As Introduced

136th General Assembly

Regular Session S. B. No. 353

2025-2026

To enact sections 1701.031, 1701.592, 1701.593, 1701.594, 1701.595, 1701.596, and 1701.597 of the Revised Code regarding the regulation of the internal affairs of domestic corporations and corporate use of committees of independent and disinterested directors.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 1701.031, 1701.592, 1701.593, 1701.594, 1701.595, 1701.596, and 1701.597 of the Revised Code be enacted to read as follows:

Sec. 1701.031. The internal affairs and activities of any corporation incorporated in Ohio are governed under the law of this state.

Sec. 1701.592. The board of directors may adopt a resolution to authorize the formation of a committee of independent and disinterested directors to review and approve transactions, whether or not contemplated at the time of the committee's formation. Such directors need not be incumbent directors to serve on the committee of independent and disinterested directors authorized under this section. Such transactions may involve the corporation or any of its subsidiaries and a controlling shareholder, director, or officer.

Sec. 1701.593. (A) If, upon the appointment of directors to a committee under section 1701.592 of the Revised Code, a shareholder, a subsidiary, or the corporation has a genuine belief that one or more of the directors appointed is not independent or disinterested with respect to any transactions involving the corporation or any of its subsidiaries and a controlling shareholder, director, or officer, the shareholder, subsidiary, or corporation may, in good faith, petition a court in accordance with division (B) of this section to hold an evidentiary hearing to determine whether the directors appointed to the committee are independent and disinterested.

(B) A petition filed under this section shall be filed in the court of common pleas in the county where the corporation's principal place of business in this state is located.

(C) In the petition, the corporation shall designate legal counsel to act on behalf of the corporation and its shareholders, other than the controlling shareholder, director, or officer involved in the transaction.

(D) Notice that the petition has been filed under this section shall be provided to shareholders. The notice shall inform the corporation's shareholders of all of the following:

(1) That a petition has been filed under this section;

(2) The court in which the petition has been filed;

(3) The case number for the proceeding;

(4) The identity of the legal counsel designated to act on behalf of the corporation and its shareholders, other than the controlling shareholder, director, or officer involved in the transaction.

(E) Notice required under this section may occur electronically via the corporation's web site or be otherwise delivered via electronic mail. If the corporation has a class or series of voting shares listed on a national securities exchange, such notice may also be provided through filing of a current report with the United States securities and exchange commission in accordance with the requirements of the "Securities Exchange Act of 1934," 15 U.S.C. 78a, et seq., and any rules promulgated under that act.

Sec. 1701.594. (A) The shareholders, other than the controlling shareholder, director, or officer involved in the transaction, have the right to participate in the evidentiary proceeding under sections 1701.593 to 1701.595 of the Revised Code in person or through counsel.

(B) Not earlier than the tenth day after the date the notice required under division (D) of section 1701.593 of the Revised Code is given, the court shall hold a preliminary hearing to determine the appropriate legal counsel to represent the corporation and its shareholders, other than the controlling shareholder, director, or officer involved in the transaction, in accordance with division (C) of this section, whether or not the same as the legal counsel identified in the petition.

(C) Any other legal counsel representing a shareholder, other than the controlling shareholder, director, or officer involved in the transaction, may participate in the hearing to do either of the following:

(1) Object to counsel designated by the corporation in the petition on the ground that the designated counsel is insufficiently independent and disinterested;

(2) Request designation by the court as the appropriate legal counsel.

Sec. 1701.595. (A) After the court determines the appropriate legal counsel under section 1701.594 of the Revised Code, the court shall promptly hold an evidentiary hearing as to whether the directors on the committee are independent and disinterested with respect to transactions involving the corporation or any of its subsidiaries and a controlling shareholder, director, or officer.

(B) The appropriate legal counsel determined under section 1701.594 of the Revised Code and legal counsel for the corporation and its board of directors may participate in the hearing.

(C) After hearing and reviewing the evidence presented, the court shall make its determination as to whether the directors on the committee are independent and disinterested.

Sec. 1701.596. (A) The court's determination that the directors are independent and disinterested under section 1701.595 of the Revised Code shall be dispositive in the absence of facts, not presented to the court, constituting evidence sufficient to prove that one or more of those directors is not independent and disinterested with respect to a particular transaction involving the corporation or any of its subsidiaries and a controlling shareholder, director, or officer.

(B) If a court of common pleas determines that the directors on the committee are independent and disinterested with respect to transactions involving the corporation or any of its subsidiaries and a controlling shareholder, director, or officer, the decisions made or recommendations issued by the committee are entitled to all presumptions of independence and disinterestedness, including the application of the business judgment rule and all entitlements under section 1701.59 of the Revised Code.

Sec. 1701.597. The court of common pleas shall make all due effort to reach determinations as promptly as possible to promote the use of committees comprised of independent and disinterested directors.