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Author: Lysander Lyon, MP & Luke Thegreat, MP
Sponsor: N/A
Type: Act of Parliament
1. Short Title
(a) This bill shall be referred to as the "Corporate Reform Act".
(b) This bill was authored by Lysander Lyon.
2. Repeals
(a) The Corporate Establishment Act shall be repealed.
(b) The Shareholder Protections Act shall be repealed.
3. Definitions
(a) Corporation: A legal entity formed by one or more individuals or parties through successful application with the Ministry of Economic Affairs as outlined in Section 3, recognized by law, capable of conducting transactions, entering into contracts, and owning assets.
(b) Shareholder: An individual or entity that holds shares in a corporation.
(c) Board of Directors: A group of individuals elected by the shareholders to oversee the management and operations of a corporation.
4. Formation of Corporations
(a) Any party wishing to form a corporation must file an application with the Ministry of Economic Affairs. The application must include the following:
(i) The name of the corporation.
(ii) The purpose and nature of the business the corporation will engage in.
(iii) The underlying plugin companies in-game that together make up the company.
(iv) The names and signatures of the founding shareholders.
(v) The corporation’s proposed bylaws, which will be legally binding on the corporation. If no bylaws are present, the default bylaws are codified in this Act.
(b) The Ministry of Economic Affairs shall review the application for compliance with the law then approve or deny the application based on this. The Ministry shall also take a $2,500 filing and registration fee.
(c) Existing companies may also choose to go public, filing the same information in the subparts of Section 2a, so long as majority approval of any existing owners/shareholders exists.
5. Corporate Governance
(a) Corporations with a $250,000 valuation or more; with $250,000 or more in assets; or that, by any other reasonable metric, handle $250,000 in value or more, are required to maintain a Board of Directors.
(b) Corporations with a $100,000-$249,999 valuation; with $100,000-$249,9999 in assets; or that, by any other reasonable metric, handle $100,000-$249,999 in value, are not required to maintain a Board of Directors, but must hold a shareholder vote every three months on whether or not they should have a Board of Directors, and shall then abide by the result.
(c) Corporations with a smaller than $100,000 valuation, amount of assets, or value handled are not required to maintain a Board of Directors.
(d) Shareholders have the power to elect the Board of Directors, as outlined in the corporation’s bylaws. There must be a minimum of three Directors.
(e) Other groups may be given the power to elect/appoint individuals to a corporation’s Board of Directors, but any such situation must be specifically approved by the Ministry of Economic Affairs.
(f) The Board of Directors shall be responsible for overseeing the corporation’s operations, making major decisions, and appointing/firing the high-level executive staff.
(g) If a corporation has no Board of Directors, its Chief Executive Officer or President (the highest executive in the company) will be directly elected by the shareholders in accordance with the company’s bylaws, with a minimum of one election every three months.
(i) The highest executive will then be in charge of hiring/firing the other executives, and managing the company.
(ii) The highest executive may be fired by a petition of the majority of shareholders at any time.
(h) Corporations with no Board of Directors are also responsible for holding elections every three months for a Shareholder Representative.
(i) The Shareholder Representative is responsible for assisting operations, but primarily serves to verify the integrity of corporate operations.
(ii) If the highest executive should ever be fired outside of a typical election for the corporation, the Shareholder Representative shall be responsible for holding elections for a replacement in a timely fashion.
6. Regulatory Compliance
(a) Corporations may be audited by the Government at any time. Whether it is to ensure compliance with regulations, to check on financial status, or just as a government inquiry, corporations must comply with government audits.
(b) Failure to comply with a government audit may lead to fines, sanctions, deregistration, or more significant penalties, such as asset seizure or forced dissolution, depending on the severity of the issue and number of offenses.
7. Business Land Ownership
(a) Corporations may own up to four total plots, but must be fully registered and compliant with this statute.
(b) Individual enterprises, as defined in Section 10b, may own a total of two plots, with the two plot limit enforced based on the owner and not the enterprise.
(i) This means, if an individual has ten in-game companies, all of which are separate companies and not all part of a corporate umbrella, only two plots total may be registered as business plots across all ten in-game companies.
(c) Plots under an individual enterprise, and under a corporation, must be registered with the Ministry of Urban Development as either business or corporate plots, respectively.
(d) Business plots may not be transferred without MUD approval.
(e) Corporate plots may not be transferred without MUD approval and proof of majority support for the transfer from either a majority of the Board of Directors, if the corporation has one, or a majority of shareholders, if there is no Board of Directors.
(f) Transferring business or corporate plots without MUD authorization shall be a prosecutable crime of up to 20 minutes in jail and up to a $10,000 fine, in addition to the reversal of the transfer.
8. Corporate Dissolution
(a) A corporation may be voluntarily dissolved only by a majority of its shareholders, or involuntarily by law due to inactivity, insolvency, noncompliance, or other legal/regulatory violations.
(b) Assets remaining after dissolution shall be distributed to the shareholders according to their ownership stake after settling all debts and obligations, unless otherwise specified by the Government.
9. Corporation Reporting Requirements
(a) Public corporations are required to publicize data about the company on a regular basis, based on their classification as set by the Ministry of Economic Affairs. The Ministry of Economic Affairs will be empowered to assign a higher classification to a corporation than its normal reporting tier, if the Ministry feels the corporation’s industry or circumstances warrant it. An easily accessible guide to additional reporting standards must be provided on the Ministry of Economic Affairs discord.
(b) Reporting tiers shall be as follows:
(i) Tier 1: Corporations with a reported value less than $100,000, or with a market capitalization of less than $125,000, shall be required to submit a financial report once each month.
(ii) Tier 2: Corporations of a value between $100,000 and $249,999 (or a publicly traded value of between $125,000 and $300,000) shall be required to submit a monthly financial report, and it must include a rundown of any major decisions undertaken by the company throughout the last month.
(iii) Tier 3: Corporations of a value surpassing $250,000 (or with a publicly traded value of more than $300,000) shall be required to submit a monthly financial report, include a rundown of any major decisions undertaken by the company throughout the last month, and also include an explanation of their financial report, along with any major upcoming plans or decisions.
(c) All corporations are expected to be able to provide a financial report and balance sheet upon request (within a reasonable timeframe) by the Ministry of Economic Affairs.
(d) Templates for the required financial reports and for a balance sheet shall be provided in the Ministry of Economic Affairs discord.
(e) All corporations are required to separately submit a full shareholder list with their financial report each month.
10. Business Limits
(a) The Financial Revisions Act shall have Section 2 repealed.
(b) In-game companies not under a corporation’s umbrella shall be known as individual enterprises.
(c) There shall be no limit on the number of individual enterprises a player may own, but each individual enterprise must serve a clear and legitimate purpose.
(d) Individual enterprises may be forcibly closed by the Ministry of Economic Affairs if they do not serve a clear and legitimate purpose in the eyes of the Ministry.
(i) This does not mean the Ministry can close businesses it seems redundant, but it may close in-game individual enterprises if they do not seem to actually be active, and are instead acting as shell companies.
(e) Using individual enterprises for the purpose of tax evasion is a criminal offense, with an attached penalty of 10 minutes in jail and a fine based on the severity, with the possibility of limiting the individual’s ability to create individual enterprises in-game based on severity and repeated offenses.
11. Stock-Specific Regulations
(a) Corporations may not have more than one class of shares, and each share must be worth one vote.
(b) If an entity wishes to engage in a transaction that would take them into a position of majority ownership of a corporation, or that would end their position of majority ownership in a corporation, they must report the transaction to the Ministry of Economic Affairs at least 24 hours in advance of the transaction going through.
(c) Corporations that are majority-owned by one entity may hold a shareholder vote not to have a Board of Directors. This will hold until either a group of shareholders representing a majority either petition to have a Board of Directors, in which case one shall be created, or the entity no longer holds a majority, in which case a Board shall be constituted.
(d) If a corporation is majority-owned by one entity, that entity shall be responsible for electing the highest executive outlined in Section 4g, while the non-majority shareholders will be responsible for electing the Shareholder Representative outlined in Section 4h.
12. Liability Regulations
(a) Shareholders cannot be held personally liable for the losses of a corporation, unless they held an executive or other role beyond being a simple shareholder.
(b) Executives of a corporation cannot be held liable for company losses, unless fraud, gross negligence, or unlawful conduct is proven.
(c) Directors of a corporation cannot be held liable for losses or actions, except in situations as outlined in Section 12c.
(d) The owners of individual enterprises can be held liable for the actions and losses of the enterprise.
13. Shareholder Protections
(a) Corporations must facilitate a quarterly general meeting (QGM) that allows shareholders to:
(i) Review the corporation’s performance.
(ii) Handle Board of Directors elections, or Chief Executive Officer/President and Shareholder Representative elections.
(iii) Raise concerns or propose items for consideration.
(b) Shareholders collectively holding at least 25% of the ownership of the company may request a special meeting of the shareholders that must be honored, so long as the submitted request includes the purpose of the meeting. This request may be denied if the privilege is being abused by the same group.
(c) A class of shareholders representing at least ⅓ of the company’s ownership may sue the Board of Directors over negligent or unlawful actions, on behalf of the company. If no Directors exist, executives may be sued.
(d) Shareholders may also sue the company itself for impactful mismanagement (IE releasing false information that causes losses), but the mismanagement must be clear, and cannot be over a reasonable business decision (IE making a reasonable business investment after performing due diligence, and then the recipient of the investment quits the server, would not be mismanagement).
(e) Shareholders must be contacted and informed of the start date for each QGM at least seven days prior to the QGM being held.
(f) If a shareholder vote is to be held for any purpose, shareholders must be notified at least 48 hours before the vote is held, and must be granted at least 72 hours to cast their votes.
14. Default Bylaws
(a) A Board of Directors, comprised of five directors, shall manage the operations of the corporation. This includes handling acquisitions and mergers, hiring executives, determining executive compensation, making major corporate decisions, and handling the long-term strategic planning.
(b) Directors shall be elected every quarterly general meeting, with one share equaling one vote and the five individuals with the most votes becoming the five Directors.
(c) Any decision relating to the minting of new stock or modifications to the corporate bylaws shall require approval from shareholders representing a majority stake in the company.
(d) Each member of the Board of Directors shall have 1 vote. In the event of a tie, the proposition shall fail.
(e) Shareholder votes shall be calculated out of votes cast, such that if 11% vote in favor and 10% vote against, but 79% do not vote, the proposal is adopted.
(f) If a shareholder should die, the corporation shall cease counting the shares owned by that shareholder for total shareholder purposes (so if a shareholder with 20% ownership dies, shareholders worth 20% of the company could call a special meeting, because 20% is 25% of 80%).
(i) After the shareholder has been dead for one month (inactive for 60 consecutive days), the corporation may buy their shares back for 75% of market value.
(ii) After the shareholder has been dead for two months (inactive for 90 consecutive days), the corporation may buy their shares back for 50% of market value.
(iii) After the shareholder has been dead for three months (inactive for 120 consecutive days), the corporation may seize their shares at no cost.
(g) Corporation-owned shares will not be counted in the same way dead shareholder shares are not counted, and cannot be used to vote, etc.
(h) (No longer part of the default bylaws corporations shall follow) The Ministry of Economic Affairs may add to the default bylaws for corporations. In the event that the default bylaws are modified, any corporation following the default bylaws shall continue to be bound only by the default bylaws at time of its incorporation.
15. Crimes
(a) As outlined in Section 7f, transferring business or corporate plots without MUD authorization shall be a prosecutable crime “Unauthorized Company Land Transfer” with penalties of up to 20 minutes in jail and up to a $10,000 fine, in addition to the reversal of the transfer.
(b) As outlined in Section 10e, using individual enterprises for the purpose of tax evasion is a criminal offense “Enterprise Tax Evasion”, with an attached penalty of 10 minutes in jail and a fine based on the severity, with the possibility of limiting the individual’s ability to create individual enterprises in-game based on severity and repeated offenses. Limiting the creation of enterprises cannot be done without a court case, nor can fines of more than $5,000 be levied without a court case.
(c) “Market Manipulation” shall be a prosecutable crime as well, described as the intentional and unnatural manipulation of market forces for the gain of oneself or others. This, for example, could be a situation where individuals deflate the selling price of a company so a corporate buyback from a deceased shareholder is less costly, or overpay for shares to increase valuation. Market manipulation shall have penalties of up to 15 minutes in jail and a fine based on severity.
Enactment: This Act comes into force immediately upon passage.
Sponsor: N/A
Type: Act of Parliament
A
BILL
TO
Reform the Laws Around Businesses
BILL
TO
Reform the Laws Around Businesses
1. Short Title
(a) This bill shall be referred to as the "Corporate Reform Act".
(b) This bill was authored by Lysander Lyon.
2. Repeals
(a) The Corporate Establishment Act shall be repealed.
(b) The Shareholder Protections Act shall be repealed.
3. Definitions
(a) Corporation: A legal entity formed by one or more individuals or parties through successful application with the Ministry of Economic Affairs as outlined in Section 3, recognized by law, capable of conducting transactions, entering into contracts, and owning assets.
(b) Shareholder: An individual or entity that holds shares in a corporation.
(c) Board of Directors: A group of individuals elected by the shareholders to oversee the management and operations of a corporation.
4. Formation of Corporations
(a) Any party wishing to form a corporation must file an application with the Ministry of Economic Affairs. The application must include the following:
(i) The name of the corporation.
(ii) The purpose and nature of the business the corporation will engage in.
(iii) The underlying plugin companies in-game that together make up the company.
(iv) The names and signatures of the founding shareholders.
(v) The corporation’s proposed bylaws, which will be legally binding on the corporation. If no bylaws are present, the default bylaws are codified in this Act.
(b) The Ministry of Economic Affairs shall review the application for compliance with the law then approve or deny the application based on this. The Ministry shall also take a $2,500 filing and registration fee.
(c) Existing companies may also choose to go public, filing the same information in the subparts of Section 2a, so long as majority approval of any existing owners/shareholders exists.
5. Corporate Governance
(a) Corporations with a $250,000 valuation or more; with $250,000 or more in assets; or that, by any other reasonable metric, handle $250,000 in value or more, are required to maintain a Board of Directors.
(b) Corporations with a $100,000-$249,999 valuation; with $100,000-$249,9999 in assets; or that, by any other reasonable metric, handle $100,000-$249,999 in value, are not required to maintain a Board of Directors, but must hold a shareholder vote every three months on whether or not they should have a Board of Directors, and shall then abide by the result.
(c) Corporations with a smaller than $100,000 valuation, amount of assets, or value handled are not required to maintain a Board of Directors.
(d) Shareholders have the power to elect the Board of Directors, as outlined in the corporation’s bylaws. There must be a minimum of three Directors.
(e) Other groups may be given the power to elect/appoint individuals to a corporation’s Board of Directors, but any such situation must be specifically approved by the Ministry of Economic Affairs.
(f) The Board of Directors shall be responsible for overseeing the corporation’s operations, making major decisions, and appointing/firing the high-level executive staff.
(g) If a corporation has no Board of Directors, its Chief Executive Officer or President (the highest executive in the company) will be directly elected by the shareholders in accordance with the company’s bylaws, with a minimum of one election every three months.
(i) The highest executive will then be in charge of hiring/firing the other executives, and managing the company.
(ii) The highest executive may be fired by a petition of the majority of shareholders at any time.
(h) Corporations with no Board of Directors are also responsible for holding elections every three months for a Shareholder Representative.
(i) The Shareholder Representative is responsible for assisting operations, but primarily serves to verify the integrity of corporate operations.
(ii) If the highest executive should ever be fired outside of a typical election for the corporation, the Shareholder Representative shall be responsible for holding elections for a replacement in a timely fashion.
6. Regulatory Compliance
(a) Corporations may be audited by the Government at any time. Whether it is to ensure compliance with regulations, to check on financial status, or just as a government inquiry, corporations must comply with government audits.
(b) Failure to comply with a government audit may lead to fines, sanctions, deregistration, or more significant penalties, such as asset seizure or forced dissolution, depending on the severity of the issue and number of offenses.
7. Business Land Ownership
(a) Corporations may own up to four total plots, but must be fully registered and compliant with this statute.
(b) Individual enterprises, as defined in Section 10b, may own a total of two plots, with the two plot limit enforced based on the owner and not the enterprise.
(i) This means, if an individual has ten in-game companies, all of which are separate companies and not all part of a corporate umbrella, only two plots total may be registered as business plots across all ten in-game companies.
(c) Plots under an individual enterprise, and under a corporation, must be registered with the Ministry of Urban Development as either business or corporate plots, respectively.
(d) Business plots may not be transferred without MUD approval.
(e) Corporate plots may not be transferred without MUD approval and proof of majority support for the transfer from either a majority of the Board of Directors, if the corporation has one, or a majority of shareholders, if there is no Board of Directors.
(f) Transferring business or corporate plots without MUD authorization shall be a prosecutable crime of up to 20 minutes in jail and up to a $10,000 fine, in addition to the reversal of the transfer.
8. Corporate Dissolution
(a) A corporation may be voluntarily dissolved only by a majority of its shareholders, or involuntarily by law due to inactivity, insolvency, noncompliance, or other legal/regulatory violations.
(b) Assets remaining after dissolution shall be distributed to the shareholders according to their ownership stake after settling all debts and obligations, unless otherwise specified by the Government.
9. Corporation Reporting Requirements
(a) Public corporations are required to publicize data about the company on a regular basis, based on their classification as set by the Ministry of Economic Affairs. The Ministry of Economic Affairs will be empowered to assign a higher classification to a corporation than its normal reporting tier, if the Ministry feels the corporation’s industry or circumstances warrant it. An easily accessible guide to additional reporting standards must be provided on the Ministry of Economic Affairs discord.
(b) Reporting tiers shall be as follows:
(i) Tier 1: Corporations with a reported value less than $100,000, or with a market capitalization of less than $125,000, shall be required to submit a financial report once each month.
(ii) Tier 2: Corporations of a value between $100,000 and $249,999 (or a publicly traded value of between $125,000 and $300,000) shall be required to submit a monthly financial report, and it must include a rundown of any major decisions undertaken by the company throughout the last month.
(iii) Tier 3: Corporations of a value surpassing $250,000 (or with a publicly traded value of more than $300,000) shall be required to submit a monthly financial report, include a rundown of any major decisions undertaken by the company throughout the last month, and also include an explanation of their financial report, along with any major upcoming plans or decisions.
(c) All corporations are expected to be able to provide a financial report and balance sheet upon request (within a reasonable timeframe) by the Ministry of Economic Affairs.
(d) Templates for the required financial reports and for a balance sheet shall be provided in the Ministry of Economic Affairs discord.
(e) All corporations are required to separately submit a full shareholder list with their financial report each month.
10. Business Limits
(a) The Financial Revisions Act shall have Section 2 repealed.
(b) In-game companies not under a corporation’s umbrella shall be known as individual enterprises.
(c) There shall be no limit on the number of individual enterprises a player may own, but each individual enterprise must serve a clear and legitimate purpose.
(d) Individual enterprises may be forcibly closed by the Ministry of Economic Affairs if they do not serve a clear and legitimate purpose in the eyes of the Ministry.
(i) This does not mean the Ministry can close businesses it seems redundant, but it may close in-game individual enterprises if they do not seem to actually be active, and are instead acting as shell companies.
(e) Using individual enterprises for the purpose of tax evasion is a criminal offense, with an attached penalty of 10 minutes in jail and a fine based on the severity, with the possibility of limiting the individual’s ability to create individual enterprises in-game based on severity and repeated offenses.
11. Stock-Specific Regulations
(a) Corporations may not have more than one class of shares, and each share must be worth one vote.
(b) If an entity wishes to engage in a transaction that would take them into a position of majority ownership of a corporation, or that would end their position of majority ownership in a corporation, they must report the transaction to the Ministry of Economic Affairs at least 24 hours in advance of the transaction going through.
(c) Corporations that are majority-owned by one entity may hold a shareholder vote not to have a Board of Directors. This will hold until either a group of shareholders representing a majority either petition to have a Board of Directors, in which case one shall be created, or the entity no longer holds a majority, in which case a Board shall be constituted.
(d) If a corporation is majority-owned by one entity, that entity shall be responsible for electing the highest executive outlined in Section 4g, while the non-majority shareholders will be responsible for electing the Shareholder Representative outlined in Section 4h.
12. Liability Regulations
(a) Shareholders cannot be held personally liable for the losses of a corporation, unless they held an executive or other role beyond being a simple shareholder.
(b) Executives of a corporation cannot be held liable for company losses, unless fraud, gross negligence, or unlawful conduct is proven.
(c) Directors of a corporation cannot be held liable for losses or actions, except in situations as outlined in Section 12c.
(d) The owners of individual enterprises can be held liable for the actions and losses of the enterprise.
13. Shareholder Protections
(a) Corporations must facilitate a quarterly general meeting (QGM) that allows shareholders to:
(i) Review the corporation’s performance.
(ii) Handle Board of Directors elections, or Chief Executive Officer/President and Shareholder Representative elections.
(iii) Raise concerns or propose items for consideration.
(b) Shareholders collectively holding at least 25% of the ownership of the company may request a special meeting of the shareholders that must be honored, so long as the submitted request includes the purpose of the meeting. This request may be denied if the privilege is being abused by the same group.
(c) A class of shareholders representing at least ⅓ of the company’s ownership may sue the Board of Directors over negligent or unlawful actions, on behalf of the company. If no Directors exist, executives may be sued.
(d) Shareholders may also sue the company itself for impactful mismanagement (IE releasing false information that causes losses), but the mismanagement must be clear, and cannot be over a reasonable business decision (IE making a reasonable business investment after performing due diligence, and then the recipient of the investment quits the server, would not be mismanagement).
(e) Shareholders must be contacted and informed of the start date for each QGM at least seven days prior to the QGM being held.
(f) If a shareholder vote is to be held for any purpose, shareholders must be notified at least 48 hours before the vote is held, and must be granted at least 72 hours to cast their votes.
14. Default Bylaws
(a) A Board of Directors, comprised of five directors, shall manage the operations of the corporation. This includes handling acquisitions and mergers, hiring executives, determining executive compensation, making major corporate decisions, and handling the long-term strategic planning.
(b) Directors shall be elected every quarterly general meeting, with one share equaling one vote and the five individuals with the most votes becoming the five Directors.
(c) Any decision relating to the minting of new stock or modifications to the corporate bylaws shall require approval from shareholders representing a majority stake in the company.
(d) Each member of the Board of Directors shall have 1 vote. In the event of a tie, the proposition shall fail.
(e) Shareholder votes shall be calculated out of votes cast, such that if 11% vote in favor and 10% vote against, but 79% do not vote, the proposal is adopted.
(f) If a shareholder should die, the corporation shall cease counting the shares owned by that shareholder for total shareholder purposes (so if a shareholder with 20% ownership dies, shareholders worth 20% of the company could call a special meeting, because 20% is 25% of 80%).
(i) After the shareholder has been dead for one month (inactive for 60 consecutive days), the corporation may buy their shares back for 75% of market value.
(ii) After the shareholder has been dead for two months (inactive for 90 consecutive days), the corporation may buy their shares back for 50% of market value.
(iii) After the shareholder has been dead for three months (inactive for 120 consecutive days), the corporation may seize their shares at no cost.
(g) Corporation-owned shares will not be counted in the same way dead shareholder shares are not counted, and cannot be used to vote, etc.
(h) (No longer part of the default bylaws corporations shall follow) The Ministry of Economic Affairs may add to the default bylaws for corporations. In the event that the default bylaws are modified, any corporation following the default bylaws shall continue to be bound only by the default bylaws at time of its incorporation.
15. Crimes
(a) As outlined in Section 7f, transferring business or corporate plots without MUD authorization shall be a prosecutable crime “Unauthorized Company Land Transfer” with penalties of up to 20 minutes in jail and up to a $10,000 fine, in addition to the reversal of the transfer.
(b) As outlined in Section 10e, using individual enterprises for the purpose of tax evasion is a criminal offense “Enterprise Tax Evasion”, with an attached penalty of 10 minutes in jail and a fine based on the severity, with the possibility of limiting the individual’s ability to create individual enterprises in-game based on severity and repeated offenses. Limiting the creation of enterprises cannot be done without a court case, nor can fines of more than $5,000 be levied without a court case.
(c) “Market Manipulation” shall be a prosecutable crime as well, described as the intentional and unnatural manipulation of market forces for the gain of oneself or others. This, for example, could be a situation where individuals deflate the selling price of a company so a corporate buyback from a deceased shareholder is less costly, or overpay for shares to increase valuation. Market manipulation shall have penalties of up to 15 minutes in jail and a fine based on severity.
Enactment: This Act comes into force immediately upon passage.