Background and Origin

The Minnesota Business Corporation Act is Minnesota’s adopted version of the Model Business Corporation Act (MBCA), a body of law first published in 1950 with the purpose of setting forth a universal understanding of the requirements of business incorporation. The MBCA is a product of the American Bar Association, and a committee within the American Bar Association continues to have full jurisdiction over the MBCA. This committee is charged with the task of making revisions and amendments in light of emerging industries, judicial decisions, and regulatory concerns. As of 2012, approximately 32 states have adopted the MBCA. The Minnesota Business Corporation Act, codified in chapter 302A of the Minnesota Statutes, was adopted by Minnesota in 1981 and has been revised periodically since that time. For Minnesota corporations formed after January 1, 1984, the Minnesota Business Corporation Act is the governing body of law.

Overview of the MBCA

The MBCA is an incredibly lengthy body of law. Its length and depth is necessary, however, since corporate structuring can be quite complicated. As a result, determining where to start, where to look, and what is most important is easier said than done. The following summary is meant to highlight some of the main sections and provisions of the MBCA. Keep in mind, however, that if you are attempting to start a corporation, a thorough review of the MBCA is crucial. Additionally, discussing plans and issues with an attorney who specializes in business law is highly recommended.

Scope, Incorporation, Powers, and Organization

Scope and Application:

The MBCA was adopted by the state of Minnesota in 1981. For corporations formed after 1984, the MBCA is the governing body of law for every corporation. Therefore, every incorporator should carefully review each provision of the statute to ensure compliance.


With only a few exceptions, every corporation in Minnesota is governed by the MBCA. In order to legally incorporate within the state of Minnesota, an individual, or “incorporator,” must sign and file the corporation’s Articles of Incorporation with the Minnesota Secretary of State’s office. A corporation’s Articles of Incorporation serve as the guiding rules governing the corporation, and should be drafted in such a way that caters to the individual needs of a corporation. Though the Articles of Incorporation will vary from one entity to another, all articles must contain the following provisions: the name of the corporation, the number of shares of stock the corporation is authorized to issue, the street address of the corporation’s registered office as well as its registered agent, and the name and address of each incorporator. The corporation’s corporate existence begins when the articles of incorporation are filed with the Secretary of State, and the incorporator has paid a required fee of $155. The Secretary of State shall then issue a Certificate of Incorporation to the corporation memorializing its formation.

The MBCA also goes into significant detail on provisions that may be included in the Articles of Incorporation. If a nonmandatory provision is not included in the articles, the MBCA permits certain assumptions to be made. For example, if the articles do not contain a provision stating the corporation’s purpose, the statute assumes that the purpose of the corporation will be to engage in any lawful business. Similarly, if the articles do not contain a provision stating the duration of the corporation, the statute assumes that the corporation will have a perpetual duration. Therefore, depending on the desired characteristics of the corporation, it would be wise to review the MBCA with an attorney in order to determine how to include such characteristics within the Articles of Incorporation.


You may be familiar with the idea that corporations are given many of the same legal capacities that you and I are given. The MBCA sets forth what these powers are, and describes the extent of such powers. Some of these include the legal capacity to sue or be sued, the power to own property, the power to enter into contracts, the power to make investments, and the power to be located anywhere in the universe.

Organization and Bylaws:

After the Articles of Incorporation have been filed, the incorporators or the directors named in the Articles of Incorporation must hold an organizational meeting. This meeting is necessary to transact business and complete organizational tasks such as amending the articles of incorporation, electing directors, adopting bylaws, and engaging in other business. Whoever calls the meeting must give at least three days’ notice of the meeting to each incorporator or director named in the articles of incorporation. While corporation bylaws are not mandatory, they may be helpful in detailing the general operational structure of the corporation. Bylaws are to be adopted by the board (unless stated otherwise in the Articles of Incorporation), and any subsequent amendment or repeal of the bylaws is to be decided by the board.


Board of Directors:

As described above, the corporation must either name the directors in the Articles of Incorporation, or, upon commencement of the legal existence of the corporation, select them at the first meeting. The board of directors manages the business and affairs of the corporation, and are, in turn, responsible for electing the corporation’s officers. The board of directors, however, is not self-governing. The corporation’s shareholders are given the task and responsibility of overseeing the board of directors, and can make changes to the board if appropriate. And this should make sense, after all, since the shareholders are the actual owners of the corporation.


The MBCA requires at least one person to act as an officer of a corporation. There must be at least two officer positions; a chief executive officer (CEO) and a chief financial officer (CFO). Intuitively, since there must be at least one officer, but two positions are required, one person can hold both offices if necessary. The statute goes on to list the duties of each position; listing requirements for the CEO and the CFO. The corporation may also, at its discretion, appoint other officers it deems necessary to effectively conduct business. The duties for other officers should be set forth in the articles of incorporation or bylaws.


The shareholders (those who have been issued authorized shares from the corporation) are the owners of the corporation. The MBCA sets forth a complex and lengthy discussion on what is required of the corporation in the issuance of shares. The shareholders, depending upon the percentage of shares owned, may be able to have direct decision-making powers over the corporation. For example, regular meetings of shareholders are not necessarily required. However, if a meeting has not been held for 15 months, a shareholder or shareholders holding at least three percent of the shares can demand a meeting by contacting the CEO or CFO. The MBCA goes on to discuss how shareholder voting is to take place; stating that action is to be taken by affirmative vote of the shareholders in a manner determined by the bylaws or Articles of Incorporation.

General Provisions

Loans, Obligations, and Distributions:

The MBCA sets forth guidelines for how and when a corporation can provide loans to people. In general, a corporation can lend money if it approved by the majority of the directors and is otherwise done in the regular course of business or in regard to an entity within which the corporation has an interest. Additionally, depending on the situation, shareholders may be required to approve such transactions.

The board of directors is permitted to make distributions only if the board determines that the corporation will still be able to pay its debts following the distribution. However, distributions can be limited through the Articles of Incorporation and/or the bylaws.


The MBCA goes into significant detail about the issue and scope of indemnification for individuals acting in their official capacities within the corporation. For example, the statute states that indemnification is to extend when the individual (1) has not been indemnified by another organization, (2) acted in good faith, (3) received no improper benefits from their actions, (4) had no reason to believe their conduct was unlawful, and (5) reasonably believed that any acts or omissions were done in the best interests of the corporation. The articles of incorporation or bylaws, however, may limit the scope of indemnification as long as it is applied equally to all persons.

Merger and Exchange:

The MBCA outlines a corporation’s ability to merge with one or more domestic or foreign corporations; resulting in a single corporate entity. Such a process is usually accomplished by first issuing a plan of merger, which is to be approved by the board of directors and, in some cases, the shareholders. Similarly, a corporation can issue a plan of exchange, which consists of the acquisition of all outstanding shares from another domestic or foreign corporation.


A corporation can be dissolved in a number of ways. The MBCA includes four methods of dissolution: (a) before the issuance of shares, (b) after the issuance of shares, (c) by order of a court, or (d) by the secretary of state. If, for example, a corporation has already issued shares, written notice must be given to the shareholders and a shareholder vote must be held. If such procedures result in an approval of corporate dissolution, the corporation must file a notice of its intent to dissolve with the Minnesota Secretary of State. Following the filing of this notice, the corporation is to cease its business operations and start the process of winding up all business affairs. Additionally, the corporation’s directors are to take the necessary steps in making provision for the corporation’s debts, obligation, and liabilities. The dissolution process can become complicated, so great care should be taken when dissolving.


The Minnesota Business Corporation Act is an extremely long and detailed body of law. The process of incorporating a business is not an undertaking one should take lightly. Carefully reviewing each provision set forth in the MBCA should be a task every incorporator engages in, and should be done under the advisement of a knowledgeable business attorney.

Written by former Law Clerk, Michael Carlson