-07.1, 10-04-07.2, 10-04-08, or 10-04-10 or a notice filing under section 10-04-08.4 has been filed nor the fact that a security or person is effectively approved or registered constitutes a finding by the commissioner that any document filed under this chapter is true, complete, and not misleading. Neither any such fact nor the fact that an exemption or exception is available for a security or a transaction means that the commissioner has passed in any way upon the merits or qualifications of, or recommended or given approval to, any security, transaction, or person.
2. It is unlawful to make, or cause to be made, to any prospective purchaser, customer, or client any representation inconsistent with subsection 1.

10-04-08.4. Federal covered security.

A federal covered security may be offered and sold in this state without registration, subject to the following:

1. Any federal covered security that is subject to section 18(b)(2) of the Securities Act of 1933, as amended, may be offered and sold upon the electronic filing of:
   1. A copy of the issuer’s registration statement or a notice of intent for an indefinite or definite dollar amount for each security or class of security on a form prescribed by the commissioner.
   2. A unit investment trust may file an initial notice filing for a definite dollar amount or an indefinite dollar amount. At the time of the initial notice filing for a definite dollar amount, the issuer shall pay a filing fee of one-tenth of one percent of the first seven hundred fifty thousand dollars and one-twentieth of one percent of any amount in excess of seven hundred fifty thousand dollars of the aggregate offering price of each security or class of security. In no event, however, may such filing fee be less than one hundred twenty-five dollars for each security or class of security.
   3. An investment company or unit investment trust may file an initial notice filing for an indefinite dollar amount and pay a filing fee of four hundred dollars for each security or class of security.
   4. A notice filing for a definite dollar amount may be increased before the expiration date on the certificate of effectiveness at the same reduced fee, which must be calculated as provided in subdivision b as a separate fee for each additional amount.
   5. A notice filing for a definite dollar amount may be renewed for additional periods of one year by filing, at least fifteen days prior to its expiration, a renewal and sales report notice with a fee of one hundred dollars to renew the unsold balance.
   6. A notice filing for an indefinite dollar amount may be renewed by filing, within sixty days following the issuer’s fiscal year, a renewal and sales report notice with a fee of one hundred twenty-five dollars.
   7. A notice filing may be terminated by the issuer upon providing the commissioner a notice of such termination.
   8. The provision for each security or class of security in this subsection is effective when the federal registration statement becomes effective with the securities and exchange commission or the date the notice of intent is received by the commissioner, whichever is later. A filing notice for a definite dollar amount is effective for a period of eighteen months from the date of effectiveness.
   9. A copy of any document filed with the securities and exchange commission as the commissioner may require.
2. 1. Any federal covered security that is subject to section 18(b)(4)(D) of the Securities Act of 1933, as amended, may be offered and sold under the following conditions:
      1. A notice of intent is filed electronically on SEC form D with a consent to service of process and a nonrefundable filing fee of one hundred dollars within fifteen calendar days after the first sale in this state.
      2. A copy of any document filed with the securities and exchange commission is provided, as the commissioner may require.
      3. The notice filing is effective for a period of one year from the date the filing is received by the commissioner.
      4. The filing fee shall be two hundred fifty dollars in the event the filing is not made within the time period specified in subdivision a.
      5. An issuer conducting an offering under this subsection may renew the offering for an additional period of twelve months by electronically filing SEC form D marked “renewal” and payment of the renewal filing fee of one hundred dollars. The renewal filing fee is two hundred fifty dollars if the filing is made after the expiration date of the current notice filing.
   2. No security may be offered or sold under this subsection, except through or by a broker-dealer and agent registered in accordance with section 10-04-10, unless it is offered and sold through an officer, director, governor, or partner of the issuer and no commission or other remuneration is paid, either directly or indirectly.
3. The commissioner, by rule or otherwise, may require the filing of a notice or any document filed with the securities and exchange commission under the Securities Act of 1933 with respect to a federal covered security under section 18(b)(3) or 18(b)(4) of the Securities Act of 1933, together with a filing fee.
4. 1. The following provisions apply to offerings made under tier 2 of federal Regulation A and section 18(b)(3) of the Securities Act of 1933 [15 U.S.C. 77r(b)(3)]:
      1. 1. An issuer planning to offer and sell securities in this state in an offering exempt under tier 2 of federal Regulation A shall submit electronically the following at least twenty-one calendar days before the initial sale in this state:
            1. A completed uniform notice filing of regulation A - tier 2 offering form;
            2. A copy of any document filed with the securities and exchange commission, as the commissioner may require; and
            3. A filing fee of five hundred dollars.
         2. The initial notice filing is effective for twelve months from the date of the filing with this state.
      2. An issuer may increase the amount of securities offered in this state by submitting electronically a uniform notice filing of regulation A - tier 2 offering form marked “amendment”.
      3. An issuer conducting an offering under this subsection may renew the offering for an additional period of twelve months by electronically filing a uniform notice filing of regulation A - tier 2 offering form marked “renewal” and payment of the renewal filing fee of one hundred dollars.
   2. A security may not be offered or sold under this subsection, except through or by a broker-dealer and agent registered in accordance with section 10-04-10, unless the security is offered and sold through an officer, director, governor, or partner of the issuer and no commission or other remuneration is paid, either directly or indirectly.
5. 1. The following provisions apply to offerings made under federal Regulation Crowdfunding [17 CFR 227] and sections 4(a)(6) and 18(b)(4)(C) of the Securities Act of 1933 [15 U.S.C. 77d(a)(b) and 15 U.S.C. 77r(b)(4)(C)]:
      1. 1. An issuer that offers and sells securities in this state in an offering exempt under federal Regulation Crowdfunding [17 CFR 227], and that either has the issuer’s principal place of business in this state or sells fifty percent or greater of the aggregate amount of the offering to residents of this state, shall file electronically the following with the commissioner:
            1. A completed uniform notice of federal crowdfunding offering form;
            2. A copy of any document filed with the securities and exchange commission, as the commissioner may require; and
            3. A filing fee of one hundred fifty dollars.
         2. If the issuer has the issuer’s principal place of business in this state, the filing required under this subsection must be filed with the commissioner when the issuer makes its initial form C filing concerning the offering with the securities and exchange commission. If the issuer does not have the issuer’s principal place of business in this state but residents of this state have purchased fifty percent or greater of the aggregate amount of the offering, the filing required under this subsection must be filed when the issuer becomes aware that such purchases have met this threshold and in no event later than thirty days from the date of completion of the offering. The initial notice filing is effective for twelve months from the date of the filing with this state.
      2. An issuer conducting an offering under this subsection may renew the offering for an additional period of twelve months by electronically filing the uniform notice of federal crowdfunding offering form marked “renewal” and payment of the renewal filing fee of one hundred dollars.
   2. A security may not be offered or sold under this subsection, except through or by a broker-dealer and agent registered in accordance with section 10-04-10, unless the security is offered and sold through an officer, director, governor, or partner of the issuer and no commission or other remuneration is paid, either directly or indirectly.
6. The commissioner may issue a stop order suspending the offer and sale of a federal covered security, except a federal covered security under section 18(b)(1) of the Securities Act of 1933, as amended, if it is found to be in the public interest or there is a failure to comply with any of the provisions stated in this section.

10-04-08.5. Financial exploitation — Vulnerable adult. [Effective through August 31, 2022]

1. As used in this section:
   1. “Eligible adult” means an adult who is at least sixty-five years old or a vulnerable adult as defined in section 50-25.2-01.
   2. “Financial exploitation” means:
      1. The wrongful or unauthorized taking, withholding, appropriation, or use of money, assets, or property of an eligible adult; or
      2. Any act or omission taken by a person, including through the use of a power of attorney, guardianship, or conservatorship of an eligible adult, to:
         1. Obtain control, through deception, intimidation, or undue influence, over the eligible adult’s money, assets, or property, to deprive the eligible adult of the ownership, use, benefit, or possession of the eligible adult’s money, assets, or property; or
         2. Convert money, assets, or property of the eligible adult to deprive the eligible adult of the ownership, use, benefit, or possession of the eligible adult’s money, assets, or property.
   3. “Qualified individual” means any agent, investment adviser representative, or person who serves in a supervisory, compliance, or legal capacity for a broker-dealer or investment adviser.
2. If a qualified individual reasonably believes financial exploitation of an eligible adult may have occurred, may have been attempted, or is being attempted, the qualified individual shall notify the department of human services and the commissioner.
3. If a qualified individual reasonably believes financial exploitation of an eligible adult may have occurred, may have been attempted, or is being attempted, a qualified individual may notify a third party reasonably associated with the eligible adult or any other person permitted under state or federal law or rule, rules of a self-regulating organization, or customer agreement. Disclosure may not be made to a designated third party who is suspected of financial exploitation or other abuse of the eligible adult.
4. A qualified individual who in good faith and exercising reasonable care discloses information under this section is immune from administrative or civil liability that might otherwise result from disclosure or for any failure to notify the customer of the disclosure.
5. 1. A broker-dealer or investment adviser may delay a transaction or disbursement of funds or securities from an account of an eligible adult or an account on which an eligible adult is a beneficiary if:
      1. The broker-dealer or investment adviser reasonably believes the requested transaction or disbursement may result in financial exploitation of an eligible adult after initiating an internal review of the requested transaction or disbursement and the suspected financial exploitation; and
      2. The broker-dealer or investment adviser:
         1. Provides written notification of the delay and the reason for the delay to all parties authorized to transact business on the account, unless a party is reasonably believed to have engaged in suspected or attempted financial exploitation of the eligible adult, within two days after the requested transaction or disbursement;
         2. Notifies the department of human services and the commissioner within two days after the requested transaction or disbursement; and
         3. Continues its internal review of the suspected or attempted financial exploitation of the eligible adult as necessary.
   2. Any delay of a transaction or disbursement authorized by this section expires upon the earlier of:
      1. A determination by the broker-dealer or investment adviser that the transaction or disbursement will not result in financial exploitation of the eligible adult; or
      2. Fifteen business days after the date on which the broker-dealer or investment adviser first delayed the transaction or disbursement of the funds or securities, unless the department of human services or the commissioner requests the broker- dealer or investment adviser extend the delay, in which case the delay expires within twenty-five business days after the date the broker-dealer or investment adviser first delayed the transaction or disbursement of the funds or securities unless the delay is terminated by either of the agencies or an order of a court of competent jurisdiction.
   3. A court of competent jurisdiction or the commissioner may enter an order extending the delay of the transaction or disbursement of funds or securities or may order other protective relief based on the broker-dealer, investment adviser, or other interested party’s petition that initiated the delay under this section.
6. A broker-dealer or investment adviser who in good faith and exercising reasonable care complies with this section is immune from any administrative or civil liability that may otherwise arise from a delay in the transaction or disbursement in accordance with this section.
7. A broker-dealer or investment adviser shall provide access to or copies of records that are relevant to the suspected or attempted financial exploitation of an eligible adult to the department of human services and to law enforcement, either as part of a referral to the department or to law enforcement, or upon request of the department or law enforcement pursuant to an investigation. The records may include historical records and records relating to the most recent transaction that may comprise financial exploitation of an eligible adult. Any record provided to the department of human services or law enforcement under this section is an exempt record under chapter 44-04. This section does not limit or otherwise impede the authority of the commissioner to access or examine the books and records of a broker-dealer or investment adviser as otherwise provided by law.

10-04-08.5. Financial exploitation — Vulnerable adult. [Effective September 1, 2022]

1. As used in this section:
   1. “Eligible adult” means an adult who is at least sixty-five years old or a vulnerable adult as defined in section 50-25.2-01.
   2. “Financial exploitation” means:
      1. The wrongful or unauthorized taking, withholding, appropriation, or use of money, assets, or property of an eligible adult; or
      2. Any act or omission taken by a person, including through the use of a power of attorney, guardianship, or conservatorship of an eligible adult, to:
         1. Obtain control, through deception, intimidation, or undue influence, over the eligible adult’s money, assets, or property, to deprive the eligible adult of the ownership, use, benefit, or possession of the eligible adult’s money, assets, or property; or
         2. Convert money, assets, or property of the eligible adult to deprive the eligible adult of the ownership, use, benefit, or possession of the eligible adult’s money, assets, or property.
   3. “Qualified individual” means any agent, investment adviser representative, or person who serves in a supervisory, compliance, or legal capacity for a broker-dealer or investment adviser.
2. If a qualified individual reasonably believes financial exploitation of an eligible adult may have occurred, may have been attempted, or is being attempted, the qualified individual shall notify the department of health and human services and the commissioner.
3. If a qualified individual reasonably believes financial exploitation of an eligible adult may have occurred, may have been attempted, or is being attempted, a qualified individual may notify a third party reasonably associated with the eligible adult or any other person permitted under state or federal law or rule, rules of a self-regulating organization, or customer agreement. Disclosure may not be made to a designated third party who is suspected of financial exploitation or other abuse of the eligible adult.
4. A qualified individual who in good faith and exercising reasonable care discloses information under this section is immune from administrative or civil liability that might otherwise result from disclosure or for any failure to notify the customer of the disclosure.
5. 1. A broker-dealer or investment adviser may delay a transaction or disbursement of funds or securities from an account of an eligible adult or an account on which an eligible adult is a beneficiary if:
      1. The broker-dealer or investment adviser reasonably believes the requested transaction or disbursement may result in financial exploitation of an eligible adult after initiating an internal review of the requested transaction or disbursement and the suspected financial exploitation; and
      2. The broker-dealer or investment adviser:
         1. Provides written notification of the delay and the reason for the delay to all parties authorized to transact business on the account, unless a party is reasonably believed to have engaged in suspected or attempted financial exploitation of the eligible adult, within two days after the requested transaction or disbursement;
         2. Notifies the department of health and human services and the commissioner within two days after the requested transaction or disbursement; and
         3. Continues its internal review of the suspected or attempted financial exploitation of the eligible adult as necessary.
   2. Any delay of a transaction or disbursement authorized by this section expires upon the earlier of:
      1. A determination by the broker-dealer or investment adviser that the transaction or disbursement will not result in financial exploitation of the eligible adult; or
      2. Fifteen business days after the date on which the broker-dealer or investment adviser first delayed the transaction or disbursement of the funds or securities, unless the department of health and human services or the commissioner requests the broker-dealer or investment adviser extend the delay, in which case the delay expires within twenty-five business days after the date the broker-dealer or investment adviser first delayed the transaction or disbursement of the funds or securities unless the delay is terminated by either of the agencies or an order of a court of competent jurisdiction.
   3. A court of competent jurisdiction or the commissioner may enter an order extending the delay of the transaction or disbursement of funds or securities or may order other protective relief based on the broker-dealer, investment adviser, or other interested party’s petition that initiated the delay under this section.
6. A broker-dealer or investment adviser who in good faith and exercising reasonable care complies with this section is immune from any administrative or civil liability that may otherwise arise from a delay in the transaction or disbursement in accordance with this section.
7. A broker-dealer or investment adviser shall provide access to or copies of records that are relevant to the suspected or attempted financial exploitation of an eligible adult to the department of health and human services and to law enforcement, either as part of a referral to the department or to law enforcement, or upon request of the department or law enforcement pursuant to an investigation. The records may include historical records and records relating to the most recent transaction that may comprise financial exploitation of an eligible adult. Any record provided to the department of health and human services or law enforcement under this section is an exempt record under chapter 44-04. This section does not limit or otherwise impede the authority of the commissioner to access or examine the books and records of a broker-dealer or investment adviser as otherwise provided by law.

10-04-09. Suspension or revocation of registration of securities.

The commissioner may revoke the registration of any securities registered under this chapter if, after a hearing or opportunity for hearing as provided in section 10-04-12, the commissioner finds that any provisions of this chapter or any rule, order, or condition lawfully imposed under this chapter has been violated, or if the commissioner finds any of the following:

1. The sale of such securities would work or tend to work a fraud, or deception upon the purchasers thereof or the public, or that the disposal of the securities is on unfair terms, or if the plan of business of the applicant appears to be unfair, unjust, or inequitable.
2. The issuer of such securities is insolvent, or has violated any of the provisions of this chapter or any order of the commissioner of which such issuer has notice, or does not conduct its business in accord with law.
3. The issuer of such securities has made any fraudulent representations in any prospectus or in any circular or other literature that has been distributed concerning the issuer or its securities.
4. The issuer of such securities has refused to permit an examination into its affairs as provided in this section or has failed to furnish the commissioner any further information required pursuant to this section.
5. No action may be brought under this section by the commissioner after ten years from the date of the alleged violation.

If the commissioner has reasonable grounds to believe that the registration of any securities registered under this chapter should be revoked upon any ground specified in this section, the commissioner or the commissioner’s agent may conduct an examination into the affairs of the issuer of such securities; provided, that the commissioner or the commissioner’s agent may conduct such an examination only if the information sought by such examination could not be obtained from other readily available sources. In making any such examination, the commissioner or the commissioner’s agent shall have access to and may compel the production of all the books and papers of an issuer and may administer oaths to and examine the officers and any employees of such issuer as to its business and affairs. They may also require a balance sheet exhibiting the assets and liabilities of any such issuer or the issuer’s income statement, or both, to be certified to by a certified public accountant. Whenever the commissioner may deem it necessary in connection with any such examination, the commissioner may also require such balance sheet or income statement, or both, to be made more specific in such particulars as the commissioner shall point out or to be brought down to the latest practicable date. Such examination shall be made at the office of the commissioner, unless the issuer or a registered dealer requests that the examination be made at some other place, in which case the person making such request may be required by the commissioner to advance sufficient funds to pay the actual expenses of such investigation.

If the commissioner has reasonable grounds to believe that the registration of any securities under this chapter should be revoked on any ground specified in this section, the commissioner may enter an order suspending the registration of such securities pending an examination into the affairs of the issuer of such securities or pending a hearing or opportunity for hearing as provided in section 10-04-12; provided, that no such suspension order shall be effective for more than thirty days and such an order, if not withdrawn by the commissioner within thirty days, shall automatically terminate thirty days after the date of its issuance. Such suspension order shall state specifically the grounds for its issuance. Upon the entry of an order suspending the registration of any securities or of an order withdrawing a suspension order previously issued, the commissioner shall send a copy of such order to the issuer of such securities.

If the commissioner finds, after a hearing or opportunity for hearing as provided in section 10-04-12, that there are grounds for revoking the registration of certain securities, the commissioner may enter in the register of securities an order revoking the registration of such securities. Such order shall state specifically the grounds for its issuance. Upon the entry of an order revoking the registration of securities, the commissioner shall send a copy of such order to the issuer of such securities. No order revoking the registration of securities shall invalidate any sale of such securities made prior to the entry of such order.

10-04-10. Registration of broker-dealers, agents, investment advisers, and investment adviser representatives — Notice filings by federal covered advisers.

1. Broker-dealers. It is unlawful for a person to transact business in this state as a broker-dealer unless the person is registered under this chapter as a broker-dealer or is exempt. The following persons are exempt from the registration requirements:
   1. A broker-dealer without a place of business in this state if its only transactions effected in this state are with:
      1. The issuer of the securities involved in the transactions;
      2. A broker-dealer registered as a broker-dealer under this chapter or not required to be registered as a broker-dealer under this chapter;
      3. An institutional investor;
      4. A nonaffiliated federal covered investment adviser with investments under management in excess of one hundred million dollars acting for the account of others pursuant to discretionary authority in a signed record;
      5. A bona fide pre-existing customer whose principal place of residence is not in this state and the person is registered as a broker-dealer under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities laws of the state in which the customer maintains a principal place of residence; and
      6. A bona fide pre-existing customer whose principal place of residence is in this state but was not present in this state when the customer relationship was established, if:
         1. The broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities laws of the state in which the customer relationship was established and where the customer had maintained a principal place of residence; and
         2. Within thirty days after the customer’s first transaction in this state, the person files an application for registration as a broker-dealer in this state and a further transaction is not effected more than forty-five days after the date on which the application is filed, or, if earlier, the date on which the commissioner notifies the person that the commissioner has denied the application for registration or has stayed the pendency of the application for good cause.
   2. A person that deals solely in United States government securities and is supervised as a broker-dealer in government securities by the board of governors of the federal reserve system, the comptroller of the currency, the federal deposit insurance corporation, or the office of thrift supervision.
2. 1. Agent. It is unlawful for an individual to transact business in this state as an agent unless the individual is registered under this chapter as an agent or is exempt from registration. The following individuals are exempt from the registration requirements:
      1. An individual who represents a broker-dealer in effecting transactions in this state limited to those in section 15(h)(2) of the Securities Exchange Act of 1934;
      2. An individual who represents a broker-dealer that is exempt under subsection 1;
      3. An individual who represents an issuer that effects transactions solely in federal covered securities of the issuer, but an individual who effects transactions in a federal covered security under section 18(b)(3) or 18(b)(4)(D) of the Securities Act of 1933 is not exempt if the individual is compensated in connection with the agent’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities; or
      4. An individual who represents a broker-dealer registered in this state or exempt from registration in the offer and sale of securities for an account of a nonaffiliated federal covered investment adviser with investments under management in excess of one hundred million dollars acting for the account of others pursuant to discretionary authority in a signed record.
   2. Application for registration as an agent must be made in writing or electronically in a form prescribed by the commissioner, must be signed by the applicant and by the registered broker-dealer or issuer employing or proposing to employ such applicant, duly verified by oath, must be filed with the department, and must contain information the commissioner determines to be necessary concerning the applicant.
   3. The commissioner shall require as a condition of registration that the applicant pass a written examination as evidence of knowledge of the securities business.
   4. The commissioner may also require such additional information as to the applicant’s previous business experience as the commissioner deems necessary to determine whether or not the applicant should be registered as an agent under the provisions of this law. If an agent proposes to be self-employed, the agent shall specifically state the particular security or securities the agent proposes to sell in this state in the application, and if said security or securities are exempt under section 10-04-05 or 10-04-06, or have been registered by announcement under section 10-04-07.1, or have been registered by coordination under section 10-04-07.2, or have been registered by qualification under section 10-04-08, then the commissioner may require that said self-employed agent file an indemnity bond running to the state of North Dakota conditioned for the faithful compliance by said self-employed agent with all the applicable provisions of this chapter and for the faithful performance and payment of all obligations hereunder. The bond must be in a form approved and in the amount required by the commissioner.
   5. When an applicant has fully complied with the provisions of this subsection, the commissioner may register such applicant as an agent unless the commissioner finds that such applicant is not of good business reputation, or that the broker-dealer named on the application is not a registered broker-dealer. When the commissioner has registered an applicant as an agent, the commissioner shall immediately notify the broker-dealer of such registration.
   6. Every registered broker-dealer or issuer promptly shall notify the department of the termination of the employment by the broker-dealer or issuer of a registered agent.
3. Investment advisers.
   1. It is unlawful for any person to transact business in this state as an investment adviser unless the person is registered under this chapter as an investment adviser or is exempt from registration as an investment adviser. The following persons are exempt from the registration requirements:
      1. A person without a place of business in this state that is registered under the securities laws of the state in which the person has its principal place of business if its only clients in this state are:
         1. Federal covered investment advisers, investment advisers registered under this chapter, or broker-dealers registered under this chapter;
         2. Institutional investors; or
         3. Bona fide pre-existing clients whose principal places of residence are not in this state if the investment adviser is registered under the securities laws of the state in which the clients maintain principal places of residences.
      2. A person without a place of business in this state if the person has had, during the preceding twelve months not more than five clients resident in this state in addition to those specified in paragraph 1.
   2. Application for registration as an investment adviser must be made in writing or electronically in a form prescribed by the commissioner, must be signed by the applicant, duly verified by oath, must be filed with the department, and must contain information the commissioner determines to be necessary concerning the applicant.
4. Federal covered adviser.
   1. Except with respect to a federal covered investment adviser described in subdivision b, it shall be unlawful for a person to transact business in this state as a federal covered adviser unless such person has made a notice filing with the department, in writing or electronically, consisting of a copy of those documents that have been filed with the securities and exchange commission as the commissioner may require by rule or otherwise and the prescribed notice filing fee.
   2. The following federal covered investment advisers are not required to comply with the notice filing requirement:
      1. A federal covered investment adviser without a place of business in this state if its only clients are:
         1. Federal covered investment advisers, investment advisers registered under this chapter, and broker-dealers registered under this chapter;
         2. Institutional investors; or
         3. Bona fide pre-existing clients whose principal places of residence are not in this state.
      2. A federal covered investment adviser without a place of business in this state if the person has had, during the preceding twelve months, not more than five clients that are resident in this state in addition to those specified under paragraph 1.
5. Investment adviser representatives. It is unlawful for an individual to transact business in this state as an investment adviser representative unless the individual is registered under this chapter as an investment adviser representative or is exempt from registration as an investment adviser representative or that the investment adviser representative is employed by or associated with an investment adviser that is exempt from registration or a federal covered investment adviser that is excluded from the notice filing requirements.
6. Refusal of registration. If the commissioner has reason to believe there are grounds to refuse the approval of any application under this section, the commissioner may, by order, summarily postpone the approval of any application made under this section. If, after affording an applicant a hearing or an opportunity for a hearing as provided in section 10-04-12, the commissioner finds that there is sufficient ground to refuse to register such applicant as provided in this section, the commissioner shall enter an order refusing to register such applicant. Such order shall state specifically the grounds for its issuance. A copy of such order must be mailed to the applicant at the applicant’s business address, and if the application is for registration as an agent, to the registered broker-dealer or issuer or if the application is for registration as an investment adviser representative to the investment adviser or federal covered adviser who proposed to employ such applicant. If the commissioner finds that an applicant has been guilty of any act or omission which would constitute a sufficient ground for revocation of a broker-dealer’s, agent’s, investment adviser’s, or investment adviser representative’s registration under section 10-04-11, such act or omission may constitute a sufficient ground for a finding by the commissioner that such applicant is not of good business reputation.
7. Record and renewal of registrations. The names and addresses of all persons who have been registered as broker-dealers, agents, investment advisers, or investment adviser representatives, and all orders with respect thereto, and the names and addresses of all federal covered advisers who have made a notice filing must be recorded in a register of broker-dealers, agents, investment advisers, federal covered advisers, and investment adviser representatives in the office of the commissioner. Every registration and notice filing under this section expires on December thirty-first of each year, unless renewed. The commissioner may by order provide for expirations and renewals, including dates, forms, and procedures, adjust registration and notice filing fees to correspond with expiration dates, and do any other thing which may be necessary or convenient in order to participate in a central registration depository or any similar arrangement designed to promote uniformity, to ease regulatory burdens, or to encourage cooperation with other states, the securities and exchange commission, or any registered national securities association or exchange.
8. Fees. The fee, which must accompany the application, for registration, transfer, or notice filing, and for each annual renewal thereof is:
   1. For each broker-dealer $200.00 b. For each agent $60.00 c. For each investment adviser or federal covered adviser $100.00 d. For each investment adviser representative $50.00

Application for registration as a broker-dealer must be made in writing or electronically in a form prescribed by the commissioner, must be signed by the applicant, duly verified by oath, must be filed with the department, and must contain information the commissioner determines to be necessary concerning the applicant.

The commissioner may also require such additional information relating to the applicant and as to the previous history, record, or association of the applicant, its officers, directors, employees, members, partners, managers, or trustees as the commissioner deems necessary to establish whether or not the applicant should be registered as a broker-dealer under the provisions of this law.

There must be filed with such application a written consent to the service of process upon the commissioner in actions against such broker-dealer, conforming to the requirements of section 10-04-14.

When an applicant has fully complied with the provisions of this subsection, the commissioner may register such applicant as a broker-dealer unless the commissioner finds that the applicant is not of good business reputation, or is not solvent, or the applicant’s principals and compliance or sales supervisor do not appear qualified by training, examination, or experience to act on behalf of a broker-dealer in securities.

Except as prohibited by the Securities Exchange Act of 1934, the commissioner may require an indemnity bond running to the state of North Dakota conditioned for the faithful compliance by the broker-dealer and the broker-dealer’s agents with all the provisions of this law and for the faithful performance and payment of all obligations of the broker-dealer and the broker-dealer’s agents.

The bond must be of such type as may be approved by the commissioner and must be in such amount as the commissioner deems necessary to protect purchasers. Any such bond must have as surety thereon a surety company authorized to do business in this state. When the commissioner has registered an applicant as a broker-dealer, the commissioner shall notify the applicant of such registration.

The commissioner may also require such additional information relating to the applicant and as to the previous history, record, or association of the applicant, its officers, directors, employees, members, partners, managers, or trustees, as the commissioner deems necessary to establish whether or not the applicant should be registered as an investment adviser under the provisions of this chapter.

Except as prohibited by the Investment Advisers Act of 1940, the commissioner may require an indemnity bond running to the state of North Dakota conditioned for the faithful compliance by the investment adviser and the investment adviser’s representatives with all the provisions of this law and for the faithful performance and payment of all obligations of the investment adviser and the investment adviser’s representatives. The bond must be of such type as may be approved by the commissioner and must be in such amount as the commissioner deems necessary to protect persons in this state. Any such bond must have as surety thereon a surety company authorized to do business in this state.

The commissioner may by rule or order provide for an examination to be taken by any class of or all applicants, as well as persons who represent or will represent an investment adviser in doing any of the acts which make the person an investment adviser.

When an applicant has fully complied with the provisions of this subsection, the commissioner may register such applicant as an investment adviser unless the commissioner finds that the applicant is not of good business reputation or is not solvent.

A registrant as investment adviser shall notify the department of any change of address.

A notice filing is effective from receipt until the following December thirty-first. It may be renewed by filing with the department, prior to expiration, those documents filed with the securities and exchange commission as the commissioner may require by rule or otherwise, with the notice filing renewal fee.

If the information contained in any document filed with the department is or becomes inaccurate or incomplete in any material respect, the federal covered adviser shall file an amendment with the department whenever such amendment is filed with the securities and exchange commission.

A notice filing may be terminated by a federal covered adviser by filing a notice of termination with the department.

Application for registration as an investment adviser representative must be submitted in writing or electronically in a form prescribed by the commissioner, be signed by the applicant and if applicable, by the investment adviser employing or proposing to employ the applicant, be duly verified by oath, be filed with the department, and contain information the commissioner determines to be necessary concerning the applicant.

When an applicant has fully complied with the provisions of this subsection, the commissioner may register the applicant as an investment adviser representative unless the commissioner finds that the applicant is not of good business reputation; that the investment adviser named in the application is not a registered investment adviser; or the federal covered adviser named in the application has not made a notice filing with the commissioner, as required by subsection 4. When the commissioner has registered an applicant as an investment adviser representative, the commissioner shall immediately notify the investment adviser or the federal covered adviser, as applicable, of such registration.

Every registered investment adviser shall promptly notify the department of the termination of the employment by the adviser of a registered investment adviser representative. Every registered investment adviser representative employed by a federal covered adviser or the federal covered adviser shall promptly notify the department of the termination of such employment. The registration of the investment adviser representative is automatically suspended from the time of termination of employment until such time as the representative is registered by the commissioner as a representative of another investment adviser or federal covered adviser.

The commissioner shall require as a condition of registration that the applicant pass a written examination as evidence of knowledge of the securities business. At the discretion of the commissioner, certain professional designations may be accepted in lieu of an examination.

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An application to register as a broker-dealer, agent, investment adviser, or investment adviser representative may, with the consent of the commissioner, be withdrawn upon written application.

10-04-10.1. Advisory activities.

1. It is unlawful for any person who receives, directly or indirectly, any consideration from another person for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise:
   1. To employ any device, scheme, or artifice to defraud the other person; or
   2. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the other person.
2. It is unlawful for any person, in the solicitation of a client for investment advisory services, to make any false or misleading statement of material fact, or to fail to disclose a material fact.
3. It is unlawful for any person who provides investment advisory services subject to the provisions of this chapter to knowingly sell any security to or purchase any security from a client while acting for the person’s own account or as a broker for another client unless the person first makes a written disclosure to the client of the capacity in which the person is acting and obtains the client’s written consent to the transaction.
4. It is unlawful for any person who provides investment advisory services subject to the provisions of this chapter to engage in dishonest or unethical practices as the commissioner may define by rule.
5. It is unlawful for any investment adviser to enter, extend, or renew any investment advisory contract unless the investment advisory contract provides in writing that:
   1. The investment adviser may not be compensated on the basis of a share of capital gains, earnings, or capital appreciation of the funds or any portion of the funds of the client. This subdivision does not prohibit an investment advisory contract that provides for compensation based on the total value of a fund determined as of a definite date or averaged as of definite dates or over a definite period. This subdivision does not prohibit an investment advisory contract that provides for performance fees permitted and determined in accordance with section 205 of the Investment Advisers Act of 1940 [Pub. L. 768; 54 Stat. 852; 15 U.S.C. 80b-5] and the rules adopted thereunder.
   2. An assignment of the investment advisory contract may not be made by the investment adviser unless the investment adviser notifies the client of the intended assignment and obtains the prior written consent of the client.
   3. The investment adviser shall provide written notice to the client within fifteen days of any change of ownership in excess of five percent.
   4. The investment adviser shall provide written notice to the client within fifteen days of a change of controlling interest of the investment adviser. The client may terminate the investment advisory contract without penalty by providing a written notice to the investment adviser within thirty days after the client’s receipt of the notice of change of controlling interest.
6. It is unlawful for any investment adviser to take or have custody of any securities or funds of any client unless the investment adviser acts as a fiduciary pursuant to duties as an executor, guardian, conservator, receiver, or trustee.

10-04-10.2. Conviction not bar to registration — Exceptions. [Repealed]

Repealed by S.L. 2003, ch. 82, § 16.

10-04-10.3. Postregistration provisions.

1. Every broker-dealer, agent, investment adviser, and investment adviser representative conducting business in this state shall make and keep such accounts, correspondence, memoranda, papers, books, and other records as described below:
   1. With the exclusion of a broker-dealer whose activities are limited to the sale of securities that it issues and who is not a member or required to be a member of any self-regulatory organization, every broker-dealer registered in or conducting business in this state, and each branch office located in or conducting business in this state, must keep and maintain all records as required by:
      1. Federal statutes or by rules or regulations promulgated by the securities and exchange commission.
      2. Rules promulgated by any securities exchange or self-regulatory organization of which the broker-dealer is a member.
      3. The laws, rules, or regulations of any state in which the broker-dealer is registered or maintains a place of business from which it conducts securities business in North Dakota.
   2. Every investment adviser which maintains its principal place of business in any state, other than this state, and is registered as an investment adviser in the state in which it maintains its principal place of business, shall keep and maintain such books and records as required by the state in which it maintains its principal place of business.
   3. Every investment adviser which maintains its principal place of business in this state, or is not registered or exempt from registration in the state in which it maintains its principal place of business, shall keep and maintain the following books and records for a period of three years:
      1. Financial documents of the investment adviser which shall include:
         1. Journals and ledgers tracking income and expenses of the investment adviser. These documents must be continually maintained to within thirty days of current.
         2. Trial balances, financial statements, and internal audit papers.
         3. Checkbooks and statements on any type of account on which the investment adviser has check-writing privileges.
         4. Statements regarding any account of the investment adviser with any insurance company, broker-dealer, investment adviser, federal covered adviser, or financial institution.
      2. A file which contains copies of all incoming and outgoing correspondence between the investment adviser or its representative and any of its customers, prospective customers, or former customers.
      3. A file containing a copy of each customer complaint against the investment adviser or a representative of the investment adviser.
      4. A file containing all advertisements used by the investment adviser or a representative of the investment adviser. To the extent that past performance of the investment adviser is used in advertising materials, the investment adviser shall maintain all accounts, records, and internal working papers that form the basis of the performance of the investment adviser.
      5. Copies of all contracts between the investment adviser and its customers.
      6. A manual regarding the supervisory procedures of the investment adviser, unless the investment adviser is wholly owned by the only representative of the investment adviser and the investment adviser has no employees.
      7. With respect to discretionary accounts:
         1. A list of all discretionary accounts.
         2. A file containing all discretionary trading agreements.
         3. A list of all trades that were conducted on a discretionary basis.
      8. All records created by the investment adviser or provided by a client or prospective client of an investment adviser regarding the financial condition of the client or prospective client.
      9. Records tracking all securities purchased by or advice provided by the investment adviser and the payment for the services if any. These records shall disclose whether the investment adviser or the investment adviser representative had any direct or indirect beneficial interest in the investment involved.
      10. An updated copy of part II of the form ADV and a summary of all material updates to the same.
      11. A list of all parties to whom referral fees have been paid and the amount of money paid to each such person.
      12. A list containing the date of receipt and date of transmission of each customer check provided to the investment adviser for the purpose of deposit with the custodian of the investment adviser. Copies of each of the checks must be maintained with the list.
2. Every registered broker-dealer, agent, investment adviser, and investment adviser representative shall file such financial reports as the commissioner prescribes by rule.
3. If the information contained in any document filed with the commissioner is or becomes inaccurate or incomplete in any material respect, the registrant shall promptly file a correcting amendment.
4. All the records of any registered person are subject at any time or from time to time to such reasonable periodic, special, or other examinations by representatives of the commissioner, within or outside this state, as the commissioner deems necessary or appropriate in the public interest or for the protection of investors. For the purpose of avoiding unnecessary duplication of examinations, the commissioner, if deemed practicable in administering this subsection, may cooperate with the securities administrators of other states, the securities and exchange commission, any national securities exchange or national securities association registered under the Securities Exchange Act of 1934, or any other jurisdiction, agency, or organization charged by law or statute with regulating or prosecuting any aspect of the securities business, and in so cooperating may share any information obtained as a result of any investigation or examination.
5. The commissioner and the commissioner’s representatives may copy records or require a registrant to copy records and provide the copies to the commissioner and the commissioner’s representatives to the extent and in a manner reasonable under the circumstances.

All records required to be maintained pursuant to subdivision a or b must be preserved as set forth in the rules or regulations of the jurisdiction originating the recordkeeping requirement. The commissioner may by rule enhance or waive the requirements of this subsection.

It is a violation of this subsection for any person who is registered, required to be registered, or is affiliated with or employed by any such entity, to create or cause to be created any record discussed in this subsection, if such record contains a material misstatement or misrepresentation regarding a customer or a customer’s investments and the person knew or should have known of the falsity of the information or acted in reckless disregard of the truthfulness of the information.

10-04-11. Suspension or revocation of broker-dealer’s, agent’s, investment adviser’s, and investment adviser representative’s registration.

1. The commissioner may censure, place limitations on the activities of, suspend for a period not exceeding twelve months, or revoke the registration of any broker-dealer, agent, investment adviser, or investment adviser representative or any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer or investment adviser if, after a hearing or opportunity for hearing as provided in section 10-04-12, the commissioner finds that such registered broker-dealer, agent, investment adviser, or investment adviser representative:
   1. Has violated or failed to comply with any provisions of this chapter or any order or rule of the commissioner under this chapter;
   2. Is, in the case of a broker-dealer or investment adviser, insolvent;
   3. Has engaged in dishonest, fraudulent, or unethical practices in the securities business;
   4. Conducts business in purchasing or selling securities at such variations from current market prices as, in light of all the circumstances, are unconscionable or unfair to the purchasing public, or if such variance, including commissions on sales, unreasonably exceeds the price quoted by a recognized national quotation list as prescribed by the commissioner;
   5. Has failed to file with the department any financial record required pursuant to section 10-04-10.3, or has refused to permit or has otherwise impeded an examination into the person’s affairs as provided by section 10-04-10.3 and subsection 3;
   6. Has filed an application for registration which, as of its effective date or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained any statement which was, in light of the circumstances under which it was made, false or misleading with respect to any material fact;
   7. Has been convicted of an offense determined by the commissioner to have a direct bearing upon a person’s ability to serve the public as a broker-dealer, agent, investment adviser, or investment adviser representative, or the commissioner finds that a person, following conviction of any offense, is not sufficiently rehabilitated under section 12.1-33-02.1;
   8. Is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities business;
   9. Is the subject of an order of the commissioner denying, suspending, or revoking registration as a broker-dealer, agent, investment adviser, or investment adviser representative;
   10. Is the subject of an order entered by the securities administrator of any other state or by the securities and exchange commission denying or revoking registration as a broker-dealer, agent, investment adviser, or investment adviser representative, or the substantial equivalent of those terms as defined in this chapter, or is the subject of an order suspending or expelling membership in or association with a member of a self-regulatory organization registered under the Securities Exchange Act of 1934, the Commodity Exchange Act, or the Investment Advisers Act of 1940; or is the subject of a United States post-office fraud order;
   11. Has, in connection with the offer, sale, or purchase of any security, directly or indirectly, effected a series of transactions creating actual or apparent active trading in any security, or to raise or depress the price of a security, for the purpose of inducing the purchase or sale of the security;
   12. Is not qualified on the basis of such factors as training, experience, and knowledge of the securities business;
   13. Has failed reasonably to supervise the person’s agents if the person is a broker-dealer or the person’s employees or investment adviser representatives if the person is an investment adviser; or
   14. Is the subject of an order entered by the insurance administrator of any state denying or revoking registration as an insurance producer, consultant, or the substantial equivalent of those terms as defined in section 26.1-26-02.
2. It is sufficient cause for revocation of registration of a broker-dealer or investment adviser as provided in this section, in case of a partnership, corporation, limited liability company, or any unincorporated association, if any member of a partnership or any officer or director of the corporation or association or any manager or governor of a limited liability company has been guilty of any act or omission which would be sufficient grounds for revoking the registration of an individual broker-dealer or investment adviser.
3. If the commissioner has reasonable grounds to believe that the registration of any registered broker-dealer, agent, investment adviser, or investment adviser representative should be censured, suspended, or revoked upon any grounds specified in this section, the commissioner or the commissioner’s agent may conduct an examination into the affairs of any such registered broker-dealer, agent, investment adviser, or investment adviser representative. In making any such examination, the commissioner or the commissioner’s agent shall have access to and may compel the production of all the books and papers of a registered broker-dealer, agent, investment adviser, or investment adviser representative, and may administer oaths to and examine the officers and employees of such broker-dealer or investment adviser as to the broker-dealer’s or investment adviser’s business and affairs.
4. If the commissioner makes written findings of fact to support the conclusion that grounds exist pursuant to subsection 1 for the commissioner to suspend or revoke any registration, the commissioner may by order summarily suspend registration pending final determination of any proceeding under this section. Upon the entry of the summary order, the commissioner shall promptly notify the applicant, as well as the employer or prospective employer if the applicant is an agent or investment adviser representative, that it has been entered and the reasons. The person subject to the order, if desiring a hearing, must make a written request for a hearing to the commissioner within fifteen days after receipt of the notice. Within fifteen days after receipt by the commissioner of a written request, the matter will be set for hearing to determine if the order should be modified, vacated, or extended pending a final determination. If a hearing is not requested and none is ordered by the commissioner, the order will remain in effect until modified or vacated by the commissioner.
5. If the commissioner finds, after affording a registered broker-dealer, a registered agent, a registered investment adviser, or a registered investment adviser representative a hearing or opportunity for hearing as provided in section 10-04-12, that there are grounds to censure, suspend, or revoke the registration of such broker-dealer, agent, investment adviser, or investment adviser representative, the commissioner may enter an order in the register of broker-dealers, agents, investment advisers, and investment adviser representatives censuring, suspending, or revoking the registration of such broker-dealer, agent, investment adviser, or investment adviser representative. Such order shall state specifically the grounds for its issuance. A copy of such order shall be sent by registered mail to the broker-dealer, agent, investment adviser, or investment adviser representative whose registration is censured, suspended, or revoked thereby at the person’s business address and, if the censure, suspension, or revocation is of the registration of an agent or investment adviser representative, to the registered broker-dealer or registered investment adviser who employs such person. Suspension or revocation of the registration of a broker-dealer shall also suspend or revoke the registration of all of the broker-dealer’s agents. Suspension or revocation of the registration of an investment adviser also suspends or revokes the registration of all of the investment adviser’s investment adviser representatives. Suspension or revocation of the registration of an agent or investment adviser representative solely because of employment by a broker-dealer or investment adviser whose registration was suspended or revoked shall not prejudice subsequent applications for registration by such person.
6. No action may be brought under this section by the commissioner after ten years from the date of the alleged violation.

It is a violation for any person to engage in any conduct described in subdivisions a, c, d, e, f, and k and any administrative rules promulgated under any of those subdivisions, if the activities occurred in this state, or with respect to a resident of this state, or has caused or could have caused harm to investors in this state.

10-04-12. Hearings.

Before entering an order revoking the registration of any securities as provided in section 10-04-09, the commissioner shall send to the issuer of the securities, and if the application for registration of the securities was filed by a registered broker-dealer, to the registered broker-dealer, a notice of opportunity for hearing. Before entering an order refusing to register any person as a broker-dealer, agent, investment adviser, or investment adviser representative, as provided in section 10-04-10, or censuring, placing limitations, suspending, or revoking the registration of any person as a registered broker-dealer, agent, investment adviser, or investment adviser representative as provided in section 10-04-11, the commissioner shall send to that person, and if that person is an agent or investment adviser representative or an applicant for registration as an agent or investment adviser representative, to the registered broker-dealer or investment adviser who employs or proposes to employ that agent or investment adviser representative, a notice of opportunity for hearing.

1. Notices of opportunity for hearing must be sent by registered mail, return receipt requested, to the addressee’s business address, and the notice must state:
   1. The order the commissioner proposes to issue.
   2. The grounds for issuing the proposed order.
   3. That the person to whom the notice is sent may be afforded a hearing upon request to the commissioner if the request is made within fifteen days after receipt of the notice.
2. Whenever a person requests a hearing in accordance with this section, the commissioner shall immediately set a date, time, and place for the hearing and shall notify the person requesting the hearing. The date set for the hearing must be within thirty days, but not earlier than fifteen days, after the request for hearing has been made, unless otherwise agreed to by both the commissioner and the person requesting the hearing.
3. Any hearing conducted under this section must be conducted in accordance with chapter 28-32.
4. If the commissioner does not receive a request for a hearing within the prescribed time, the commissioner may enter a final order which must set forth the findings with respect to the matters involved.

10-04-12.1. Board of review. [Repealed]

Repealed by S.L. 1983, ch. 128, § 7.

10-04-13. Appeals. [Repealed]

Repealed by S.L. 1995, ch. 313, § 14.

10-04-14. Service of process.

1. Every applicant for registration under this chapter, every issuer which proposes to offer a security in this state through any person acting on an agency basis in the common-law sense, and every person making a notice filing under subsection 2 of section 10-04-08.4 shall file with the department, in such form as the commissioner prescribes, an irrevocable consent appointing the commissioner or the commissioner’s successor in office to be the applicant’s attorney to receive service of any lawful process in any noncriminal suit, action, or proceeding against the applicant or the applicant’s successor, executor, or administrator which arises under this chapter or any rule or order hereunder after the consent has been filed, with the same force and validity as if served personally on the person filing the consent. A person who has filed such a consent in connection with a previous registration or notice filing need not file another. Service may be made by leaving a copy of the process with the department, but it is not effective unless the plaintiff, who may be the commissioner in a suit, action, or proceeding instituted by the commissioner, forthwith sends notice of the service and a copy of the process by registered or certified mail to the defendant or respondent at the defendant’s or respondent’s last-known address on file with the department, and the plaintiff’s affidavit of compliance with this subsection is filed in the case on or before the return day of the process, if any, or within such further time as the court allows.
2. When any person, including any nonresident of this state, engages in conduct prohibited or made actionable by this chapter or any rule or order hereunder, and the person has not filed a consent to service of process under subsection 1 and personal jurisdiction over the person cannot otherwise be obtained in this state, that conduct shall be considered equivalent to the person’s appointment of the commissioner or the commissioner’s successor in office to be the person’s attorney to receive service of any lawful process in any noncriminal suit, action, or proceeding against the person or the person’s successor, executor, or administrator which grows out of that conduct and which is brought under this chapter or any rule or order hereunder, with the same force and validity as if served on the person personally. Service may be made by leaving a copy of the process with the department, and it is not effective unless the plaintiff, who may be the commissioner in a suit, action, or proceeding instituted by the commissioner, forthwith sends notice of the service and a copy of the process by registered or certified mail to the defendant or respondent at the defendant’s or respondent’s last-known address or takes other steps which are reasonably calculated to give actual notice, and the plaintiff’s affidavit of compliance with this subsection is filed in the case on or before the return day of the process, if any, or within such further time as the court allows.
3. When process is served under this section, the court, or the commissioner in a proceeding before the commissioner, shall order such continuance as may be necessary to afford the defendant or respondent reasonable opportunity to defend.

10-04-15. Fraudulent practices.

It shall be a fraudulent practice and it shall be unlawful:

1. For any person knowingly to subscribe to, or make or cause to be made, any material false statement or representation in any application, financial statement, or other document or statement required to be filed under any provision of this chapter, or to omit to state any material statement or fact in any such document or statement which is necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading.
2. For any person, in connection with the offer, sale, or purchase of any security, directly or indirectly, to:
   1. Employ any device, scheme, or artifice to defraud;
   2. Make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; or
   3. Engage in any act, practice, or course of business which operates or would operate as a fraud or deception upon purchasers or the public.
3. For any person that advises others for compensation, either directly or indirectly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation as part of a regular business, issues or promulgates analyses or reports relating to securities:
   1. To employ a device, scheme, or artifice to defraud another person; or
   2. To engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person or the public.
4. For any person, in connection with the offer, sale, or purchase of any security, or advising a person to offer, sell, or purchase any security, directly or indirectly, to effect a series of transactions creating actual or apparent active trading in any security, or to raise or depress the price of a security, for the purpose of inducing the purchase of the security.

10-04-16. Orders, injunctions, and prosecutions for violations — Civil penalty.

If it appears to the commissioner, either upon complaint or otherwise, that any person has engaged in, or is engaging in, or is about to engage in any act or practice or transaction that is prohibited by this chapter or by any order of the commissioner issued under this chapter or which is declared to be illegal in this chapter, the commissioner may:

1. Issue any order, including cease and desist, rescission, stop, and suspension orders, which the commissioner deems necessary or appropriate in the public interest or for the protection of investors. The commissioner may, in addition to any other remedy authorized by this chapter, impose by order and collect a civil penalty against any person found in an administrative action to have violated any provision of this chapter, or any rule or order adopted or issued under this chapter, in an amount not to exceed ten thousand dollars for each violation. The commissioner may bring actions to recover penalties pursuant to this section in district court. A person aggrieved by an order issued pursuant to this subsection may request a hearing before the commissioner if a written request is made within fifteen days after receipt of the order. If a request for hearing is made under this subsection, the commissioner shall schedule a hearing within a reasonable time. Subsections 3 and 4 of section 10-04-12 apply to any hearing conducted under this subsection. If, after a hearing, the commissioner sustains an order previously issued, the sustaining order is subject to appeal to the district court of Burleigh County according to the procedures set forth in chapter 28-32. Any order issued under this subsection is a final order if it is properly served and no hearing was requested within the required timeline. If an order issued under this subsection is sustained or modified after a hearing held in accordance with section 10-04-12, the order sustaining or modifying that order is a final order. If the final order is not appealed in accordance with the procedures set forth in chapter 28-32 or if the final order is sustained on appeal, the securities department may file a certified copy of the final order with the clerk of a court of competent jurisdiction. The order so filed has the same effect as a judgment of the court and may be recorded, enforced, or satisfied in the same manner as a judgment of the court.
2. Apply to the district court of any county in this state for an injunction restraining the person and the person’s agents, employees, partners, officers, and directors from continuing the act, practice, or transaction or engaging therein or doing any acts in furtherance thereof, and for such other and further relief as the facts warrant. In any proceeding for an injunction, the commissioner may apply for and on due showing be issued the court’s subpoena requiring the appearance forthwith of any defendant and the defendant’s agents, employees, partners, officers, or directors, and the production of the documents, books, and records necessary for the hearing upon the petition for an injunction. Upon proof of any of the offenses described in this section, the court may grant the injunction as the facts warrant, and a receiver or conservator may be appointed for the defendant or the defendant’s assets, and the court may assess civil penalties in an amount not to exceed ten thousand dollars for each violation of this chapter, and any rules promulgated thereunder or orders issued thereunder. The court shall not require the commissioner to post a bond.
3. Refer any evidence available concerning the act, practice, or transaction to the appropriate criminal prosecutor who may, with or without the reference, institute the necessary criminal proceedings. The prosecutor may apply for and on due showing be issued the court’s subpoena requiring the appearance forthwith of any defendant and the defendant’s agents, employees, partners, officers, and directors, and the production of any documents, books, and records necessary for the prosecution of the criminal proceedings.

10-04-16.1. Investigations and subpoenas.

1. The department may:
   1. Make such public or private investigations within or outside of this state as deemed necessary to determine whether any person has violated, is violating, or is about to violate any provision of this chapter or any rule or order hereunder, or to aid in the enforcement of this chapter or in the prescribing of rules and forms hereunder.
      1. For the purposes of this section, an investigation may include an examination of the books and records of any person registered under the provisions of this chapter. In the discretion of the commissioner, the expense reasonably attributed to an investigation under this section must be paid by the broker-dealer, agent, investment adviser, or investment adviser representative whose affairs are investigated.
      2. No person is liable to a broker-dealer, agent, investment adviser, federal covered adviser, or investment adviser representative for defamation relating to a statement that is contained in a record required or requested by the securities department pursuant to this subsection or required to be maintained under section 10-04-10.3, unless the person knew, or should have known at the time the statement was made, that it was false in a material respect or the person acted in reckless disregard of the statement’s truth or falsity.
   2. Require or permit any person to file a statement in writing, under oath or otherwise, as to all the facts and circumstances concerning the matter to be investigated.
   3. Publish information concerning any violation of this chapter or any rule or order hereunder and may keep confidential the information or documents obtained or prepared in the course of any investigation conducted under this section but only during an active and ongoing investigation. If an investigation under this section extends beyond six months, the commissioner shall, upon a request by any party, state in writing that the need for confidentiality still exists, the general reason why the need exists, and the date, as can best be determined at the time, when the need for confidentiality will cease.
2. For the purpose of any investigation or proceeding under this chapter, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry.
3. The commissioner may issue subpoenas in this state at the request of a securities agency or administrator of another state if the activities constituting an alleged violation for which information is sought would be a violation of this chapter if the activities had occurred in this state.
4. In case of contumacy by, or refusal to obey a subpoena issued to, any person, the district court, upon application by the commissioner, may issue to the person an order requiring the person to appear before the commissioner, or the officer designated by the commissioner, there to produce documentary evidence if so ordered or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt of court.
5. No person is excused from attending and testifying or from producing any document or record before the commissioner, or in obedience to the subpoena of the commissioner or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence, documentary or otherwise, required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture. No testimony or evidence, documentary or otherwise, compelled from an individual after a valid claim of the privilege against self-incrimination has been made may be used against the individual in any criminal proceeding, or in any proceeding to subject the individual to a penalty or forfeiture, except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.

10-04-17. Remedies.

1. Every sale or contract for sale made in violation of any of the provisions of this chapter, or of any rule or order issued by the commissioner under any provisions of this chapter, shall be voidable at the election of the purchaser. The person making such sale or contract for sale, and every director, officer, or agent of or for such seller who shall have participated or aided in any way in making such sale shall be jointly and severally liable to such purchaser who may sue either at law or in equity to recover the full amount paid by such purchaser, together with all taxable court costs, interest as provided in this subsection, and reasonable attorney’s fees, less the amount of any income received on the securities, upon tender to the seller, in person or in open court, of the securities sold or of the contracts made, or for damages if the purchaser no longer owns the securities. Damages are the amount that would be recoverable upon a tender less the value of the securities when the purchaser disposed of them and interest as provided in subsection 2 from the date of disposition. No purchaser shall claim or have the benefit of this section if the purchaser shall have refused or failed to accept, within thirty days from the date of such offer, an offer in writing of the seller to take back the securities in question and to refund the full amount paid by such purchaser, together with interest on such amount for the period from the date of payment by such purchaser down to the date of repayment. Any offer made pursuant to this subsection must be registered or exempt from registration under this chapter in order to preclude a subsequent civil action by the purchaser. For the purposes of this subsection, interest shall be computed as follows:
   1. In case such securities consist of interest-bearing obligations, at the same rate as provided in such securities, less the amount of any income received on the securities.
   2. In case such securities consist of other than interest-bearing obligations, at the legal rate specified in section 47-14-05, less the amount of any income received on the securities.
2. Any person that receives directly or indirectly any consideration for providing investment advice to another person and violates this chapter is liable to the other person as follows:
   1. For violations of section 10-04-15, the person is liable for the actual damages caused by the violative conduct, interest at the rate as specified in section 47-14-05, costs, and reasonable attorney’s fees, less the amount of any income received as a result of the violative conduct.
   2. For all other violations of this chapter, or any rule promulgated thereunder, the person is liable for all income collected in connection with the violative conduct.
3. The provisions of this section do not apply to a violation of section 10-04-08.4.
4. Nothing in this chapter shall limit any statutory or common-law right of any person in any court for any act involved in the sale of securities.
5. No action may be taken under this section after five years from the date that the aggrieved party knew or reasonably should have known about the facts that are the basis for the alleged violation.
6. Each of the following persons are liable jointly and severally with and to the same effect as persons liable under this section:
   1. A person who controls, supervises, or serves as an officer, director, or managing partner of a person liable under this section, unless the person did not know, and in the exercise of reasonable care could not have known, of the conduct by reason of which the liability is alleged to exist.
   2. An individual who is an employee of or associated with a person liable under this section and who materially aids the conduct giving rise to the liability, unless the individual did not know, and in the exercise of reasonable care could not have known, of the conduct by reason of which the liability is alleged to exist.
   3. A person who is a broker-dealer, agent, investment adviser, or investment adviser representative that materially aids the conduct giving rise to the liability under this section, unless the person did not know, and in the exercise of reasonable care could not have known, of the conduct by reason of which the liability is alleged to exist.

10-04-18. Penalties.

1. Any person who willfully violates any provision of this chapter, except section 10-04-08.4 or subsection 4 of section 10-04-10, or any rule or order of the commissioner made pursuant to the provisions of this chapter, or who engages in any act, practice, or transaction declared by any provision of this chapter to be unlawful shall be guilty of a class B felony.
2. As used in this section, the term “willfully”, except as it applies to subdivisions a and b of subsection 1 of section 10-04-10.1 and subdivisions a and c of subsection 2 of section 10-04-15, means that the person acted intentionally in the sense that the person was aware of what the person was doing. Proof of evil motive or intent to violate the law or knowledge that the law was being violated is not required.
3. Each violative act or omission constitutes a separate offense, and a prosecution or conviction for any one offense shall not bar a prosecution or conviction for any other offense.
4. An information must be filed or an indictment must be found under this chapter within five years after the alleged violation.
5. No action may be brought under this chapter by the commissioner after five years from the date that the commissioner knew or reasonably should have known about the facts that are the basis for the alleged violation. This subsection does not apply to any action under sections 10-04-09 and 10-04-11.

10-04-19. Evidentiary matters.

1. In any action, civil or criminal, when a defense is based upon any exemption provided for in this chapter, the burden of proving the existence of such exemption shall be upon the party raising such defense.
2. In any action, civil or criminal, a certificate signed and sealed by the commissioner, stating compliance or noncompliance with the provisions of this chapter, shall constitute prima facie evidence of such compliance or noncompliance with the provisions of this chapter and shall be admissible in any such action.

10-04-20. Repeal of certain prior laws, saving of certain rights and liabilities thereunder. [Repealed]

Repealed by omission from this code.

10-06.1-01. Definitions.

For the purposes of this chapter, unless the language or context clearly indicates that a different meaning is intended:

1. “Farming or ranching” means cultivating land for production of agricultural crops or livestock, or the raising or producing of livestock or livestock products, poultry or poultry products, milk or dairy products, or fruit or horticultural products. It does not include production of timber or forest products, the growing or processing of marijuana under chapter 19-24.1, or a contract whereby a processor or distributor of farm products or supplies provides grain, harvesting, or other farm services.
2. “Farming or ranching corporation” means a farm or ranch corporation, joint-stock company, or association which, at all times, complies with the requirements of this chapter.
3. “Farming or ranching limited liability company” means a farm or ranch limited liability company which, at all times, complies with the requirements of this chapter.
4. “Nonprofit organization” means an organization or trust that has tax-exempt status under at least one of the following sections of the Internal Revenue Code:
   1. An organization that was in existence on December 31, 1984, and that is organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals under section 501(c)(3), or is a domestic fraternal organization under section 501(c)(10).
   2. A charitable, religious, educational, or scientific organization classified as either a private foundation or as a public charity having status as an organization described in section 509(a)(1) or (3).
   3. A trust described in section 4947 for which a deduction is allowable under section 170.
5. “Operating the farm or ranch” means engaging in personal labor or management activities on or off the farm or ranch, which contribute to the farm or ranch operations.

10-06.1-02. Farming or ranching by corporations and limited liability companies prohibited.

All corporations and limited liability companies, except as otherwise provided in this chapter, are prohibited from owning or leasing land used for farming or ranching and from engaging in the business of farming or ranching. A corporation or a limited liability company may be a partner in a partnership that is in the business of farming or ranching only if that corporation or limited liability company complies with this chapter.

10-06.1-03. Retention of mineral interests prohibited.

For land and minerals acquired after July 1, 1985, any corporation or limited liability company that acquires mineral interests through foreclosure or in lieu of foreclosure which were not specifically valued at the time the security interest in the minerals was acquired, and which is prohibited from owning or leasing land used in farming or ranching, is prohibited from retaining mineral interests in land used for farming or ranching when the corporation or limited liability company divests itself of the land, and the mineral interests must be passed with the surface estate of the land when the corporation or limited liability company divests itself of the land under this chapter.

10-06.1-04. Conversion of corporations.

A business corporation regulated under chapter 10-19.1 may convert to a farming or ranching corporation by adopting an amendment to its articles of incorporation or by applying for an amended certificate of authority which specifies that the corporation elects to be subject to this chapter and by complying with all requirements of this chapter. The amendment must be filed with the secretary of state with the prescribed fee and with the initial report required by section 10-06.1-15. A farming or ranching corporation may convert to a business corporation by adopting an amendment to its articles of incorporation or by applying for an amended certificate of authority. The amendment must be filed with the secretary of state with the prescribed fee. The amendment must be accompanied by a report outlining the information, as of the date of the amendment, which is required under section 10-06.1-17, and the manner in which the corporation has divested itself of its owned or leased land holdings and its business of farming or ranching.

10-06.1-05. Conversion of limited liability company.

A business limited liability company regulated under chapter 10-32.1 may convert to a farming or ranching limited liability company by adopting an amendment to its articles of organization or by applying for an amended certificate of authority which specifies that the limited liability company elects to be subject to this chapter and by complying with all requirements of this chapter. The amendment must be filed with the secretary of state with the prescribed fee and with the initial report required by section 10-06.1-15. A farming or ranching limited liability company may convert to a business limited liability company by adopting an amendment to its articles of organization or by applying for an amended certificate of authority. The amendment must be filed with the secretary of state with the prescribed fee. The amendment must be accompanied by a report outlining the information, as of the date of the amendment, which is required under section 10-06.1-17 and the manner in which the limited liability company has divested itself of its owned or leased land holdings and its business of farming or ranching.

10-06.1-06. Surface coal mining — Exception.

A corporation or limited liability company not engaged in the business of farming or ranching may own or lease lands used for farming or ranching, when the business of such a corporation or limited liability company is the conducting of surface coal mining operations or related energy conversion, and when the owning or leasing of lands used for farming or ranching is reasonably necessary in the conduct of the business of surface coal mining or related energy conversion. When the necessity for owning or leasing of lands used for farming or ranching no longer exists, the exception provided in this section ceases and the corporation or limited liability company owning or leasing such lands is subject to this chapter.

10-06.1-07. Industrial and business purpose exception.

A corporation or limited liability company that is not engaged in the business of farming or ranching may own or lease land used for farming or ranching when the land is necessary for residential or commercial development; the siting of buildings, plants, facilities, industrial parks, or similar business or industrial purposes of the corporation or limited liability company; or for uses supportive of or ancillary to adjacent nonagricultural land for the benefit of both land parcels. The farmland or ranchland while not being immediately used for any purpose of the corporation or limited liability company must be available to be leased by persons who farm or ranch as sole proprietorships or partnerships, or by corporations or limited liability companies allowed to engage in farming or ranching under section 10-06.1-12.

10-06.1-08. Cooperative corporations allowed to engage in the business of farming or ranching — Requirements.

This chapter does not prohibit cooperative corporations, seventy-five percent of whose members or shareholders are actual farmers or ranchers residing on farms or ranches or depending principally on farming or ranching for their livelihood, from acquiring real estate and engaging in cooperative farming or ranching.

10-06.1-09. Certain nonprofit organizations or trusts may own or lease land — Certain nonprofit organizations may continue farming or ranching — Restriction on acquisition and ownership of land.

1. A nonprofit organization or a trust for the benefit of an individual or a class of individuals related within the degrees of kinship specified in subsection 2 of section 10-06.1-12 may own or lease farmland or ranchland if that land is leased to a person who farms or ranches the land as a sole proprietorship or partnership, or a corporation or limited liability company allowed to engage in farming or ranching under section 10-06.1-12.
2. To the extent farming or ranching is essential to a nonprofit organization’s charitable purposes, a nonprofit organization actively engaged in the business of farming or ranching in this state on January 1, 1983, may continue to engage in the business of farming or ranching without interruption after January 1, 1983.
3. A nonprofit organization that owned farmland or ranchland for the preservation of unique historical, archaeological, or environmental land before January 1, 1983, may continue ownership of that land without interruption after January 1, 1983. An organization that is holding land for scenic preservation shall either prohibit all hunting, or if any parcel of the land is open to hunting, it must be open to hunting by the general public.

10-06.1-10. Acquisition of certain farmland or ranchland by certain nonprofit organizations.

A nonprofit organization may acquire farmland or ranchland only in accordance with the following:

1. Unless it is permitted to own farmland or ranchland under section 10-06.1-09, the nonprofit organization must have been either incorporated in this state or issued a certificate of authority to do business in this state before January 1, 1985, or, before January 1, 1987, have been incorporated in this state if the nonprofit organization was created or authorized under Public Law No. 99-294 [100 Stat. 418]. A nonprofit organization created or authorized under Public Law No. 99-294 [100 Stat. 418] may acquire no more than twelve thousand acres [4856.228 hectares] of land from interest derived from state, federal, and private sources held in its trust fund.
2. The land may be acquired only for the purpose of conserving natural areas and habitats for biota, and, after acquisition:
   1. The land must be maintained and managed for the purpose of conserving natural area and habitat for biota.
   2. Any agricultural use of the land is in accordance with the management of the land for conservation and agricultural use, and is by a sole proprietorship or partnership, or a corporation or limited liability company allowed to engage in farming or ranching under section 10-06.1-12.
   3. If any parcel of the land is open to hunting, it must be open to hunting by the general public.
   4. The nonprofit organization must fully comply with all state laws relating to the control of noxious and other weeds and insects.
   5. The nonprofit organization must make payments in lieu of property taxes on the property, calculated in the same manner as if the property was subject to full assessment and levy of property taxes.
   6. All property subject to valuation must be assessed for the purpose of making the payments under subdivision e in the same manner as other real property in this state is assessed for tax purposes. Before June thirtieth of each year, the county auditor of any county in which property subject to valuation is located shall give written notice to the nonprofit organization and the tax commissioner of the value placed by the county board of equalization upon each parcel of property subject to valuation in the county.
3. Before farmland or ranchland may be purchased by a nonprofit organization for the purpose of conserving natural areas and habitats for biota, the governor must approve the proposed acquisition. A nonprofit organization that desires to purchase farmland or ranchland for the purpose of conserving natural areas and habitats for biota shall first submit a proposed acquisition plan to the agriculture commissioner who shall convene an advisory committee consisting of the director of the parks and recreation department, the agriculture commissioner, the state forester, the director of the game and fish department, the president of the North Dakota farmers union, the president of the North Dakota farm bureau, the president of the North Dakota stockmen’s association, and the chairman of the county commission of any county affected by the acquisition, or their designees. The advisory committee shall hold a public hearing with the board of county commissioners concerning the proposed acquisition plan and shall make recommendations to the governor within forty-five days after receipt of the proposed acquisition plan. The governor shall approve or disapprove any proposed acquisition plan, or any part thereof, within thirty days after receipt of the recommendations from the advisory committee.
4. Land acquired in accordance with this section may not be conveyed to the United States or any agency or instrumentality of the United States.
5. On failure to qualify to continue ownership under subsection 2, the land must be disposed of within five years of that failure to qualify.

10-06.1-11. Required divestiture of agricultural land.

In addition to the divestiture requirements of sections 10-06.1-10 and 10-06.1-24, a nonprofit corporation that acquires land by gift or devise after December 31, 1984, the ownership of which is not permitted under this chapter, shall divest itself of the land within ten years after the acquisition. For purposes of this section, “ownership” means holding either fee or equitable title, unless fee title is held solely as security for payment of the purchase price, or unless fee title does not carry with it the right to immediate possession of the property. If the corporation fails to divest itself of the land within the required time, the attorney general shall take action under section 10-06.1-24.

10-06.1-12. Corporation or limited liability company allowed to engage in the business of farming or ranching — Requirements.

This chapter does not prohibit a corporation or a limited liability company from owning real estate and engaging in the business of farming or ranching, if the corporation meets all the requirements of chapter 10-19.1 or the limited liability company meets all the requirements of chapter 10-32.1 which are not inconsistent with this chapter. The following requirements also apply:

1. If a corporation, the corporation must not have more than fifteen shareholders. If a limited liability company, the limited liability company must not have more than fifteen members.
2. Each shareholder or member must be related to each of the other shareholders or members within one of the following degrees of kinship or affinity: parent, son, daughter, stepson, stepdaughter, grandparent, grandson, granddaughter, brother, sister, uncle, aunt, nephew, niece, great-grandparent, great-grandchild, first cousin, second cousin, or the spouse of a person so related.
3. Each shareholder or member must be an individual or one of the following:
   1. A trust for the benefit of an individual or a class of individuals who are related to every shareholder of the corporation or member of the limited liability company within the degrees of kinship or affinity specified in this section.
   2. An estate of a decedent who was related to every shareholder of the corporation or member of the limited liability company within the degrees of kinship or affinity specified in this section.
4. A trust or an estate may not be a shareholder or member if the beneficiaries of the trust or the estate together with the other shareholders or members are more than fifteen in number.
5. Each individual who is a shareholder or member must be a citizen of the United States or a permanent resident alien of the United States.
6. If a corporation, the officers and directors of the corporation must be shareholders who are actively engaged in operating the farm or ranch and at least one of the corporation’s shareholders must be an individual residing on or operating the farm or ranch. If a limited liability company, the governors and managers of the limited liability company must be members who are actively engaged in operating the farm or ranch and at least one of its members must be an individual residing on or operating the farm or ranch.
7. An annual average of at least sixty-five percent of the gross income of the corporation or limited liability company over the previous five years, or for each year of its existence, if less than five years, must have been derived from farming or ranching operations.
8. The income of the corporation or limited liability company from nonfarm rent, nonfarm royalties, dividends, interest, and annuities cannot exceed twenty percent of the gross income of the corporation or limited liability company.
9. The corporation or limited liability company must own or lease farmland or ranchland in this state.

10-06.1-12.1. Ownership or leasing of land by corporations — Exceptions.

Disapproved by R.M. June 14, 2016.

History. S.L. 2015, ch. 84, § 1, effective August 1, 2015.

Note.

This section was rejected by voters at a primary election held in June of 2016.

10-06.1-13. Applicability of North Dakota Business Corporation Act.

Chapter 10-19.. is applicable to farming or ranching corporations, which have the powers and privileges and are subject to the duties, restrictions, and liabilities of other business corporations except when inconsistent with the intent of this chapter. This chapter takes precedence in the event of any conflict with the provisions of chapter 10-19.1.

10-06.1-14. Applicability of North Dakota limited liability company laws.

Chapter 10-32.., except those sections which pertain to foreign limited liability companies, is applicable to farming or ranching limited liability companies, which have the powers and privileges and are subject to the duties, restrictions, and liabilities of other business limited liability companies, except when inconsistent with the intent of this chapter. This chapter takes precedence in the event of any conflict with the provisions of chapter 10-32.1.

10-06.1-15. Initial report — Shareholder and member requirements.

1. Every farming or ranching corporation or limited liability company shall file an initial report with its articles of incorporation, articles of organization, or certificate of authority. The report must be signed by the incorporators or organizers or, in the case of a certificate of authority, an authorized person, and must contain the following:
   1. The name of the corporation or limited liability company.
   2. With respect to each shareholder or member:
      1. The name and address of each, including the names and addresses and relationships of trusts and estates that own shares or membership interests;
      2. The number of shares or membership interests or percentage of shares or membership interests owned by each;
      3. The relationship of each;
      4. A statement of whether each is a citizen or permanent resident alien of the United States; and
      5. A statement of whether each will be actively engaged in operating the farm or ranch and whether each will reside on the farm or ranch.
   3. With respect to management:
      1. If a corporation, then the names and addresses of the officers and members of the board of directors; or
      2. If a limited liability company, then the names and addresses of the managers and members of the board of governors.
   4. If the purchase or lease of farmland or ranchland is final at the time of the initial report, a statement listing the acreage [hectarage] and location listed by section, township, range, and county of all land in the state owned or leased by the corporation or limited liability company and used for farming or ranching. If the purchase or lease of farmland or ranchland is not yet final at the time of the initial report, a statement that there is a bona fide and imminent intent and a plan to purchase or lease farmland or ranchland in the state.
   5. A statement that at least sixty-five percent of the gross income of the corporation or limited liability company will be derived from farming or ranching operations, and that twenty percent or less of the gross income of the corporation or limited liability company will be from nonfarm rent, nonfarm royalties, dividends, interest, and annuities.
2. A corporation or a limited liability company may not commence farming or ranching in this state until the secretary of state has received and filed the articles of incorporation or articles of organization and the initial report required by this section. The corporation or limited liability company shall furnish to the official county newspaper of each county or counties in which any land is owned or leased by the corporation or limited liability company a legal notice reporting the following:
   1. The name of the corporation or limited liability company and its shareholders or members as listed in the initial report.
   2. A statement to the effect that the corporation or limited liability company has reported that it owns or leases land used for farming or ranching in the county and that a description of that land is available for inspection at the secretary of state’s office.

10-06.1-16. Share and membership interest transfer records.

Every corporation owning or leasing land used for farming or ranching or engaged in farming or ranching after June 30, 1981, shall keep a record of transfers of shares or transfers of interests in the corporation. Every limited liability company owning or leasing land used for farming or ranching or engaged in farming or ranching shall keep a record of transfers of membership interests in the limited liability company. If a corporation, the corporation’s secretary shall cause to be recorded in the record all transfers of shares or transfers of interests among and between the corporation and its respective shareholders or holders of interest. If a limited liability company, the limited liability company’s secretary shall cause to be recorded in the record all transfers of membership interests among and between the limited liability company and its respective members. The record must contain at least the following: the names of the transferor and transferee, their relationship, the date of the transfer and, if a corporation, the number of shares or the percentage of interests transferred or, if a limited liability company, the number or percentage of membership interests transferred.

10-06.1-17. Annual report — Contents — Filing requirements.

Except for the first annual report, the annual report of a corporation engaged in farming or ranching after June 30, 1981, and a limited liability company engaged in farming or ranching must be delivered to the secretary of state before April sixteenth of each year. The first annual report must be delivered before April sixteenth in the year following the calendar year of the effective date of the articles of incorporation, articles of organization, or certificate of authority. The annual report must be signed as provided in subsection 58 of section 10-19.1-01 if a corporation and subsection 49 of section 10-32.1-02 if a limited liability company, and submitted on a form prescribed by the secretary of state. If the corporation or limited liability company is in the hands of a receiver or trustee, it must be signed on behalf of the corporation or limited liability company by the receiver or trustee. An annual report must include the following information with respect to the preceding calendar year:

1. The name of the corporation or limited liability company.
2. The name of the registered agent of the corporation or limited liability company as provided in chapter 10-01.1 and, if a noncommercial registered agent, the address of the registered office of the corporation or limited liability company in this state.
3. With respect to each corporation:
   1. A statement of the aggregate number of shares the corporation has authority to issue, itemized by classes, par value of shares, shares without par value, and series, if any, within a class.
   2. A statement of the aggregate number of issued shares, itemized by classes, par value of shares, shares without par value, and series, if any, within a class.
4. With respect to each shareholder or member:
   1. The name and address of each, including the names and addresses and relationships of beneficiaries of trusts and estates which own shares or membership interests;
   2. The number of shares or membership interests or percentage of shares or membership interests owned by each;
   3. The relationship of each;
   4. A statement of whether each is a citizen or permanent resident alien of the United States; and
   5. A statement of whether at least one is an individual residing on or operating the farm or ranch.
5. With respect to management:
   1. If a corporation, then the name and address of each officer and member of the board of directors, and a statement of whether each is a shareholder actively engaged in operating the farm or ranch; or
   2. If a limited liability company, then the name and address of each manager and member of the board of governors, and a statement of whether each is a member actively engaged in operating the farm or ranch.
6. A statement providing the land description and listing the acreage [hectarage] and location listed by section, township, range, and county of all land in the state owned or leased by the corporation or limited liability company and used for farming or ranching. The statement must also designate which, if any, of the acreage [hectarage] is leased from or jointly owned with any shareholder or member and list the name of the shareholder or member with that acreage [hectarage].
7. A statement of the percentage of the annual average gross income of the corporation or limited liability company which has been derived from farming or ranching operations over the previous five years or for each year of existence if less than five years.
8. A statement of the percentage of gross income of the corporation or limited liability company derived from nonfarm rent, nonfarm royalties, dividends, interest, and annuities during the period covered by the report.
9. A corporation engaged in farming which fails to file an annual report is subject to the penalties for failure to file an annual report as provided in chapter 10-19.1, except that the penalties must be calculated from the date of the report required by this section.
10. A limited liability company engaged in farming which fails to file an annual report is subject to the penalties for failure to file an annual report as provided in chapter 10-32.1, except that the penalties must be calculated from the date of the report required by this section.

10-06.1-18. Reports of corporations and limited liability companies not engaged in farming or ranching.

Any business or nonprofit corporation and any limited liability company not engaged in the business of farming or ranching which owns or leases a tract of land used for farming or ranching which is larger than twenty acres [8.09 hectares] in size shall file with the attorney general, within twelve months of any transaction involving the purchase, sale, or surface leasing of such farmland or ranchland by that corporation or limited liability company, a report containing all of the following information:

1. The name of the corporation or limited liability company and its place of incorporation or organization and, if a nonprofit corporation, a copy of its section 501(c)(3) exemption letter from the internal revenue service.
2. The name of the registered agent of the corporation or limited liability company as provided in chapter 10-01.1 and, if a noncommercial registered agent, then the address of the noncommercial registered agent in this state.
3. The acreage [hectarage] and location listed by section, township, range, and county of all such land in the state owned or leased by the corporation or limited liability company and used for farming or ranching.
4. The date and method of acquisition or disposal of such farmland or ranchland.

10-06.1-19. Exemption from certain disclosure and other requirements for certain organizations.

Sections 10-06.1-12, 10-06.1-15, 10-06.1-17, and 10-06.1-18 do not apply to nonprofit organizations or to corporations or limited liability companies such as banks, trust companies, or foundations serving in a fiduciary capacity as the personal representative or trustee of an estate or trust for an individual described in subsection 2 of section 10-06.1-12.

10-06.1-20. Failure to file report — Penalty.

Every corporation or limited liability company which fails to file any report required under this chapter or willfully files false information on any report required under this chapter is guilty of a class A misdemeanor.

10-06.1-21. Secretary of state to transmit information of noncompliance.

If the secretary of state finds from the annual report that the corporation or limited liability company is not in compliance with the requirements of section 10-06.1-12, the secretary of state shall transmit such information to the attorney general and the governor.

10-06.1-22. Tax commissioner to compare returns and reports.

Each year the tax commissioner shall select at random at least five percent of the income tax returns filed by corporations or limited liability companies which report on income from farming or ranching operations and shall compare such returns with the annual report required to be filed with the secretary of state by section 10-06.1-17 and shall forward any apparent violations to the attorney general and the governor.

10-06.1-23. Attorney general to conduct random compliance program.

Each year the attorney general shall select at random at least five percent of the total number of corporations and limited liability companies authorized by this chapter for requests for information to determine compliance with this chapter. For such purpose, the attorney general may request affidavits, share transfer records, certified copies of marriage licenses, birth certificates, deeds, leases, and such other records and documents necessary to determine compliance. The corporation or limited liability company shall comply with any request for information made under this section.

10-06.1-24. Enforcement — Penalty.

1. The recorder shall mail or deliver a copy of every instrument filed or recorded, within thirty days after the instrument is recorded, to the attorney general if the instrument documents evidence of a lease agreement or purchase agreement pursuant to subsection 6 or 7 or if the instrument conveys the title to farmland or ranchland to a corporation or limited liability company. The attorney general shall commence an action in the district court of the county in which the substantial portion of farmland or ranchland used in violation of this chapter is situated if the attorney general has reason to believe that any person is violating this chapter. The attorney general shall file for record with the recorder of each county in which any portion of the land is located a notice of the pendency of the action. If the court finds that the land in question is being held in violation of this chapter, or that a corporation or limited liability company is conducting the business of farming or ranching in violation of this chapter, the court shall enter an order so declaring. The attorney general shall file any such order for record with the recorder of each county in which any portion of the land is located. Thereafter, the corporation or limited liability company shall, within the time set by the court not to exceed one year from the date of the court’s final order, divest itself of any farming or ranching land owned or leased by it in violation of this chapter, and cease all farming or ranching operations. Except as otherwise provided in subsection 10, any corporation or limited liability company that fails to comply with the court’s order is subject to a civil penalty not to exceed twenty-five thousand dollars and may be dissolved or terminated by the secretary of state.
2. The divestment period is deemed to be a covenant running with the title to the land against any corporate or limited liability company grantee, corporate or limited liability company successor, or corporation or limited liability company assignee of the corporation or limited liability company not authorized to do business under this chapter.
3. Any land not divested within the divestment period prescribed must be sold at public sale in the manner prescribed by law for the foreclosure of real estate mortgage by action. In addition, any prospective or threatened violation may be enjoined by an action brought by the attorney general in the manner provided by law, including enjoining the corporation or limited liability company from completing performance on the remainder of any leasehold which is in violation of this chapter.
4. Subject to the divestiture requirements of subsections 5, 6, and 7, a domestic or foreign corporation or limited liability company may acquire farmland or ranchland as security for indebtedness, by process of law in the collection of debts, or by any procedure for the enforcement of a lien or claim thereon, whether created by mortgage or otherwise.
5. Unless retention of the farmland or ranchland is permitted under subsection 6 or 7, all farmland or ranchland acquired as security for indebtedness, in the collection of debts, or by the enforcement of a lien or claim shall be disposed of within three years after acquiring ownership, if the acquisition would otherwise violate this chapter.
6. The disposition requirement does not apply to a corporation or limited liability company that has acquired title to the land through the process of foreclosure of a mortgage, or a deed from a mortgagor instead of a foreclosure, if, by the expiration of one month after what is or what would have been the redemption period of the mortgage if the mortgage had been foreclosed, that corporation or limited liability company leases to the prior mortgagor from whom it was acquired, with an option to purchase, and if documents evidencing the lease agreement have been filed with the recorder of each county in which the land is located. A copy of a notice of lease is sufficient evidence. The exemption in this subsection applies for only five years and then only if the property has been appraised in accordance with subsection 8. The annual lease payments required of the tenant may not exceed seven percent of the appraised value.
7. The disposition requirement does not apply to a corporation or limited liability company that has acquired title to the land through the process of foreclosure of a mortgage, or a deed from the mortgagor instead of foreclosure, if, by the expiration of one month after what is or what would have been the redemption period of the mortgage if the mortgage had been foreclosed, that corporation or limited liability company contracts for the sale of the land to the prior mortgagor from whom it was acquired, and if documents evidencing the purchase agreement have been filed with the recorder of each county in which the land is located. A copy of a notice of the contract for deed is sufficient evidence. An exemption under this subsection is valid only if an appraisal has been made in accordance with subsection 8, and if it is valid, the exemption is unlimited in duration. The sale price may not exceed the price determined by the appraisers.
8. If an appraisal is required, the appraisal must be made by three independent appraisers, one selected by the corporation or limited liability company, one selected by the prior mortgagor, and the third selected by the first two appraisers.
9. If a corporation or limited liability company holds land pending divestiture, and the holding is not otherwise governed by this section, the land must be leased to persons actually engaged in farming or ranching and a disposal may not be to a corporation or limited liability company unless ownership by that corporation or limited liability company is authorized under this chapter.
10. The civil penalty for a violation of section 10-06.1-10 may not exceed one hundred thousand dollars.
11. Except as provided in subsection 10, any corporation or limited liability company continuing to violate this chapter is subject to a civil penalty not to exceed twenty-five thousand dollars and may be dissolved or terminated by the attorney general in accordance with the laws of this state.

10-06.1-25. Private enforcement.

This chapter may be enforced in the same manner as provided in section 10-06.1-24 by any corporation or limited liability company authorized to engage in farming or ranching by this chapter or any resident of legal age of a county in which the land owned or leased by a corporation or limited liability company in violation of this chapter is located. If such action is successful, all costs of the action must be assessed against the defendant and a reasonable attorney’s fee must be allowed the plaintiff. If judgment is rendered for the defendant, such costs and a reasonable attorney’s fee for the defendant must be paid by the plaintiff.

10-06.1-26. Protection of minority shareholders.

If a shareholder owns less than fifty percent of the shares of a farming or ranching corporation doing business under this chapter, and if the terms and conditions for the repurchase of those shares by the corporation or by the other shareholders are not set forth in the bylaws or the instrument which transferred the shares to the shareholder, or are not the subject of a shareholders’ agreement or an agreement between that shareholder and the corporation, then the disposition of such shares must be determined by this section upon the withdrawal of the shareholder. Any shareholder who desires to withdraw from the corporation shall first offer the shares for sale to the remaining shareholders in proportion to the shares owned by them. If not all of the shareholders wish to purchase the shares, any one shareholder may purchase all of the shares of the withdrawing shareholder. If no shareholder desires to purchase the shares of a withdrawing shareholder, then the corporation may purchase the shares. If the corporation chooses not to purchase the shares of the withdrawing shareholder, then the withdrawing shareholder may sell the shares to any other person eligible to be a shareholder. If the withdrawing shareholder is unable to sell the shares to any other person eligible to become a shareholder, then the withdrawing shareholder may bring an action in district court to dissolve the corporation. Upon a finding that the withdrawing shareholder cannot sell the shares at a fair price, the court shall enter an order directing that the corporation itself or any or all of the remaining shareholders pro rata or otherwise shall have twelve months from the date of the court’s order to purchase the shares of the withdrawing shareholder at a fair price as determined by the court and that if the shares of the withdrawing shareholder are not completely purchased at said price, the corporation shall be dissolved and the assets of the corporation shall be first used to pay all the liabilities of the corporation with the remaining net assets to be distributed pro rata to the shareholders in proportion to their ownership of shares. For the purpose of this section, a fair price for the shares of the withdrawing shareholder must be determined as though the shares were being valued for federal gift tax purposes under the Internal Revenue Code.

10-06.1-27. Protection of minority members.

If a member owns less than fifty percent of the membership interest of a farming or ranching limited liability company doing business under this chapter and if the terms and conditions for the repurchase of that membership interest by the limited liability company or by the other members are not set forth in the bylaws, the instrument that transferred the membership interest to the member, or are not the subject of a member-control agreement or other agreement between that member and the limited liability company, the disposition of the membership interest must be determined by this section upon the withdrawal of the member. Any member who desires to withdraw from the limited liability company shall first offer the membership interest for sale to the remaining members in proportion to the membership interests owned by the remaining members. If not all of the members wish to purchase the membership interest, any one member can purchase all of the membership interest of the withdrawing member. If no member desires to purchase the membership interest of the withdrawing member, the limited liability company may purchase the membership interest. If the limited liability company chooses not to purchase the membership interest of the withdrawing member, the withdrawing member may sell the membership interest to any other person eligible to be a member. If the withdrawing member is unable to sell the membership interest to any other person eligible to become a member, the withdrawing member may bring an action in district court to terminate the limited liability company. Upon a finding that the withdrawing member cannot sell the membership interest at a fair price, the court shall enter an order directing that the limited liability company or any of the remaining members pro rata or otherwise, have twelve months from the date of the court’s order to purchase the membership interest of the withdrawing member at a fair price as determined by the court and that if the membership interest of the withdrawing member is not completely purchased at the fair price, the limited liability company must be dissolved and the assets of the limited liability company must be first used to pay all liabilities of the limited liability company with the remaining net assets to be distributed pro rata to the members in proportion to the member’s membership interest ownership. For the purpose of this section, a fair price for the membership interest of the withdrawing member must be determined as though the membership interest was being valued for federal gift tax purposes under the Internal Revenue Code.

10-12-01. Mutual aid cooperatives.

Nonprofit cooperatives may be organized for the purpose of effectuating any plan for rural rehabilitation, subsistence farming, or housing, or for the purpose of effectuating any plan or program of any state or federal department or agency or of any other agency or corporation for giving assistance, financial or otherwise, in such endeavors or in cooperative endeavors of any nature or description, or for the purpose of engaging in such endeavors with or without such assistance.

10-12-02. Special requirements and powers.

Mutual aid cooperatives are subject to the general law governing cooperatives, but shall also state in their articles the territory to be served by the cooperative, and shall have power to act as the agent or representative of any state, federal, or other agency, corporation, or limited liability company giving assistance to rural rehabilitation, subsistence farming, housing, or cooperative endeavors of any nature. Any cooperative that is hereafter organized under this chapter shall be known as a “mutual aid cooperative” and the word cooperative shall form a part of the name of each cooperative so organized. Any cooperative organized prior to July 1, 1957, and whose name does not include the term “mutual aid cooperative”, may at its option elect to change its name to include “mutual aid cooperative”.

10-12-03. Personal property of rural rehabilitation corporation exempt from taxation — Real property taxable. [Repealed]

Repealed by S.L. 1983, ch. 595, § 3.

10-12-04. Industrial commission to receive assets of North Dakota rural rehabilitation corporation upon dissolution.

The industrial commission of North Dakota is hereby designated the agency of the state to receive the assets of the North Dakota rural rehabilitation corporation in the event such corporation is dissolved, including all properties that have been returned or may be returned to the North Dakota rural rehabilitation corporation by the secretary of agriculture upon the application of the corporation pursuant to the provisions of Public Law 499 of the 81st Congress, dated April 3, 1950, including also such assets as have again been transferred or may hereafter be transferred to the secretary of agriculture for administration pursuant to agreement between the North Dakota rural rehabilitation corporation and the secretary of agriculture under the provisions of Public Law 499 of the 81st Congress, dated April 3, 1950. The industrial commission of North Dakota is hereby authorized to enter into any agreement with the secretary of agriculture that may be required with respect to the administration of the assets it so receives.

10-12-05. Application of Act to existing cooperatives. [Repealed]

Repealed by omission from this code.

10-13-01. Purposes of electric cooperatives.

A cooperative may be organized and operated as an electric cooperative under the general law governing cooperatives and this chapter for the purpose of engaging in rural electrification by any one or more of the following methods:

1. The furnishing of electric energy to persons in rural areas who are not receiving central station service.
2. The furnishing of assistance in the wiring of the premises of persons in rural areas or in the acquisition, supply, or installation of electrical or plumbing equipment therein.
3. The furnishing of electrical energy, wiring facilities, electrical or plumbing equipment, or services to any other corporation, limited liability company, or cooperative organized under this chapter or to the members thereof.
4. The operation and maintenance of electrical cold storage and electrical processing plants.
5. The establishment and operation by itself or with any one or more electric cooperatives of an electric generation or transmission cooperative for the purpose of providing electric energy to other cooperatives, public utilities, municipalities, or any department or agency of the state or federal government.

10-13-02. Name of electric cooperative.

The name of an electric cooperative must include the words “electric cooperative”. The name must be such as to distinguish it from any other cooperative organized and existing under the laws of this state or authorized to do business in this state. Only a cooperative organized subject to this chapter or authorized to do business under this chapter may use the words “electric cooperative” in its name.

10-13-03. Powers of electric cooperatives.

In addition to the powers granted by the general law governing cooperatives, electric cooperatives have the power:

1. To generate, manufacture, purchase, acquire, and accumulate electrical energy and to transmit, distribute, sell, furnish, and dispose of such electrical energy to its members, and to other persons not in excess of ten percent of the number of its members. However, a cooperative that acquires existing electrical facilities may continue service to persons, not in excess of twenty percent of the number of its members, who are already receiving service from such facilities without requiring such persons to become members but such persons may become members upon such terms as may be prescribed in the bylaws. An electric generation or transmission cooperative providing electric energy to other cooperatives, public utilities, municipalities, or any department or agency of the state or federal government shall not be limited to the ten percent and twenty percent limitation on the transmission, distribution, sale, furnishing, and disposal of electric energy as provided in this subsection.
2. To establish, maintain, and operate electrical cold storage and electrical processing plants.
3. To construct, erect, purchase, lease as lessee, and in any manner acquire, own, hold, maintain, operate, sell, dispose of, lease as lessor, exchange, and mortgage plants, buildings, works, machinery, supplies, equipment, apparatus, and transmission and distribution lines or systems necessary and proper for the operation of its business.
4. To assist only its members to wire their premises and install therein electrical and plumbing fixtures, machinery, supplies, apparatus, and equipment of any and all kinds and character, and in connection therewith and for such purposes, to purchase, acquire, lease, sell, distribute, install, and repair electrical and plumbing fixtures, machinery, supplies, apparatus, and equipment of any and all kinds and character, and to receive, acquire, endorse, pledge, hypothecate, and dispose of notes, bonds, and other evidences of indebtedness.
5. To furnish to other corporations, limited liability companies, or cooperatives organized under this chapter, or to the members thereof, electrical energy, wiring facilities, electrical and plumbing equipment, and services.
6. To use any highway, right of way, easement, or other similar property right owned or held by the state or any political subdivision thereof in connection with the acquisition, construction, improvement, operation, or maintenance of its lines, with the consent of the local authorities having control of the street or highway proposed to be used for such purpose.
7. Subject to chapter 32-15, to have and exercise the power of eminent domain to acquire private property for its use, such right to be paramount except as to property of the state or any political subdivision thereof.
8. To fix, regulate, and collect rates, fees, rents, or other charges for electrical energy and other facilities, supplies, equipment, or services furnished by it.
9. To make contracts with other cooperatives, with public utilities, with municipalities, or with any department or agency of the state or federal government, for the sale at wholesale to, or interchange of electric energy with, such cooperatives, public utilities, municipalities, or department or agency of the state or federal government, and, notwithstanding any provisions of this chapter, such cooperatives, public utilities, municipalities, or department or agency of the state or federal government shall be eligible to membership in cooperatives organized under this chapter.
10. To establish and operate by itself or with any one or more electric cooperatives an electric generation or transmission cooperative for the purpose of providing electric energy to other cooperatives, public utilities, municipalities, or any department or agency of the state or federal government.

10-13-04. Members of electric cooperatives.

All persons who are not receiving central station service and who reside in rural areas proposed to be served by a cooperative organized under this chapter shall be eligible to membership in the cooperative. No person other than the incorporators shall be, become, or remain a member of a cooperative unless such person shall use or agree to use electrical energy or the facilities, supplies, equipment, and services furnished by a cooperative.

“Rural area” means any area not included within the boundaries of an incorporated city having a population in excess of two thousand five hundred inhabitants at the time a corporation or cooperative commences to operate electric facilities or to furnish electric energy in such an area, and includes both the farm and nonfarm population thereof. No change thereafter in the population of a rural area, as defined herein, regardless of the reason for such change, shall operate to affect in any way its status as a rural area for the purposes of this chapter.

An electric cooperative organized under this chapter may become a member of another such electric cooperative and may avail itself fully of the facilities and services thereof.

10-13-05. Nonprofit basis — Rates and fees.

Each electric cooperative shall be operated without profit to its members, but the rates, fees, rents, or other charges for electrical energy and for any other facilities, supplies, equipment, or services furnished by the cooperative shall be sufficient at all times:

1. To pay all the operating and maintenance expenses necessary or desirable for the prudent conduct of its business and the principal and interest on the obligations issued or assumed by the cooperative in the performance of the purpose for which it was organized.
2. For the creation of reserves.

10-13-06. Use of revenue — Dividends.

The revenues of an electric cooperative shall be devoted first to the payment of operating and maintenance expenses and the principal and interest on outstanding obligations, and thereafter, to such reserves for improvement, new construction, depreciation, and contingencies as the board of directors from time to time may prescribe. Revenues not required for the purposes set forth in this section shall be returned from time to time to the members of the cooperative in cash, in abatement of current charges for electrical energy, or otherwise as the board of directors may determine on a pro rata basis according to the amount of business done with each during the period. Such return may be made by way of general rate reduction to the members if the board of directors so elects.

10-13-07. Excise tax exemption — License fee. [Repealed]

Repealed by S.L. 1965, ch. 97, § 1.

10-13-08. Exemption from securities law.

The provisions of chapter 10-04 shall not apply to the issuance of membership certificates in electric cooperatives organized under this chapter nor to obligations issued by any such cooperative to secure the repayment of moneys borrowed by the cooperative from or allotted to it by any federal agency.

10-13-08.1. Electric cooperatives — Sale of physical plant — Approval.

No electric cooperative corporation shall sell, transfer, or convey, within the period of any single calendar year, physical plant in excess of five percent in value of such cooperative corporation, based upon the most recent audit of the books of said cooperative corporation, unless consent therefor shall have been obtained by vote of not less than two-thirds of the entire membership of such cooperative corporation cast at any regular or special meeting called for that purpose, after notice in writing to all the membership of such cooperative corporation not less than twenty nor more than thirty days prior to the date of such meeting. Nothing in this section shall prohibit the sale, transfer, conveyance, or exchange of electric cooperative corporation assets to another electric cooperative corporation, an agency of the state of North Dakota or of the government of the United States, nor in exchange for physical plant of equal monetary value to any person or organization, public or private.

10-13-09. Powers of electric cooperative corporation. [Repealed]

Repealed by omission from this code.

10-13-10. Directors, trustees, officers, and managers — Immunity from civil liability.

The directors, trustees, and officers of an electric cooperative, and the manager of an electric cooperative who is the person most responsible for carrying out the policies and directives of the officers, trustees, or the board of directors, are immune from civil liability for any act or omission relating to their service or function as a director, trustee, officer, or manager, unless the act or omission constitutes gross or willful negligence or gross or willful misconduct.

10-13-11. Right of rural electric cooperative to construct, own, and maintain electric transmission lines.

1. For purposes of this section, the terms electric transmission provider, electric transmission line, electric public utility, and rural electric cooperative have the same meanings as in section 49-03-01.5.
2. Except as provided in subsection 3, an electric transmission provider or designee may not construct an electric transmission line interconnecting with an existing electric transmission line owned, leased, or operated by a rural electric cooperative, unless the electric transmission provider or designee has provided written notice to the rural electric cooperative of its intention to do so. If the rural electric cooperative provides written notification to the electric transmission provider or designee within one hundred eighty days from receipt of the written notice under this subsection, that the rural electric cooperative is willing and able to construct and operate a similar electric transmission line, the rural electric cooperative shall have the right to construct the line.
3. If an electric transmission line would interconnect facilities owned, leased, or operated by a rural electric cooperative and facilities owned, leased, or operated by a municipal utility, a municipal power agency, or an electric public utility doing business in this state the following conditions apply:
   1. The rural electric cooperative and municipal utility, municipal power agency, or the electric public utility shall attempt to agree on all terms and conditions, including design, construction, ownership, and operation of the electric transmission line.
   2. If parties are unable to agree, this subsection does not compel a party to participate in the project or be construed as a waiver by any party of its right to establish and enforce any requirements for interconnection of transmission facilities to its transmission system.
4. For purposes of this section, a “municipal utility” means anything a municipality is allowed to possess under section 40-33-01 and a “municipal power agency” has the meaning provided in section 40-33.2-02.

History. S.L. 2015, ch. 85, § 1, effective August 1, 2015.

10-15-01. Definitions.

As used in this chapter, unless the context requires otherwise, the term:

1. “Association” includes both cooperatives and foreign cooperatives.
2. “Cooperative” means an association incorporated under this chapter.
3. “Corporation” means all corporations not associations.
4. “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
5. “Electronic communication” means any form of communication, not directly involving the physical transmission of paper that:
   1. Creates a record that may be retained, retrieved, and reviewed by a recipient of the communication; and
   2. May be directly reproduced in paper form by the recipient through an automated process.
6. “Electronic record” means a record created, generated, sent, communicated, received, or stored by electronic means.
7. “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.
8. “Filed with the secretary of state” means, except as otherwise permitted by law or rule:
   1. That a document meeting the applicable requirements of this chapter together with the fees provided in section 10-15-54 was delivered or communicated to the secretary of state by a method or medium of communication acceptable by the secretary of state and was determined by the secretary of state to conform to law.
   2. That the secretary of state shall then:
      1. Record the actual date on which the document is filed, and if different, the effective date of filing; and
      2. Record the document in the office of the secretary of state.
9. “Foreign cooperative” means an association incorporated under a cooperative law of another state which has members residing within this state and which is operating on the following cooperative bases:
   1. Either no member of the foreign cooperative who is an individual is allowed more than one vote because of the amount of stock or membership capital the member owns therein, or the foreign cooperative does not pay dividends on stock or membership capital in excess of eight percent per annum.
   2. The foreign cooperative shall not deal in the products of or for nonmembers to an amount greater in value than such as are handled by it for members.
   3. The foreign cooperative distributes its proceeds according to either the law governing cooperatives of this state or the law of the state of its incorporation.
10. “Member” means a person who has been qualified and accepted for membership in an association.

10-15-01.1. Legal recognition of electronic records and electronic signatures.

1. For purposes of this chapter:
   1. A record or signature may not be denied legal effect or enforceability solely because it is in electronic form;
   2. A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation;
   3. If a provision requires a record to be in writing, then an electronic record satisfies the requirement; and
   4. If a provision requires a signature, then an electronic signature satisfies the requirement.
2. The provisions of this chapter relating to electronic records or electronic transactions do not limit or supersede any provision of chapter 9-16.

10-15-02. Purposes.

Cooperatives may be organized under this chapter for any lawful purpose except banking and insurance, but subject to statutes relating to the organization or operation of specified kinds of corporations or associations.

10-15-03. General powers.

Unless otherwise provided by its articles, a cooperative may:

1. Exist perpetually.
2. Sue and be sued.
3. Have a seal.
4. Make contracts, incur liabilities, and borrow money; issue certificates representing indebtedness, or representing equity interests in its assets; acquire property; and dispose of, mortgage, pledge, lease, or otherwise use in any manner any of its property, or any interest therein, wherever situated.
5. Invest its funds, lend money for its purposes, and hold any property as security for repayment.
6. Conduct its business and affairs and have offices and exercise its powers in the United States or in any foreign country.
7. Elect officers and appoint agents, define their duties, and fix their compensation.
8. Make and alter bylaws, consistent with its articles and the laws of this state, for the administration and regulation of its affairs.
9. Make donations for charitable, scientific, educational, or religious purposes.
10. Indemnify any present or former director, officer, agent, or manager against actual expenses necessarily incurred in defense of any proceeding in which the person is a party because the person is or was a director, officer, agent, or manager. This subsection does not apply to those proceedings in which the person is adjudged liable for gross or willful negligence or gross or willful misconduct in the performance of duty. Such indemnification is not exclusive of other rights to which the person may be entitled. For purposes of this subsection, “manager” means the person who was the most responsible for carrying out the policies and directives of the officers or the board of directors when the act or omission complained of occurred.
11. Cease its activities and surrender its franchise.
12. Exercise all powers necessary or convenient to effect its purposes.

10-15-04. Incorporators.

Five or more adults, one of whom must be a resident, may form a cooperative by signing, acknowledging, and filing articles of association.

10-15-05. Articles — Provisions.

The articles of association shall set forth:

1. The name of the cooperative.
2. The period of existence, unless perpetual. Cooperatives now organized under the provisions of chapter 4-07 or 10-15 are granted perpetual existence irrespective of the period of existence set forth in articles of incorporation. Any such cooperative may nevertheless amend its articles to provide for a limited period of existence.
3. The purposes for which organized. It is sufficient to state that the cooperative may engage in any activity within the purposes for which cooperatives may be organized, and all such activities shall then be deemed within its purposes, subject to express limitations.
4. Whether the cooperative is organized with or without capital stock.
5. The designation of classes of members, if more than one.
6. The number and par value of shares of each authorized class of stock. If more than one class is authorized, the designation, preferences, limitations, and relative rights of each class shall also be set forth.
7. Which classes of stock are membership stock.
8. As to each class of stock, the rate of dividend, or that the rate of dividend may be fixed by the board, or that no dividend will be paid.
9. Any reservation of a right to acquire or recall any stock.
10. The basis of distribution of assets in the event of liquidation.
11. The complete address where the cooperative’s principal office is to be located.
12. If the address of the principal office is not located in North Dakota, the name and complete address in this state of the cooperative’s registered agent.
13. The name and address of each incorporator.
14. The names and addresses of at least five incorporators who will act as the temporary board.
15. The effective date of the cooperative if a later date than that on which the certificate of association is issued by the secretary of state. A later effective date may not be later than ninety days after the date on which the certificate of association is issued.

10-15-06. Articles — Scope.

It is not necessary to set forth in the articles of association any of the powers granted by this chapter. The articles may include additional provisions, consistent with law, including provisions which are required or permitted to be set forth in the bylaws. Any provision required or permitted in the bylaws has equal force and effect if stated in the articles. Whenever a provision of the articles is inconsistent with a bylaw, the articles control.

10-15-07. Filing articles of association — Cooperative existence.

An original of the articles of association, duly signed and acknowledged, must be delivered to the secretary of state for filing. The legal corporate existence of a cooperative begins when the certificate of association is issued by the secretary of state or on a later date as specified in the articles of association. The secretary of state shall stamp on the articles of association the date of filing and provide to the cooperative a certificate of the filing.

10-15-08. Certificate of association.

Upon receipt of the articles of association and payment of the required fees, the secretary of state shall issue a certificate of association. The certificate of association shall be conclusive evidence, except as against the state in a proceeding to cancel or revoke such certificate, that all conditions precedent to corporate existence have been met.

10-15-08.1. Cooperative name. [Contingent expiration date – See note]

1. The cooperative name:
   1. Must be expressed in letters or characters used in the English language as those letters or characters appear in the American standard code for information interchange (ASCII) table.
   2. May contain the word “corporation” or “incorporated” or an abbreviation of either of those words.
   3. May not contain a word or phrase that indicates or implies that it is organized for a purpose other than one or more business purposes for which a cooperative association may be organized under this chapter.
   4. May not be the same as, or deceptively similar to, the name, whether foreign and authorized to do business in this state, or domestic, unless there is filed with the articles of association of a domestic cooperative or the application for authority of a foreign cooperative, a record in compliance with subsection 2 of:
      1. Another cooperative association;
      2. A corporation;
      3. A limited liability company;
      4. A limited liability partnership;
      5. A limited partnership;
      6. A limited liability limited partnership;
      7. A name the right to which is, at the time of organization, in some manner reserved;
      8. A fictitious name registered with the secretary of state as provided in chapter 45-11;
      9. A trade name registered with the secretary of state as provided in chapter 47-25; or
      10. A trademark or service mark registered in the manner provided in chapter 47-22.
2. If the secretary of state determines a cooperative name is deceptively similar to another name for purposes of this chapter, then the cooperative name may not be used unless there is filed with the articles of association or application for authority:
   1. A written consent to use the name obtained from the domestic or foreign corporation, limited liability company, limited liability partnership, limited liability limited partnership, or limited partnership authorized to do business in this state having a deceptively similar name, or the holder of a reserved name, registered trade name, fictitious name, or trademark or service mark; or
   2. A certified copy of a judgment of a court in this state establishing the prior right of the applicant to the use of the name in this state.
3. The secretary of state shall determine whether a cooperative name is deceptively similar to another name for purposes of this chapter.
4. This section and section 10-15-08.2 do not:
   1. Abrogate or limit:
      1. The law of unfair competition or unfair practices;
      2. Chapter 47-25;
      3. The laws of the United States with respect to the right to acquire and protect copyrights, trade names, trademarks, service names, and service marks; or
      4. Any other rights to the exclusive use of names or symbols; or
   2. Derogate the common law or the principles of equity.
5. A cooperative that is involuntarily dissolved by the secretary of state under section 10-15-53.2 may reacquire the right to use that name by reinstating the cooperative within the time provided in section 10-15-53.3 or by refiling articles of association, unless the name has been adopted for use or reserved by another person, in which case the filing must be rejected unless the filing is accompanied by a written consent or judgment as provided in subdivision d of subsection 1. A cooperative that is unable to reacquire the use of its name shall adopt a new name that complies with this section.
6. A cooperative that files its articles of association with an effective date later than the date of filing as provided in section 10-15-07 shall maintain the right to the name until the effective date.

10-15-08.1. Cooperative name. [Contingent effective date – See note]

1. The cooperative name:
   1. Must be expressed in letters or characters used in the English language as those letters or characters appear in the American standard code for information interchange (ASCII) table.
   2. May contain the word “corporation” or “incorporated” or an abbreviation of either of those words.
   3. May not contain a word or phrase indicating or implying it is organized for a purpose other than one or more business purposes for which a cooperative association may be organized under this chapter.
   4. Must be distinguishable in the records of the secretary of state from the name, whether foreign and authorized to do business in this state, or domestic, unless there is filed with the articles of association of a domestic cooperative or the application for authority of a foreign cooperative, a record in compliance with subsection 2 of:
      1. Another cooperative association;
      2. A corporation;
      3. A limited liability company;
      4. A limited liability partnership;
      5. A limited partnership;
      6. A limited liability limited partnership;
      7. A name the right to which is, at the time of organization, in some manner reserved;
      8. A fictitious name registered with the secretary of state as provided in chapter 45-11;
      9. A trade name registered with the secretary of state as provided in chapter 47-25; or
      10. A trademark or service mark registered in the manner provided in chapter 47-22.
2. If the secretary of state determines a cooperative name is indistinguishable from another name for purposes of this chapter, then the cooperative name may not be used unless there is filed with the articles of association or application for authority:
   1. A written consent to use the name obtained from the domestic or foreign corporation, limited liability company, limited liability partnership, limited liability limited partnership, or limited partnership authorized to do business in this state having an indistinguishable name, or the holder of a reserved name, registered trade name, fictitious name, or trademark or service mark; or
   2. A certified copy of a judgment of a court in this state establishing the prior right of the applicant to the use of the name in this state.
3. The secretary of state shall determine whether a cooperative name is distinguishable in the secretary of state’s records from another name for purposes of this chapter and may adopt rules reasonable or necessary for making these determinations.
4. This section and section 10-15-08.2 do not:
   1. Abrogate or limit:
      1. The law of unfair competition or unfair practices;
      2. Chapter 47-25;
      3. The laws of the United States with respect to the right to acquire and protect copyrights, trade names, trademarks, service names, and service marks; or
      4. Any other rights to the exclusive use of names or symbols; or
   2. Derogate the common law or the principles of equity.
5. A cooperative that is involuntarily dissolved by the secretary of state under section 10-15-53.2 may reacquire the right to use that name by reinstating the cooperative within the time provided in section 10-15-53.3 or by refiling articles of association, unless the name has been adopted for use or reserved by another person, in which case the filing must be rejected unless the filing is accompanied by a written consent or judgment as provided in subsection 2. A cooperative that is unable to reacquire the use of its name shall adopt a new name that complies with this section.
6. A cooperative that files its articles of association with an effective date later than the date of filing as provided in section 10-15-07 shall maintain the right to the name until the effective date.

10-15-08.2. Reserved name.

1. The exclusive right to the use of a name otherwise permitted by section 10-15-08.1 may be reserved by any person.
2. The reservation must be made by filing with the secretary of state a request that the name be reserved, together with the fees provided in section 10-15-54. If the name is available for use by the applicant, the secretary of state shall reserve the name for the exclusive use of the applicant for a period of twelve months. The reservation may be renewed for successive twelve-month periods.
3. The right to the exclusive use of a cooperative name reserved under this section may be transferred to another person by or on behalf of the applicant for whom the name was reserved by filing with the secretary of state a notice of the transfer and specifying the name and address of the transferee, together with the fees provided in section 10-15-54.
4. The right to the exclusive use of a cooperative name reserved under this section may be canceled by or on behalf of the applicant for whom the name was reserved by filing with the secretary of state a notice of the cancellation, with the fees provided in section 10-15-54.
5. The secretary of state may accept for filing a legible facsimile copy of the signed original of any request for a reserved name which is the same size as the original document and which meets all other requirements of this section.
6. The secretary of state may destroy all reserved name requests and the reserved name requests index one year after expiration.

10-15-09. Organization meetings — Temporary board.

After articles have been filed, an organization meeting of the temporary board shall be held at the call of a majority of the incorporators or of a majority of the temporary directors for the adoption of bylaws, election of temporary officers, and transaction of other business.

10-15-10. Members’ first meeting.

The first meeting of the members shall be called by the temporary president or a majority of the temporary directors. Such meeting shall be held as soon as reasonably possible after the organization meeting of the temporary board but not later than six months after filing the articles. Failure to hold such meeting within the time specified does not affect the validity of organization.

10-15-11. Bylaws.

The initial bylaws of a cooperative may be adopted by the temporary board. Thereafter, bylaws may be adopted and amended only by the members, unless the members adopt a bylaw that permits the board to make and amend specified bylaws. Any bylaw adopted or amended by the board shall be reported at the next regular member meeting. Any such bylaw shall be at any time subject to amendment or repeal by the members. Unless the bylaws provide otherwise, any bylaw may be adopted, amended, or repealed by a majority of the members present at a meeting, provided that the members voting must be sufficient in number to constitute a quorum as provided in this chapter or the bylaws.

10-15-12. Principal office — Registered agent.

1. A cooperative shall maintain in this state either:
   1. Its principal office; or
   2. A registered agent as provided in chapter 10-01.1 and, if a noncommercial registered agent, the address of the registered office in this state.
2. The board may establish a registered agent and address of the registered agent or change the location of the principal office by causing a statement in writing to be filed as an amendment to the articles as provided in section 10-15-53 or, if only a change of address of the principal office is required, an amendment need not be filed; however, the change of address of the principal office must then be reported on the annual report filed after the change. If a written statement is filed, the statement shall set forth the name of the cooperative, the name and address of the registered agent as established, and the location of its principal office as changed. For the purposes of this chapter, the post-office address of an existing cooperative becoming subject to this chapter, as set forth in the articles for its business office, shall be considered its registered office and the secretary of the cooperative shall be considered its registered agent unless the articles are amended otherwise.
3. The board may establish a registered agent as provided in chapter 10-01.1 by causing a statement in writing to be filed as an amendment to the articles as provided in section 10-15-53. Such statement shall set forth:
   1. The name of the cooperative; and
   2. The name of the registered agent as provided in chapter 10-01.1, and if a noncommercial registered agent, the address of the registered office.
4. As provided in chapter 10-01.1:
   1. The board may change:
      1. A registered agent;
      2. The address of a registered agent; or
      3. The name of a registered agent.
   2. A registered agent may resign.

10-15-12.1. Change of registered office or registered agent — Change of name of registered agent. [Repealed]

Repealed by S.L. 2007, ch. 99, § 85.

10-15-13. Service of process.

Any process, notice, or demand required or permitted by law to be served upon the cooperative or its directors may be served as provided in chapter 10-01.1.

10-15-14. Promotion expense — Limitation.

No cooperative funds may be used, nor any stock issued, in payment of any promotion expenses in excess of ten percent of the paid-up capital stock or membership fees. No commission or expenses shall be paid on the sale of stock in excess of ten percent of the par value thereof, and the commission or expense shall be added to the selling price of the stock.

10-15-15. Membership.

A cooperative may have one or more classes of members. Provisions for qualifications, requirements, method of acceptance, terms, conditions, termination, and other incidents of membership shall be set forth in the bylaws. Any person, including a partnership, incorporated or unincorporated association, corporation, or body politic, may become a member in accordance with the bylaws.

10-15-16. Voting.

Except as permitted in this section, no person other than a member may vote at any member meeting.

1. A person who has not fully paid for membership may not vote except as expressly permitted in the bylaws. If the cooperative permits two or more persons to hold one membership, the bylaws may provide how such member vote is to be cast.
2. At any member meeting of a cooperative composed of individual members and member associations, each such individual member or association member shall be entitled to only one vote. In the case of a cooperative composed only of member associations, such member associations shall have only one vote, except that the articles may permit either or both:
   1. A member association to cast additional votes not exceeding a number equal to its membership.
   2. A cooperative whose member-patrons include other associations to base voting in whole or in part on a patronage basis.
3. A member owning membership stock gains no additional vote thereby.
4. Voting by proxy shall not be allowed in any cooperative, except the bylaws may provide for representation of members by delegates apportioned territorially. A delegate shall cast the votes to which members represented by the delegate are entitled.
5. An absent member may submit a signed vote if the absent member has been previously notified in writing of the exact motion or resolution upon which the vote is taken. The bylaws may limit use of signed votes.
6. In the absence of written notice that some person has been designated to represent a member who is other than a natural person, such member may be represented by any of its principal officers. Unless the bylaws provide otherwise, an individual may represent more than one such member, and may also vote as an individual if the individual is a member.
7. The bylaws may set forth provisions, not inconsistent with this chapter, relating to the methods and procedures for voting.
8. Whenever the articles require the vote of a greater proportion of the members than required by this chapter, the articles control.

10-15-17. Member meetings.

1. Unless the bylaws provide otherwise, member meetings shall be held at the principal office or such other place as the board may determine.
2. An annual member meeting shall be held at the time fixed in or pursuant to the bylaws. In the absence of a bylaw provision, such meeting shall be held within six months after the close of the fiscal year at the call of the president or board.
3. Special member meetings may be called by the president, board, or members having one-fifth of the votes entitled to be cast at such meeting.
4. Written notice, stating the place, day, and hour, and in case of a special member meeting the purposes for which the meeting is called, shall be given not less than ten nor more than thirty days before the meeting at the direction of the person calling the meeting.
5. At any meeting at which members are to be represented by delegates, notice to such members may be given by notifying such delegates and their alternates. Notice may consist of a notice to all members or may be in the form of an announcement at the meeting at which such delegates or alternates were elected.
6. Action without a meeting may be taken pursuant to section 10-15-28.

10-15-18. Quorum.

A quorum at a member meeting shall be ten percent of the first one hundred members plus five percent of additional members, present in person or represented by delegates. Unless the bylaws fix a larger number of members to constitute a quorum, a quorum shall never be more than fifty members nor less than five members, or a majority of all members, whichever is smaller. Members represented by signed vote may be counted in computing a quorum only on those questions as to which the signed vote is taken. The provisions of this section shall not apply to an electric generation or transmission cooperative as provided in subsection 10 of section 10-13-03 and a quorum for such cooperative at a meeting of its membership shall be as provided in its bylaws.

10-15-19. Notice — Waiver.

Whenever notice is required by this chapter to be given to any person, such notice shall be given either personally or by mail. If mailed, such notice is given when deposited in the United States mail, with postage prepaid thereon, addressed to such person at the person’s address as it appears on the records of the cooperative.

A signed waiver is equivalent to personal notice to the person so signing.

10-15-20. Stock — Authorization, control, use, right.

1. A cooperative organized with capital stock may issue the amount of stock stated in its articles. The stock may be divided into two or more classes with the designations, preferences, limitations, and relative rights as stated in the articles, except that:
   1. Stock as such has no voting power.
   2. Stock without par value may not be authorized or issued.
   3. The rate of dividends upon stock may not exceed eight percent of its par value for any year, and dividends may not be cumulative.
2. The articles may require that members own one or more shares of membership stock. Such stock shall be issued or transferred only to a person eligible to become a member and only when such person satisfies other requisites for membership. Unless restricted by the articles, stock other than membership stock may be issued or transferred to any person.
3. Unless the articles provide otherwise, a cooperative may acquire, recall, exchange, redeem, and reissue its own stock. Provisions in the articles and on the stock certificate may reserve to the cooperative a prior right to acquire any stock offered for sale, or a right to recall the stock of any stockholder, or both of said rights. The consideration paid for stock recalled by the cooperative shall be its par value and accrued unpaid dividends; provided, that if the book value of such stock is less than the par value, the consideration shall be such book value. The cooperative may set off obligations of the stockholder to it. If the remaining assets would be less than the aggregate amount payable to creditors and persons holding stock with preferential rights upon liquidation, no stock shall be acquired, recalled, exchanged, or redeemed for a consideration other than stock or certificates of equity interest of equal or subordinate rank.
4. When stock is acquired, recalled, exchanged, or redeemed by the cooperative, such stock is restored to the status of authorized but unissued stock.
5. Stockholders as such have no pre-emptive right to purchase additional stock.

10-15-21. Stock certificates.

No stock certificate may be issued except upon payment of at least the par value of the stock it represents. No cooperative may issue stock or bonds except for money, labor done, or money or property actually received. All fictitious increases of stock or indebtedness are void. If payment for stock is not in money, the board shall determine the value of the consideration and the determination, if made in good faith, is conclusive.

Each certificate for stock must bear the manual or facsimile signature of a principal officer and must state:

1. The name of the cooperative; the number, par value, and class of the shares represented by the certificate; and whether or not it is membership stock.
2. Any restrictions on the issuance or transfer of the stock, including those provided by law and the articles.
3. If more than one class of stock is authorized, the designation of the several classes and their respective preferences, limitations, and relative rights. In lieu of the full statement, this information may be given in summary form or the certificate may state that the cooperative will, upon request, furnish the information required by this subsection.

10-15-22. Stock subscriptions — Liability.

A subscription for stock of a cooperative is irrevocable for six months unless otherwise provided by the subscription agreement or unless all subscribers consent to the revocation.

A stockholder or subscriber is under no obligation to any person with respect to the stockholder’s or subscriber’s stock or subscription other than the obligation to pay to the cooperative the full consideration for which such stock was to be issued.

10-15-23. Missing securities or records.

1. When a security issued by a cooperative is missing, the cooperative shall issue a duplicate security if the owner so requests and furnishes an indemnity acceptable to the cooperative.
2. When records showing ownership of securities or apportionment of equity interest in the assets are missing and the information therein contained is necessary to a proposed redemption of the interest, the cooperative may give notice and redeem as follows:
   1. The cooperative shall set aside an amount equal to the value of the interests to be redeemed.
   2. The cooperative shall give notice of such redemption to all owners of interests of which the cooperative has knowledge.
   3. If there are interests, the ownership of which is unknown to the cooperative, it shall publish notice of the redemption at least once a month for four months both in a publication circulated among members of cooperatives in the area, if any, and in a newspaper of general circulation in the area.
   4. Any unclaimed outstanding interest represented by the missing records may then be terminated in accordance with section 10-15-34.1.

10-15-24. Liability of cooperative for wrongful transfers of its securities.

1. A cooperative is not liable for acting upon wrongful transfers of its securities unless it has notice that the certificate was not transferred by a proper person or has notice that the transfer was wrongful.
2. As used in this section:
   1. “Proper person” means the registered owner or last prior transferee, whether or not described as fiduciary for another, or the person’s authorized agent, legal representative, or successor to the person’s interest by operation of law.
   2. “Transfer” includes a redemption or recall of stock.
   3. “Wrongful transfer” means a transfer which is in excess of the authorization or capacity of the transferor, or which is made in breach of the transferor’s fiduciary duty.

10-15-25. Directors — Number, election, removal, and vacancies.

1. The business and affairs of a cooperative shall be managed by a board of directors. Every director shall be a member or a representative of a member who is other than a natural person. The bylaws shall prescribe any other qualifications for directors and may provide that directors be from specified territorial districts.
2. The number of directors shall not be less than five, provided that in a cooperative with less than fifty members, the number of directors shall not be less than three. However, the number of directors required of a cooperative association shall never be greater than the number of members of the association. Subject to such limitation, the number shall be fixed in the articles, or if the articles so provide, in the bylaws.
3. The directors constituting the temporary board, named in the articles, shall hold office until the first member meeting. At that meeting and thereafter, directors shall be elected by the members at a member meeting in the manner and for the terms provided in the bylaws. If the bylaws provide that directors be from specified territorial districts, the articles may limit voting for any director to members from within the territorial district from which such director is to be elected. Unless the bylaws provide otherwise, a director’s term of office shall be one year. Each director shall hold office for the term for which elected and until a successor takes office. The bylaws may permit selection of alternates to take the place of directors absent at a meeting of the board.
4. Unless the bylaws provide otherwise, a director may be removed upon a majority vote of all members.
5. Unless the bylaws provide otherwise, any vacancy existing in the board may be filled until the next annual meeting by appointment by a majority vote of the directors then in office.

10-15-26. Directors — Meetings, quorum, and waiver of notice.

1. Meetings of the board shall be held at such place and upon such notice as is prescribed in or pursuant to the bylaws.
2. Unless a greater number is required in the bylaws, a majority of the directors in office shall constitute a quorum for transaction of business. Unless a greater number is required in the bylaws, an act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board.
3. A signed waiver of notice of a board meeting is equivalent to personal notice to the person so signing. Attendance at a meeting is a waiver of notice of such meeting, except when a director attends the meeting and objects thereat to the transaction of business because the meeting was not lawfully convened.
4. Unless the bylaws provide otherwise, the purposes of any meeting of the board need not be specified in the notice or waiver of notice of such meeting.

10-15-27. Executive committee.

If the bylaws so provide, the board may elect an executive committee to consist of three or more directors. When the board is not in session, such committee shall have all powers of the board except in respect to:

1. Powers reserved by the board to itself.
2. Apportionment or distribution of proceeds.
3. Election of officers.
4. Filling of vacancies in the board.
5. Amendments to the bylaws.

The board may elect other directors as alternates for members of the executive committee.

10-15-28. Action without meeting by directors or members.

Any action which may be taken at a member meeting may be taken without a meeting if a writing setting forth and approving the action taken shall be signed by a majority of the members entitled to vote on such action. Any action which may be taken at a meeting of the directors or executive committee may be taken without a meeting if a writing setting forth and approving the action taken shall be signed by all of the directors or executive committee members entitled to vote on such action. In such cases, such consent shall have the same force and effect as if a meeting had been held.

10-15-29. Officers.

1. The principal officers of a cooperative are a president, one or more vice presidents and a treasurer as prescribed in the bylaws, and a secretary. They shall be elected annually by the board at such time and in such manner as the bylaws provide. Each principal officer except the secretary and the treasurer must be a director of the cooperative. The offices of secretary and treasurer may be combined in one person. If the bylaws provide, the board of directors may also elect from its number a chairman and one or more vice chairmen, in which case the president and vice presidents need not be directors or stockholders.
2. Any other officer may be chosen by the board or as provided in the bylaws.
3. All officers shall have such authority and perform such duties as the bylaws provide or as the board may determine not inconsistent with the bylaws. Any officer may be removed by the board whenever in its judgment the best interests of the cooperative will be served thereby. Election or appointment shall not of itself create contract rights.

10-15-30. Compensation and benefits to directors, officers, and employees.

1. Unless the bylaws provide otherwise, only the members may establish compensation or other benefits for a director, not available generally to officers and employees, for services as a director.
2. Unless the bylaws provide otherwise, for prior or future services of any officer or employee, the board may provide reasonable compensation, pension, bonuses, or other benefits to such officer or employee, and pension or other benefits to family members or beneficiaries of an officer or employee. No officer or employee who is a director may take part in the vote on that person’s salary for services rendered the cooperative.

10-15-31. Liability of directors and members.

1. Directors, trustees, and officers, and the manager who is the person most responsible for carrying out the policies and directives of the trustees, officers, or board of directors, are immune from civil liability for any act or omission relating to their service or function as a director, trustee, officer, or manager, unless the act or omission constitutes gross or willful negligence or gross or willful misconduct.
2. Members, stockholders, and patrons of a cooperative are neither obligated to pay, nor liable upon, any cooperative obligation.

10-15-32. Disposition of assets — Right to secure debts.

1. Except as authorized by the members, the board may not dispose of all or substantially all of a cooperative’s fixed assets. At any meeting the members may authorize the disposition of all or substantially all of a cooperative’s fixed assets if:
   1. Notice that such disposition will be considered at such meeting has been given to all persons entitled to vote thereon.
   2. Such disposition has been approved by three-fourths of those voting at the meeting.
2. Unless the bylaws provide otherwise, the board may secure payment of a cooperative’s debts by mortgaging the cooperative’s rights, privileges, authority and franchises, revenues, and other property.

10-15-33. Apportionment and distribution of proceeds.

At least once annually the directors shall determine and distribute net proceeds as follows:

1. There shall be deducted from total proceeds:
   1. All operating expenses and costs.
   2. The cost of supplies, commodities, equipment, and other property or services procured or sold for patrons.
   3. The cost of services performed for patrons.
   4. All taxes and all other expenses.
   5. Reasonable and necessary reserves for depreciation, depletion, and obsolescence of physical property, doubtful accounts, and other valuation reserves, all of which shall be established in accordance with usual and customary accounting practices.
2. The remainder of the total proceeds are net proceeds and shall be distributed and paid as follows:
   1. An amount, not to exceed five percent thereof, may be set aside as an educational fund to be used in teaching or promoting cooperative organization or principles when approved by a majority of the members voting at any annual meeting. Such fund shall for all purposes except the computation of net proceeds be deemed an expense of operation of the cooperative. Such funds shall not be used in any political activity. Such educational funds shall not be paid to any other cooperative, mutual aid corporation, or other general farm organization unless such cooperative, mutual aid corporation, or general farm organization receiving such funds provides in its bylaws or articles that officers and directors shall be elected by secret ballot and that only active or retired farmers and ranchers, their spouses, and their children, are eligible to vote on the affairs of the cooperative, mutual aid corporation, or general farm organization.
   2. A share of the net proceeds may be set aside for or paid to employees. Such amount shall for all purposes except the computation of net proceeds be deemed an expense of operation of the cooperative.
   3. In a cooperative organized with capital stock, such dividend may be paid upon capital stock as is authorized by the articles. No dividend may be paid if the capital is impaired or if payment of such dividend would result in an impairment of capital.
3. Unless the articles or bylaws otherwise expressly provide, none of the remainder of the net proceeds shall constitute income of the cooperative but all thereof shall be distributed and paid to patrons, whether members or not, as follows:
   1. Reasonable reserves for necessary purposes may be created, which shall be credited to patrons in accordance with the ratio which their patronage bears to total patronage.
   2. All the remainder of the net proceeds shall be distributed and paid to patrons in accordance with the ratio which their patronage bears to total patronage.
   3. There shall be no distinction between the persons entitled thereto, but such reserves and distribution may be based upon business done with particular departments or in particular commodities, supplies, or services, or upon classification of business according to the type or nature thereof.
4. If the articles or bylaws so provide:
   1. Any of the net proceeds may be credited to allocated or unallocated surplus or reserves of the cooperative.
   2. None of the remainder shall constitute income to the cooperative, but all thereof shall be distributed and paid in accordance with the ratio which individual patronage bears to total patronage, either to all patrons, to member patrons only, or to all patrons with nonmembers receiving a lower proportion than members, as the bylaws may provide. There shall be no other distinction between members and nonmembers, but distribution may be based on business done with particular departments, or in particular commodities, supplies, or services, or upon classification of business according to type or nature thereof.
5. The distribution and payment of net proceeds under subsections 3 and 4 may be in cash, credits, stock, membership interests, certificates of interest, revolving fund certificates, letters of advice, or other certificates or securities of the cooperative or of other associations, corporations, or limited liability companies, in other property, or in any combination thereof.
6. All or any part of the net proceeds may be applied to losses incurred in prior years, and the bylaws may also include any reasonable provisions for the apportionment of losses.
7. When authorized by a majority of the members voting at any annual meeting, the directors may provide for the deduction from patronage dividends of membership dues in any other cooperative, mutual aid corporation, or other general farm organization.

10-15-34. Unclaimed distributions, redemptions, or payments. [Repealed]

Repealed by S.L. 1977, ch. 75, § 4.

Note.

See N.D.C.C. § 10-15-34.1 for present provisions on unclaimed distributions, redemptions, or payments.

10-15-34.1. Unclaimed distributions, redemptions, or payments.

1. Any distribution of proceeds or redemption of, or payment based upon, any security by a domestic cooperative, excluding all credit unions, which remains unclaimed six years after the date authorized for retirement or payment in cash or other property, may be forfeited by the board. Any amount forfeited shall revert to the domestic cooperative, as contributed capital, if, at least six months prior to the declared date of forfeiture, notice that such payment is available has been mailed to the last-known address of the person shown by the records to be entitled thereto, or if the address is unknown, notice is published under section 10-15-23.
2. This section applies to all such payments authorized before or after July 1, 1979.

10-15-35. Books and records — Penalty for refusal to produce.

1. A cooperative shall keep correct and complete books and records of account and shall also keep minutes of the proceedings of meetings of its members, board, and executive committee. The cooperative shall keep at its principal office records of the names and addresses of all members and stockholders with the amount of stock held by each and of ownership of equity interests. At any reasonable time, any member or stockholder, or the agent or attorney of either, upon written notice delivered or sent to the cooperative at least one week in advance, may examine any books or records for a purpose that is proper and specified in the notice.
2. In any proceedings, or upon petition, any court of record may, upon notice and after hearing at which proper cause is shown, and upon suitable terms, order any of the cooperative’s books or records, and any other pertinent documents in its possession, or duly authenticated copies thereof, to be brought within this state. The documents must be kept at the place and for the time and purposes the order designates. Any cooperative failing to comply with the order is subject to dissolution, and its directors and officers are guilty of contempt of court.

10-15-36. Annual reports — Filing thereof — Fees — Penalties. [Repealed]

10-15-37. Amendments to articles.

At any member meeting, a cooperative may adopt any amendment to its articles which is lawful under section 10-15-05 if a statement of the nature of the amendment was contained in the notice of the meeting.

An amendment is adopted when approved by members holding a majority of the member votes cast thereon.

10-15-38. Filing amendments — Limitation of action.

1. Amendments to articles must be signed and acknowledged by an officer of the cooperative and set forth:
   1. The name of the cooperative.
   2. The amendments and date of adoption.
   3. The number of members.
   4. The number of members voting for and against the amendment.
2. One copy of the amendment must be retained in the records of the association, and one copy must be filed in the office of the secretary of state.
3. No amendment may affect any existing claim for relief or proceedings to which the cooperative is a party or existing rights of persons other than members or stockholders.
4. No action may be maintained to invalidate any amendment because of the manner of its adoption unless commenced within two years after the date of filing.
5. A cooperative that amends its name and is the owner of a service mark, trademark, or trade name, is a general partner named in a fictitious name certificate, or is a general partner in a limited partnership which is on file with the secretary of state, must change or amend its name in each registration when it files an amendment.

10-15-39. Restated articles.

A cooperative may, by action taken in the manner required for an amendment, adopt restated articles which shall state they supersede existing articles and amendments. Restated articles shall meet all requirements of original articles except:

1. Incorporators constituting the temporary board and the names and addresses of the incorporators may be omitted.
2. The location of the principal office, or the complete address of the present registered agent, shall be set forth as of the time of adoption of the restated articles. The name of a new registered agent as provided in chapter 10-01.1 and, if a noncommercial registered agent, then the address of such noncommercial registered agent in this state may be set forth in lieu of the location of the principal office.

10-15-40. Amendments by bankruptcy court.

Certified copies of any order of a court of the United States, in proceedings under the bankruptcy laws, shall be filed as an amendment if the order affects an amendment to the articles. The principal officers of a cooperative shall cause each order to be promptly filed after it becomes final.

10-15-41. Merger and consolidation.

If otherwise lawful, any two or more associations may merge or consolidate under this chapter or under the law of the state where the surviving or new association will exist. Before a cooperative may merge or consolidate with any other association, a written plan of merger or consolidation shall be prepared by the board or by a committee selected by the board or the members for that purpose. Such plan shall set forth all the terms of the merger or consolidation and the proposed effect thereof on all members and stockholders of the cooperative. In case of consolidation, the plan shall also contain the articles of the new association. The members shall approve the plan in the manner provided in section 10-15-37 for amendments to the articles.

10-15-42. Articles of merger or consolidation — Effect.

1. Articles of merger or consolidation shall set forth the approved plan and such other information as is required by section 10-15-38. They shall be signed by two principal officers of each association merging or consolidating, sealed with the seal of each such association if any, and filed as an amendment to the articles. Unless otherwise specified in the plan, the merger or consolidation is effective when the articles are so filed.
2. After the effective date, the associations which are parties to the plan become a single association. In the case of a merger, the surviving association is that association so designated in the plan. In the case of a consolidation, the new association is the association provided for in the plan. The separate existence of all associations which are parties to the plan, except the surviving or new association, then ceases.
3. The surviving or new association possesses all the rights and all the property of each of the individual associations and is responsible for all their obligations. Title to any property is vested in the surviving or new association with no reversion or impairment thereof caused by the merger or consolidation. No right of any creditor may be impaired by the merger or consolidation without the creditor’s consent.
4. The articles of the surviving association are deemed amended to the extent provided in the plan of merger.

10-15-43. Division of a cooperative.

1. Any cooperative may divide itself into two or more cooperatives under this chapter. A written plan of division shall be prepared by the board or by a committee selected by the board for that purpose. Such plan shall set forth all the terms of the division and the proposed effect thereof on all members and stockholders of the cooperative. The plan shall also contain the articles of each new cooperative being formed and any amendments to the articles of the remaining cooperative.
2. The members shall approve the plan in the manner provided in section 10-15-37 for amendments to articles.
3. Articles of division shall set forth the approved plan and such other information as is required by section 10-15-38 and shall be filed as an amendment to the articles. Each part of the plan which contains the articles of a new cooperative shall be separately filed as articles of association for such new cooperative.

10-15-44. Conversion of corporation.

A corporation may convert itself into a cooperative by adopting an amendment to its articles by which it elects to become subject to this chapter, together with changes in its articles required by this chapter and other desirable changes permitted by this chapter. Such amendment shall be adopted and filed in the manner provided by the law then applicable to the corporation.

10-15-45. Voluntary dissolution.

1. At any member meeting, whether or not a quorum is present, a cooperative may dissolve if:
   1. Notice that a resolution for dissolution will be considered and acted upon has been given to all members and to all other persons entitled by the articles to vote thereon.
   2. Such resolution is adopted by members holding three-fourths of the member votes cast thereon. The articles may permit stockholders to vote on the resolution for dissolution.
2. When the resolution is adopted, either a committee designated by the resolution or the board shall liquidate all assets and pay the net proceeds of such liquidation available for distribution to all persons entitled to the same by law, the articles, and the bylaws.
3. Articles of dissolution shall be signed by a majority of directors or of committee members and shall be sealed with the cooperative’s seal, if any. They shall set forth:
   1. The name of the cooperative.
   2. The name and address of each director or committee member.
   3. The date of adoption of the resolution of dissolution.
   4. A statement that all liquidation activities have been completed.
4. The articles of dissolution shall be filed as provided in section 10-15-53, and thereupon the existence of the cooperative ceases.

10-15-46. Involuntary dissolution.

1. A cooperative may be dissolved involuntarily by a decree of the district court where the principal office or registered agent is located in an action commenced by the attorney general when any of the following is established:
   1. The cooperative’s certificate of association was procured through fraud.
   2. The cooperative has continued to exceed or abuse the authority conferred upon it by this chapter.
   3. The cooperative failed to comply with a court order for the production of books, records, or other documents of the cooperative as provided in section 10-15-35.
2. If the cooperative cures its defaults under subdivision c of subsection 1 prior to the entry of the court’s final decree and pays all penalties and court costs that have accrued, the claim for relief with respect to the defaults so cured will abate.

10-15-47. Liquidation under court supervision.

1. The district court of the county where the principal office or registered agent of the cooperative is located may liquidate the assets and business of such cooperative when an action for that purpose is filed by or on behalf of:
   1. A majority of the designated committee or directors when a resolution is adopted pursuant to section 10-15-45.
   2. The attorney general when a decree of dissolution has been obtained pursuant to section 10-15-46.
   3. A judgment creditor whose execution is returned unsatisfied when it is established that the cooperative is unable to pay its debts as they become due in the usual course of its business.
   4. Any creditor when it is established that the cooperative is dissolving pursuant to section 10-15-45 without making adequate provision for payment of all creditors.
2. Upon filing of any such action, the court acquires exclusive jurisdiction of all matter pertaining to the liquidation of such cooperative and the distribution of its assets to persons entitled thereto and may determine and order paid the expense of such liquidation proceeding. The court has power to issue injunctions, appoint receivers with such duties and powers as the court may direct, and take any other action necessary to the cooperative’s liquidation. A receiver appointed in such proceeding has authority to sue and be sued as receiver for the cooperative.
3. The court shall fix the time within which creditors may file claims and shall prescribe the notice to be given to interested persons. Creditors who do not file their claims within the time limit may not participate in any distribution thereafter made, unless the court upon good cause shown extends their time for filing.
4. When the court approves the final distribution of a cooperative’s assets, it shall enter a decree in the nature of articles of dissolution which shall be filed in the secretary of state’s office.
5. The filing of an action under this section operates as a stay of all other proceedings against the cooperative until such time as the court issues its final judgment or directs otherwise.
6. The court upon proper cause shown may at any time order the proceedings dismissed upon such terms and conditions as the court may impose.

10-15-48. Property omitted from final distribution.

1. Upon filing the articles or decree of dissolution, title to any property omitted from the final distribution vests in the surviving directors or committee members who signed the articles, as trustees. They have all the powers of the cooperative with respect to such property and shall distribute the property or its proceeds to the persons beneficially entitled thereto.
2. When no trustee can be found, the district court of the county where the property is located has power to appoint trustees upon application of any person having an interest in such property or its disposition.
3. Any trustee may at any time make application to the proper district court for supervision of liquidation pursuant to section 10-15-47.

10-15-49. Amounts due unknown persons.

Upon liquidation of a cooperative, the assets distributable to persons who are unknown or cannot be found may be reduced to cash and transferred to the commissioner of university and school lands and shall be treated as abandoned and unclaimed property under the escheat and abandoned property laws of the state.

10-15-50. Survival of remedy after dissolution.

Except as provided in section 10-15-47, the dissolution of a cooperative does not impair any remedy available to or against such cooperative, its directors, stockholders, or members for any claim existing or any liability incurred prior to such dissolution if a proceeding thereon is commenced within two years after the date of filing the articles or decree of dissolution.

10-15-51. Admission of foreign cooperatives.

A foreign cooperative is authorized to do business in this state when the secretary of state issues a certificate of authority. In order to procure such certificate, the foreign cooperative shall make application therefor to the secretary of state and file with a certificate of good standing or certificate of existence duly authenticated by the incorporating officer of the state or country of incorporation. The application must set forth:

1. The name of the cooperative and the state or country under the laws of which it is incorporated.
2. The date of incorporation and the period of duration of the corporation.
3. The address of the principal office of the cooperative.
4. As provided in chapter 10-01.1, the name of the registered agent, and if a noncommercial registered agent, the address of the noncommercial registered agent in this state.
5. The purpose or purposes of the cooperative which it proposes to pursue in the transaction of business in this state.
6. The names and respective addresses of the directors and officers of the cooperative.
7. Such additional information as may be necessary or appropriate in order to enable the secretary of state to determine whether such cooperative is entitled to a certificate of authority to transact business in this state.

Such application must be made on forms prescribed by the secretary of state and must be executed by an officer of the cooperative.

10-15-51.1. Foreign cooperative — Name.

A foreign cooperative may apply for a certificate of authority under any name that would be available to a domestic cooperative, whether the name is the name under which it is authorized in its jurisdiction of origin. A trade name must be registered as provided in chapter 47-25 when applying for a certificate of authority under a name different from the name authorized in the jurisdiction of origin.

10-15-52. Foreign cooperative authority.

Upon issuance of the secretary of state’s certificate of authority, a foreign cooperative is entitled to all rights, exemptions, and privileges of a cooperative organized for the same purposes under the laws of this state.

10-15-52.1. Merger of foreign cooperative authorized to transact business in this state.

Whenever a foreign cooperative authorized to transact business in this state is a party to a statutory merger permitted by the laws of the state or country under the laws of which it is associated, and such cooperative is not the surviving cooperative, within thirty days after such merger becomes effective, the surviving cooperative shall file with the secretary of state a certificate of fact of merger duly authenticated by the proper officer of the state or country under the laws of which such statutory merger was effected.

10-15-52.2. Amendment to articles of association of foreign cooperatives. [Repealed]

Repealed by S.L. 1993, ch. 88, § 10.

10-15-52.3. Amended certificate of authority.

A foreign cooperative authorized to transact business in this state must procure an amended certificate of authority if it changes its cooperative name or desires to pursue in this state purposes other than those set forth in its prior application for a certificate of authority by making application to the secretary of state.

The requirements in respect to the application and the issuance of an amended certificate of authority and the effect thereof are the same as an original application for a certificate of authority.

In addition, an application must be accompanied by a certificate of fact of amendment duly authenticated by the proper officer of the state or country where the cooperative is incorporated.

A foreign cooperative which amends its name and applies for an amended certificate of authority, and is the owner of a service mark, trademark, or trade name, is a general partner named in a fictitious name certificate, or is a general partner in a limited partnership which is on file with the secretary of state, must change or amend its name in each registration when it files an application for an amended certificate of authority.

10-15-52.4. Withdrawal of foreign cooperative.

A foreign cooperative authorized to transact business in this state may withdraw from this state upon procuring from the secretary of state a certificate of withdrawal. In order to procure such certificate of withdrawal, such foreign cooperative shall deliver to the secretary of state an application for withdrawal, which shall set forth:

1. The name of the cooperative and the state or country under the laws of which it is associated.
2. That the cooperative is not transacting business in this state.
3. That the cooperative surrenders its authority to transact business in this state.
4. That service of process in any action, suit, or proceeding based upon any claim for relief arising in this state during the time the cooperative was authorized to transact business in this state may thereafter be made on such cooperative by service as provided in section 10-01.1-13.
5. A post-office address to which the secretary of state may mail a copy of any process against the cooperative that may be served on the secretary of state.
6. Such additional information as may be necessary or appropriate in order to enable the secretary of state to determine and assess any unpaid fees payable by such foreign cooperative.

The application for withdrawal shall be made on forms prescribed and furnished by the secretary of state and shall be executed by the cooperative by its president or vice president and by its secretary or an assistant secretary or, if the cooperative is in the hands of a receiver or trustee, shall be executed on behalf of the cooperative by such receiver or trustee.

10-15-52.5. Filing of application for withdrawal for foreign cooperatives.

An application by a foreign cooperative for withdrawal must be delivered to the secretary of state. If the secretary of state finds that the application conforms to the provisions of section 10-15-52.4 and that all fees have been paid, the secretary of state shall endorse on the original application the word “filed”, and the month, day, and year of the filing and issue a certificate of withdrawal to the cooperative or its representative. Upon the issuance of the certificate of withdrawal, the authority of the cooperative to transact business in this state ceases.

10-15-52.6. Change of registered office or registered agent of foreign cooperative.

As provided in section 10-01.1-11:

1. A foreign cooperative authorized to transact business in this state may change its registered office, its registered agent, or both; and
2. A registered agent of a foreign cooperative may resign.

10-15-52.7. Foreign cooperative — Revocation of certificate of authority.

1. The certificate of authority of a foreign cooperative to transact business in this state may be revoked by the secretary of state if:
   1. The foreign cooperative has failed to:
      1. Appoint and maintain a registered agent, and if a noncommercial registered agent, then the registered office of the noncommercial registered agent as provided in chapter 10-01.1;
      2. File in the office of the secretary of state any amendment to its application for a certificate of authority as provided in section 10-15-52.3;
      3. File in the office of the secretary of state any merger as provided in section 10-15-52.1;
      4. File in the office of the secretary of state an application for a certificate of withdrawal of its authority as provided in section 10-15-52.5 when the cooperative’s existence has expired or the cooperative has been dissolved in the jurisdiction of origin; or
   2. A misrepresentation has been made of any material matter in any application, report, affidavit, or other record submitted by the foreign cooperative pursuant to this chapter.
2. Except for revocation of the certificate of authority for failure to file the annual report as provided in section 10-15-53.2, no certificate of authority of a foreign cooperative may be revoked by the secretary of state unless:
   1. The secretary of state has given the foreign cooperative at least sixty days’ notice by mail addressed to its registered agent at the registered office in this state or, if the foreign cooperative fails to appoint and maintain a registered agent in this state, then addressed to its principal executive office; and
   2. During the sixty-day period, the foreign cooperative has failed to:
      1. File the report of change as provided in chapter 10-01.1 regarding the registered office or the registered agent;
      2. File any amendment;
      3. File any merger;
      4. File an application for certificate of withdrawal; or
      5. Correct the misrepresentation.
3. Upon the expiration of sixty days after the mailing of the notice, the authority of the foreign cooperative to transact business in this state ceases and the secretary of state shall issue a notice of revocation and shall mail the notice to the registered agent at the registered office in this state or, if the foreign cooperative failed to appoint and maintain a registered agent or a registered office in this state, then addressed to the principal executive office of the foreign cooperative.

10-15-53. Secretary of state — Filing documents — Effective date.

1. A record authorized or required to be filed with the secretary of state under this chapter must be captioned to describe the purpose of the record, be in a medium permitted by the secretary of state, and be delivered to the secretary of state. If the filing fees required by section 10-15-54 have been paid, then, unless the secretary of state determines that a record does not comply with the filing requirements of this chapter, the secretary of state shall file the record, and for all records, except annual reports, send an image of the filed record to the person who filed the record.
2. Upon request and payment of the fee provided in section 10-15-54, the secretary of state shall send to the requester a certified copy of a requested record.
3. Except as otherwise provided in this chapter, a record filed with the secretary of state under this chapter may specify a delayed effective date that is no later than ninety days from the date of filing. If the record does not specify a delayed effective date, a record filed with the secretary of state is effective on the date the record is filed as evidenced by the endorsement of the secretary of state of the date on the record.

10-15-53.1. Secretary of state — Annual report to the secretary of state.

1. A cooperative and a foreign cooperative shall file an annual report signed by a principal officer or the general manager setting forth:
   1. Its name and complete address of its principal place of business.
   2. The names and addresses of its directors and principal officers.
   3. In the case of a domestic cooperative, a statement, by class and par value, of the amount of stock it has authority to issue and the amount issued.
   4. A statement as to the general type of business in which engaged during the prior year.
2. The annual report must be made on forms prescribed by the secretary of state and the information contained in the report must be given as of the date of the execution of the report. If the cooperative or foreign cooperative is in the hands of a receiver or trustee, the annual report must be signed on behalf of the cooperative or foreign cooperative by the receiver or trustee.
3. The secretary of state may destroy any annual report provided for in this section after the annual report is on file for six years.
4. Except for the first annual report, the annual report of a cooperative or foreign cooperative must be delivered to the secretary of state with the fees provided in section 10-15-54 before April first of each year. The first annual report of a cooperative must be delivered before April first in the year following the calendar year of the effective date stated in the articles of association, and the first annual report of a foreign cooperative must be delivered before April first of the year following the calendar year in which the certificate of authority was issued by the secretary of state. The secretary of state shall file the report if the report conforms to the requirements of subsections 1 and 2.
   1. If the report does not conform to those requirements, the report must be returned to the cooperative or foreign cooperative for any necessary corrections.
   2. If the report is filed before the deadlines provided in this section, any penalty for the failure to file a report within the time provided does not apply if the report is corrected to conform to the requirements of subsections 1 and 2 and returned to the secretary of state within thirty days after the annual report was returned by the secretary of state for corrections.
5. After May first, the secretary of state shall notify any cooperative or foreign cooperative failing to file its annual report that its certificate of incorporation or certificate of authority is not in good standing and may be dissolved or revoked as provided in section 10-15-53.2.

History. S.L. 2015, ch. 86, § 6, effective July 1, 2015; 2019, ch. 92, § 2, effective August 1, 2019; 2021, ch. 85, § 10, effective August 1, 2021.

10-15-53.2. Secretary of state — Involuntary dissolution — Revocation of certificate of authority.

1. With respect to involuntary dissolution of a cooperative by the secretary of state:
   1. A cooperative may be involuntarily dissolved by the secretary of state if:
      1. The cooperative has failed to:
         1. File with the secretary of state its annual report or any other record required to be filed with the secretary of state under this chapter together with the fees provided in section 10-15-54; or
         2. Appoint and maintain a registered agent and registered office as provided in section 10-15-12; or
      2. A misrepresentation has been made of any material matter in any application, report, affidavit, or other record submitted by the cooperative pursuant to this chapter.
   2. A cooperative that fails to file its annual report, together with the fees provided in section 10-15-54, before April first of the year following the year it is found to be not in good standing ceases to exist and is considered involuntarily dissolved by operation of law.
      1. The secretary of state shall note the dissolution of the certificate of incorporation of the cooperative on the records of the secretary of state and shall give notice of the action to the dissolved cooperative.
      2. Notice by the secretary of state must be mailed to the cooperative to its principal office.
      3. The decision of the secretary of state that the cooperative has been involuntarily dissolved under this subsection is final.
      4. A cooperative that was dissolved for failure to file an annual report may be reinstated as provided in subsection 1 of section 10-15-53.3.
   3. Except for dissolution of a cooperative for failure to file the annual report as provided in section 10-15-53.1, a cooperative may not be dissolved by the secretary of state unless:
      1. The secretary of state has given the cooperative not less than sixty days’ notice by mail addressed to its principal office; and
      2. During the sixty-day period, the cooperative has failed to:
         1. File the report of change as provided in chapter 10-01.1 regarding the registered office or the registered agent;
         2. File any other required record; or
         3. Correct the misrepresentation.
   4. Upon expiration of sixty days after the mailing of the notice, the existence of the cooperative ceases. The secretary of state shall issue a notice of dissolution and shall mail the notice to the cooperative to its principal office.
2. With respect to the revocation of a certificate of authority of a foreign cooperative by the secretary of state:
   1. The certificate of a foreign cooperative to transact business in this state may be revoked by the secretary of state if:
      1. The foreign cooperative has failed to:
         1. File with the secretary of state its annual report or any other record required to be filed with the secretary of state under this chapter together with the fees provided in section 10-15-54;
         2. Appoint and maintain a registered agent and registered office as provided in section 10-15-12;
         3. File with the secretary of state any amendment to its application for a certificate of authority as provided in section 10-15-52.3;
         4. File with the secretary of state any merger as provided in section 10-15-52.1; or
         5. File with the secretary of state an application for certificate of withdrawal of its authority as provided in section 10-15-52.4 when the existence of the foreign cooperative has expired or the foreign cooperative has been dissolved in the jurisdiction of the foreign cooperative; or
      2. A misrepresentation has been made of any material matter in any application, report, affidavit, or other record submitted by the foreign cooperative pursuant to this chapter.
   2. A foreign cooperative that fails to file its annual report, together with the fees provided in section 10-15-54, before April first of the year following the year it is found not to be in good standing forfeits its authority to transact business in this state and its certificate of authority is considered revoked by operation of law.
      1. The secretary of state shall note the revocation of the certificate of authority of the foreign cooperative on the records of the secretary of state and shall give notice of the action to the foreign cooperative.
      2. Notice by the secretary of state must be mailed to the last registered agent of the cooperative at its last registered office in this state or, if the cooperative failed to maintain a registered agent in this state, mailed to its principal office.
      3. The decision of the secretary of state that a certificate of authority must be revoked under this subsection is final.
      4. A foreign cooperative for which authority was forfeited by, and certificate of authority was revoked by the secretary of state for failure to file an annual report may be reinstated as provided in subsection 1 of section 10-15-53.3 and may appeal as provided in subsection 2 of section 10-15-53.3.
   3. Except for revocation of the certificate of authority for failure to file the annual report as provided in section 10-15-53.1, a certificate of authority of a foreign cooperative may not be revoked by the secretary of state unless:
      1. The secretary of state has given the foreign cooperative not less than sixty days’ notice by mail addressed to its registered agent at the registered office in this state or, if the cooperative failed to maintain a registered agent in this state, the notice must be mailed to its principal office; and
      2. During the sixty-day period, the foreign cooperative has failed to:
         1. File the report of change as provided in chapter 10-01.1 regarding the registered office or the registered agent;
         2. File any amendment;
         3. File any merger;
         4. File an application for withdrawal;
         5. File any other required record; or
         6. Correct the misrepresentation.
   4. Upon expiration of sixty days after the mailing of the notice, the authority of the foreign cooperative to transact business in this state ceases. The secretary of state shall issue a notice of revocation and shall mail the notice to the registered agent at the registered office in this state or, if the foreign cooperative failed to maintain a registered agent in this state, the notice must be mailed to its principal office.
3. If the cooperative or foreign cooperative files its annual report after the notice with the fee provided for in section 10-15-54 for late filing, the secretary of state shall restore the certificate of incorporation or authority to good standing. Until restored to good standing, the secretary of state may not accept for filing any document respecting the cooperative or foreign cooperative except those incident to its dissolution or withdrawal.

History. S.L. 2015, ch. 86, § 7, effective July 1, 2015.

10-15-53.3. Secretary of state — Reinstatement following an involuntary dissolution or revocation of authority — Appeals.

1. With respect to reinstatement following involuntary dissolution or revocation of authority:
   1. A cooperative dissolved for failure to file an annual report or a foreign cooperative for which authority was forfeited by failure to file an annual report may be reinstated by filing the most recent past-due report, together with the statutory filing and penalty fees for an annual report and a reinstatement fee. The fees must be paid and the report filed within one year following the date of the involuntary dissolution or revocation. Reinstatement under this section does not affect the rights or liability of any person for the time from the dissolution or revocation to the reinstatement.
   2. With respect to a reinstatement that is more than one year after involuntary dissolution or revocation:
      1. If the secretary of state dissolves a cooperative or revokes the certificate of authority to transact business in this state of any foreign cooperative, under the provisions of section 10-15-53.2, the cooperative or foreign cooperative may appeal to district court in the judicial district serving Burleigh County for reinstatement by filing with the clerk of court a petition, including:
         1. A copy of the articles of incorporation of the cooperative and a copy of the notice of the involuntary dissolution given by the secretary of state; or
         2. A copy of the certificate of authority of the foreign cooperative to transact business in this state and a copy of the notice of revocation given by the secretary of state.
      2. If the court order sought is one for reinstatement of a cooperative that has been dissolved as provided in subsection 1 of section 10-15-53.2, or reinstatement of the certificate of authority of a foreign cooperative that has been revoked as provided in subsection 2 of section 10-15-53.2, together with any other actions the court deems proper, any order that reverses the decision of the secretary of state shall require the cooperative or foreign cooperative to:
         1. File the most recent past-due annual report;
         2. Pay the fees to the secretary of state for all past-due annual reports as provided in subsection 10 of section 10-15-54; and
         3. Pay the reinstatement fee to the secretary of state as provided in subsection 10 of section 10-15-54.
      3. Appeals from all final orders and judgments entered by the district court under this section in review of any ruling or decision of the secretary of state may be taken as in other civil actions.
   3. Reinstatement returns the cooperative to active status:
      1. As of the date of the reinstatement:
         1. In the office of the secretary of state; and
         2. As to persons adversely affected by the reinstatement; and
      2. As of the date of the involuntary dissolution or revocation:
         1. Validates contracts or other acts within the authority of the articles, and the cooperative is liable for those contracts or acts; and
         2. Restores to the cooperative all assets and rights of the cooperative and its members to the extent they were held by the cooperative and its members before the involuntary dissolution or revocation occurred, except to the extent that assets or rights were affected by acts occurring after the involuntary dissolution or revocation, sold, or otherwise distributed after that time.
   4. Reapplication for any license or permit by a reinstated cooperative must be pursuant to the law governing the issuance of the license or permit.
   5. Appeals from all final orders and judgments by the district court under this subsection may be taken as in other civil actions.
2. With respect to appeals of the rejection by the secretary of state of any record required to be approved by the secretary of state before the record may be filed:
   1. The secretary of state shall give written notice of the rejection to the person that delivered the record, specifying the reasons for rejection.
   2. Within thirty days after the service of the notice of denial, the cooperative or foreign cooperative may appeal to the district court in the judicial district serving Burleigh County by filing with the clerk of court a petition setting forth a copy of the record sought to be filed and a copy of the written rejection of the record by the secretary of state.
   3. The matter must be tried de novo by the court.
   4. The court either shall sustain the action of the secretary of state or direct the secretary of state to take the action as the court may deem proper.
   5. Appeals from all final orders and judgments by the district court under this subsection may be taken as in other civil actions.

The matter must be tried de novo by the court. The court shall either sustain the action of the secretary of state or direct the secretary of state to take the action as the court may deem proper.

History. S.L. 2015, ch. 86, § 8, effective July 1, 2015.

10-15-54. Fees.

No document may be filed or recorded nor any certificate issued until all fees therefor have been paid. Any fee or penalty due under this chapter may be recovered in a suit brought by the attorney general in the name of the state. The secretary of state shall charge and collect from any association for:

1. Filing articles of association and issuing a certificate of association, thirty dollars.
2. Filing articles of amendment and issuing a certificate of amendment, twenty dollars.
3. Filing restated articles of association, thirty dollars.
4. Filing articles of merger or consolidation and issuing a certificate of merger or consolidation, fifty dollars.
5. Filing articles or decree of dissolution, twenty dollars.
6. Receiving service of any process, notice, or demand, the fee provided in section 10-01.1-03.
7. Filing an application of a foreign cooperative for a certificate of authority to do business in this state and issuing a certificate therefor, forty dollars.
8. For filing a name reservation, a transfer of name reservation, a cancellation of name reservation, or a consent to use of name, ten dollars.
9. For filing a change of registered office or change of registered agent, or both, the fees provided in section 10-01.1-03.
10. Filing an annual report of a cooperative or foreign cooperative, twenty dollars.
    1. The secretary of state shall charge and collect additional fees for late filing of the annual report as follows:
       1. After the date provided in subsection 4 of section 10-15-53.1, five dollars.
       2. After the notice provided in subsection 5 of section 10-15-53.1, ten dollars.
       3. After the dissolution of a cooperative or the revocation of the certificate of authority of a foreign cooperative, a reinstatement fee of thirty dollars.
    2. Fees paid to the secretary of state under this subsection are not refundable if an annual report submitted to the secretary of state cannot be filed because the report lacks information required by section 10-15-53.1, or the annual report lacks sufficient payment as required by this subsection.
11. Filing any other document or statement, or issuing any other certificate, ten dollars.
12. Filing a statement of correction, twenty dollars.
13. Any document submitted for approval before the actual time of submission for filing, one-half of the fee provided in this section for filing the document.
14. Furnishing a copy of any record, or paper relating to a cooperative or a foreign cooperative:
    1. The fee provided in section 54-09-04 for copying a record; and
    2. Five dollars for a search of records.
15. Furnishing a certificate of good standing, existence, authorization, or certifying any copy:
    1. Fifteen dollars; and
    2. Five dollars for a search of records.

10-15-55. Defense of ultra vires.

No act and no transfer of property to or by a cooperative is invalid because made in excess of the cooperative’s power, except that such lack of power may be asserted in a proceeding by:

1. A member, stockholder, or director against the cooperative to enjoin any act or any transfer of property to or by the cooperative.
2. The cooperative or its legal representative against any present or former officer or director.
3. The attorney general against the cooperative in an action to dissolve the cooperative or to enjoin it from the transaction of unauthorized business.

10-15-56. Member or stockholder derivative actions.

1. No action may be instituted or maintained in the right of any association by a member or stockholder unless the member or stockholder:
   1. Alleges in a complaint that the person was a member or registered stockholder when any part of the transaction of which the person complains took place, or that the person’s stock thereafter devolved upon the person by operation of law from a stockholder at such time.
   2. Alleges in a complaint with particularity the person’s efforts to secure from the board such action as the person desires. The person shall allege further that the person has either informed the association or board in writing of the ultimate facts of each claim for relief against each director or that the person has delivered to the association or board a copy of the complaint which the person proposes to file. The person shall state the reasons for the person’s failure to obtain such action or the reasons for not making such effort.
2. The action shall not be dismissed or compromised without the approval of the court.
3. If anything is recovered or obtained as the result of the action, whether by means of a compromise and settlement or by a judgment, the court may, out of the proceeds of the action, award the plaintiff the reasonable expenses of maintaining the action, including reasonable attorney’s fees, and may direct the plaintiff to account to the association for the remainder of such proceeds.
4. In any action brought in the right of an association by less than three percent of the members or by holders of less than three percent of any class of stock outstanding, the defendants may require the plaintiff to give security for the reasonable expenses of defending such action, including attorney’s fees. The amount of such security may thereafter be increased or decreased in the discretion of the court upon showing that the security provided is or may be inadequate or is excessive.

10-15-57. Forms to be furnished by secretary of state.

The secretary of state may provide forms for any document to be filed in the secretary of state’s office under this chapter.

10-15-57.1. Correcting a filed record.

With respect to correction of a filed record:

1. Whenever a record authorized by this chapter to be filed with the secretary of state has been filed and inaccurately records the action referred to in the record, contains an inaccurate or erroneous statement, or was defectively or erroneously signed, sealed, acknowledged, or verified, the record may be corrected by filing a statement of correction.
2. A statement of correction:
   1. Must:
      1. Be signed by:
         1. The person that signed the original record; or
         2. By a person authorized to sign on behalf of that person;
      2. Set forth the name of the cooperative that filed the record;
      3. Identify the record to be corrected by description and by the date of its filing with the secretary of state;
      4. Identify the inaccuracy, error, or defect to be corrected; and
      5. Set forth a statement in corrected form of the portion of the record to be corrected.
   2. May not revoke or nullify the record.
3. The statement of correction must be filed with the secretary of state.
4. With respect to the effective date of correction:
   1. A certificate issued by the secretary of state before a record is corrected, with respect to the effect of filing the original record, is considered to be applicable to the record as corrected as of the date the record as corrected is considered to have been filed under this subsection.
   2. After a statement of correction has been filed with the secretary of state, the original record as corrected is considered to have been filed on the date the original record was filed as to all other persons and for all other purposes.

10-15-57.2. Secretary of state — Certificates and certified copies to be received in evidence.

1. All certificates issued by the secretary of state and all copies of records filed in accordance with this chapter, when certified by the secretary of state, may be taken and received in all courts, public offices, and official bodies as evidence of the facts stated.
2. A certificate by the secretary of state under the great seal of this state, as to the existence or nonexistence of the facts relating to a cooperative which would not appear from a certified copy of any of the foregoing records or certificates, may be taken and received in all courts, public offices, and official bodies as evidence of the existence or nonexistence of the facts stated.
3. Any certificate or certified copy issued by the secretary of state under this section may be created and disseminated as an electronic record with the same force and effect as if produced in a paper form.

10-15-58. Use of term cooperative — Penalty for improper use.

1. The term “cooperative”, or any variation thereof, may be used either by any association organized under this chapter or under other laws of this state relating to cooperative corporations.
2. No other person may use the term “cooperative”, or any variation thereof, as part of the person’s corporate or other business name or title, nor may any other person in any other manner represent that that person is a cooperative. A violation of this subsection is an infraction.
3. Any cooperative may obtain an injunction against acts prohibited by subsection 2 without showing any damage to itself.

10-15-59. Associations not in restraint of trade.

No association organized under this chapter shall be deemed to be a combination in restraint of trade or an illegal monopoly, or an attempt to lessen competition or fix prices arbitrarily. The marketing contracts or agreements between any such association and its members, or any agreements authorized in this chapter, shall not be considered illegal nor in restraint of trade.

10-15-60. Application of chapter.

All foreign and domestic cooperatives are governed by the provisions of this chapter except that they shall not apply to cooperatives governed by title 26 or by chapters 6-06, 10-12, 10-13, 36-08, or 49-21, except when the laws governing such associations clearly adopt or refer to any provisions of this chapter or refer to provisions of the general law governing cooperatives.

10-15-61. Short title.

This chapter may be cited as the North Dakota Cooperative Association Act.

10-15-62. Secretary of state — Confidential records.

Any social security number or federal tax identification number disclosed or contained in any document filed with the secretary of state under this chapter is confidential. The secretary of state shall delete or obscure any social security number or federal tax identification number before a copy of any document is released to the public.

10-19.1-00.1. Citation.

This chapter may be cited as the “North Dakota Business Corporation Act”.

10-19.1-01. Definitions.

For purposes of this chapter, unless the context otherwise requires:

1. “Acquiring corporation” means the domestic or foreign corporation that acquires the shares of a corporation in an exchange.
2. “Acquiring organization” means the foreign or domestic organization acquiring the ownership interests of another foreign or domestic organization participating in an exchange.
3. “Address” means:
   1. In the case of a registered office or principal executive office, the mailing address, including the zip code, of the actual office location, which may not be only a post-office box; and
   2. In any other case, the mailing address, including the zip code.
4. “Articles” means:
   1. In the case of a corporation incorporated under or governed by this chapter, articles of incorporation, articles of amendment, a resolution of election to become governed by this chapter, a demand retaining the two-thirds majority for shareholder approval of certain transactions, a statement of change of registered office, registered agent, or name of registered agent, a statement establishing or fixing the rights and preferences of a class or series of shares, a statement of cancellation of authorized shares, articles of merger, articles of abandonment, articles of conversion, and articles of dissolution.
   2. In the case of a foreign corporation, the term includes all records serving a similar function required to be filed with the secretary of state or other officer of the state of incorporation of the foreign corporation.
5. “Authenticated electronic communication” means:
   1. That the electronic communication is delivered:
      1. To the principal place of business of the corporation; or
      2. To an officer or agent of the corporation authorized by the corporation to receive the electronic communication; and
   2. That the electronic communication provides information from which the corporation can reasonably conclude that the electronic communication was sent by the purported sender.
6. “Ballot” means a written ballot or a ballot transmitted by electronic communications.
7. “Board” or “board of directors” means the board of directors of a corporation.
8. “Board member” means:
   1. An individual serving on the board of directors in the case of a corporation; and
   2. An individual serving on the board of governors in the case of a limited liability company.
9. “Bylaws” means the code adopted for the regulation or management of the internal affairs of a corporation, regardless of how that code is designated.
10. “Class”, when used with reference to ownership interests, means a category of ownership interests that differs in designation or one or more rights or preferences from another category of ownership interests of the organization.
11. “Closely held corporation” means a corporation that does not have more than thirty-five shareholders.
12. “Constituent corporation” means a corporation or a foreign corporation that:
    1. In a merger, is either the surviving corporation or a foreign or domestic corporation that is merged into the surviving organization; or
    2. In an exchange, is either the acquiring corporation or a foreign or domestic corporation whose shares are acquired by the acquiring organization.
13. “Constituent organization” means an organization that:
    1. In a merger, is either the surviving organization or an organization that is merged into the surviving organization; or
    2. In an exchange, is either the acquiring organization or an organization whose securities are acquired by the acquiring organization.
14. “Converted organization” means the organization into which a converting organization converts pursuant to sections 10-19.1-104.1 through 10-19.1-104.6.
15. “Converting organization” means an organization that converts into another organization pursuant to sections 10-19.1-104.1 through 10-19.1-104.6.
16. “Corporation” or “domestic corporation” means a corporation, other than a foreign corporation, organized for profit and incorporated under or governed by this chapter.
17. “Data address” means the string of alphanumeric characters on a distributed or other electronic network or database which may be accessed only by knowledge or possession of a private key to facilitate or record transactions on the distributed or other electronic network or database.
18. “Director” means a member of the board.
19. “Distribution” means a direct or indirect transfer of money or other property, other than its own shares, with or without consideration, or an incurrence or issuance of indebtedness, by a corporation to any of its shareholders in respect of its shares, and may be in the form of a dividend, an interim distribution, or a distribution in liquidation, or as consideration for the purchase, redemption, or other acquisition of its shares, or otherwise.
20. “Division” or “combination” means dividing or combining shares of a class or series, whether issued or unissued, into a greater or lesser number of shares of the same class or series.
21. “Domestic organization” means an organization created under the laws of this state.
22. “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
23. “Electronic communication” means any form of communication, not directly involving the physical transmission of paper, including a process of communication which uses a distributed or other electronic network or database, or that:
    1. Creates a record that may be retained, retrieved, and reviewed by a recipient of the communication; and
    2. May be directly reproduced in paper form by the recipient through an automated process.
24. “Electronic record” means a record created, generated, sent, communicated, received, or stored by electronic means.
25. “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with a record and signed or adopted by a person with the intent to sign the record.
26. “Filed with the secretary of state” means, except as otherwise permitted by law or rule:
    1. That a record meeting the applicable requirements of this chapter, together with the fees provided in section 10-19.1-147, was delivered or communicated to the secretary of state by a method or medium of communication acceptable by the secretary of state and was determined by the secretary of state to conform to law.
    2. That the secretary of state did then:
       1. Record the actual date on which the record was filed, and if different the effective date of filing; and
       2. Record the record in the office of the secretary of state.
27. “Foreign corporation” means a corporation organized for profit which is incorporated under laws other than the laws of this state for a purpose for which a corporation may be incorporated under this chapter.
28. “Foreign limited liability company” means a limited liability company organized under laws other than the laws of this state for a purpose for which a limited liability company may be organized under chapter 10-32.1.
29. “Foreign organization” means an organization created under laws other than the laws of this state for a purpose for which an organization may be created under the laws of this state.
30. “Good faith” means honesty in fact in the conduct of an act or transaction.
31. “Governing body” means for an organization that is:
    1. A corporation, its board of directors;
    2. A limited liability company, its board of governors; or
    3. Any other organization, the body selected by its owners that has the ultimate power to determine the policies of the organization and to control its policies.
32. “Governing statute” of an organization means:
    1. With respect to a domestic organization, the following chapters of this code which govern the internal affairs of the organization:
       1. If a corporation, then this chapter;
       2. If a limited liability company, then chapter 10-32.1;
       3. If a general partnership, then chapters 45-13 through 45-21;
       4. If a limited partnership, then chapter 45-10.2;
       5. If a limited liability partnership, then chapter 45-22; and
       6. If a limited liability limited partnership, then chapter 45-23; and
    2. With respect to a foreign organization, the laws of the jurisdiction under which the organization is created and under which the internal affairs of the organization are governed.
33. “Identity” means the name of a shareholder or the data address for which the shareholder has knowledge or possession of the private key uniquely associated with the data address.
34. “Intentionally” means that the person referred to has a purpose to do or fail to do the act or cause the result specified or believes that the act or failure to act, if successful, will cause that result. A person “intentionally” violates a statute:
    1. If the person intentionally does the act or causes the result prohibited by the statute; or
    2. If the person intentionally fails to do the act or cause the result required by the statute, even though the person may not know of the existence or constitutionality of the statute or the scope or meaning of the terms used in the statute.
35. “Legal representative” means a person empowered to act for another person, including an agent, a manager, an officer, a partner, or an associate of an organization; a trustee of a trust; a personal representative; a trustee in bankruptcy; and a receiver, guardian, custodian, or conservator.
36. “Limited liability company” or “domestic limited liability company” means a limited liability company, other than a foreign limited liability company, organized under or governed by chapter 10-32.1.
37. “Network signature” means a string of alphanumeric characters which when broadcasted by a shareholder to the data address’s corresponding distributed or other electronic network or database provides reasonable assurances to a corporation that the shareholder has knowledge or possession of the private key uniquely associated with the data address.
38. “Nonprofit corporation” means a corporation, whether domestic or foreign, incorporated under or governed by chapter 10-33.
39. “Notice”:
    1. Is given by a shareholder of a corporation to the corporation or an officer of the corporation:
       1. When in writing and mailed or delivered to the corporation or the officer at the registered office or principal executive office of the corporation; or
       2. When given by a form of electronic communication consented to by the corporation to which the notice is given if by:
          1. Facsimile communication, when directed to a telephone number at which the corporation has consented to receive notice.
          2. Electronic mail, when directed to an electronic mail address at which the corporation has consented to receive notice.
          3. Posting on an electronic network on which the corporation has consented to receive notice, together with separate notice to the corporation of the specific posting, upon the later of:
             1. The posting; or
             2. The giving of the separate notice.
          4. Any other form of electronic communication by which the corporation has consented to receive notice, when directed to the corporation.
    2. Is given by a publicly held corporation to a shareholder:
       1. If the notice is addressed to the shareholder or group of shareholders in a manner permitted by the rules and regulations under the Securities Exchange Act of 1934, as amended, provided that the corporation has first received any affirmative written consent or implied consent required under those rules and regulations;
       2. When an electronic transmission has been made to a data address provided by the shareholder; or
       3. When electronically transmitted to the shareholder in a manner by which the shareholder has consented, when directed to the shareholder.
    3. Is given, in all other cases:
       1. When mailed to the person at an address designated by the person or at the last-known address of the person;
       2. When deposited with a nationally recognized overnight delivery service for overnight delivery or, if overnight delivery to the person is not available, for delivery as promptly as practicable to the person at an address designated by the person or at the last-known address of the person;
       3. When handed to the person;
       4. When left at the office of the person with a clerk or other person in charge of the office or:
          1. If there is no one in charge, when left in a conspicuous place in the office; or
          2. If the office is closed or the person to be notified has no office, when left at the dwelling house or usual place of abode of the person with some person of suitable age and discretion then residing there;
       5. When given by a form of electronic communication consented to by the person to whom the notice is given if by:
          1. Facsimile communication, when directed to a telephone number at which the person has consented to receive notice.
          2. Electronic mail, when directed to an electronic mail address at which the person has consented to receive notice.
          3. Posting on an electronic network on which the person has consented to receive notice, together with separate notice to the person of the specific posting, upon the later of:
             1. The posting; or
             2. The giving of the separate notice.
          4. Any other form of electronic communication by which the person has consented to receive notice, when directed to the person; or
       6. When the method is fair and reasonable when all of the circumstances are considered.
    4. Is given by mail when deposited in the United States mail with sufficient postage affixed.
    5. Is given by deposit for delivery when deposited for delivery as provided in paragraph 2 of subdivision c, after having made sufficient arrangements for payment by the sender.
    6. Is deemed received when it is given.
40. “Officer” means an individual who is eighteen years of age or more who is:
    1. Elected, appointed, or otherwise designated as the president, the treasurer, or any other officer pursuant to section 10-19.1-52; or
    2. Deemed elected as an officer pursuant to section 10-19.1-56.
41. “Organization”:
    1. Means, whether domestic or foreign, a corporation, limited liability company, general partnership, limited partnership, limited liability partnership, limited liability limited partnership, or any other person subject to a governing statute; but
    2. Excludes:
       1. A nonprofit corporation, whether a domestic nonprofit corporation which is incorporated under chapter 10-33 or a foreign nonprofit corporation which is incorporated in another jurisdiction; and
       2. A nonprofit limited liability company, whether a domestic nonprofit limited liability company which is organized under chapter 10-36 or a foreign nonprofit limited liability company which is organized in another jurisdiction.
42. “Originating records” means for an organization that is:
    1. A corporation, its articles of incorporation;
    2. A limited liability company, its articles of organization;
    3. A limited partnership, its certificate of limited partnership;
    4. A limited liability partnership, its registration; or
    5. A limited liability limited partnership, its certificate of limited liability limited partnership.
43. “Outstanding shares” means all shares duly issued and not reacquired by a corporation.
44. “Owners” means the holders of ownership interests in an organization.
45. “Ownership interests” means for a domestic or foreign organization that is:
    1. A corporation, its shares;
    2. A limited liability company, its membership interests;
    3. A limited partnership, its partnership interests;
    4. A general partnership, its partnership interests;
    5. A limited liability partnership, its partnership interests;
    6. A limited liability limited partnership, its partnership interests; or
    7. Any other organization, its governance or transferable interests.
46. “Parent” of a specified organization means an organization that directly, or indirectly through related organizations, owns more than fifty percent of the voting power of the ownership interests entitled to vote for directors or other members of the governing body of the specified organization.
47. “Principal executive office” means:
    1. If the corporation has an elected or appointed president, then an office where the elected or appointed president of a corporation has an office; or
    2. If the corporation has no elected or appointed president, then the registered office of the corporation.
48. “Publicly held corporation” means a corporation that has a class of equity securities registered pursuant to section 12 of the Securities Exchange Act of 1934 [15 U.S.C. 78L], or is subject to section 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. 78o(d)].
49. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
50. “Record of shareholders” means a record administered by or on behalf of a corporation and which records the identity of all the corporation’s shareholders and the number and class of shares held by each shareholder in accordance with section 10-19.1-84. The term includes a record of all issuances and transfers of shares of a corporation at the discretion of the corporation;
51. “Registered office” means the place in this state designated in a corporation’s articles of incorporation or in a foreign corporation’s certificate of authority as the registered office.
52. “Related organization” means an organization that controls, is controlled by, or is under common control with another organization with control existing if an organization:
    1. Owns, directly or indirectly, at least fifty percent of the ownership interests of another organization;
    2. Has the right, directly or indirectly, to elect, appoint, or remove fifty percent or more of the voting members of the governing body of another organization; or
    3. Has the power, directly or indirectly, to direct or cause the direction of the management and policies of another organization, whether through the ownership of voting interests, by contract, or otherwise.
53. “Remote communication” means communication via electronic communication, conference telephone, videoconference, the internet, or such other means by which persons not physically present in the same location may communicate with each other on a substantially simultaneous basis.
54. “Security” has the meaning given in section 10-04-02.
55. “Series” means a category of shares, within a class of shares authorized or issued by a corporation by or pursuant to a corporation’s articles, that have some of the same rights and preferences as other shares within the same class, but that differ in designation or one or more rights and preferences from another category of shares within that class.
56. “Share” means one of the units, however designated, into which the shareholders’ proprietary interests of the shareholder in a corporation are divided.
57. “Shareholder” means a person registered on the books or records of a corporation or the corporation’s transfer agent or registrar as the owner of whole or fractional shares of the corporation or the owner of a private key uniquely associated with a data address that facilitates or records the sending and receiving of shares.
58. “Signed” means:
    1. That the signature of a person, which may be a facsimile affixed, engraved, by network signature, printed, placed, stamped with indelible ink, transmitted by facsimile telecommunication or electronically, or in any other manner reproduced on the record, is placed on a record with the present intention to authenticate that record; and
    2. With respect to a record required by this chapter to be filed with the secretary of state, that:
       1. The record is signed by a person authorized to do so by this chapter, the articles or bylaws, or a resolution approved by the directors as required under section 10-19.1-46 or the shareholders as required under section 10-19.1-74; and
       2. The signature and the record are communicated by a method or medium of communication acceptable by the secretary of state.
59. “Subscriber” means a person that subscribes for shares in a corporation, whether before or after incorporation.
60. “Subsidiary” of a specified organization means an organization having more than fifty percent of the voting power of its ownership interests entitled to vote for directors, governors, or other members of the governing body of the organization owned directly, or indirectly, through related organizations, by the specified organization.
61. “Surviving corporation” means the domestic or foreign corporation resulting from a merger which:
    1. May pre-exist the merger; or
    2. May be created by the merger.
62. “Surviving organization” means the organization resulting from a merger which:
    1. May pre-exist the merger; or
    2. May be created by the merger.
63. “Vote” includes authorization by written action.
64. “Written action” means:
    1. A written record signed by all of the persons required to take the action; or
    2. The counterparts of a written record signed by any of the persons taking the action described.
       1. Each counterpart constitutes the action of the person signing; and
       2. All the counterparts, taken together, constitute one written action by all of the persons signing the counterparts.

10-19.1-01.1. Legal recognition of electronic records and electronic signatures.

For purposes of this chapter:

1. A record or signature may not be denied legal effect or enforceability solely because it is in electronic form;
2. A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation;
3. If a provision requires a record to be in writing, an electronic record satisfies the requirement; and
4. If a provision requires a signature, an electronic signature satisfies the requirement.

10-19.1-01.2. Knowledge and notice.

1. A person knows or has knowledge of a fact if the person has actual knowledge of it. A person does not know or have knowledge of a fact merely because the person has reason to know or have knowledge of the fact.
2. A person has notice of a fact if the person:
   1. Knows of the fact;
   2. Has received notice of the fact as provided in subsection 39 of section 10-19.1-01;
   3. Has reason to know the fact exists from all of the facts known to the person at the time in question; or
   4. Has notice of it under subsection 3.
3. Subject to subsection 8, a person has notice of:
   1. The intention of a corporation to dissolve, ninety days after the effective date of the filed notice of intent to dissolve;
   2. The dissolution of a corporation, ninety days after the effective date of the filed articles of dissolution;
   3. The conversion of a corporation, ninety days after the effective date of the filed articles of conversion; or
   4. The merger of a corporation, ninety days after the effective date of the filed articles of merger.
4. A person notifies or gives a notification to another person by taking the steps provided in subsection 39 of section 10-19.1-01, whether or not the other person learns of it.
5. A person receives a notification as provided in subsection 39 of section 10-19.1-01.
6. Except as otherwise provided in subsection 7 and except as otherwise provided in subsection 39 of section 10-19.1-01, a person other than an individual knows, has notice, or receives a notification of a fact for purposes of a particular transaction when the individual conducting the transaction for the person knows, has notice, or receives a notification of the fact, or in any event when the fact would have been brought to the attention of the individual if the person had exercised reasonable diligence.
   1. A person other than an individual exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the individual conducting the transaction for the person and there is reasonable compliance with the routines.
   2. Reasonable diligence does not require an individual acting for the person to communicate information unless the communication is part of the regular duties of the individual or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.
7. Knowledge, notice, or receipt of a notification of a fact relating to the corporation by an officer or director is effective immediately as knowledge of, notice to, or receipt of a notification by the corporation, except in the case of a fraud on the corporation committed by or with the consent of the officer or director. Knowledge, notice, or receipt of a notification of a fact relating to the corporation by a shareholder who is not an officer or director, is not effective as knowledge by, notice to, or receipt of a notification by the corporation.
8. Notice otherwise effective under subsection 3 does not affect the power of a person to transfer real property held in the name of a corporation unless at the time of transfer a certified copy of the relevant statement, amendment, or articles, as filed with the secretary of state, has been recorded in the office of the county recorder in the county in which the real property affected by the statement, amendment, or articles is located.
9. With respect to notice given by a form of electronic communication:
   1. Consent by an officer or director to notice given by electronic communication may be given in writing or by authenticated electronic communication. The corporation is entitled to rely on any consent so given until revoked by the officer or director. However, no revocation affects the validity of any notice given before receipt by the corporation of revocation of the consent.
   2. An affidavit of an officer or director or an authorized agent of the corporation, that the notice has been given by a form of electronic communication is, in the absence of fraud, prima facie evidence of the facts stated in the affidavit.

10-19.1-02. Application to corporations incorporated after June 30, 1985.

This chapter applies to all corporations for profit incorporated for a purpose or purposes for which a corporation might be incorporated under this chapter or which are incorporated under chapters 6-05, 10-06.1, 10-30, 10-31, 26-08, or any other chapter which provides that such corporations are governed by the general corporation laws of this state.

10-19.1-02.1. Reservation of legislative right.

The legislative assembly reserves the right to amend or repeal the provisions of this chapter. A corporation incorporated under or governed by this chapter is subject to this reserved right.

10-19.1-03. Election prior to mandatory application. [Repealed]

Repealed by S.L. 1999, ch. 50, § 79.

10-19.1-04. Mandatory application.

After June 30, 1986, this chapter applies to all existing corporations incorporated under any chapter of this code providing for the incorporation of corporations for a purpose or purposes for which a corporation might be incorporated under this chapter or which are otherwise to be governed by the general corporation laws of this state.

All provisions of the articles and bylaws of the corporation that may be included in the articles or bylaws under this chapter remain in effect. All provisions of the articles and bylaws of the corporation that are inconsistent with this chapter cease to be effective on July 1, 1986. Any provisions required by this chapter to be contained in the articles that do not appear in the articles are read into them as a matter of law.

10-19.1-05. Retention of two-thirds majority.

1. If the articles of a corporation described in section 10-19.1-02 do not contain a provision specifying the proportion of the voting power of the shares required for approval of amendments to the articles, plans of merger or exchange, or sales of assets, a shareholder or shareholders holding more than one-third of the voting power of all the shares entitled to vote for any or all of the above-mentioned actions, by signed written demand filed in duplicate original with the secretary of state, along with the fees provided in section 10-19.1-147, may amend the articles of the corporation to include a provision requiring the approval of the holders of two-thirds of the voting power of the shares entitled to vote for any or all of the above-mentioned actions for which no required majority was specified, notwithstanding any provisions of section 10-19.1-19, 10-19.1-98, or 10-19.1-104 to the contrary. Notice that the demand has been filed must be given by the shareholder to an officer of the corporation, but failure to give the notice does not invalidate the demand.
2. A shareholder or shareholders holding more than one-third of the voting power of the shares entitled to vote for dissolution of a corporation described in section 10-19.1-02, by signed written demand filed in duplicate original with the secretary of state, along with the fees provided in section 10-19.1-147, may amend the articles of the corporation to include a provision requiring the approval of the holders of two-thirds of the voting power of all the shares for the authorization of the dissolution of the corporation, notwithstanding the provisions of section 10-19.1-107. Notice that the demand was filed must be given by the shareholder to an officer of the corporation, but failure to give the notice does not invalidate the demand.
3. A signed written demand by the shareholders of a corporation pursuant to subsection 1 or 2 is valid only if filed with the secretary of state before July 1, 1986.

10-19.1-06. Transition.

The continuation or completion of any act by a corporation that has not incorporated under, but has become governed by, this chapter, and the continuation or performance of any executed or wholly or partially executory contract, conveyance, or transfer to or by the corporation, if otherwise lawful before the corporation became governed by this chapter, remains valid, and may be continued, completed, consummated, enforced, or terminated as required or permitted by a statute applicable prior to the date on which the corporation became governed by this chapter.

10-19.1-07. Reservation of legislative power. [Repealed]

Repealed by S.L. 1995, ch. 55, § 30.

10-19.1-08. Purposes.

A corporation may be incorporated under this chapter for any lawful business purpose or purposes, unless some other statute of this state requires incorporation for any of those purposes under a different law. Unless otherwise provided in its articles, a corporation has general business purposes.

10-19.1-09. Incorporators.

One or more individuals of the age of eighteen years or more may act as incorporators of a corporation by filing with the secretary of state articles of incorporation for the corporation.

10-19.1-10. Articles.

1. The articles of incorporation must contain:
   1. The name of the corporation.
   2. The name of the registered agent as provided in chapter 10-01.1 and, if a noncommercial registered agent, then the address of that noncommercial registered agent in this state.
   3. The address of the principal executive office.
   4. The aggregate number of shares that the corporation has authority to issue.
   5. The name and address of each incorporator.
   6. The effective date of incorporation if a later date than that on which the certificate of incorporation is issued by the secretary of state, which may not be later than ninety days after the date on which the certificate of incorporation is issued.
2. The following provisions govern a corporation unless modified in the articles or in a shareholder control agreement under section 10-19.1-83:
   1. A corporation has general business purposes as provided in section 10-19.1-08.
   2. A corporation has perpetual existence and certain powers as provided in section 10-19.1-26.
   3. The power to adopt, amend, or repeal the bylaws is vested in the board as provided in section 10-19.1-31.
   4. A corporation must allow cumulative voting for directors as provided in section 10-19.1-39.
   5. The affirmative vote of a majority of directors present is required for an action of the board as provided in section 10-19.1-46.
   6. A written action by the board taken without a meeting must be signed by all directors as provided in section 10-19.1-47.
   7. The board may authorize the issuance of securities and rights to purchase securities as provided in subsection 1 of section 10-19.1-61.
   8. All shares are common shares entitled to vote and are of one class and one series as provided in subdivisions a and b of subsection 2 of section 10-19.1-61.
   9. All shares have equal rights and preferences in all matters not otherwise provided for by the board as provided in subdivisions a and b of subsection 2 of section 10-19.1-61.
   10. The par value of shares is fixed at one cent per share for certain purposes and may be fixed by the board for certain other purposes as provided in subdivisions a and b of subsection 2 of section 10-19.1-61.
   11. The board may effect share dividends, divisions, and combinations under certain circumstances without shareholder approval as provided in section 10-19.1-61.1.
   12. The board or the shareholders may issue shares for any consideration or for no consideration to effectuate share dividends or splits and determine the value of nonmonetary consideration as provided in subsection 1 of section 10-19.1-63.
   13. Shares of a class or series may not be issued to holders of shares of another class or series to effectuate share dividends or splits, unless authorized by a majority of the voting power of the shares of the same class or series as the shares to be issued as provided in subsection 1 of section 10-19.1-63.
   14. A corporation may issue rights to purchase securities whose terms, provisions, and conditions are fixed by the board as provided in section 10-19.1-64.
   15. A shareholder has certain pre-emptive rights, unless otherwise provided by the board as provided in section 10-19.1-65.
   16. Each share has one vote unless otherwise provided in the terms of the share as provided in subsection 5 of section 10-19.1-73.2.
   17. The affirmative vote of the holders of a majority of the voting power of the shares present and entitled to vote at a duly held meeting is required for an action of the shareholders, except when this chapter requires the affirmative vote of:
       1. A plurality of the votes cast as provided in subsection 1 of section 10-19.1-39; or
       2. A majority of the voting power of all shares entitled to vote as provided in subsection 1 of section 10-19.1-74.
   18. A written action of shareholders must be signed by all shareholders as provided in section 10-19.1-75.
   19. Shares of a corporation acquired by the corporation may be reissued as provided in subsection 1 of section 10-19.1-93.
   20. An exchange need not be approved by shareholders of the acquiring corporation unless the outstanding shares entitled to vote of that corporation will be increased by more than twenty percent immediately after the exchange as provided in subdivision c of subsection 3 of section 10-19.1-98.
   21. An exchange need not be approved by shareholders of the acquiring corporation unless the outstanding participating shares of that corporation will be increased by more than twenty percent immediately after the exchange as provided in subdivision d of subsection 3 of section 10-19.1-98.
3. The following provisions govern a corporation unless modified in the articles, in a shareholder control agreement under section 10-19.1-83, or in the bylaws:
   1. A director serves for an indefinite term that expires upon the election and qualification of a successor as provided in section 10-19.1-35.
   2. The compensation of directors is fixed by the board as provided in section 10-19.1-37.
   3. The method provided in section 10-19.1-41 or 10-19.1-41.1 must be used for removal of directors.
   4. The method provided in section 10-19.1-42 must be used for filling board vacancies.
   5. If the board fails to select a place for a board meeting, it must be held at the principal executive office as provided in subsection 1 of section 10-19.1-43.
   6. A director may call a board meeting, and the notice of the meeting need not state the purpose of the meeting as provided in subsection 3 of section 10-19.1-43.
   7. A majority of the board is a quorum for a board meeting as provided in section 10-19.1-45.
   8. A committee:
      1. Must consist of one or more individuals, who need not be directors, appointed by affirmative vote of a majority of the directors present as provided in subsection 2 of section 10-19.1-48; and
      2. May create one or more subcommittees, each consisting of one or more members of the committees and may delegate to the subcommittee any or all of the authority of the committee as provided in subsection 7 of section 10-19.1-48.
   9. The board may establish a special litigation committee as provided in section 10-19.1-48.
   10. Unless the board determines otherwise, the officers have specified duties as provided in section 10-19.1-53.
   11. Officers may delegate some or all of their duties and powers, if not prohibited by the board from doing so as provided in section 10-19.1-59.
   12. The corporation may establish uncertificated shares as provided in subsection 6 of section 10-19.1-66.
   13. Regular meetings of shareholders need not be held, unless demanded by a shareholder under certain conditions as provided in section 10-19.1-71.
   14. No fewer than ten nor more than fifty days’ notice is required for a meeting of shareholders as provided in subsection 3 of section 10-19.1-73.
   15. The board may fix a date up to fifty days before the date of a shareholders’ meeting as the date for the determination of the holders of shares entitled to notice of and entitled to vote at the meeting as provided in subsection 1 of section 10-19.1-73.2.
   16. The number of shares required for a quorum at a shareholders’ meeting is a majority of the voting power of the shares entitled to vote at the meeting as provided in section 10-19.1-76.
   17. Indemnification of certain persons is required as provided in section 10-19.1-91.
   18. The board may authorize, and the corporation may make, distributions not prohibited, limited, or restricted by an agreement as provided in subsection 1 of section 10-19.1-92.
4. The following provisions relating to the management of the business or the regulation of the affairs of a corporation may be included either in the articles or, except for naming members of the first board fixing a greater than majority director or shareholder vote or giving or prescribing the manner of giving voting rights to persons other than shareholders otherwise than pursuant to the articles, or eliminating or limiting a director’s personal liability, in the bylaws:
   1. The members of the first board may be named in the articles as provided in subsection 1 of section 10-19.1-32.
   2. A manner for increasing or decreasing the number of directors as provided in section 10-19.1-33.
   3. Additional qualifications for directors may be imposed as provided in section 10-19.1-34.
   4. Directors may be classified as provided in section 10-19.1-38.
   5. The day or date, time, and place of board meetings may be fixed as provided in subsection 1 of section 10-19.1-43.
   6. Absent directors may be permitted to give written consent or opposition to a proposal as provided in section 10-19.1-44.
   7. A larger than majority vote may be required for board action as provided in section 10-19.1-46.
   8. A director’s personal liability to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director may be eliminated or limited in the articles as provided in section 10-19.1-50.
   9. Authority to sign and deliver certain documents may be delegated to an officer or agent of the corporation other than the president as provided in section 10-19.1-53.
   10. Additional officers may be designated as provided in section 10-19.1-52.
   11. Additional powers, rights, duties, and responsibilities may be given to officers as provided in section 10-19.1-53.
   12. A method for filling vacant offices may be specified as provided in subsection 3 of section 10-19.1-58.
   13. A certain officer or agent may be authorized to sign share certificates as provided in subsection 1 of section 10-19.1-66.
   14. The transfer or registration of transfer of securities may be restricted as provided in section 10-19.1-70.
   15. The day or date, time, and place of regular shareholder meetings may be fixed as provided in subsection 3 of section 10-19.1-71.
   16. Certain persons may be authorized to call special meetings of shareholders as provided in subsection 1 of section 10-19.1-72.
   17. Notices of shareholder meetings may be required to contain certain information as provided in subsection 3 of section 10-19.1-73.
   18. Voting rights may be granted in or pursuant to the articles to persons who are not shareholders as provided in subsection 6 of section 10-19.1-73.2.
   19. A larger than majority vote may be required for shareholder action as provided in section 10-19.1-74.
   20. Corporate actions giving rise to dissenter rights may be designated as provided in subdivision d of subsection 1 of section 10-19.1-87.
   21. The rights and priorities of persons to receive distributions may be established as provided in section 10-19.1-92.
5. The articles may contain other provisions not inconsistent with section 10-19.1-32 or any other provision of law relating to the management of the business or the regulation of the affairs of the corporation.
6. It is not necessary to set forth in the articles any of the corporate powers granted by this chapter.
7. Subsection 4 does not limit:
   1. The permissible scope of a shareholder control agreement; or
   2. The right of the board, by resolution, to take an action that the bylaws may authorize under this section without including the authorization in the bylaws, unless the authorization is required to be included in the bylaws by another provision of this chapter.
8. Except for provisions included pursuant to subsection 1, any provision of the articles may:
   1. Be made dependent upon facts ascertainable outside the articles, but only if the manner in which the facts operate upon the provision is clearly and expressly set forth in the articles; and
   2. Incorporate by reference some or all of the terms of any agreements, contracts, or other arrangements entered into by the corporation, but only if the corporation retains at its principal executive office a copy of the agreements, contracts, or other arrangements or the portions incorporated by reference.

10-19.1-11. Filing of articles of incorporation.

An original of the articles of incorporation must be filed with the secretary of state. If the secretary of state finds that the articles of incorporation conform to law and all fees are paid under section 10-19.1-147, the secretary of state shall issue a certificate of incorporation to the incorporators or the incorporators’ representative.

10-19.1-12. Effective date of incorporation.

The corporate existence begins upon the issuance of the certificate of incorporation or at a later date as specified in the articles of incorporation. The certificate of incorporation is conclusive evidence that all conditions precedent and required to be performed by the incorporators have been performed and that the corporation has been incorporated under this chapter, except as against this state in a proceeding to cancel or revoke the certificate of incorporation or for involuntary dissolution of the corporation.

10-19.1-13. Corporate name. [Contingent effective date – See note]

1. The corporate name:
   1. Must be expressed in letters or characters used in the English language as those letters or characters appear in the American standard code for information interchange (ASCII) table.
   2. Must contain the word “company”, “corporation”, “incorporated”, “limited”, or an abbreviation of one or more of these words.
   3. May not contain the words “limited liability company”, “limited partnership”, “limited liability partnership”, “limited liability limited partnership”, or an abbreviation of these words.
   4. May not contain a word or phrase indicating or implying the corporation:
      1. Is incorporated for a purpose other than:
         1. A lawful business purpose for which a corporation may be incorporated under this chapter; or
         2. For a purpose stated in its articles of incorporation; or
      2. May not be incorporated under this chapter.
   5. Must be distinguishable in the records of the secretary of state from:
      1. The name, whether foreign and authorized to do business in this state or domestic, unless there is filed with the articles a record that complies with subsection 3, of:
         1. Another corporation;
         2. A corporation incorporated or authorized to do business in this state under another chapter of this code;
         3. A limited liability company;
         4. A limited partnership;
         5. A limited liability partnership; or
         6. A limited liability limited partnership;
      2. A name the right to which is, at the time of incorporation, reserved in the manner provided in section 10-19.1-14, 10-32.1-12, 10-33-11, 45-10.2-11, 45-13-04.2, or 45-22-05;
      3. A fictitious name registered in the manner provided in chapter 45-11;
      4. A trade name registered in the manner provided in chapter 47-25; or
      5. A trademark or service mark registered in the manner provided in chapter 47-22.
2. The secretary of state shall determine whether a corporate name is distinguishable in the secretary of state’s records from another name for purposes of this chapter and may adopt rules reasonable or necessary for making these determinations.
3. If the secretary of state determines a corporate name is indistinguishable in the secretary of state’s records from another name for purposes of this chapter, the corporate name may not be used unless there is filed with the articles:
   1. The written consent of the holder of the rights to the name to which the proposed name has been determined to be indistinguishable; or
   2. A certified copy of a judgment of a court in this state establishing the prior right of the applicant to the use of the name in this state.
4. This section does not affect the right of a domestic corporation existing on July 1, 1986, or a foreign corporation authorized to do business in this state on that date to continue the use of its name.
5. This section and section 10-19.1-14 do not:
   1. Abrogate or limit:
      1. The law of unfair competition or unfair practices;
      2. Chapter 47-25;
      3. The laws of the United States with respect to the right to acquire and protect copyrights, trade names, trademarks, service names, and service marks; or
      4. Any other rights to the exclusive use of names or symbols; or
   2. Derogate the common law or the principles of equity.
6. A domestic or foreign corporation that is the surviving organization in a merger with one or more other organizations, or that acquires by sale, lease, or other disposition to or exchange with an organization all or substantially all of the assets of another organization including its name, may have the same name, subject to the requirements of subsection 1, as that used in this state by any of the other organizations, if the other organization whose name is sought to be used:
   1. Was incorporated, organized, formed, or registered under the laws of this state;
   2. Is authorized to transact business or conduct activities in this state;
   3. Holds a reserved name in the manner provided in section 10-19.1-14, 10-32.1-12, 10-33-11, 45-10.2-11, 45-13-04.2, or 45-22-05;
   4. Holds a fictitious name registered in the manner provided in chapter 45-11;
   5. Holds a trade name registered in the manner provided in chapter 47-25; or
   6. Holds a trademark or service mark registered in the manner provided in chapter 47-22.
7. The use of a name by a corporation in violation of this section does not affect or vitiate its corporate existence. However, a court in this state may, upon application of the state or of an interested or affected person, enjoin the corporation from doing business under a name assumed in violation of this section, although its articles may have been filed with the secretary of state and a certificate of incorporation issued.
8. A corporation whose period of existence has expired or is involuntarily dissolved by the secretary of state pursuant to section 10-19.1-146 or 10-19.1-146.1 may reacquire the right to use that name by refiling articles of incorporation pursuant to section 10-19.1-11, unless the name has been adopted for use or reserved by another person, in which case the filing will be rejected unless the filing is accompanied by a written consent or judgment as provided in subsection 3. A corporation that cannot reacquire the use of its corporate name shall adopt a new corporate name that complies with the provisions of this section:
   1. By refiling articles of incorporation pursuant to section 10-19.1-11;
   2. By amending pursuant to section 10-19.1-17; or
   3. By reinstating pursuant to section 10-19.1-146.
9. Subject to section 10-19.1-133, this section applies to a foreign corporation transacting business in this state, having a certificate of authority to transact business in this state, or applying for a certificate of authority.
10. An amendment that only changes the name of the corporation may be authorized by a resolution approved by the board and may be submitted to and approved by the shareholders as provided in section 10-19.1-18.
11. A corporation that files its articles of incorporation with an effective date later than the date of filing as provided in section 10-19.1-12 shall maintain the right to the name until the effective date.

10-19.1-14. Reserved name.

1. The exclusive right to the use of a corporate name otherwise permitted by section 10-19.1-13 may be reserved by any person.
2. The reservation must be made by filing with the secretary of state a request that the name be reserved, together with the fees provided in section 10-19.1-147:
   1. If the name is available for use by the applicant, the secretary of state shall reserve the name for the exclusive use of the applicant for a period of twelve months.
   2. The reservation may be renewed for successive twelve-month periods.
3. The right to the exclusive use of a corporate name reserved pursuant to this section may be transferred to another person by or on behalf of the applicant for whom the name was reserved by filing with the secretary of state a notice of the transfer and specifying the name and address of the transferee, together with the fees provided in section 10-19.1-147.
4. The right to the exclusive use of a corporate name reserved pursuant to this section may be canceled by or on behalf of the applicant for whom the name was reserved by filing with the secretary of state a notice of the cancellation, together with the fees provided in section 10-19.1-147.
5. The secretary of state may destroy all reserved name requests and index thereof one year after expiration.

10-19.1-15. Registered office — Registered agent.

A corporation shall continuously maintain a registered agent in this state as provided by chapter 10-01.1, and if a noncommercial registered agent, then the address of that noncommercial registered agent in this state.

10-19.1-16. Change of registered office or registered agent — Change of name of registered agent.

As provided in chapter 10-01.1:

1. A corporation may change its registered office, change its registered agent, or state a change in the name of its registered agent.
2. A registered agent of a corporation may resign.

10-19.1-17. Amendment of articles.

The articles of a corporation may be amended at any time to include or modify any provision that is required or permitted to appear in the articles or to omit any provision not required to be included in the articles, except that when articles are amended to restate them, the name and address of each incorporator and each initial director may be omitted. If only a change of address of the principal executive office is required, an amendment need not be filed; however, the change of address of the principal executive office must then be reported on the annual report filed after the change or be submitted in writing to the secretary of state without a filing fee. Unless otherwise provided in this chapter, the articles may be amended or modified only in accordance with sections 10-19.1-18, 10-19.1-19, and 10-19.1-20.

10-19.1-18. Procedure for amendment when no shares are outstanding.

Before the issuance of shares by a corporation, the articles also may be amended pursuant to section 10-19.1-30 by the incorporators or by the board. The articles may be amended by the board to change or cancel a statement pursuant to subsection 4 of section 10-19.1-61, establishing or fixing the rights and preferences of a class or series of shares before the issuance of any shares of that class or series or at any subsequent time that no shares of that class or series are outstanding by filing articles of amendment or a statement of cancellation, as appropriate, with the secretary of state. If a statement filed pursuant to subsection 4 of section 10-19.1-61 is canceled, the shares of the class and series originally covered by the statement have the status of authorized but unissued, undesignated shares, unless the articles otherwise provide. If the articles provide that the canceled shares may not be reissued, the statement of cancellation must include the information specified in subsection 2 of section 10-19.1-93.

10-19.1-19. Procedure for amendment after issuance of shares.

1. Except as otherwise provided in section 10-19.1-18, after the issuance of shares by the corporation, the articles may be amended in the manner set forth in this section.
2. A resolution approved by the affirmative vote of a majority of the directors present, or proposed by a shareholder or shareholders holding five percent or more of the voting power of the shares entitled to vote, that sets forth the proposed amendment must be submitted to a vote at the next regular or special meeting of the shareholders of which notice has not yet been given but still can be timely given. Any number of amendments may be submitted to the shareholders and voted upon at one meeting, but the same or substantially the same amendment proposed by a shareholder or shareholders need not be submitted to the shareholders or be voted upon at more than one meeting during a fifteen-month period, except that if a corporation is registered or reporting under the federal securities laws, the provisions of this sentence do not apply to the extent that these provisions are in conflict with the federal securities laws or rules adopted under those laws. The resolution may amend the articles in their entirety to restate and supersede the original articles and all amendments to them.
3. Written notice of the shareholders’ meeting setting forth the substance of the proposed amendment must be given to each shareholder entitled to vote in the manner provided in section 10-19.1-73 for the giving of notice of meetings of shareholders.
4. The proposed amendment to the articles is adopted:
   1. When approved by the affirmative vote of the shareholders required by section 10-19.1-74, except as provided in subdivision b and in subsection 5; or
   2. If the articles provide for a specified proportion or number equal to or larger than the majority necessary to transact a specified type of business at a meeting, or if it is proposed to amend the articles to provide for a specified proportion or number equal to or larger than the majority necessary to transact a specified type of business at a meeting, the affirmative vote necessary to add the provision to, or to amend an existing provision in, the articles is the larger of:
      1. The specified proportion or number or, in the absence of a specific provision, the affirmative vote necessary to transact the type of business described in the proposed amendment at a meeting immediately before the effectiveness of the proposed amendment; or
      2. The specified proportion or number that would, upon effectiveness of the proposed amendment, be necessary to transact the specified type of business at a meeting.
5. An amendment that merely restates the existing articles, as amended, may be authorized by a resolution approved by the board and may be submitted to and approved by the shareholders as provided in subsections 2, 3, and 4.
6. Notwithstanding any contrary provision of this chapter, the board of a corporation that is registered as an open-end management investment company under the Investment Company Act of 1940, as amended, may, without shareholder approval, increase or decrease, but not below the then outstanding shares, the aggregate number of shares the corporation has authority to issue, including shares of any class or series, unless a provision has been included in the corporation’s articles prohibiting the board from increasing or decreasing the aggregate number of shares, or any class or series of shares, as applicable, that the corporation has authority to issue.

10-19.1-20. Class or series voting on amendments.

The holders of the outstanding shares of a class or series are entitled to vote as a class or series upon a proposed amendment, whether or not entitled to vote thereon by the provisions of the articles, if the amendment would:

1. Increase or decrease the par value of the shares of the class or series;
2. Effect an exchange, reclassification, or cancellation of all or part of the shares of the class or series or effect a combination of outstanding shares of a class or series into a lesser number of shares of the class or series when each other class and series is not subject to a similar combination;
3. Effect an exchange, or create a right of exchange, of all or any part of the shares of another class or series for the shares of the class or series;
4. Change the rights or preferences of the shares of the class or series;
5. Create a new class or series of shares having rights and preferences prior and superior to the shares of that class or series, or increase the rights and preferences or the number of authorized shares, of a class or series having rights and preferences prior or superior to the shares of that class or series;
6. Divide the shares of the class into series and determine the designation of each series and the variations in the relative rights and preferences between the shares of each series, or authorize the board to do so;
7. Limit or deny any existing pre-emptive rights of the shares of the class or series; or
8. Cancel or otherwise affect distributions on the shares of the class or series that have accrued but have not been declared.

10-19.1-21. Articles of amendment.

When an amendment has been adopted, articles of amendment must be prepared which contain:

1. The name of the corporation.
2. The amendment adopted.
3. The date of the adoption of the amendment by the shareholders or by the incorporators or the board when no shares have been issued.
4. If the amendment restates the articles in their entirety, a statement that the restated articles supersede the original articles and all amendments to the original articles.
5. A statement that the amendment has been adopted pursuant to this chapter.

10-19.1-22. Effect of amendment.

1. An amendment does not affect an existing cause of action in favor of or against the corporation, nor a pending suit to which the corporation is a party, nor the existing rights of persons other than shareholders.
2. If the corporate name is changed by the amendment, a suit brought by or against the corporation under its former name does not abate for that reason.
3. When effective under section 10-19.1-24, an amendment restating the articles in their entirety supersedes the original articles and all amendments to the original articles.

10-19.1-23. Filing articles of amendment.

An original of the articles of amendment must be filed with the secretary of state. If the secretary of state finds that the articles of amendment conform to law and all fees have been paid as provided under section 10-19.1-147, the articles of amendment must be recorded in the office of the secretary of state. A corporation that amends the corporate name and is the owner of a service mark, trademark, or trade name, is a general partner named in a fictitious name certificate, or is a general partner in a limited partnership or a limited liability limited partnership, or is a managing partner of a limited liability partnership that is on file with the secretary of state must change or amend the corporation’s name in each registration when the corporation files an amendment.

10-19.1-24. Effective date of articles of amendment.

The articles of amendment are effective upon acceptance by the secretary of state or at another time within thirty days after acceptance if the articles of amendment so provide.

10-19.1-25. Amendment of articles in court-supervised reorganization.

1. Whenever a plan of reorganization of a corporation has been confirmed by decree or order of a court of competent jurisdiction in proceedings for the reorganization of the corporation, pursuant to the provisions of any applicable statute of the United States relating to reorganization of corporations, the articles may be amended, in the manner provided in this section, in as many respects as may be necessary to carry out the plan and to put it into effect, so long as the articles as amended contain only provisions which might be lawfully contained in original articles at the time of making the amendment. In particular, and without limitation upon any general power of amendment, the articles may be amended to:
   1. Change the corporate name, period of duration, or corporate purposes of the corporation.
   2. Repeal, alter, or amend the bylaws of the corporation.
   3. Change the aggregate number of shares, or shares of any class, which the corporation has the authority to issue.
   4. Change the preferences, limitations, relative rights in respect of all or any part of the shares of the corporation, and classify, reclassify, or cancel all or any part thereof, whether issued or unissued.
   5. Authorize the issuance of bonds, debentures, or other obligations of the corporation, whether convertible into shares of any class or bearing warrants or other evidences of optional rights to purchase or subscribe for shares of any class, and fix the terms and conditions thereof.
   6. Constitute or reconstitute and classify or reclassify a board and appoint directors and officers in place of or in addition to all or any of the directors or officers then in office.
2. Amendments to the articles pursuant to subsection 1 must be made in the following manner:
   1. Articles of amendment approved by decree or order of the court must be executed and verified by the person or persons designated or appointed by the court for that purpose and must set forth the name of the corporation, the amendments of the articles approved by the court, the date of the decree or order approving the articles of amendment, and the title of the proceedings in which the decree or order was entered by a court having jurisdiction of the proceedings for the reorganization of the corporation under the provisions of an applicable statute of the United States.
   2. An original of the articles of amendment must be filed with the secretary of state. If the secretary of state finds that the articles of amendment conform to law and that all fees have been paid as provided in section 10-19.1-147, the original must be recorded in the office of the secretary of state.
3. The articles of amendment become effective upon their acceptance by the secretary of state or at another time within thirty days after acceptance if the articles of amendment so provide.
4. The articles are amended accordingly with the same effect as if the amendment had been adopted by unanimous action of the directors and shareholders.

10-19.1-26. General powers.

1. A corporation has the powers set forth in this section, subject to any limitations provided in any other statute of this state or in its articles.
2. A corporation has perpetual duration.
3. A corporation may sue and be sued, complain and defend and participate as a party or otherwise in any legal, administrative, or arbitration proceeding, in its corporate name.
4. A corporation may purchase, lease, or otherwise acquire, own, hold, improve, use and otherwise deal in and with, real or personal property, or any interest in property, wherever situated.
5. A corporation may sell, convey, mortgage, create a security interest in, lease, exchange, transfer, or otherwise dispose of all or any part of its real or personal property, or any interest in property, wherever situated.
6. A corporation may purchase, subscribe for, or otherwise acquire, own, hold, vote, use, employ, sell, exchange, mortgage, lend, create a security interest in, or otherwise dispose of, use and deal in and with, securities or other interests in, or obligations of, a person or direct or indirect obligations of any domestic or foreign government or instrumentality.
7. A corporation may make contracts and incur liabilities, borrow money, issue its securities, and secure any of its obligations by mortgage of or creation of a security interest in all or any of its property, franchises, and income.
8. A corporation may invest and reinvest its funds.
9. A corporation may take and hold real and personal property, whether or not of a kind sold or otherwise dealt in by the corporation, as security for the payment of money loaned, advanced, or invested.
10. A corporation may conduct its business, carry on its operations, have offices, and exercise the powers granted by this chapter anywhere in the universe.
11. Except as otherwise prohibited by law, a corporation may make donations, irrespective of corporate benefit, for the public welfare; for social, community, charitable, religious, educational, scientific, civic, literary, testing, and public safety purposes; for the purpose of fostering national or international amateur sports competition; the prevention of cruelty to children and animals; and for similar or related purposes.
12. A corporation may pay pensions, retirement allowances, and compensation for past services, and establish employee or incentive benefit plans, trusts, and provisions for the benefit of its and its related organizations’ officers, managers, directors, governors, employees, and agents and, in the case of a related organization that is a limited liability company, members who provide services to the limited liability company, and the families, dependents, and beneficiaries of any of them. It may indemnify and purchase and maintain insurance for a fiduciary of any of these employee benefit and incentive plans, trusts, and provisions.
13. A corporation may participate in any capacity in the promotion, organization, ownership, management, and operation of any organization or in any transaction, undertaking, or arrangement that the participating corporation would have power to conduct by itself, whether or not the participation involves sharing or delegation of control.
14. A corporation may provide for its benefit life insurance and other insurance with respect to the services of its officers, directors, employees, and agents, or on the life of a shareholder for the purpose of acquiring at the death of the shareholder any or all shares in the corporation owned by the shareholder.
15. A corporation may have, alter at pleasure, and use a corporate seal as provided in section 10-19.1-27.
16. A corporation may adopt, amend, and repeal bylaws relating to the management of the business or the regulation of the affairs of the corporation as provided in section 10-19.1-31.
17. A corporation may establish committees of the board of directors, elect or appoint persons to the committees, and define their duties as provided in section 10-19.1-48 and fix their compensation.
18. A corporation may elect or appoint officers, employees, and agents of the corporation, and define their duties and fix their compensation.
19. A corporation may issue securities and rights to purchase securities as provided in sections 10-19.1-61 through 10-19.1-69.
20. A corporation may lend money to, guarantee an obligation of, become a surety for, or otherwise financially assist persons as provided in section 10-19.1-89.
21. A corporation may make advances to its directors, officers, and employees and those of its subsidiaries as provided in section 10-19.1-90.
22. A corporation shall indemnify those persons identified in section 10-19.1-91 against certain expenses and liabilities only as provided in section 10-19.1-91 and may indemnify other persons.
23. A corporation may conduct all or part of its business under one or more trade names as provided in chapter 47-25.
24. A corporation may acquire an ownership interest in another organization.
25. A corporation may have and exercise all other powers necessary or convenient to effect any or all of the business purposes for which the corporation is incorporated.
26. A corporation only may seek to obtain a license or permit required of the state after the articles of incorporation are filed with the secretary of state.

10-19.1-27. Corporate seal.

A corporation may, but need not, have a corporate seal. The use or nonuse of a corporate seal does not affect the validity, recordability, or enforceability of a record or act. If a corporation has a corporate seal, the use of the seal by the corporation on a record is not necessary.

10-19.1-28. Defense of ultra vires.

No act of a corporation and no conveyance or transfer of real or personal property to or by a corporation is invalid by reason of the fact that the corporation was without capacity or power to do such act or to make or receive such conveyance or transfer but such lack of capacity or power may be asserted:

1. In a proceeding by a shareholder against the corporation to enjoin the doing of any act or acts or the transfer of real or personal property by or to the corporation. If the unauthorized acts or transfers sought to be enjoined are being, or are to be, performed or made pursuant to any contract to which the corporation is a party, the court may, if all of the parties to the contract are parties to the proceeding and if it deems the same to be equitable, set aside and enjoin the performance of such contract, and in so doing may allow to the corporation or to the other parties to the contract, as the case may be, compensation for the loss or damage sustained by either of them which may result from the action of the court in setting aside and enjoining the performance of such contract. However, anticipated profits to be derived from the performance of the contract shall not be awarded by the court as a loss or damage sustained.
2. In a proceeding by the corporation, whether acting directly or through a receiver, trustee, or other legal representative, or through shareholders in a representative suit, against the incumbent or former officers or directors of the corporation.
3. In a proceeding by the attorney general, as provided in this chapter, to dissolve the corporation or to enjoin the corporation from the transaction of unauthorized business.

10-19.1-29. Unauthorized assumption of corporate powers — Liability.

All persons who assume to act as a corporation without authority are jointly and severally liable for all debts and liabilities incurred or arising as a result.

10-19.1-30. Organization.

1. If the first board is not named in the articles, the incorporators may elect the first board or may act as directors with all of the powers, rights, duties, and liabilities of directors, until directors are elected or until shares are issued, whichever occurs first.
2. After the issuance of the certificate of incorporation, the incorporators or the directors named in the articles shall, within a reasonable time, hold an organizational meeting at the call of a majority of the incorporators or of the directors named in the articles or take written action, for the purposes of transacting business and taking actions necessary or appropriate to complete the organization of the corporation, including amending the articles; electing directors; adopting bylaws; electing officers; adopting banking resolutions; authorizing or ratifying the purchase, lease, or other acquisition of suitable space, furniture, furnishings, supplies, and materials; approving a corporate seal; approving forms of certificates for shares of the corporation; adopting a fiscal year for the corporation; accepting subscriptions for and issuing shares of the corporation; and making any appropriate tax elections. If a meeting is held, the person or persons calling the meeting shall give at least three days’ notice of the meeting to each incorporator or director named, stating the date, time, and place of the meeting. Incorporators and directors may waive notice of an organizational meeting in the same manner a director may waive notice of meetings of the board under subsection 5 of section 10-19.1-43.

10-19.1-31. Bylaws.

1. A corporation may, but need not, have bylaws. Bylaws may contain any provision relating to the management or the regulation of the affairs of the corporation not inconsistent with section 10-19.1-32 or any other provision of law or the articles, including:
   1. The number of directors, and the qualifications, manner of election, powers, duties, and compensation, if any, of directors;
   2. The qualifications of shareholders;
   3. Different classes of shares;
   4. The manner of admission, withdrawal, suspension, and expulsion of shareholders;
   5. Property, voting, and other rights and privileges of shareholders;
   6. The appointment and authority of committees;
   7. The appointment or election, duties, compensation, and tenure of officers;
   8. The time, place, and manner of calling, conducting, and giving notice of shareholder, board, and committee meetings, or of conducting mail ballots;
   9. The making of reports and financial statements to shareholders; or
   10. The number establishing a quorum for meetings of members and the board.
2. Unless reserved by the articles to shareholders with voting rights, initial bylaws may be adopted by a majority of the incorporators, or by the first board pursuant to section 10-19.1-30. Unless reserved by the articles to the shareholders with voting rights, the power to adopt, amend, or repeal the bylaws is vested in the board. The power of the board is subject to the power of the shareholders, exercisable in the manner provided in subsection 3, to adopt, amend, or repeal bylaws adopted, amended, or repealed by the board.
3. Unless the articles or bylaws provide otherwise, a shareholder or shareholders holding five percent or more of the voting power of the shares entitled to vote may propose a resolution for action by the shareholders to adopt, amend, or repeal bylaws adopted, amended, or repealed by the board.
   1. The resolution must set forth the provisions proposed for adoption, amendment, or repeal.
   2. The limitations and procedures for submitting, considering, and adopting the resolution are the same as provided in subsections 2, 3, and 4 of section 10-19.1-19 for amendment of the articles.

10-19.1-32. Board.

1. The business and affairs of a corporation must be managed by or under the direction of a board, subject to subsection 2 and section 10-19.1-83. The members of the first board may be named in the articles or elected by the incorporators pursuant to section 10-19.1-30 or by the shareholders.
2. The holders of the shares entitled to vote for directors of the corporation may, by unanimous affirmative vote, take any action that this chapter requires or permits the board to take. As to an action taken by the shareholders in that manner:
   1. The directors have no duties, liabilities, or responsibilities as directors under this chapter with respect to or arising from the action.
   2. The shareholders collectively and individually have all of the duties, liabilities, and responsibilities of directors under this chapter with respect to and arising from the action.
   3. If the action relates to a matter required or permitted by this chapter or by any other law to be approved or adopted by the board, either with or without approval or adoption by the shareholders, the action is deemed to have been approved or adopted by the board.
   4. A requirement that an instrument filed with a governmental agency contain a statement that the action has been approved and adopted by the board is satisfied by a statement that the shareholders have taken the action under this subsection.

10-19.1-33. Number of directors.

The board must consist of one or more directors. The number of directors must be fixed by or in the manner provided in the articles or bylaws. The number of directors may be increased or, subject to section 10-19.1-41, decreased at any time by amendment to or in the manner provided in the articles or bylaws.

10-19.1-34. Qualifications and election of directors.

Directors must be individuals. The method of election and any additional qualifications for directors may be imposed by or in the manner provided in the articles or bylaws.

10-19.1-35. Terms of directors.

1. With respect to length of terms:
   1. Unless fixed terms are provided for in the articles or bylaws, a director serves for an indefinite term that expires at the next regular meeting of the shareholders.
      1. A fixed term of a director, other than an ex officio director, may not exceed five years.
      2. An ex officio director serves as long as the director holds the office or position designated in the articles or bylaws.
   2. Unless the articles or bylaws provide otherwise, a director holds office until expiration of the term for which the director was elected or appointed and until a successor is elected and has qualified, or until the earlier death, resignation, removal, or disqualification of the director.
   3. A decrease in the number of directors or term of office does not shorten an incumbent director’s term.
   4. Except as provided in the articles or bylaws, the term of a director filling a vacancy expires at the end of the unexpired term that the director is filling.
2. The articles or bylaws may provide for staggering the terms of directors by dividing the total number of directors into groups. The terms of office of the groups need not be uniform.

10-19.1-36. Acts not void or voidable.

The expiration of a director’s term with or without the election of a qualified successor does not make prior or subsequent acts of the officers or the board void or voidable.

10-19.1-37. Compensation of directors.

Subject to any limitations in the articles or bylaws, the board may fix the compensation of directors.

10-19.1-38. Classification of directors.

Directors may be divided into classes as provided in the articles or bylaws.

10-19.1-39. Voting for directors — Cumulative voting.

With respect to the election of directors:

1. Unless otherwise provided in the articles and subject to subsection 2, directors are elected by a plurality of the voting power of the shares present and entitled to vote on the election of directors at a meeting at which a quorum is present.
2. Unless otherwise provided in the articles, and except as provided in subsection 4 of section 10-19.1-41, each shareholder entitled to vote for directors has the right to cumulate those votes in all elections of directors by giving written notice of intent to cumulate those votes to any officer of the corporation before the meeting, or to the presiding officer at the meeting at which the election is to occur at any time before the election of directors at the meeting, in which case:
   1. The presiding officer at the meeting shall announce, before the election of directors, that shareholders may cumulate their votes; and
   2. Each shareholder shall cumulate those votes either by casting for one candidate the number of votes equal to the number of directors to be elected multiplied by the number of votes represented by the shares entitled to vote, or by distributing all of those votes on the same principle among any number of candidates.

10-19.1-40. Resignation of directors.

1. A director may resign at any time by giving written notice to the corporation. The resignation is effective without acceptance when the notice is given to the corporation, unless a later effective time is specified in the notice.
2. If a resignation is made effective at a later date, the board may fill the pending vacancy before the effective date if the board provides that the successor does not take office until the effective date.

10-19.1-41. Nonjudicial removal of directors.

1. The provisions of this section apply unless modified by the articles, the bylaws, or an agreement described in section 10-19.1-83.
2. A director may be removed at any time, with or without cause, if:
   1. The director was named by the board to fill a vacancy;
   2. The shareholders have not elected directors in the interval between the time of the appointment to fill a vacancy and the time of the removal; and
   3. A majority of the remaining directors present affirmatively vote to remove the director.
3. Except as provided in subsection 4, any or all of the directors may be removed at any time, with or without cause, by the affirmative vote of the holders of a majority of the voting power of all shares entitled to vote at an election of directors. However, if a director has been elected solely by the holders of a class or series of shares, as stated in the articles or bylaws, then that director may be removed only by the affirmative vote of the holders of a majority of the voting power of all shares of that class or series entitled to vote at an election of that director.
4. In a corporation having cumulative voting, unless the entire board is removed simultaneously, a director is not removed from the board if there are cast against removal of the director the votes of a proportion of the voting power sufficient to elect the director at an election of the entire board under cumulative voting.
5. New directors may be elected at a meeting at which directors are removed. If the corporation allows cumulative voting and if a shareholder notifies the presiding officer at any time prior to the election of new directors of interest to cumulate the votes of the shareholders, then the presiding officer shall announce before the election that cumulative voting is in effect and shareholders shall cumulate their votes as provided in subdivision b of subsection 2 of section 10-19.1-39.

10-19.1-41.1. Removal of directors by judicial proceeding.

1. The district court of the county where the principal executive office of a corporation is located may remove any director of the corporation from office in a proceeding commenced either by the corporation or its shareholders holding at least ten percent of the voting power of any class of shares, if the court finds:
   1. The director engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion, with respect to the corporation;
   2. A final judgment has been entered finding that the director has violated section 10-19.1-50; and
   3. Removal is in the best interest of the corporation.
2. The court that removes a director may bar the director from serving on the board for a period prescribed by the court.
3. If the shareholders commence a proceeding under subdivision a of subsection 1, then the corporation shall be made a party defendant.

10-19.1-42. Board vacancies.

1. Unless different rules for filling vacancies are provided for in the articles or bylaws:
   1. Vacancies on the board resulting from the death, resignation, removal, or disqualification of a director may be filled by the affirmative vote of a majority of the remaining directors, even though the remaining directors constitute less than a quorum; and
   2. Vacancies on the board resulting from newly created directorships may be filled by the affirmative vote of a majority of the directors serving at the time of the increase.
2. Each director elected under this section to fill a vacancy holds office until a qualified successor is elected by the shareholders at the next regular or special meeting of the shareholders.
3. A vacancy that will occur at a specific later date may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.

10-19.1-43. Board meetings.

1. Meetings of the board may be held from time to time as provided in the articles or bylaws at any place within or without the state that the board may select or by any means described in subsection 2.
   1. If the articles, bylaws, or board fail to select a place for a meeting, the meeting must be held at the principal executive office, unless the articles or bylaws provide otherwise.
   2. The board may determine under subsection 2 that a meeting of the board shall be held solely by means of remote communication.
   3. Any participation in a meeting by a means set forth in subsection 2 constitutes presence in person at the meeting.
2. Any meeting may be conducted:
   1. Solely by one or more means of remote communication through which all of the directors may participate with each other during the meeting:
      1. If the notice required by subsection 3 is given for the meeting; and
      2. If the number of directors participating in the meeting is a quorum at a meeting.
   2. By means of conference telephone or, if authorized by the board, by one or more other means of remote communication, in each case, through which the director, other directors so participating, and all directors physically present at the meeting may participate with each other during the meeting.
3. Unless the articles or bylaws provide for a different time period, a director may call a board meeting by giving at least ten days’ notice or, in the case of organizational meetings pursuant to subsection 2 of section 10-19.1-30, at least three days’ notice, to all directors of the date, time, and place of the meeting.
   1. The notice need not state the purpose of the meeting unless the articles or bylaws require it.
   2. Any notice to a director given under any provision of this chapter, the articles, or the bylaws by a form of electronic communication consented to by the director to whom the notice is given is effective when given.
   3. Consent by a director to notice given by electronic communication may be given in writing or by authenticated electronic communication.
      1. Any consent so given may be relied upon until revoked by the director.
      2. However, no revocation affects the validity of any notice given before a receipt of revocation of the consent.
4. If the date, time, and place of a board meeting have been provided in the articles or bylaws, or announced at a previous meeting of the board, no notice is required. Notice of an adjourned meeting need not be given other than by announcement at the meeting at which adjournment is taken.
5. A director may waive notice of a meeting of the board. A waiver of notice by a director entitled to notice is effective whether given before, at, or after the meeting, and whether given in writing, by authenticated electronic communication, or by attendance. Attendance by a director at a meeting is a waiver of notice of that meeting, except when the director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate in the meeting after the objection.

10-19.1-44. Absent directors.

If the articles or bylaws so provide, a director may give advance written consent or opposition to a proposal to be acted on at a board meeting. If the director is not present at the meeting, consent or opposition to a proposal does not constitute presence for purposes of determining the existence of a quorum, but consent or opposition must be counted as the vote of a director present at the meeting in favor of or against the proposal and must be entered in the minutes or other record of action at the meeting, if the proposal acted on at the meeting is substantially the same or has substantially the same effect as the proposal to which the director has consented or objected.

10-19.1-45. Quorum of directors.

A majority, or a larger or smaller proportion or number provided in the articles or bylaws, of the directors currently holding office is a quorum for the transaction of business. In the absence of a quorum, a majority of the directors present may adjourn a meeting from time to time until a quorum is present. If a quorum is present when a duly called or held meeting is convened, the directors present may continue to transact business until adjournment, even though the withdrawal of a number of directors originally present leaves less than the proportion or number otherwise required for a quorum.

10-19.1-46. Act of the board.

1. The board shall take action by the affirmative vote of the greater of a majority of the directors present at a duly held meeting at the time the action is taken, or a majority of the minimum proportion or number of directors that would constitute a quorum for the transaction of business at the meeting, except when this chapter or the articles require the affirmative vote of a larger proportion or number. If the articles require a larger proportion or number than is required by this chapter for a particular action, then the articles control.
2. The articles of a domestic corporation that is not incorporated under chapter 10-35 may confer upon one or more directors voting powers greater than or less than those of other directors.
   1. After the adoption of the initial articles, an amendment to the articles to confer upon one or more directors voting powers greater than or less than those of other directors requires the approval of all of the shareholders entitled to vote on the amendment.
   2. If the articles provide that any director has more or less than one vote on any matter, then:
      1. Every reference in this chapter to a majority or other proportion of the directors shall refer to a majority or other proportion of the voting power of the directors.
      2. Unless otherwise provided in the articles, the bylaws, or the resolution establishing the committee or the subcommittee, any such provision conferring greater or lesser voting power applies to voting in a committee or subcommittee.

10-19.1-47. Action without meeting by directors.

1. An action required or permitted to be taken at a board meeting may be taken by written action signed by all of the directors. If the articles so provide, any action, other than an action requiring shareholder approval, may be taken by written action signed, or consented to by authenticated electronic communication, by the number of directors that would be required to take the same action at a meeting of the board at which all directors were present.
2. The written action is effective when signed by, or consented to by authenticated electronic communication, the required number of directors, unless a different effective time is provided in the written action.
3. When written action is permitted to be taken by less than all directors, all directors must be notified immediately of its text and effective date. Failure to provide the notice does not invalidate the written action. A director who does not sign or consent to the written action has no liability for the action or actions.

10-19.1-48. Board committees.

1. A resolution approved by the affirmative vote of a majority of the directors currently holding office may establish committees having the authority of the board in the management of the business of the corporation only to the extent provided in the resolution. Committees may include a special litigation committee consisting of one or more independent directors or other independent persons to consider legal rights or remedies of the corporation and whether those rights or remedies should be pursued. Committees other than special litigation committees are subject at all times to the direction and control of the board.
2. Committee members must be individuals. Unless the articles or bylaws provide for a different membership or manner of appointment, a committee must consist of one or more persons, who need not be directors, appointed by the board.
3. Sections 10-19.1-43, 10-19.1-44, and 10-19.1-45 apply to committees and members of committees to the same extent as those sections apply to the board and directors.
4. Minutes, if any, of committee meetings must be made available upon request to members of the committee and to any director.
5. The establishment of, delegation of authority to, and action by a committee does not alone constitute compliance by a director with the standard of conduct set forth in section 10-19.1-50.
6. Committee members are deemed to be directors for purposes of sections 10-19.1-50, 10-19.1-51, and 10-19.1-91.
7. Unless otherwise provided in the articles, the bylaws, or the resolution of the board establishing the committee, a committee may create one or more subcommittees, each consisting of one or more members of the committee, and may delegate to a subcommittee any or all of the authority of the committee. In this chapter, unless the language or the context clearly indicates that a different meaning is intended:
   1. Any reference to a committee is deemed to include a subcommittee; and
   2. Any reference to a committee member is deemed to include a subcommittee member.

10-19.1-49. Committee of disinterested persons. [Repealed]

Repealed by S.L. 1993, ch. 54, § 107.

10-19.1-50. Standard of conduct for directors.

1. A director shall discharge the duties of the position of director in good faith, in a manner the director reasonably believes to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. A person who so performs those duties is not liable by reason of being or having been a director of the corporation.
2. A director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by:
   1. One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;
   2. Counsel, public accountants, or other persons as to matters that the director reasonably believes are within the person’s professional or expert competence; or
   3. A committee of the board upon which the director does not serve, duly established in accordance with section 10-19.1-48 as to matters within its designated authority, if the director reasonably believes the committee to merit confidence.
3. Subsection 2 does not apply to a director who has knowledge concerning the matter in question that makes the reliance otherwise permitted by subsection 2 unwarranted.
4. A director who is present at a meeting of the board when an action is approved by the affirmative vote of a majority of the directors present is presumed to have assented to the action approved, unless the director:
   1. Objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting, in which case the director shall not be considered to be present at the meeting for any purpose of this chapter;
   2. Votes against the action at the meeting; or
   3. Is prohibited from voting on the action:
      1. By the articles;
      2. By the bylaws;
      3. As the result of a decision to approve, ratify, or authorize a transaction pursuant to section 10-19.1-51; or
      4. By a conflict of interest policy adopted by the board.
5. A director’s personal liability to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director may be eliminated or limited in the articles. The articles may not eliminate or limit the liability of a director:
   1. For any breach of the director’s 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;
   3. Under section 10-19.1-95 or 10-04-17;
   4. For any transaction from which the director derived an improper personal benefit; or
   5. For any act or omission occurring prior to the date when the provision in the articles eliminating or limiting liability becomes effective.
6. In discharging the duties of the position of director, a director may, in considering the best interests of the corporation, consider the interests of the corporation’s employees, customers, suppliers, and creditors, the economy of the state and nation, community and societal considerations, and the long-term as well as the short-term interests of the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation.

10-19.1-51. Director conflicts of interest.

1. A contract or other transaction between a corporation and:
   1. One or more of its directors or a member of the family of a director;
   2. A director or governor of a related organization, or a member of the family of a director or governor of a related organization; or
   3. An organization in or of which the corporation’s director, or a member of the family of its director, is a director, officer, governor, manager, or representative or has a material financial interest,
2. The contract or transaction described in subsection 1 is not void or voidable if:
   1. The contract or transaction was, and the person asserting the validity of the contract or transaction was, fair and reasonable as to the corporation at the time it was authorized, approved, or ratified;
   2. The material facts as to the contract or transaction and as to the director’s or directors’ interest are fully disclosed or known to the holders of all outstanding shares, whether or not entitled to vote, and the contract or transaction is approved in good faith by:
      1. The holders of two-thirds of the voting power of the shares entitled to vote which are owned by persons other than the interested director or directors; or
      2. The unanimous affirmative vote of the holder of all outstanding shares, whether or not entitled to vote;
   3. The material facts as to the contract or transaction and as to the director’s or directors’ interest are fully disclosed or known to the board or a committee, and the board or committee authorizes, approves, or ratifies the contract or transaction in good faith by a majority of the directors or committee members currently holding office:
      1. However, the interested director or directors may not vote and are not considered for purposes of a quorum.
      2. If as a result, the number of remaining directors is not sufficient to reach a quorum, then a quorum for the purpose of considering the contract or transaction is the number of remaining directors or committee members, not counting any vote that the interested director might otherwise have in, and not counting the director in determining the presence of a quorum; or
   4. The contract or transaction is a distribution described in subsection 1 of section 10-19.1-92 or a merger or exchange described in subsection 1 or 2 of section 10-19.1-96.
3. For purposes of this section:
   1. A director does not have a material financial interest in a resolution fixing the compensation of a director or fixing the compensation of another director as a director, officer, employee, or agent of the corporation, is not void or voidable or considered to be a contract or other transaction between a corporation even though the director receiving the compensation fixed by the resolution is present and voting at the meeting of the board or a committee at which the resolution is authorized, approved, or ratified, or even though other directors voting upon the resolution are also receiving compensation from the corporation;
   2. A director has a material financial interest in each organization in which the director, or a member of the family of the director, has a material financial interest; and
   3. A “member of the family” of a director is a spouse, parent, child, child of a spouse, brother, sister, or the spouse of any of these.
4. The procedures described under subdivisions a, b, and c of subsection 2 are not required if the contract or other transaction is between related organizations.

is not void or voidable because the director or the other individual or organization is a party or because the director is present at the meeting of the shareholders or the board or a committee at which the contract or transaction is authorized, approved, or ratified, if at least one of the requirements of subsection 2 is satisfied.

10-19.1-52. Officers.

1. The officers of a corporation must be individuals who are eighteen years of age or more, exercising the functions of the offices and:
   1. Must consist of a president, a secretary, and a treasurer, however designated; and
   2. May also include one or more vice presidents and any other officers, however designated, as may be provided in the bylaws.
2. Unless the articles or the bylaws provide that the shareholders with voting rights may elect the officers:
   1. Each officer must be elected by the board at the time and in the manner as may be provided in the bylaws; or
   2. To the extent authorized in the articles, the bylaws, or a resolution approved by the affirmative vote of a majority of the directors present, the president may appoint one or more officers, other than the treasurer.
3. Unless otherwise provided, president means chief executive officer and treasurer means chief financial officer.

10-19.1-53. Duties of officers and agents.

Unless the articles, bylaws, or a resolution adopted by the board and not inconsistent with the articles or bylaws, provides otherwise, the officers shall have the following duties:

1. The president shall:
   1. Have general active management for the business of the corporation;
   2. When present, preside at all meetings of the board and of shareholders;
   3. See that all orders and resolutions of the board are carried into effect;
   4. Sign and deliver in the name of the corporation any deeds, mortgages, bonds, contracts, or other instruments pertaining to the business of the corporation, except in cases in which the authority to sign and deliver is required by law to be exercised by another person or is expressly delegated by the articles or bylaws or by the board to some officer or agent of the corporation;
   5. Maintain records of and, whenever necessary, certify all proceedings of the board and the shareholders; and
   6. Perform other duties prescribed by the board.
2. The vice president, if any, or, if there is more than one, the vice presidents in the order determined by the board, shall:
   1. In the absence or disability of the president, perform the duties and exercise the powers of the president; and
   2. Shall perform other duties and shall have other powers as the board may from time to time prescribe.
3. The treasurer shall:
   1. Keep accurate financial records for the corporation;
   2. Deposit all money, drafts, and checks in the name of and to the credit of the corporation in the banks and depositories designated by the board;
   3. Endorse for deposit all notes, checks, and drafts received by the corporation as ordered by the board, making proper vouchers;
   4. Disburse corporate funds and issue checks and drafts in the name of the corporation, as ordered by the board;
   5. Give to the president and the board, whenever requested, an account of all transactions by the treasurer and of the financial condition of the corporation; and
   6. Perform other duties prescribed by the board or by the president.
4. The secretary shall:
   1. Attend all meetings of the board, all meetings of the shareholders, and when required, all meetings of standing committees;
   2. Record all proceedings of the meetings;
   3. Give, or cause to be given, notice of all meetings of the shareholders and meetings of the board; and
   4. Perform other duties prescribed by the board.
5. All other officers and agents of the corporation, as between themselves and the corporation, have the authority and shall perform the duties in the management of the corporation as may be provided in the articles or bylaws, or as may be determined by resolution of the board not inconsistent with the articles and bylaws.

10-19.1-54. Other officers. [Repealed]

Repealed by S.L. 1997, ch. 103, § 248.

10-19.1-55. Multiple offices.

Any number of offices or functions of those offices may be held or exercised by the same individual. If a record must be signed by individuals holding different offices or functions and an individual holds or exercises more than one of those offices or functions, that individual may sign the record in more than one capacity, but only if the record indicates each capacity in which the individual signs.

10-19.1-56. Officers deemed elected.

In the absence of an election or appointment of officers by the board, the individual or individuals exercising the functions of the principal officers of the corporation are deemed to have been elected to those offices.

10-19.1-57. Contract rights.

The election or appointment of an individual as an officer or agent does not, of itself, create contract rights. However, a corporation may enter into a contract with an officer or agent. The resignation or removal of an officer or agent is without prejudice to any contractual rights or obligations. The fact that the contract may be for a term that is longer than the terms of the directors who authorized or approved the contract does not make the contract void or voidable.

10-19.1-58. Resignation, removal, and vacancies for officers.

1. An officer may resign at any time by giving written notice to the corporation. The resignation is effective without acceptance when the notice is given to the corporation, unless a later effective date is specified in the notice.
2. With respect to removal:
   1. Except as otherwise provided in the articles and bylaws, an officer may be removed at any time, with or without cause, by a resolution approved by the affirmative vote of a majority of the directors present, subject to the provisions of a shareholder control agreement.
   2. An officer appointed by the president also may be removed at any time, with or without cause, by the president.
   3. To the extent authorized in the articles, the bylaws, or a resolution approved by the affirmative vote of a majority of the directors present, the president may remove an officer elected or appointed by the board, other than the treasurer.
   4. The articles or the bylaws may provide other manners of removing an officer.
   5. A removal as described in this subsection is without prejudice to any contractual rights of the officer.
3. A vacancy in an office because of death, resignation, removal, disqualification, or other cause may, or in the case of the president or treasurer must, be filled for the unexpired portion of the term in the manner provided in the articles or bylaws, or determined by the board, or pursuant to section 10-19.1-56.

10-19.1-59. Delegation by officers.

Unless prohibited by the articles or bylaws or by a resolution adopted by the board, an officer elected or appointed by the board may, without the approval of the board, delegate some or all of the duties and powers of an office to other individuals. An officer who delegates the duties or powers of an office remains subject to the standard of conduct for an officer with respect to the discharge of all duties and powers so delegated.

10-19.1-60. Standard of conduct for officers.

An officer shall discharge the duties of an office in good faith, in a manner the officer reasonably believes to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. An individual exercising the principal functions of an office or to whom some or all of the duties and powers of an office are delegated pursuant to section 10-19.1-59 is deemed an officer for purposes of this section and sections 10-19.1-86 and 10-19.1-91.

10-19.1-61. Authorized shares.

1. Subject to any restrictions in the articles, a corporation may issue securities and rights to purchase securities only when authorized by the board.
2. All shares of a corporation:
   1. Must be of one class and one series, unless the articles establish or authorize the board to establish more than one class or series;
   2. Must be common shares entitled to vote and have equal rights and preferences in all matters not otherwise provided for by the board, unless and to the extent the articles have created nonvoting shares or have fixed the relative rights and preferences of different classes and series; and
   3. Must have, unless a different par value is specified in the articles, a par value of one cent per share.
3. Subject to any restrictions in the articles, the power granted in subsection 2 may be exercised by a resolution approved by the directors as required under section 10-19.1-46 establishing a class or series, setting forth the designation of the class or series, and fixing the relative rights and preferences of the class or series.
4. A statement executed by an officer setting forth the name of the corporation and the text of the resolution and certifying the adoption of the resolution and the date of adoption must be filed with the secretary of state, together with the fees provided under section 10-19.1-147, before the issuance of any shares for which the resolution creates rights or preferences not set forth in the articles. The resolution is effective when the statement is filed with the secretary of state unless the statement specifies a later effective date within thirty days of filing the statement with the secretary of state.
5. Without limiting the authority granted under this section, a corporation may issue shares of a class or series which:
   1. Are subject to the right of the corporation to redeem any of those shares at the price fixed for the shares’ redemption by the articles or by the board;
   2. Entitle the shareholders to cumulative, partially cumulative, or noncumulative distributions;
   3. Have preference over any class or series of shares for the payment of distributions of any or all kinds;
   4. Convert into shares of any other class or any series of the same or another class; or
   5. Have full, partial, or no voting rights, except as provided under section 10-19.1-20.

10-19.1-61.1. Share dividends, divisions, and combinations.

1. A corporation may effect a share dividend or a division or combination of its shares as provided in this section.
2. Articles of amendment must be adopted by the board and the shareholders under section 10-19.1-19 and, if required, section 10-19.1-20 to effect a division or combination if, as a result of the proposed division or combination:
   1. The rights or preferences of the holders of outstanding shares of any class or series will be adversely affected; or
   2. The percentage of authorized shares of any class or series remaining unissued after the division or combination will exceed the percentage of authorized shares of that class or series that were unissued before the division or combination.
3. If a division or combination is effected under this section, articles of amendment must be prepared that contain the information required by section 10-19.1-21.
4. Subject to the restrictions provided in subsections 2 and 3 or any restrictions in the articles that state that this subsection does not apply, a share dividend, division, or combination may be effected by action of the board alone, without the approval of shareholders under sections 10-19.1-19 and 10-19.1-20. In effecting a division or combination under this subsection, the board may amend the articles to increase or decrease the par value of shares, increase or decrease the number of authorized shares, and make any other change necessary or appropriate to assure that the rights or preferences of the holders of outstanding shares of any class or series will not be adversely affected by the division or combination.
5. If a division or combination that includes an amendment of the articles is effected under subsection 4, articles of amendment must be prepared that contain the information required by section 10-19.1-21 and a statement that the amendment will not adversely affect any right or preference of any holder of outstanding shares of any class or series and will not result in the percentage of authorized shares of any class or series which remains unissued after the division or combination exceeding the percentage of authorized shares of that class or series which were unissued before the division or combination.
6. For purposes of this section, an increase or decrease in the relative voting rights of the shares that are the subject of the division or combination that arises solely from the increase or decrease in the number of shares outstanding is not an adverse effect on the outstanding shares of any class or series and any increase in the percentage of authorized shares remaining unissued arising solely from the elimination of fractional shares under section 10-19.1-68 must be disregarded.

10-19.1-62. Subscriptions for shares.

1. A subscription for shares, whether made before or after the incorporation of a corporation, is not enforceable against the subscriber unless it is in writing and signed by the subscriber.
2. Unless otherwise provided in the subscription agreement, or unless all of the subscribers and, if in existence, the corporation consents to a shorter or longer period, a subscription for shares is irrevocable for a period of six months.
3. A subscription for shares, whether made before or after the incorporation of a corporation, shall be paid in full at the time or times, or in the installments, if any, specified in the subscription agreement. In the absence of a provision in the subscription agreement specifying the time at which the subscription is to be paid, the subscription shall be paid at the time or times determined by the board, but a call made by the board for payment on subscriptions shall be uniform for all shares of the same class or for all shares of the same series.
4. Unless otherwise provided in the subscription agreement, in the event of default in the payment of an installment or call when due, the corporation may proceed to collect the amount due in the same manner as a debt due the corporation.
5. If the amount due on a subscription for shares remains unpaid for a period of twenty days after written notice of demand for payment has been given to the delinquent subscriber, the shares subscribed for may be offered for sale by the corporation for a price in money equaling or exceeding the sum of the full balance owed by the delinquent subscriber plus the expenses incidental to the sale. If the shares subscribed for are sold pursuant to this subsection, the corporation shall pay to the delinquent subscriber or to the delinquent subscriber’s legal representative the lesser of:
   1. The excess of net proceeds realized by the corporation over the sum of the amount owed by the delinquent subscriber plus the expenses incidental to the sale; and
   2. The amount actually paid by the delinquent subscriber.
6. If the amount due on a subscription for shares remains unpaid for a period of twenty days after written notice of demand for payment has been given to the delinquent subscriber and the shares subscribed for by the delinquent subscriber have not been sold pursuant to subsection 5, the corporation may cancel the subscription, in which event the shares subscribed for must be restored to the status of authorized but unissued shares, the corporation may retain the portion of the subscription price actually paid that does not exceed ten percent of the subscription price, and the corporation shall refund to the delinquent subscriber or the delinquent subscriber’s legal representative that portion of the subscription price actually paid which exceeds ten percent of the subscription price.

If the shares subscribed for are not sold pursuant to this subsection, the corporation may collect the amount due in the same manner as a debt due the corporation or cancel the subscription in accordance with subsection 6.

10-19.1-63. Consideration for shares — Value and payment — Liability.

1. Consideration for the issuance of shares may be paid, in whole or in part, in money; in other property, tangible or intangible; or in labor or services actually performed for the corporation. When payment of the consideration for which shares are to be issued is received by the corporation, the shares are considered fully paid and nonassessable. Neither promissory notes nor future services constitute payment or part payment for shares of a corporation.
2. Subject to any restrictions in the articles, a corporation may, without any new or additional consideration, issue its own shares in exchange for or in conversion of its outstanding shares, or, subject to authorization of share dividends, divisions, and combinations according to section 10-19.1-61.1, issue its own shares pro rata to shareholders or the shareholders of one or more classes or series, to effectuate share dividends, divisions, or combinations. No shares of a class or series, shares of which are then outstanding, shall be issued to the holders of shares of another class or series, except in exchange for or in conversion of outstanding shares of the other class or series, unless the issuance is expressly provided for in the articles or is approved at a meeting by the affirmative vote of the holders of a majority of the voting power of all shares of the same class or series as the shares to be issued.
3. The determinations of the board or the shareholders as to the amount or fair value or the fairness to the corporation of the consideration received or to be received by the corporation for its shares or the terms of payment, as well as the agreement to issue shares for that consideration, are presumed to be proper if they are made in good faith and on the basis of accounting methods, or a fair valuation or other method, reasonable in the circumstances. Unless otherwise required by the articles, the consideration may be less than the par value, if any, of the shares. Directors or shareholders who are present and entitled to vote, and who, intentionally or without reasonable investigation, fail to vote against approving an issue of shares for a consideration that is unfair to the corporation, or overvalue property received or to be received by the corporation as consideration for shares issued, are jointly and severally liable to the corporation for the benefit of the then shareholders who did not consent to and are damaged by the action, to the extent of the damages of those shareholders. A director or shareholder against whom a claim is asserted pursuant to this subsection, except in case of knowing participation in a deliberate fraud, is entitled to contribution on an equitable basis from other directors or shareholders who are liable under this section.
4. A corporation may issue only shares that are nonassessable or that are assessable but are issued with the unanimous consent of the shareholders. “Nonassessable” shares are shares for which the agreed consideration has been fully paid, delivered, or rendered to the corporation.
   1. The reasonable charges and expenses of organization or reorganization of a corporation, and the reasonable expenses of and compensation for the sale or underwriting of its shares, may be paid or allowed by the corporation out of the consideration received by it in payment for its shares without rendering the shares not fully paid and nonassessable.
   2. If shares are issued in violation of this subsection, then the following persons are jointly and severally liable to the corporation for the difference between the agreed consideration for the shares and the consideration actually received by the corporation:
      1. A director or shareholder who was present and entitled to vote but who failed to vote against the issuance of the shares knowing of the violation;
      2. The person to whom the shares were issued; and
      3. A successor or transferee of the interest in the corporation of a person described in paragraph 1 or 2, including a purchaser of shares, a subsequent assignee, successor, or transferee, a pledgee, a holder of any other security interest in the assets of the corporation or shares granted by the person described in paragraph 1 or 2, or a legal representative of or for the person or estate of the person, which successor, transferee, purchaser, assignee, pledgee, holder, or representative acquired the interest knowing of the violation.
5. A pledgee or holder of any other security interest in all or any shares that have been issued in violation of subsection 4 is not liable under subdivision b of subsection 4 if all those shares are surrendered to the corporation. The surrender does not impair any rights of the pledgee or holder of any other security interest against the pledgor or person granting the security interest.
6. A pledgee, holder of any other security interest, or legal representative is liable under subdivision b of subsection 4 only in that capacity. The liability of the person under subdivision a of subsection 4 is limited to the assets held in that capacity for the person or estate of the person described in paragraph 1 or 2 of subdivision b of subsection 4.
7. Each person liable under subdivision b of subsection 4 has a full right of contribution on an equitable basis from all other persons liable under that subdivision for the same transaction.
8. An action may not be maintained against a person under subdivision b of subsection 4 unless commenced within two years from the date on which shares are issued in violation of subsection 4.

10-19.1-64. Rights to purchase.

1. “Right to purchase” means the right, however designated, pursuant to the terms of a security or agreement, entitling a person to subscribe to, purchase, or acquire securities of a corporation, whether by the exchange or conversion of other securities, or by the exercise of options, warrants, or other rights, or otherwise, but excluding pre-emptive rights.
2. Rights to purchase may be either transferable or nontransferable and either separable or inseparable from other securities of the corporation, as the board may determine under this section.
3. A corporation may issue rights to purchase after the terms, provisions, and conditions of the rights to purchase to be issued, including the conversion basis or the price at which securities may be purchased or subscribed for, are fixed by the board or by an officer pursuant to board authorization, subject to any restrictions in the articles.
4. The instrument or written agreement evidencing the right to purchase must set forth in full, summarize, or incorporate by reference all the terms, provisions, and conditions applicable to the right to purchase.

10-19.1-65. Pre-emptive rights.

1. Unless denied or limited in the articles or by the board pursuant to subdivision b of subsection 2 of section 10-19.1-61, a shareholder of a corporation has the pre-emptive rights provided in this section.
2. A pre-emptive right is the right of a shareholder to acquire a certain fraction of the unissued securities or rights to purchase securities of a corporation before the corporation may offer them to other persons.
3. A shareholder has a pre-emptive right whenever the corporation proposes to issue new or additional shares or rights to purchase shares of the same class or series as the series held by the shareholder or, if a class of shares has no series, the same class as the class held by the shareholder, new or additional securities other than shares, or rights to purchase securities other than shares, that are exchangeable for, convertible into, or carry a right to acquire new or additional shares of the same class or series as those held by the shareholder or, if a class of shares has no series, the same class as the class held by the shareholder.
4. Unless otherwise provided in the articles, a shareholder does not have a pre-emptive right pursuant to this section to acquire securities or rights to purchase securities that are:
   1. Issued for a consideration other than money;
   2. Issued pursuant to a plan of merger or exchange;
   3. Issued pursuant to an employee or incentive benefit plan approved at a meeting by the affirmative vote of the holders of a majority of the voting power of all shares entitled to vote;
   4. Issued upon exercise of previously issued rights to purchase securities of the corporation;
   5. Issued pursuant to a public offering of the corporation’s securities or rights to purchase securities. For purposes of this subdivision, “public offering” means an offering of the corporation’s securities or rights to purchase securities if the resale or other distribution of those securities or rights to purchase securities is not restricted by either state or federal securities laws; or
   6. Issued pursuant to a plan of reorganization approved by a court of competent jurisdiction pursuant to a statute of this state or of the United States.
5. The fraction of the new issue that each shareholder may acquire by exercise of a pre-emptive right is the ratio that the number of shares of that class or series owned by the shareholder before the new issue bears to the total number of shares of that class or series issued and outstanding before the new issue.
6. A shareholder may waive a pre-emptive right in writing. The waiver is binding upon the shareholder whether or not consideration has been given for the waiver. Unless otherwise provided in the waiver, a waiver of pre-emptive rights is effective only for the proposed issuance described in the waiver.
7. When proposing the issuance of securities with respect to which shareholders have pre-emptive rights under this section, the board shall cause notice to be given to each shareholder entitled to pre-emptive rights. The notice must be given at least ten days before the date by which the shareholder must exercise a pre-emptive right and must contain:
   1. The number or amount of securities with respect to which the shareholder has a pre-emptive right and the method used to determine that number or amount;
   2. The price and other terms and conditions upon which the shareholder may purchase them; and
   3. The time within which and the method by which the shareholder must exercise the right.
8. Securities that are subject to pre-emptive rights but not acquired by shareholders in the exercise of those rights may, for a period not exceeding one year after the date fixed by the board for the exercise of those pre-emptive rights, be issued to persons the board determines, at a price not less than, and on terms no more favorable to the purchaser than, those offered to the shareholders. Securities that are not issued during that one-year period shall, at the expiration of the period, again become subject to pre-emptive rights of shareholders.
9. If the shareholders of a corporation are entitled to cumulative voting in the election of directors, no amendment to the articles which has the effect of denying, limiting, or modifying the pre-emptive rights provided in this section may be adopted if the votes of a proportion of the voting power sufficient to elect a director at an election of the entire board under cumulative voting are cast against the amendment.
10. A denial or limitation of pre-emptive rights otherwise provided under this section does not limit the power of the corporation to grant first refusal rights or other rights to purchase from the corporation shares or other securities of the corporation to shareholders, subscribers, or other persons before the shares or other securities are offered to or acquired by any other person.

10-19.1-66. Share certificates — Issuance and contents — Uncertificated shares.

1. The shares of a corporation must be certificated shares or uncertificated shares. Each holder of certificated shares issued in compliance with section 10-19.1-63 is entitled to a certificate of shares.
2. The shares of a corporation must be represented by certificates signed by the president or a vice president, and by the secretary, or by an assistant secretary of the corporation.
3. If a person signs or has a facsimile signature placed upon a certificate while an officer, transfer agent, or registrar of a corporation, the certificate may be issued by the corporation even if the person ceases having that capacity before the certificate is issued, with the same effect as if the person had that capacity at the date of the certificate’s issue.
4. Every certificate representing shares issued by a corporation that is authorized to issue shares of more than one class must set forth upon the face or back of the certificate, or must state that the corporation will furnish to any shareholders upon request and without charge, a full or summary statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued and, if the corporation is authorized to issue any preferred or special class or series, the variations in the relative rights and preferences between the shares of each of the series to the extent the relative rights and preferences have been fixed and determined and the authority of the board to fix and determine the relative rights and preferences of subsequent series. Each certificate representing shares must state upon its face:
   1. The name of the corporation.
   2. That the corporation is organized under the laws of this state.
   3. The name of the person to whom issued.
   4. The number and class of shares and the designation of the series, if any, the certificate represents.
   5. The par value of any share represented by the certificate or a statement the shares are without par value.
5. A certificate signed as provided under subsection 1 is prima facie evidence of the ownership of the shares referred to in the certificate.
6. Unless uncertificated shares are prohibited by the articles or bylaws, a corporation may provide that some or all of any or all classes and series of the corporation’s shares will be uncertificated shares.
   1. The action by the corporation provided in this subsection does not apply to shares represented by a certificate until the certificate is surrendered to the corporation.
   2. Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall give to the new shareholder the information required by this section to be stated on certificates.
   3. The information required under this section is not required to be given to the new shareholder by a publicly held corporation that adopted a system of issuance, recordation, and transfer of the corporation’s shares by electronic or other means not involving the issuance of certificates if the system complies with federal law.
   4. Except as otherwise expressly provided by statute, the rights and obligations of the holders of certificated and uncertificated shares of the same class and series are identical.

10-19.1-67. Lost share certificates — Replacement.

1. A new share certificate may be issued pursuant to section 41-08-38 in place of one that is alleged to have been lost, stolen, or destroyed.
2. The issuance of a new certificate under this section does not constitute an overissue of the shares it represents.

10-19.1-68. Fractional shares.

1. A corporation may issue fractions of a share originally or upon transfer. If it does not issue fractions of a share, then it shall in connection with an original issuance of shares:
   1. Arrange for the disposition of fractional interests by those entitled to them;
   2. Pay in money the fair value of fractions of a share as of the time when persons entitled to receive the fractions are determined; or
   3. Issue scrip or warrants in registered or bearer form that entitle the holder to receive a certificate for a full share upon the surrender of the scrip or warrants aggregating a full share.
2. A corporation may not pay money for fractional shares if that action would result in the cancellation of more than twenty percent of the outstanding shares of a class or series. A determination by the board of the fair value of fractions of a share is conclusive in the absence of fraud. A certificated or uncertificated fractional share, and any scrip or warrants if expressly provided, entitles the shareholder to exercise voting rights or receive distributions. The board may cause scrip or warrants to be issued subject to the condition the scrip or warrants become void if not exchanged for full shares before a specified date, or that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds distributed to the holder of the scrip or warrants, or to any other condition or set of conditions the board may impose.

10-19.1-69. Liability of subscribers and shareholders with respect to shares.

1. A holder of or subscriber for shares of a corporation is under no obligation to the corporation or its creditors with respect to such shares other than the obligation to pay to the corporation the full consideration of which such shares were issued or to be issued. As such, a shareholder is not personally liable for the acts or debts of the corporation.
2. Any person becoming an assignee or transferee of shares or of a subscription for shares in good faith and without knowledge or notice that the full consideration therefore has not been paid shall not be personally liable to the corporation or its creditors for any unpaid portion of such consideration.
3. A personal representative, conservator, guardian, trustee, assignee for the benefit of creditors, or a receiver is not personally liable to the corporation as a holder of or subscriber for shares of a corporation but the estate and funds in said person’s hands are liable.
4. No pledgee or other holder of shares as collateral security is personally liable as a shareholder.

10-19.1-70. Restriction on transfer or registration of securities.

1. A restriction on the transfer or registration of transfer of securities of a corporation may be imposed in the articles, in the bylaws, by a resolution adopted by the shareholders, or by an agreement among or other written action by a number of shareholders or holders of other securities or among them and the corporation. A restriction is not binding with respect to securities issued prior to the adoption of the restriction, unless the holders of those securities are parties to the agreement or voted in favor of the restriction.
2. A written restriction on the transfer or registration of transfer of securities of a corporation which is not manifestly unreasonable under the circumstances and is noted conspicuously on the face or back of the certificate or included in information sent to the holders of uncertificated shares in accordance with subsection 6 of section 10-19.1-66 is valid and specifically enforceable against the holder of the restricted securities or a successor or transferee of the holder, including a pledgee or a legal representative.
   1. Unless noted conspicuously on the face or back of the certificate or included in information sent to holders of uncertificated shares in accordance with subsection 6 of section 10-19.1-66, a restriction, even though permitted by this section, is ineffective against a person without knowledge of the restriction.
   2. A restriction under this section is deemed to be noted conspicuously and is effective if the existence of the restriction is stated on the certificate and reference is made to a separate record creating or describing the restriction.

10-19.1-71. Regular meetings of shareholders.

1. Regular meetings of shareholders may be held on an annual or other less frequent periodic basis but need not be held unless required by the articles or bylaws or by subsection 2.
2. If a regular meeting of shareholders has not been held during the earlier of six months after the fiscal yearend of the corporation or fifteen months after its last meeting:
   1. A shareholder or shareholders holding five percent or more of the voting power of all shares entitled to vote may demand a regular meeting of shareholders by written notice of demand given to the president or secretary of the corporation.
   2. Within thirty days after receipt of the demand by one of those officers, the board shall cause a regular meeting of shareholders to be called and held at the expense of the corporation on notice no later than ninety days after receipt of the demand.
   3. If the board fails to cause a regular meeting to be called as required by this subsection, the shareholders making the demand may call the meeting by giving notice as required by section 10-19.1-73.
   4. All necessary expenses of the notice and the meeting must be paid by the corporation.
3. A regular meeting, if any, must be held on the date and at the time and place fixed by, or in a manner authorized by, the articles or bylaws, except that a meeting called by or at the demand of a shareholder pursuant to subsection 2 must be held in the county where the principal executive office of the corporation is located. To the extent authorized by the articles or bylaws, the board may determine that a regular meeting of the shareholders shall be held solely by means of remote communication in accordance with subsection 3 of section 10-19.1-75.2.
4. At each regular meeting of shareholders:
   1. There must be an election of qualified successors for directors who serve for an indefinite term or whose terms have expired or are due to expire within six months after the date of the meeting.
   2. No other particular business is required to be transacted.
   3. Any business appropriate for action by the shareholders may be transacted.
5. Failure to hold a meeting in accordance with the articles or bylaws does not affect the validity of a corporate action.

10-19.1-72. Special meetings of shareholders.

1. Special meetings of the shareholders may be called for any purpose or purposes at any time, by:
   1. The president;
   2. Two or more directors;
   3. A person authorized in the articles or bylaws to call special meetings; or
   4. A shareholder or shareholders holding ten percent or more of the voting power of all shares entitled to vote, except that a special meeting for the purpose of considering any action to directly or indirectly facilitate or effect a business combination, including any action to change or otherwise affect the composition of the board of directors for that purpose, must be called by twenty-five percent or more of the voting power of all shares entitled to vote.
2. A shareholder or shareholders holding the voting power specified in subdivision d of subsection 1 may demand a special meeting of shareholders by written notice of demand given to the president or secretary of the corporation and containing the purposes of the meeting.
   1. Within thirty days after receipt by one of those officers of the demand, the board shall cause a special meeting of shareholders to be called and held on notice no later than ninety days after receipt of the demand.
   2. If the board fails to cause a special meeting to be called as required by this subsection, the shareholder or shareholders making the demand may call the special meeting by giving notice as required by section 10-19.1-73.
   3. All necessary expenses of the notice and the meeting shall be paid by the corporation.
3. Special meetings must be held on the date and at the time and place fixed by the president, the board, or a person authorized by the articles or bylaws to call a meeting, except that a special meeting called by or at the demand of a shareholder or shareholders pursuant to subsection 2 must be held in the county where the principal executive office is located. To the extent authorized by the articles or bylaws, the board may determine that a special meeting of the shareholders shall be held solely by means of remote communication in accordance with subsection 3 of section 10-19.1-75.2.
4. The business transacted at a special meeting is limited to the purposes stated in the notice of the meeting. Any business transacted at a special meeting that is not included in those stated purposes is voidable by or on behalf of the corporation, unless all of the shareholders have waived notice of the meeting in accordance with subsection 4 of section 10-19.1-73.

10-19.1-72.1. Court-ordered meeting of shareholders.

1. The district court of the county where the principal executive office of a corporation is located may order a meeting to be held:
   1. On application of a shareholder or shareholders holding five percent or more of the voting power of all shares entitled to vote, if a meeting was not held within the earlier of:
      1. Six months after the fiscal yearend of the corporation; or
      2. Fifteen months after its last meeting; or
   2. On application of a voting shareholder who signed a demand for a special meeting valid under section 10-19.1-72 or a person entitled to call a special meeting if:
      1. Notice of the special meeting was not given within thirty days after the date the demand was delivered to a corporate officer; or
      2. The special meeting was not held in accordance with the notice.
2. The court may:
   1. Fix the time and place of the meeting;
   2. Specify a record date for determining shareholders entitled to notice of and to vote at the meeting;
   3. Prescribe the form and content of the meeting notice;
   4. Fix the quorum required for specific matters to be considered at the meeting or direct that the votes represented at the meeting constitute a quorum for action on those matters; and
   5. Enter other orders necessary to accomplish the purposes of the meeting.
3. If the court orders a meeting it may also order the corporation to pay the costs of the shareholder, including reasonable attorney’s fees, incurred to obtain the order.

10-19.1-73. Notice of shareholder meetings.

1. Except as otherwise provided in this chapter, notice of all meetings of shareholders must be given to every holder of shares entitled to vote unless:
   1. The meeting is an adjourned meeting to be held not more than one hundred twenty days after the date fixed for the original meeting and the date, time, and place of the meeting were announced at the time of the original meeting or any adjournment of the original meeting; or
   2. The following have been mailed by first-class mail to a shareholder at the address in the corporate records and returned nondeliverable:
      1. Two consecutive regular meeting notices and notices of any special meetings held during the period between the two regular meetings; or
      2. All payments of distributions, provided there were at least two sent during a twelve-month period.
2. If notice of an adjourned meeting is required under subdivision a of subsection 1, then the date for determination of shares entitled to notice of and entitled to vote at the adjourned meeting must comply with subsection 1 of section 10-19.1-73.2, except that if the date of the meeting is set by court order, the court may provide that the original date of determination will continue in effect or may fix a new date.
3. The notice:
   1. If a specific minimum notice period has not otherwise been fixed by law, must be given at least ten days before the date of the meeting, or a shorter time provided in the articles or bylaws, and not more than fifty days before the date of the meeting;
   2. Must contain the date, time, and place of the meeting;
   3. Must contain the information with respect to dissenters’ rights required by subsection 2 of section 10-19.1-88, if applicable;
   4. Must inform shareholders if proxies are permitted at the meeting and, if so, state the procedure for appointing proxies;
   5. Must contain a statement of the purpose of the meeting, in the case of a special meeting;
   6. Must contain any other information:
      1. Required by the articles or bylaws, or this chapter; or
      2. Considered necessary or desirable by the board of directors; and
   7. May contain any other information considered necessary or desirable by the person or persons calling the meeting.
4. A shareholder may waive notice of a meeting of shareholders.
   1. A waiver of notice by a shareholder entitled to notice is effective whether given before, at, or after the meeting, and whether given in writing, or by attendance.
   2. Attendance by a shareholder at a meeting is a waiver of notice of that meeting, except when the shareholder objects:
      1. At the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened; or
      2. Before a vote on an item of business because the item may not lawfully be considered at that meeting and does not participate in the consideration of the item at that meeting.

An action or meeting that is taken or held without notice under this subdivision has the same force and effect as if notice was given. If the shareholder delivers a written notice of the shareholder’s current address to the corporation, the notice requirement is reinstated.

10-19.1-73.1. Electronic communications. [Repealed]

Repealed by S.L. 1997, ch. 103, § 248.

10-19.1-73.2. Voting rights.

1. The board may fix or authorize an officer to fix a date not more than fifty days, or a shorter time period provided in the articles or bylaws, before the date of a meeting of shareholders as the date for the determination of the holders of shares entitled to notice of and entitled to vote at the meeting. If a date is fixed, only shareholders on that date are entitled to notice of and permitted to vote at that meeting of shareholders.
2. A determination of the holders of shares entitled to notice and to vote at a meeting of shareholders is effective for an adjournment of the meeting unless the board fixes a new date for determining the right to notice and to vote, which it must do if the meeting is adjourned to a date more than fifty days after the record date for determining shareholders entitled to notice of the original meeting.
3. If a court orders a meeting adjourned to a date more than one hundred twenty days after the date fixed for the original meeting, it may:
   1. Maintain the original record date for notice and voting; or
   2. Fix a new record date for notice and voting.
4. A resolution approved by the affirmative vote of a majority of the directors present may establish a procedure whereby a shareholder may certify in writing to the corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of one or more beneficial owners. Upon receipt by the corporation of the writing, the persons specified as beneficial owners, rather than the actual shareholder, are deemed the shareholders for the purposes specified in the writing.
5. Unless otherwise provided in the articles or bylaws, or in the terms of the shares, a shareholder has one vote for each share held.
6. The articles may give or prescribe the manner of giving a creditor, securityholder, or other person a right to vote under this section.
7. Shares owned by two or more shareholders may be voted by any one of them unless the corporation receives written notice from any one of them denying the authority of that person to vote those shares.
8. Except as provided in subsection 7, a holder of shares entitled to vote may vote any portion of the shares in any way the shareholder chooses. If a shareholder votes without designating the proportion or number of shares voted in a particular way, the shareholder is deemed to have voted all of the shares in that way.

10-19.1-73.3. Voting list.

1. After fixing a record date for notice of and voting at a meeting, a corporation shall prepare an alphabetical or numerical list of the identities of all its shareholders entitled to notice and to vote. The list must show:
   1. The number of shares each shareholder is entitled to vote at the meeting;
   2. Each shareholder’s physical mailing address, if the identity of a shareholder on the list consists of the shareholder’s name; and
   3. Each shareholder’s authorized means of receipt for electronic transmissions, if the identity of a shareholder on the list consists of the shareholder’s data address.
2. The list of shareholders must be available for inspection by a shareholder with voting rights for the purpose of communication with other shareholders concerning the meeting, beginning two business days after the meeting notice is given and continuing through the meeting, at the principal executive office of the corporation or at a reasonable place identified in the meeting notice in the city where the meeting will be held.
   1. The list must also be available at the meeting.
   2. A shareholder or a shareholder’s agent or attorney is entitled on written demand to inspect and to copy the list, at a reasonable time and at the shareholder’s expense, during the period it is available for inspection and at any time during the meeting or an adjournment.
3. If the corporation refuses to allow a shareholder with voting rights, or the shareholder’s agent or attorney, to inspect the list of shareholders before or at the meeting, the district court of the county where the principal executive office of the corporation is located, on application of the shareholder, may:
   1. Order the inspection or copying at the corporation’s expense;
   2. Postpone the meeting until the inspection or copying is complete; or
   3. Order the corporation to pay the shareholder’s costs, including reasonable attorney’s fees, incurred to obtain the order.
4. Unless a written demand to inspect and copy a shareholder list has been made under subsection 2 before the shareholder meeting and a corporation improperly refuses to comply with the demand, refusal or failure to comply with this section does not affect the validity of action taken at the meeting.
5. A shareholder or a shareholder’s agent or attorney who gains access to a shareholder list under this section may not use or give it to another for use of the shareholder list for any purpose other than a proper purpose. Upon application of the corporation, the district court may issue a protective order or order other relief necessary to enforce this subsection.

10-19.1-74. Act of the shareholders.

1. Unless this chapter or the articles require a greater vote or voting by class and except for the election of directors which is governed by section 10-19.1-39, the shareholders shall take action by the affirmative vote of the holders of the greater of:
   1. A majority of the voting power of the shares present and entitled to vote on that item of business; or
   2. A majority of the voting power of the minimum number of shares entitled to vote that would constitute a quorum for the transaction of business at the meeting.
2. In any case when a class or series of shares is entitled by this chapter, the articles of incorporation, or the terms of the shares to vote as a class or series, the matter being voted upon must also receive the affirmative vote of the owners of the same proportion of the shares as is required as provided in subsection 1, unless the articles of incorporation require a larger proportion. Unless otherwise stated in the articles or the bylaws in the case of voting as a class or series, the minimum percentage of the total voting power of shares of the class or series that must be present is equal to the minimum percentage of all shares entitled to vote required to be present under section 10-19.1-76.
3. Unless otherwise provided in the articles or bylaws, shareholders may take action at a meeting by:
   1. Voice or ballot;
   2. Action without a meeting pursuant to section 10-19.1-75;
   3. Ballot pursuant to section 10-19.1-75.1; or
   4. Remote communication pursuant to section 10-19.1-75.2.

If the articles require a larger proportion or number than is required by this chapter for a particular action, then the articles control.

10-19.1-74.1. Contractual requirement to submit matter to shareholders.

A corporation may agree to submit a matter to its shareholders whether or not the board determines, at any time after approving the matter, that the matter is no longer advisable and recommends that the shareholders reject it.

10-19.1-75. Shareholder action without a meeting.

An action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting by written action signed, or consented to by authenticated electronic communication, by all of the shareholders entitled to vote on that action.

1. If the articles so provide, any action may be taken by written action signed, or consented to by authenticated electronic communication, by the shareholders who own voting power equal to the voting power that would be required to take the same action at a meeting of the shareholders at which all shareholders were present. However, in no event may written action be taken by holders of less than a majority of the voting power of all shares entitled to vote on that action.
   1. After the adoption of the initial articles, an amendment to the articles to permit written action to be taken by less than all shareholders requires the approval of all of the shareholders entitled to vote on the amendment.
   2. When written action is permitted to be taken by less than all shareholders, all shareholders must be notified of its text and effective date no later than five days after the date on which the action is taken.
   3. Failure to provide the notice does not invalidate the written action.
   4. A shareholder who does not sign or consent to the written action has no liability for the action or actions taken by the written actions.
2. The written action is effective when it has been signed, or consented to by authenticated electronic communication, by the required shareholders, unless a different effective time is provided in the written action.
3. When this chapter requires or permits a certificate concerning an action to be filed with the secretary of state, the officers signing the certificate must so indicate if the action was taken under this section.

10-19.1-75.1. Shareholder action by ballot.

1. Except as provided in subsection 5 and unless prohibited or limited by the articles or bylaws, an action that may be taken at a regular or special meeting of shareholders may be taken without a meeting if the corporation mails or delivers a ballot to every shareholder entitled to vote on the matter.
2. A ballot must set forth each proposed action and provide an opportunity to vote for or against each proposed action.
3. Approval by ballot under this section is valid only if:
   1. The number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action; and
   2. The number of approvals equals or exceeds the number of votes that would be required to approve the matter at a meeting at which the total number of votes cast was the same as the number of votes cast by ballot.
4. Solicitations for votes by ballot must:
   1. Indicate the number of responses needed to meet the quorum requirements;
   2. State the percentage of approvals necessary to approve each matter other than election of directors; and
   3. Specify the time by which a ballot must be received by the corporation in order to be counted.
5. Except as otherwise provided in the articles or bylaws, a ballot may not be revoked.
6. With respect to a ballot by electronic communication:
   1. A corporation may deliver a ballot by electronic communication only if the corporation complies with subsection 4 of section 10-19.1-75.2 as if the ballot were a notice.
   2. Consent by a shareholder to receive notice by electronic communication in a certain manner constitutes consent to receive a ballot by electronic communication in the same manner.

10-19.1-75.2. Remote communications for shareholder meetings.

1. This section shall be construed and applied to:
   1. Facilitate remote communication consistent with other applicable law; and
   2. Be consistent with reasonable practices concerning remote communication and with the continued expansion of those practices.
2. To the extent authorized in the articles or the bylaws and determined by the board:
   1. A meeting of the shareholders may be held solely by any combination of means of remote communication through which the participants may participate in the meeting:
      1. If notice of the meeting is given to every holder of shares entitled to vote as would be required by this chapter for a meeting; and
      2. If the number of shares held by the shareholders participating in the meeting would be sufficient to constitute a quorum at a meeting.
   2. A shareholder not physically present in person or by proxy at a regular or special meeting of shareholders may participate by means of remote communication in a meeting of shareholders held at a designated place.
3. In any meeting of shareholders held solely by means of remote communication under subdivision a of subsection 2 or in any meeting of shareholders held at a designated place in which one or more shareholders participate by means of remote communication under subdivision b of subsection 2:
   1. The corporation shall implement reasonable measures to:
      1. Verify that each person deemed present and entitled to vote at the meeting by means of remote communication is a shareholder; and
      2. Provide each shareholder participating by means of remote communication with a reasonable opportunity to participate in the meeting, including an opportunity to:
         1. Read or hear the proceedings of the meeting substantially concurrently with those proceedings;
         2. If allowed by the procedures governing the meeting, have the shareholder’s remarks heard or read by other participants in the meeting substantially concurrently with the making of those remarks; and
         3. If otherwise entitled, vote on matters submitted to the shareholders.
   2. Participation in a meeting by this means constitutes presence at the meeting in person or by proxy if all of the requirements of section 10-19.1-76.2 are met.
4. With respect to notice to shareholders:
   1. Any notice to shareholders given by the corporation under any provision of this chapter, the articles, or the bylaws by a form of electronic communication consented to by the shareholder to whom the notice is given is effective when given. The notice is deemed given:
      1. If by facsimile communication, when directed to a telephone number at which the shareholder has consented to receive notice;
      2. If by electronic mail, when directed to an electronic mail address at which the shareholder has consented to receive notice;
      3. If by a posting on an electronic network on which the shareholder has consented to receive notice, together with separate notice to the shareholder of the specific posting, upon the later of:
         1. The posting; or
         2. The giving of the separate notice; or
      4. If by any other form of electronic communication by which the shareholder has consented to receive notice, when directed to the shareholder.
   2. An affidavit of the secretary, other authorized officer, or authorized agent of the corporation, that the notice has been given by a form of electronic communication is, in the absence of fraud, prima facie evidence of the facts stated in the affidavit.
   3. Consent by a shareholder to notice given by electronic communication may be given in writing or by authenticated electronic communication. The corporation is entitled to rely on any consent so given until revoked by the shareholder. However, no revocation affects the validity of any notice given before receipt by the corporation of revocation of the consent.
5. Any ballot, vote, authorization, or consent submitted by electronic communication under this chapter may be revoked by the shareholder submitting the ballot, vote, authorization, or consent so long as the revocation is received by an officer of the corporation at or before the meeting or before an action without a meeting is effective according to section 10-19.1-75.
6. Waiver of notice by a shareholder of a meeting by means of authenticated electronic communication may be given in the manner provided in subsection 4 of section 10-19.1-73. Participation in a meeting by means of remote communication described in subdivisions a and b of subsection 2 is a waiver of notice of that meeting, except when the shareholder objects:
   1. At the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened; or
   2. Before a vote on an item of business because the item may not lawfully be considered at the meeting and does not participate in the consideration of the item at that meeting.

10-19.1-75.3. Number of shareholders.

1. The following identified as a shareholder in a corporation’s current record of shareholders constitutes one shareholder:
   1. Three or fewer co-owners;
   2. A corporation, partnership, trust, estate, or other entity;
   3. The trustees, guardians, custodians, or other fiduciaries of a single trust, estate, or account; or
   4. One data address.
2. Shareholdings registered in substantially similar names constitute one shareholder if it is reasonable to believe the names represent the same person.

10-19.1-76. Quorum of shareholders.

1. Unless otherwise provided in the articles or bylaws, a quorum for a meeting of shareholders is the holders of a majority of the voting power of the shares entitled to vote at the meeting.
2. Except as provided in subdivision b, a quorum is necessary for the transaction of business at a meeting of shareholders.
   1. If a quorum is not present, a meeting may be adjourned from time to time for that reason.
   2. If a quorum has been present at a meeting and shareholders have withdrawn from the meeting so that less than a quorum remains, the shareholders still present may continue to transact business until adjournment.

10-19.1-76.1. Voting of shares by organizations and legal representatives.

1. Shares of a corporation registered in the name of another domestic or foreign corporation may be voted by the president or other legal representative of the domestic or foreign corporation.
2. Except as provided in subsection 3, shares of a corporation registered in the name of a subsidiary are not entitled to be voted on any matter.
3. Shares of a corporation in the name of or under the control of the corporation or a subsidiary in a fiduciary capacity are not entitled to be voted on any matter, except to the extent that the settlor or beneficial owner possesses and exercises a right to vote or gives the corporation or, with respect to shares in the name of or under control of a subsidiary, the subsidiary, binding instructions on how to vote the shares.
4. Shares under the control of a person in a capacity as a personal representative, an administrator, executor, guardian, conservator, or attorney in fact may be voted by the person, either in person or by proxy, without registration of those shares in the name of the person. Shares registered in the name of a trustee of a trust or in the name of a custodian may be voted by the person, either in person or by proxy, but a trustee of a trust or a custodian may not vote shares held by the person unless they are registered in the name of the person.
5. Shares registered in the name of a trustee in bankruptcy or a receiver may be voted by the trustee or either in person or by proxy. Shares under the control of a trustee in bankruptcy or a receiver may be voted by the trustee or receiver without registering the shares in the name of the trustee or receiver, if authority to do so is contained in an appropriate order of the court by which the trustee or receiver was appointed.
6. Shares registered in the name of an organization not described in subsections 1 through 5 may be voted either in person or by proxy by the legal representative of that organization.
7. A shareholder whose shares are pledged may vote those shares until the shares are registered in the name of the pledgee. If the corporation pledges its own shares under subsection 1 of section 10-19.1-93, the corporation may not vote the shares at a meeting or otherwise.

10-19.1-76.2. Proxies.

1. At or before the meeting for which the appointment is to be effective, a shareholder may cast or authorize the casting of a vote:
   1. By filing with an officer authorized to tabulate votes a written appointment of a proxy which is signed by the shareholder.
   2. By remote communication or authenticated electronic communication to an officer authorized to tabulate votes, whether or not accompanied by written instructions of the shareholder, of an appointment of a proxy.
      1. The remote communication or authenticated electronic communication must set forth or be submitted with information from which it can be determined that the appointment is authorized by the shareholder. If it is reasonably concluded that the remote communication or authenticated electronic communication is valid, the inspectors of election or, if there are no inspectors, the other persons making that determination of validity shall specify the information upon which they relied to make that determination.
      2. A proxy so appointed may vote on behalf of the shareholder, or otherwise participate, in a meeting by remote communication according to section 10-19.1-75.2 to the extent the shareholder appointing the proxy would have been entitled to participate by remote communication according to section 10-19.1-75.2 if the shareholder did not appoint the proxy.
   3. A copy, facsimile telecommunication, or other reproduction of the original writing or transmission may be substituted or used in lieu of the original writing or transmission for any purpose for which the original writing or transmission could be used if the copy, facsimile telecommunication, or other reproduction is a complete and legible reproduction of the entire original writing or transmission.
   4. An appointment of a proxy for shares held jointly by two or more shareholders is valid if signed or consented to by authenticated electronic communication by any one of the shareholders, unless the corporation receives from any of those shareholders written notice or authenticated electronic communication either denying the authority of that person to appoint a proxy or appointing a different proxy.
2. The appointment of a proxy is valid for eleven months, unless a longer period is expressly provided in the appointment. No appointment is irrevocable unless the appointment is coupled with an interest, including a security interest, in the shares or in the corporation. A shareholder who revokes a proxy is not liable in any way for damages, restitution, or other claim.
3. An appointment may be revoked at will, unless the appointment is coupled with an interest, in which case it may not be revoked except in accordance with the terms of an agreement, if any, between the parties to the appointment. Appointment of a proxy is revoked by the person appointing the proxy by:
   1. Attending a meeting and voting in person;
   2. Signing and delivering to an officer or to a duly authorized agent of the corporation either:
      1. A writing stating the appointment of the proxy is revoked; or
      2. A new appointment; or
   3. Remote communication or by authenticated electronic communication, whether or not accompanied by written instructions of the shareholder, of:
      1. A statement that the proxy is revoked; or
      2. A new appointment.
4. Revocation in either manner provided in subdivision b or c of subsection 3 revokes all earlier proxy appointments and is effective:
   1. When filed with an officer or with a duly authorized agent of the corporation; or
   2. When the remote communication or the authenticated electronic communication is received by an officer or by the duly authorized agent of the corporation.
5. The death or incapacity of a person appointing a proxy does not affect the right of the corporation to accept the authority of the proxy, unless written notice of the death or incapacity is received by an officer authorized to tabulate votes before the proxy exercises authority under that appointment.
6. Unless the appointment specifically provides otherwise, if two or more persons are appointed as proxies for a shareholder:
   1. Any one of them may vote the shares on each item of business in accordance with specific instructions contained in the appointment; and
   2. If no specific instructions are contained in the appointment with respect to voting the shares on a particular item of business, the shares must be voted as a majority of the proxies determine. If the proxies are equally divided, the shares may not be voted.
7. Subject to section 10-19.1-76.3 and an express restriction, limitation, or specific reservation of authority of the proxy appearing on the appointment, the corporation may accept a vote or action by the proxy as the action of the shareholder. The vote of a proxy is final, binding, and not subject to challenge. However, the proxy is liable to the shareholder or beneficial owner for damages resulting from a failure to exercise the proxy or from an exercise of the proxy in violation of the authority granted in the appointment.
8. If a proxy is given authority by a shareholder to vote on less than all items of business considered at a meeting of shareholders, the shareholder is considered to be present and entitled to vote by the proxy for purposes of subsection 1 of section 10-19.1-74, only with respect to those items of business for which the proxy has authority to vote. A proxy who is given authority by a shareholder who abstains with respect to an item of business is considered to have authority to vote on the item of business for purposes of this subsection.

The remote communication or the authenticated electronic communication must set forth or be submitted with information from which it can be determined that the revocation or the new appointment was authorized by the shareholder.

10-19.1-76.3. Acceptance of shareholder act by the corporation.

1. If the name or network signature signed on a vote, consent, waiver, or proxy appointment corresponds to the record name or data address of a shareholder, the corporation if acting in good faith may accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder.
2. Unless the articles or bylaws provide otherwise, if the name or network signature signed on a vote, consent, waiver, or proxy appointment does not correspond to the record name or data address of a shareholder, the corporation if acting in good faith may accept the vote, consent waiver, or proxy appointment and give it effect as the act of the shareholder if:
   1. The shareholder is an organization and the name or network signature signed purports to be that of an officer, manager, or agent of the organization;
   2. The name or network signature signed purports to be that of an administrator, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
   3. The name or network signature signed purports to be that of a receiver or trustee in bankruptcy of the shareholder, and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
   4. The name or network signature signed purports to be that of a pledgee, beneficial owner, or attorney in fact of the shareholder, and if, the corporation requests, evidence acceptable to the corporation of the signatory’s authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment; or
   5. Two or more persons hold the shares as cotenants or fiduciaries and the name or network signature signed purports to be the name or data address of at least one of the coholders and the person signing appears to be acting on behalf of all the coholders.
3. The corporation may reject a vote, consent, waiver, or proxy appointment if the officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis to doubt the validity of the signature on it or the authority of the signatory to sign for the shareholder.
4. The corporation or its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section is not liable in damages to the shareholder for the consequences of the acceptance or rejection.
5. Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.

10-19.1-77. Voting rights. [Repealed]

Repealed by S.L. 1997, ch. 103, § 248.

10-19.1-78. Voting list. [Repealed]

Repealed by S.L. 1997, ch. 103, § 248.

10-19.1-79. Voting of shares by organizations and legal representatives. [Repealed]

Repealed by S.L. 1997, ch. 103, § 248.

10-19.1-80. Proxies. [Repealed]

Repealed by S.L. 1997, ch. 103, § 248.

10-19.1-81. Voting trusts.

1. Shares in a corporation may be transferred to a trustee pursuant to written agreement, for the purpose of conferring on the trustee the right to vote and otherwise represent the beneficial owner of those shares for a period not exceeding ten years, except that if the agreement is made in connection with an indebtedness of the corporation, the voting trust may extend until the indebtedness is discharged. Unless otherwise specified in the agreement, the voting trust may be terminated at any time by the beneficial owners of a majority of the voting power of the shares held by the trustee. A signed original of the agreement must be filed with the corporation.
2. When a voting trust agreement is signed, the trustee shall prepare a list of the identities of all owners of beneficial interests in the trust, together with the number and class of shares each transferred to the trust. The list must include each shareholder’s:
   1. Physical mailing address, if the identity of a shareholder on the list consists of the shareholder’s name; or
   2. Authorized means of receipt for electronic transmissions, if the identity of a shareholder on the list consists of the shareholder’s data address.
3. Unless otherwise provided in the trust agreement, if there are two or more trustees, the manner of voting is determined as provided in subsection 5 of section 10-19.1-73.2.

10-19.1-82. Shareholder voting agreements.

A written agreement solely among persons who are then shareholders or subscribers for shares to be issued, relating to the voting of their shares, is valid and specifically enforceable by and against the parties to the agreement. The agreement may override the provisions of section 10-19.1-76.2 regarding proxies and is not subject to the provisions of section 10-19.1-73.2 regarding voting trusts.

10-19.1-83. Shareholder control agreements.

1. A written agreement among the shareholders of a corporation and the subscribers for shares to be issued, relating to the control of any phase of the business and affairs of the corporation, its liquidation and dissolution, or the relations among shareholders of or subscribers to shares of the corporation is valid and specifically enforceable as provided in subsections 2 and 3. The agreement may also include as parties persons who are neither shareholders or subscribers.
2. A written agreement as described in subsection 1 which relates to the control of or the liquidation and dissolution of the corporation, the relations among the shareholders and subscribers, or any phase of the business and affairs of the corporation, including the management of its business, the declaration and payment of distributions, the election of directors or officers, the employment of shareholders and others by the corporation, or the arbitration of disputes, is valid and specifically enforceable, if the agreement is signed by all persons who, on the date the agreement first became effective, are then the shareholders of the corporation, whether or not the shareholders all have voting shares, and the subscribers for shares, whether or not voting shares, to be issued. A written agreement as described in subsection 1 may provide for its amendment through nonunanimous means.
3. The written agreement is enforceable by the persons described in subsection 1 who are parties to the agreement and is binding upon and enforceable against only the persons described in subsection 1 and other persons with knowledge of the existence of the agreement. A signed original of the written agreement must be filed with the corporation. The existence and location of a copy of the written agreement must be noted conspicuously on the face or back of each certificate for shares issued by the corporation and included in information sent to the holders of uncertificated shares according to subsection 6 of section 10-19.1-66. A shareholder, a beneficial owner of shares, or another person with a security interest in shares may obtain upon written demand a copy of the agreement from the corporation at the expense of the corporation.
4. If an agreement authorized by this section takes away from any person any of the authority and responsibility which that person would otherwise possess under this chapter, the effect of the agreement is also:
   1. To relieve that person of liability imposed by law for acts and omissions in the possession or exercise of that authority and responsibility; and
   2. To impose that liability on the person or persons possessing the authority and responsibility under the agreement.
5. A shareholder is not liable pursuant to subsection 4 by virtue of a shareholder vote, if the shareholder had no right to vote on the action.
6. This section does not apply to, limit, or restrict agreements otherwise valid, nor is the procedure set forth in this section the exclusive method of agreement among shareholders or between the shareholders and the corporation with respect to any of the matters described in this section.

10-19.1-84. Books and records — Inspection.

1. A corporation shall keep, at the corporation’s principal executive office or at another place or places within the United States determined by the board, a share register not more than one year old, containing the identities of each shareholder, in alphabetical or numerical order by class of shares showing the number and classes of shares held by each shareholder.
   1. The list must include each shareholder’s:
      1. Physical mailing address, if the identity of a shareholder on the list consists of the shareholder’s name; or
      2. Authorized means of receipt for electronic transmissions, if the identity of a shareholder on the list consists of the shareholder’s data address.
   2. A record of shareholders may show both the shareholder’s name and data address.
   3. A corporation shall also keep, at the corporation’s principal executive office or at another place or places within the United States determined by the board, a record of the dates on which certificated or uncertificated shares were issued.
2. A corporation shall keep, at its principal executive office or at another place or places within the United States determined by the board, and, if its principal executive office or any such other place is outside of this state, shall make available at its registered office or at its principal executive office within this state within ten days after receipt by an officer of the corporation of a written demand for them made by a person described in subsection 4 or 5, originals or copies of:
   1. Records of all proceedings of shareholders for the last three years;
   2. Records of all proceedings of the board for the last three years;
   3. Its articles and all amendments currently in effect;
   4. Its bylaws and all amendments currently in effect;
   5. Financial statements required by section 10-19.1-85 and the financial statement for the most recent interim period prepared in the course of the operation of the corporation for distribution to the shareholders or to a governmental agency as a matter of public record;
   6. Reports made to shareholders generally within the last three years;
   7. A statement of the identities and usual business addresses of its directors and principal officers;
   8. Voting trust agreements and beneficial interests owner’s list described in section 10-19.1-81;
   9. Shareholder control agreements described in section 10-19.1-83; and
   10. A copy of agreements, contracts, or other arrangements or portions of them incorporated by reference under subsection 8 of section 10-19.1-10.
3. A corporation shall keep appropriate and complete financial records.
4. A shareholder or a holder of a voting trust certificate of a corporation that is not a publicly held corporation has an absolute right, upon written demand, to examine and copy, in person or by a legal representative, at any reasonable time, and the corporation shall make available within ten days after receipt by an officer of the corporation of the written demand:
   1. The share register; and
   2. All records referred to in subsection 2.
5. A shareholder or a holder of a voting trust certificate of a corporation that is not a publicly held corporation has a right, upon written demand, to examine and copy, in person or by a legal representative, other corporate records at any reasonable time only if the shareholder, beneficial owner, or holder of a voting trust certificate demonstrates a proper purpose for the examination.
6. A shareholder, beneficial owner, or holder of a voting trust certificate of a publicly held corporation has, upon written demand stating the purpose and acknowledged or verified in the manner provided in chapter 44-06.1, a right at any reasonable time to examine and copy the cor