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HB 5939

Businesses: business corporations; benefit corporations; authorize formation and establish duties of officers and directors. Amends and adds (See bill).

2025-2026 Regular Session Introduced by Gina Johnsen and 1 co-sponsor

Creates a governance framework for benefit corporations, adds independent directors and expanded filing, notice, and ratification rules.

bill electronically reproduced 04/30/2026
#businesses:businesscorporations #businesses:profitcorporations
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Bill Summary · HB 5939

HB 5939 (2025-2026) — Summary

Overview and purpose
- This bill proposes a broad set of amendments to the Michigan Business Corporation Act to authorize new corporate forms (notably benefit corporations) and to revise numerous corporate governance, filing, notice, and enforcement provisions.
- It adds sections 152–159 and 545b (and chapter 9A) and makes extensive changes to sections across the Act. The net effect is to create a governance framework for benefit corporations and to modernize filing, notice, and fiduciary-relation rules.

Key concepts and new or amended provisions
- Benefit corporation status (Sec. 105(4) and related references)
- Introduces and defines “benefit corporation” as a domestic corporation that meets requirements of a new chapter 9A and retains status until terminated.
- Requires alignment of a benefit corporation with the duties and standards specific to benefit entities.

  • Independent directors (Sec. 107(3))

    • Defines an “independent director” with criteria:
    • Elected by shareholders; designated as independent by board or shareholders.
    • At least 5 years of relevant experience (business, legal, financial, etc.); for registered securities, experience may include senior roles.
    • No disqualifying relationships in the prior 3 years (no large transactions, no close family ties to disqualifying persons, etc.).
    • Not proposed to enter related-party relationships within specified scopes.
    • Limited cumulative tenure as a director (no more than 3 years on the board as an independent director).

  • Internal affairs and definitions (Sec. 109, 131)

    • Clarifies terms such as “internal affairs,” “shares,” “voting group,” and electronic transmission.
    • Updates filing and service rules to accommodate electronic delivery and records.

  • Filing, notices, and expedited processing (Sec. 131, 143)

    • Requires documents to be delivered to the administrator with fees; permits electronic delivery (via facsimile, email, or internet) with timelines.
    • Establishes expedited filing fees for same-day processing (1 hour: $1,000; 2 hours: $500; other filings: $100 standard; other expedited options: $50–$200 depending on document type and 24-hour service).
    • Reforms notice rules, including electronic notice as written notice and consolidated notices for shared addresses, with options to deliver to common addresses after appropriate notice to affected shareholders.

  • Capital structure and articles (Sec. 202, 209, 211)

    • Articles of incorporation may include broader provisions on management, liability limitations for directors and officers, and designation of powers.
    • Allows class and series rights designations, including rights and limitations related to preferred shares and changes to authorize shares to prevent overissuance.
    • Benefit corporation provisions linked to specific sections (e.g., section 953) to ensure alignment with the new benefit framework.

  • Corporate actions, ratification, and validation (Secs. 152–159)

    • Introduces a mechanism to ratify defective corporate actions, including putative shares created by defective actions.
    • Provides standards, timelines (e.g., 120-day post-validation period for claims), and a certificate of validation process to correct filings and ensure actions are effective going forward.
    • Grants courts authority to determine validity and to adjust or waive procedures if warranted by circumstances.

  • Directors and officers (Sec. 505, 711, 745)

    • Details board composition, independent director designation, terms, removal, resignation, and the ability to classify directors.
    • Allows parent-subsidiary mergers under certain ownership thresholds without requiring all shareholder approvals (Sec. 711).
    • Enables corporate conversions to another form of business organization (Sec. 745), with conditions to ensure continuity with governing law.

  • Officer duties, removal, and indemnification (Secs. 531, 545b, 564a)

    • Sets out officer roles, authority, and removal standards (board vs. shareholder authority).
    • Addresses business opportunities and disclosures to avoid misappropriation (Sec. 545b).
    • Updates indemnification standards for directors and officers, outlining who may authorize indemnification, under what conditions, and how conflicts are handled.

Who would be affected
- Domestic corporations, including those seeking to form benefit corporations.
- Existing corporations that incorporate or convert to a benefit corporation or that adopt new governance provisions for independent directors.
- Shareholders, officers, and directors, due to new notice, voting, and fiduciary-duty requirements.
- The Michigan Department (Corporations, through the Administrator) due to expanded filing, processing, and electronic delivery responsibilities.
- Professionals and counsel involved in corporate governance, given expanded ratification/validation processes and potential for accelerated filings.

Key timelines and procedural notes
- Electronic filing and service provisions become effective over time, with explicit milestones for electronic delivery becoming standard (earliest references point to post-2006/2007-era procedures; HB 5939 formalizes electronic capability).
- Expedited filing fees require timely submission by applicants and are designed to fund the department’s expedited processing duties.
- Validation and ratification provisions set specific deadlines (e.g., 120-day claims window after validation time) for challenges to defective corporate actions.

Impact considerations
- Creates a formal framework for benefit corporations, potentially expanding the range of acceptable corporate purposes and stakeholder considerations beyond traditional shareholder primacy.
- Emphasizes governance rigor through independent directors, enhanced notice rules, and explicit procedures for correcting defective actions.
- Could increase administrative and legal complexity for corporations contemplating rapid filings or complex corporate actions, but offers clearer mechanisms to address defects and disputes.

Note: This summary reflects the substantive elements present in the bill text and aims to present its provisions in an accessible, neutral manner. For precise language and cross-references, consult the bill as introduced.

Compiled from official sources — confirm details with the bill’s official record.

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