Corporation Law: Utah

This Q&A addresses key areas of corporate law such as formation, foreign qualification, mergers, anti-takeover laws and dissolution. Answers to questions can be compared across a number of jurisdictions (see Corporation Law: State Q&A Tool). Forming a Corporation and Corporate Formalities What is required to form and organize a corporation in your jurisdiction? Articles of Incorporation The incorporator must file articles of incorporation with the Utah Division of Corporations and Commercial Code (Division). The articles of incorporation must include all of the following information:

The purpose or purposes for which the corporation is organized.
A corporate name for the corporation that satisfies the requirements of Section 16-10a-401 of the Utah Revised Business Corporation Act.
The number of shares the corporation is authorized to issue.
The information required by Section 16-10a-601 of the Utah Revised Business Corporation Act regarding each class of shares the corporation is authorized to issue (seeQuestion 11).
The name of the corporation’s commercial registered agent or if the corporation does not have a commercial registered agent, either:
the name and address of the corporation’s non-commercial registered agent; or
the title and address of an office or other position in the corporation that service of process should be sent to (Utah Code §16-17-203(1)).
The name and address of each incorporator.

(Utah Code § 16-10a-202(1).) Additionally, the articles of incorporation may also include the following information so long as it is not inconsistent with law:

The names and addresses of the persons who will serve as the initial directors of the corporation.
Provisions for the management of the business and affairs of the corporation.
Provisions defining, limiting and regulating the powers of the corporation, its board of directors and its shareholders.
A par value for authorized shares or classes of shares.
The imposition of personal liability on shareholders for debts of the corporation to a specified extent and on specified conditions.
Any provision that the Utah Revised Business Corporation Act requires or permits in the by-laws of the corporation.

(Utah Code § 16-10a-202(2).) By-laws The by-laws of a corporation may contain any provision for managing the business and affairs of the corporation that is consistent with the articles of incorporation. In the event of a conflict between the articles of incorporation and the by-laws of a corporation, the articles of incorporation control. By-laws are not required to be filed with the Division. (Utah Code § 16-10a-206(2).) Initial by-laws of a corporation may be adopted by the board of directors of the corporation. If no directors have been elected, the incorporators may adopt initial by-laws. If neither the incorporators nor the board of directors have adopted initial by-laws, the shareholders may do so. (Utah Code § 16-10a-206(1).) The board of directors of a corporation may amend the corporation’s by-laws at any time, unless the articles of incorporation, the by-laws or the Utah Revised Business Corporation Act reserve this power to the shareholders. The shareholders of a corporation may amend the corporation’s by-laws at any time, even if the directors are also entitled to do so. (Utah Code § 16-10a-1020.) Corporate Actions After the articles of incorporation have been filed with the Division, the initial directors (if the initial directors are named in the articles) may hold on organizational meeting to:

Appoint officers.
Adopt by-laws.
Conduct any other business brought before the meeting.

If initial directors are not named in the corporation’s articles of incorporation, then the incorporators may hold an organizational meeting to elect directors, appoint officers and adopt by-laws. Either the initial directors or the incorporators, as the case may be, may take any action permitted to be taken at an organizational meeting by written consent. (Utah Code § 16-10a-205.) Name Requirements and Reservation Options Naming a Utah Corporation The name of a Utah corporation must contain one of the following words or abbreviations (or similar words in a different language):

Corporation or corp.
Incorporated or inc.
Company or co.

(Utah Code § 16-10a-401(1)(a).) The name of a Utah corporation may not contain language stating or implying that that the corporation is organized for a purpose other than that permitted by the corporation’s articles of incorporation. Additionally, the name of a Utah corporation may not contain any of the following words without the permission of the US Olympic Committee:

Olympic.
Olympiad.
Citius Altius Fortius.

Without the written consent of the Utah Division of Consumer Protection issued according to the provisions of Section 13-34-114 of the Utah Code, the name of a Utah corporation may not contain the following words:

University.
College.
Institute.
Institution.

(Utah Code § 16-10a-401(1)(b).) Name Reservations A corporation can reserve a name by submitting an Application for Reservation of Business Name to the Division by mail, fax or e-mail. The fee for each name reservation is $22, which reserves the name for 120 days. Name reservations can be renewed for additional 120-day periods by filing another Application of Reservation of Business Name with the Division and paying an additional fee of $22. Filing Requirements A corporation must file its articles of incorporation with the Division. Articles of incorporation may be filled out on the Division’s website(https://corporations.utah.gov/business/dp.html), or they can be filed by fax, mail or in person. A corporation that prepares and files its articles of incorporation online will be registered within 24 hours. If a corporation files its articles of incorporation by mail, fax or in person, the articles may take up to seven days to be processed. However, the effective date of the articles of incorporation stated in the articles of incorporation, once accepted, will be the filing date. The filing fee for articles of incorporation is $70. After receiving an initial set of articles of incorporation, the Division stamps the articles of incorporation with the word “Received” and the date of filing. Once the articles of incorporation have been processed and approved, the Division stamps the articles of incorporation with a statement certifying that the articles of incorporation have been filed and approved, and the date of the approval. What corporate formalities are required annually? Annual Return and Franchise Taxes All Utah corporations must file an annual franchise tax return (Form TC-20). Franchise tax returns may be filed electronically or by mail. All corporations must pay an annual franchise tax, with the exception of S-corporations or corporations that have received an exemption from the Utah state tax commission. The franchise tax rate is computed at 5% of the corporation’s net income, with a minimum payment of $100. Franchise tax returns are due by April 15^th of each year. Annual Reports All corporations must file an annual report with the Utah Division of Corporations and Commercial Code (Division). The report is filed on a form provided by the Division and sets out:

The corporation’s name and its assumed name, if any.
Its jurisdiction of incorporation.
Registered agent information.
The street address of its principal office.
The names of its principal officers.

(Utah Code § 16-10a-1607(1).) The annual report must be filed annually with the Division, no later than the end of the second calendar month following the calendar month in which the report form is mailed to the corporation by the Division. The filing fee for the annual report is $15, with an additional $10 fee for late filings. (Utah Code § 16-10a-1607(4).) If a corporation fails to file its annual report when due it is grounds for administrative dissolution of the corporation. If the Division determines that one or more grounds exist under the Utah Revised Business Corporation Act for dissolving a corporation, it will mail a written notice of its determination and the grounds for dissolution to the registered agent of the corporation. If the corporation does not correct each ground for dissolution, or demonstrate to the reasonable satisfaction of the Division that each alleged ground does not exist, the Division may administratively dissolve the corporation within 60 days after the Division’s mailing of the dissolution notice. (Utah Code § 16-10a-1420 & 1421.) Annual Meeting of Shareholders Utah corporations must hold meetings of shareholders annually, at the time and date stated in the by-laws. Annual meetings may be held in or out of the state, as stated in the by-laws. If no meeting place is stated in the by-laws, then annual meetings are held at the corporation’s principal office. (Utah Code § 16-10a-701.) Directors are elected at the annual meeting unless the directors have been divided into two or three staggered groups, in which case, either:

Half of the directors are elected every other year.
One-third every three years.

(Utah Code § 16-10a-803(3) and 16-10a-806.) Unless otherwise provided in the articles of incorporation, shareholders may take any action that would otherwise be taken at an annual meeting of shareholders (including electing directors), without prior notice, if the shareholders holding the number of votes necessary to take the action consent to do so in writing. (Utah Code § 16-10a-704(1)(a).) Unless all of the shareholders consent to the written action, notice of the action must be provided to the non-voting shareholders at least ten days before the event, action or transaction authorized by the written consent can take place. (Utah Code § 16-10a-704(1)(d).) Foreign Corporations When and how does a corporation qualify to do business in your jurisdiction? State Nexus Analysis Under the Utah Revised Business Corporation Act, a foreign corporation is a corporation organized for profit under the jurisdiction of a state other than Utah. A foreign corporation may not transact business until it files an application to transact business with the Utah Division of Corporations and Commercial Code (Division). Certain activities of foreign corporations do not constitute “transacting business,” including:

Maintaining and defending a legal proceeding.
Holding meetings.
Maintaining bank accounts.
Selling through independent contractors.
Soliciting orders if the orders require acceptance outside the state before they become contracts.
Owning real or personal property.
Conducting isolated transactions.
Transacting business in interstate commerce.
Other activities at the discretion of the Division.

(Utah Code § 16-10a-1501.) Filing Requirements Registration Documents To qualify to do business in Utah, a foreign corporation must file an application with the Division. The application must contain the following information:

The foreign corporation’s name and its assumed name, if any.
The jurisdiction under which it is incorporated.
The date of incorporation and period of its corporate duration.
The street address of its principal office.
Registered agent information.
The names and usual business addresses of its current directors and officers.
The date it commenced or expects to commence transacting business in the state.
Any additional information the foreign corporation elects to include.

(Utah Code § 16-10a-1503(1).) Annual Reports Foreign corporations must file an annual report with the Division. The form is provided by the Division and sets out:

The foreign corporation’s name and its assumed name, if any.
The jurisdiction under which it is incorporated.
Registered agent information.
The street address of its principal office.
The names of its principal officers.

(Utah Code § 16-10a-1607(1).) The annual report must be filed annually with the Division, no later than the end of the second calendar month following the calendar month in which the report form is mailed to the foreign corporation by the Division (Utah Code § 16-10a-1607(4)). Fees The filing fee for a foreign corporation registration application is $70. The filing fee for the annual report is $15, with an additional $10 fee for late filings. Name Requirements Generally, if a foreign corporation’s name does not satisfy the naming requirements applied to domestic corporations, then the foreign corporation must assume a name that satisfies the domestic corporation naming requirements for use in Utah (see Question 1:Name Requirements and Reservation Options; Utah Code § 16-10a-1506). Fiduciary Duties What are the fiduciary duties of directors and officers in your jurisdiction? Directors Every director of a Utah corporation owes certain duties to the corporation. Although the duties set out in the Utah Revised Business Corporation Act closely resemble traditional fiduciary duties, the drafters explicitly chose not to call them fiduciary duties to avoid confusion with the obligations imposed on a fiduciary of a trust by the law of trusts (seeComment to Utah Code § 16-10a-840(1)). Additionally, the Utah Revised Business Corporation Act does not specifically label the duties owed by directors as the duty of care and the duty of loyalty. Instead the Utah Revised Business Corporation Act provides three general guidelines that correspond to:

The duty of good faith.
The duty of care.
The duty of loyalty.

The Utah Revised Business Corporation Act provides that each director shall discharge his duties as a director:

In good faith.
With the care an ordinarily prudent person in a like position would exercise under similar circumstances.
In a manner the director or officer reasonably believes to be in the best interests of the corporation.

(Utah Code § 16-10a-840(1).) Utah case law further clarifies that the standard of care that a director must exercise is the amount of skill and learning ordinarily possessed by other members of the director’s profession practicing in the same or similar community and other similar circumstances (see Stevensen 3^rd East, LC v. Watts, 2009 UT App 137, 210 P.3d 977). In discharging his duties a director is entitled to rely on information provided by:

The employees or officers of the corporation, if the director reasonably believes them to be reliable and competent.
Legal counsel, accountants, or other professionals for matters that the director reasonably believes are in such person’s professional competence.
A committee of the directors of which he is not a member, if the director reasonably believes that the committee merits confidence.

(Utah Code § 16-10a-840(2).) However, if a director relies on third-party advice, but has knowledge that makes the reliance unreasonable, the director is not acting in good faith. (Utah Code § 16-10a-840(3).) Finally, a director will not be liable for any action taken or failure to take any action unless:

The director breaches one or more of the duties identified above.
The breach constitutes gross negligence, willful misconduct or intentional infliction of harm on the corporation or its shareholders.

(Utah Code § 16-10a-840(4).) Officers The Utah Revised Business Corporation Act states that each officer with discretionary authority is subject to the same standards and duties as a director of a corporation (Utah Code § 16-10a-840(1)). Mergers What is required to complete a merger in your jurisdiction? Documents A domestic corporation may merge into another entity if the board of directors and the shareholders (if required) approve a plan of merger or share exchange and any other entity party to the merger approves the plan of merger or share exchange (Utah Code § 16-10a-1101(1)). After the plan of merger is approved, the surviving or acquiring corporation must deliver articles of merger or share exchange to the Utah Division of Corporations and Commercial Code (Division) for filing (Utah Code § 16-10a-1105). Plan of Merger or Share Exchange The plan of merger or share exchange must contain:

The name of each entity planning to merge and the name of the surviving entity into which each other entity plans to merge.
The terms and conditions of the merger.
The manner and basis of converting the ownership interests in each entity (as applicable).
Any amendments to the articles of incorporation or organization of the surviving entity.
Any other provisions relating to the merger that the parties wish to include.

(Utah Code § 16-10a-1101(2) and (3).) Articles of Merger or Share Exchange The articles of merger or share exchange must contain:

The plan of merger or share exchange.
If shareholder approval was required:
a statement that approval was required and the voting requirements; and
the votes actually cast for the merger or share exchange for each entity.
If the merger is of a 90% owned subsidiary into a parent corporation, a statement to that effect and the effective date of the merger.

(Utah Code § 16-10a-1105(1).) Board Actions The board of directors of each corporation party to the merger must approve a plan of merger or share exchange. If approval of the shareholders of the corporation is required, the board of directors must also submit the plan of merger or share exchange to the shareholders for approval. (Utah Code §§ 16-10a-1401). If shares have been issued, the board of directors must recommend dissolution to the shareholders. However, the directors may condition the effectiveness of the dissolution on any basis. (Utah Code § 16-10a-1402.) Filing Requirements The articles of dissolution must be filed with the Division to be effective. Dissolution is effective as of the date of filing. (Utah Code § 16-10a-1403.) Shareholder Action Unless a greater vote is required by the organizational documents, the board of directors or by law, the plan of merger or share exchange must be approved by majority of each voting group entitled to vote separately (Utah Code § 16-10a-1103(5)). In the case of a merger of a parent corporation and its subsidiary corporation (at least 90% owned by the parent corporation), shareholder approval is not required if the parent is the surviving corporation. However, if the subsidiary corporation is the surviving corporation, majority shareholder approval by the parent corporation is required. (Utah Code § 16-10a-1103(5).) Dissenters’ Rights The Utah Revised Business Corporation Act gives shareholders, whether or not entitled to vote, a right to dissent from, and obtain payment of the fair value of their shares in a merger if either:

Shareholder approval is required under Section 16-10a-1103 of the Utah Revised Business Corporation Act or the articles of incorporation of the corporation.
The corporation is a subsidiary that is merged with its parent under Section 16-10a-1104 of the Utah Revised Business Corporation Act.

However there are certain exceptions (subject to specified limitations) from the dissenters’ rights provisions for corporations either:

With a class or series of shares which either were listed on a national securities exchange or on the NASDAQ.
Were held of record by more than 2,000 shareholders at the time of the record date or the effective date of the proposed action.

(Utah Code § 16-10a-1302.) Asset Sales What is required for an asset sale in your jurisdiction? Please include any distinctions for a sale of substantially all of the assets. In particular, please include information on: Documents Although the Utah Revised Business Corporation Act does not require any filings to effect an asset sale, generally a corporation that wishes to sell its property or assets enters into an asset purchase agreement with the buyer. The asset purchase agreement sets out:

The assets being sold.
Details of the sale process.
The liabilities and obligations of the parties.

Board Actions A corporation may sell, lease, exchange or otherwise dispose of all, or substantially all, of its property, on the terms and conditions and for the consideration determined by the board of directors. The board of directors must propose the transaction to the shareholders. (Utah Code § 16-10a-1202.) Stockholder Actions To sell all or substantially all of its property, a corporation must get the majority approval of its shareholders at a meeting, unless the articles of incorporation or the by-laws require greater approval. Shareholders must receive notice of the meeting which states the purpose of the meeting. (Utah Code § 16-10a-1202.) Bulk Sales A buyer does not have to give notice to the seller’s creditors if it is acquiring a significant portion of the seller’s business or assets. Successor Liability or De Facto Merger Analysis Utah courts follow the general rule that the buyer of assets in an asset sale does not automatically assume the seller’s debts and liabilities, except where one of the following is true:

The purchaser expressly or impliedly agrees to assume those debts.
The transaction amounts to a consolidation or merger of the seller and purchaser.
The purchasing corporation is merely a continuation of the selling corporation.
The transaction is entered into fraudulently to escape liability for the debts.

(See Macris & Associates, Inc. v. Neways, Inc., 986 P.2d 748, 752 (Utah Ct. App. 1999).) Dissenters’ Rights The Utah Revised Business Corporation Act gives shareholders, whether or not entitled to vote, a right to dissent from, and obtain payment of the fair value of their shares in either:

A sale of all or substantially all of the assets for which a shareholder vote is required under Section 16-10a-1202(1) of the Utah Revised Business Corporation Act. However, this does not include a sale for cash under a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one year after the date of sale.
A sale of all or substantially all of the assets of an entity controlled by the corporation if the shareholders of the corporation were entitled to vote on the consent of the corporation to the disposition under Section16-10a-1202(2) of the Utah Revised Business Corporation Act.

However, there are certain exceptions (subject to specified limitations) from the dissenters’ rights provisions for corporations either:

With a class or series of shares which either were listed on:
a national securities exchange; or
the NASDAQ.
Held of record by more than 2,000 shareholders at the time of the record date or the effective date of the proposed action.

(Utah Code § 16-10a-1302.) Anti-takeover Laws The Utah Control Shares Acquisition Act (UCSAA) applies to “control shares” of an “issuing public corporation.” The UCSAA defines “control shares” as the shares of an issuing public corporation that would entitle a person to exercise voting power within any of the following ranges of voting power:

1/5 or more but less than 1/3 of all voting power.
1/3 or more but less than a majority of all voting power.
A majority or more of all voting power.

(Utah Code § 61-6-2(1).) The UCSAA defines an issuing public corporation as a corporation, other than a depository institution, that is organized under the laws of the state of Utah and that has all of the following:

100 or more shareholders.
Its principal place of business, its principal office, or substantial assets in the state of Utah.
Either:
more than 10% of its shareholders residing in the state of Utah;
more than 10% of its shares owned by Utah residents; or
10,000 shareholders residing in the state of Utah.

(Utah Code § 61-6-5.) Any person who proposes to make or has made a control share acquisition (as defined in the UCSAA) may deliver an acquiring person statement to the public corporation. The statement must contain:

The identity of the acquiring person and each other member of any group of which the person belongs to.
A statement that the acquisition statement is given under the UCSAA.
The number of shares of the public corporation owned by the acquiring person and each other member of the group.
The range of voting power under which the control share acquisition falls, if completed.
If the control share acquisition has not taken place:
a description in reasonable detail of the proposed control share acquisition; and
a statement by the acquiring person stating that the acquisition is not contrary to law and that the acquiring person has the financial capacity to make the proposed control share acquisition.

(UCSAA § 61-6-7.) After the acquiring person statement has been delivered to the corporation, the corporation must call a meeting of the shareholders to vote on the proposed acquisition. The proposed acquisition must be approved by each voting group entitled to vote, voting separately, by a majority of the votes entitled to be cast by that group (excluding all interested shares). (UCSAA § 61-6-10.) A corporation’s articles of incorporation or by-laws may provide that this chapter does not apply to control share acquisitions of shares of the corporation. However, the provision must have been adopted before a control share acquisition to exempt it. (UCSAA § 61-6-6.) Dissolving a Corporation What is required to dissolve a corporation in your jurisdiction? Documents Generally a corporation that wishes to dissolve must file articles of dissolution with the Utah Division of Corporations and Commercial Code (Division). The articles of dissolution must contain:

The name of the corporation.
The address of the corporation’s principal office.
The date the dissolution was authorized.
If dissolution was authorized by the directors or incorporator (before the issuance of shares), a statement to that effect.
If dissolution was authorized by the shareholders (after issuance of shares), the voting requirements and votes actually cast for dissolution.
Any additional information the Division determines is necessary or appropriate.

A corporation is dissolved on the effective date of its articles of dissolution. (Utah Code § 16-10a-1403.) Board Actions If no shares have been issued, but the corporation has a board of directors, the majority of directors must authorize the dissolution of the corporation (Utah Code § 16-10a-1401). If shares have been issued, the board of directors must recommend dissolution to the shareholders. However, the directors may condition the effectiveness of the dissolution on any basis. (Utah Code § 16-10a-1402.) Filing Requirements The articles of dissolution must be filed with the Division to be effective. Dissolution is effective as of the date of filing. (Utah Code § 16-10a-1403.) Shareholder Action Unless a greater vote is required by organizational documents or the board of directors, dissolution must be approved by a majority vote for each voting group entitled to vote separately on the proposal (Utah Code § 16-10a-1402). Activities Requiring Shareholder Consent What activities require stockholder consent in your jurisdiction? Generally a corporation can require shareholder approval for any specific corporate actions by stating so in its articles of incorporation or by-laws. However, for certain actions, the Utah Revised Business Corporation Act requires a corporation to get shareholder approval. Actions requiring shareholder approval include:

Certain amendments to the articles of incorporation (Utah Code § 16-10a-1002).
A merger or consolidation (Utah Code § 16-10a-1103).
The sale of all or substantially all of a corporation’s property (Utah Code § 16-10a-12020).
Dissolution of the corporation (Utah Code § 16-10a-1402).

A minimum majority shareholder approval is required to approve these actions. However, a corporation may require a greater majority in its articles of incorporation or by-laws. Pre-emptive Rights Is there a statutory provision for pre-emptive rights? Do corporations have the ability to opt in or out of this provision? The shareholders of a Utah corporation do not have a pre-emptive right to acquire the corporation’s unissued shares unless provided in the articles of incorporation (Utah Code § 16-10a-630). Limitations on Classes or Series of Stock Are there any limits on the classes or series of stock that can be issued in your jurisdiction? The Utah Revised Business Corporation Act does not impose any limits on the classes or series of capital stock that can be issued by a corporation. Any limitations or restrictions on any classes or series of capital stock must be set out in the articles of incorporation or in the resolution by which the class or series of stock is authorized. (Utah Code § 16-10a-601.) Limitations on Dividends Please describe any limitations on the ability of a corporation to pay dividends on capital stock. Subject to any restrictions in the articles of incorporation, the directors of a corporation may declare and pay dividends on the shares of its capital stock (Utah Code § 16-10a-640(1)). However, no dividends may be made if, after paying the dividends either:

The corporation would not be able to pay its debts as they become due in the usual course of business.
The corporation’s total assets would be less than the sum of its total liabilities plus, unless the articles of incorporation authorize otherwise, the amount that would be needed to satisfy the preferential rights on dissolution of shareholders whose preferential rights are superior to those receiving the dividend.

(Utah Code § 16-10a-640(2).)

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