ND Corporate Law May Bring New Revenue To State
The Associated Press
06/15/09 - 10:19 AM EDT
DALE WETZEL
BISMARCK, N.D. (AP) Aside from the prospect of increasing North Dakota's profile in the business world, a state law on corporate organization offers a potential source of new revenue.
The law makes it easier for shareholders of publicly traded corporations to contest actions by a company's board of directors and air their views about management compensation.
American Railcar Industries Inc., a Missouri company that manufactures and repairs railroad cars, is expected to switch its corporate home to North Dakota later this month, Secretary of State Al Jaeger says.
Shareholders in the company, which is controlled by New York investor Carl Icahn, voted to approve the change last week. American Railcar now is incorporated in Delaware, which is the corporate home of more than half the nation's publicly traded companies.
Companies that use North Dakota's new "shareholder friendly" law will be obliged to pay annual franchise fees to incorporate in the state.
The law sets the fee at $60 for each 10,000 authorized shares of stock in a company, with an annual cap of $80,000. The fee is prorated for any company that files its first registration in the middle of the year.
American Railcar, which has 50 million authorized shares of stock, will owe the $80,000 fee maximum over the entire year. If the cap were not in place, the company would pay an annual fee of $300,000. Delaware's annual franchise fee cap is $165,000.
"Now that this first one has hit, I think (the North Dakota corporate law) will be noticed more out in the corporate world," Jaeger said. "It will draw some attention to North Dakota."
Ten percent of a corporation's franchise fee under the new law is earmarked for the secretary of state's operating fund, with the remainder going into the general state government treasury. For the 2009-2011 budget period, the secretary of state's entire two-year budget is $18.4 million.
"I think when we got into this, I didn't believe we would be getting hundreds (of new company incorporations) or anything like that," Jaeger said. "But if you have 10 or 15 of them register, that certainly would be something we would find to be beneficial."
Shareholder-rights activists have asked stockholders in at least 18 companies to approve reincorporating in North Dakota. Fifteen have rejected the idea; two other companies, insurer American International Group Inc. and Pep Boys, an auto parts and repair company, will decide the question later this month.
Jaeger said he does not consider the law an attempt to compete with Delaware.
"This is an option for business, as far as business structure," Jaeger said. "If people want to use it, we have it. If they don't, that's fine with us."
