HB 1068 revise provisions related to the conversion of nonprofit corpo...
State of South Dakota
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NINETY-FIRST SESSION
LEGISLATIVE ASSEMBLY, 2016
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238X0010
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HOUSE JUDICIARY ENGROSSED NO. HB 1068 - 02/22/2016
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This bill has been extensively amended (hoghoused) and may no longer be consistent
with the original intention of the sponsor.
Introduced by: Representatives Stevens, Johns, and Schoenbeck and Senator Rusch
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FOR AN ACT ENTITLED, An Act to revise provisions related to the conversion of nonprofit
corporations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 47-22-4 be amended to read:
47-22-4. Corporations may be organized under this chapter for any lawful purpose,
including, but not limited to, any one or more of the following purposes:
(1) Agricultural;
(2) Animal husbandry;
(3) Athletic;
(4) Benevolent;
(5) Charitable;
(6) Civic;
(7) Cultural;
(8) Educational;
(9) Eleemosynary;
(10) Fraternal;
(11) Horticultural;
(12) Literary;
(13) Patriotic;
(14) Political;
(15) Religious;
(16) Scientific;
(17) Social; and
(18) Professional, commercial, industrial, or trade association. However, labor unions,
cooperative organizations, other than housing cooperatives, communals, and
organizations subject to any of the provisions of the banking laws of this state may
not be organized under this chapter. Notwithstanding any other provision of this title,
any insurance organization formed under this chapter is subject to Title 58.
Section 2. That § 47-22-5 be amended to read:
47-22-5. Three One or more natural persons of the age of majority may act as incorporators
of a corporation by delivering to the secretary of state the articles of incorporation for such
corporation. Delivery may be made by electronic transmission if and to the extent permitted by
the Office of the Secretary of State. If the document is filed in typewritten or printed form and
not transmitted electronically, the Office of the Secretary of State may require one exact or
conformed copy to be delivered with the document.
Section 3. That chapter 47-22 be amended by adding a NEW SECTION to read:
Notwithstanding any provision to the contrary in chapters 47-22 to 47-28, inclusive, filings
with the Office of Secretary of State may be made by electronic transmission if and to the extent
permitted by the Office of Secretary of State.
Section 4. That chapter 47-22 be amended by adding a NEW SECTION to read:
Notwithstanding any provision to the contrary in chapters 47-22 to 47-28, inclusive, filings
with the Office of Secretary of State may specify delayed effective time and date, and if it does
so the document becomes effective at the time and date specified. If a delayed effective date is
indicated, but no time is specified, the document is effective at the close of business on that
date. A delayed effective date for a document may not be later than the ninetieth day after the
date it is filed.
Section 5. That § 47-23-2.1 be amended to read:
47-23-2.1. No director, trustee, committee member, or officer serving without compensation,
other than reimbursement for actual expenses, of any corporation organized under this chapter
or under similar laws of another state,
and which is exempt from taxation pursuant to Section
501(a) of the Internal Revenue Code, 26 U.S.C. Section 501(a) and is listed as an exempt
organization in Section 501(c) of the Internal Revenue Code, 26 U.S.C. Section 501(c), or any
hospital organized pursuant to chapter 34-8, 34-9, or 34-10 is liable, and no cause of action may
be brought, for damages resulting from the exercise of judgment or discretion in connection
with the duties or responsibilities of such director, trustee, committee member, or officer while
acting in an official capacity as such director, trustee, committee member, or officer, unless the
act or omission involved willful or wanton misconduct. The immunity provided by this section
applies to any member of an advisory board, serving without compensation, other than
reimbursement for actual expenses, of any corporation described by this section.
Section 6. That § 47-23-4 be amended to read:
47-23-4. An annual meeting of the members of a corporation shall be held at such time as
may be provided in the bylaws. Failure to hold the annual meeting at the designated time shall
not work a forfeiture or dissolution of the corporation. The articles of incorporation or bylaws
may provide that an annual or regular meeting of members does not need to be held at a
geographic location and may instead be held by any means of electronic communication which
allows the members to read or hear the proceedings substantially concurrently with their
occurrence, vote on matters submitted to the members, pose questions, and make comments.
Section 7. That § 47-23-6 be amended to read:
47-23-6. Any action required by chapters 47-22 to 47-28, inclusive, to be taken at a meeting
of the members or directors of a corporation, or any action which may be taken at a meeting of
the members or directors or of a committee of directors, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all the members entitled
to vote with respect to the subject matter thereof, or all of the directors, or all of the members
of the committee of directors, as the case may be. If permitted in the articles of incorporation
or the bylaws, such consent and signature may be transmitted by any reasonable means
including, but not limited to, traditional mail, hand delivery, email, or electronic facsimile.
Such consent shall have the same force and effect as a unanimous vote, and may be stated
as such in any articles or document filed with the secretary of state under chapters 47-22 to 47-28, inclusive.
Section 8. That § 47-23-7 be amended to read:
47-23-7. Unless otherwise provided in the articles of incorporation or the bylaws, written
notice stating the place, day, and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less than ten nor
more than fifty days before the date of the meeting, either personally or by mail, by or at the
direction of the president, or the secretary, or the officers or persons calling the meeting, to each
member entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the member at his address as it appears
on the records of the corporation, with postage thereon prepaid. If permitted in the articles of
incorporation or the bylaws, notice of meetings may be given by any reasonable means
including, but not limited to, traditional mail, hand delivery, email, or electronic facsimile.
Section 9. That § 47-23-9 be amended to read:
47-23-9. A member entitled to vote may vote in person or, unless the articles of
incorporation or the bylaws otherwise provide, may vote by proxy executed in writing by the
member or by his duly authorized attorney in fact. No proxy shall be valid after eleven months
from the date of its execution, unless otherwise provided in the proxy. Where directors or
officers are to be elected by members, the bylaws may provide that such elections may be
conducted by mail. Except as otherwise provided in the articles of incorporation or bylaws, any
action that may be taken at any annual, regular, or special meeting of members may be taken
without a meeting if the corporation delivers a ballot to every member entitled to vote on the
matter. Each ballot must:
(1) Set forth each proposed action;
(2) Provide an opportunity to vote for or against, or withhold a vote for, each proposed
action;
(3) Be delivered to each member by any means of transmission set forth in the bylaws
or articles of incorporation. If no method is set forth in the bylaws or articles of
incorporation, ballots may be delivered by any reasonable means, including, but not
limited to, traditional mail, hand delivery, email, or electronic facsimile;
(4) Indicate the number of responses needed to meet the quorum requirements;
(5) State the percentage of approvals necessary to approve each matter other than
election of directors; and
(6) Specify the time by which a ballot must be received in order to be counted.
Unless otherwise provided in the articles of incorporation or bylaws, approval by ballot,
pursuant to this section, of action other than election of directors is valid only when the number
of votes cast by ballot equals or exceeds the quorum required to be present at a meeting
authorizing the action, and the number of approvals equals or exceeds the number of votes that
would be required to approve the matter at a meeting at which the total number of votes cast was
the same as the number of votes cast by ballot. Except as otherwise provided in the articles of
incorporation or bylaws, a ballot may not be revoked.
Section 10. That § 47-23-13 be amended to read:
47-23-13.
The Except as authorized by § 47-23-22, the affairs of a corporation shall be
managed by a board of directors. Directors need not be members of the corporation unless the
articles of incorporation or the bylaws so require. The articles of incorporation or the bylaws
may prescribe other qualifications for directors.
Section 11. That § 47-23-22 be amended to read:
47-23-22. If the articles of incorporation or the bylaws so provide, the board of directors
,
by resolution adopted by a majority of the directors in office, may designate one or more
committees each of which shall consist of
two one or more directors
, which and such additional
members as specified in the resolution which such additional members need not be a director
or member of the nonprofit corporation, or resident of the state. Such committees, to the extent
provided
in such resolution, in the articles of incorporation or in the bylaws of the corporation,
shall have and exercise the authority
or function of the board of directors in the management of
the corporation
; but the. The designation of such committees and the delegation thereto of
authority shall not operate to relieve the board of directors, or any individual director of any
responsibility imposed upon it or
him any individual director by law
except those
responsibilities related to the authority or function the committee is authorized to exercise.
Other committees not having and exercising the authority of the board of directors in the
management of the corporation may be designated by a resolution adopted by a majority of the
directors present at a meeting at which a quorum is present. Members of committees created
under this section have the same rights of indemnification and immunity as are provided to the
board of directors in chapters 47-22 to 47-28, inclusive, unless otherwise provided in the articles
of incorporation or bylaws.
Section 12. That § 47-24-1 be amended to read:
47-24-1. Each corporation shall keep correct and complete books and records of account and
shall keep minutes of the proceedings of its members, board of directors, and committees having
any of the authority of the board of directors; and shall keep at its registered office or principal
office a record of the names and addresses of its members entitled to vote. If authorized by the
articles of incorporation or bylaws, the records required by this section may be kept in electronic
format.
Section 13. That § 47-24-17 be amended to read:
47-24-17. Upon At least ten days prior to the sale, transfer, conversion, or merger of at least
thirty percent of the assets of a nonprofit corporation, the corporation shall give written notice
to the attorney general. The following information shall, within sixty days of such sale, transfer,
or merger, be submitted to the secretary of state:
(1) Name and address of the parties involved in the sale, transfer, conversion, or merger;
(2) Terms and conditions of the sale, transfer, conversion, or merger;
(3) Dollar value of the assets being sold, transferred, converted, or merged, including an
account of how the value was determined; and
(4) An explanation of how the sale, transfer,
conversion, or merger furthers the purpose
of the nonprofit corporation.
The information shall be submitted on forms provided by the secretary of state.
Section 14. That the code be amended by adding a NEW SECTION to read:
At least ten days prior to a meeting to dissolve under chapter 47-26, or conversion from a
nonprofit corporation to a domestic business corporation or other business entity authorized by
law, the corporation shall provide notice to the attorney general which notice shall include a
copy of the plan for distribution of assets required pursuant to § 47-26-6 or plan of conversion
pursuant to section 23 or 24 of this Act.
Section 15. That the code be amended by adding a NEW SECTION to read:
If so provided in the articles of incorporation or bylaws of the corporation, any written notice
required to be provided to any member or director pursuant to any provision of chapters 47-22
to 47-28, inclusive, may be sent by any reasonable means of transmission set forth in the articles
of incorporation or bylaws of the corporation, including, but not limited to, traditional mail,
hand delivery, email, or electronic facsimile.
Section 16. That the code be amended by adding a NEW SECTION to read:
Terms used in sections 16 to 37, inclusive, of this Act, mean:
(1) "Conversion," a transaction authorized by sections 23 to 37, inclusive, of this Act;
(2) "Converting corporation," the domestic or foreign nonprofit or business corporation
that approves a conversion pursuant to sections 23 to 37, inclusive, of this Act, or the
applicable laws of the foreign jurisdiction;
(3) "Converting entity," the domestic or foreign entity that approves a conversion
pursuant to sections 23 to 37, inclusive, of this Act;
(4) "Domesticated corporation," the domesticating corporation as it continues in
existence after a domestication;
(5) "Domesticating corporation," the domestic nonprofit corporation that adopts a plan
of domestication pursuant to sections 18 to 22, inclusive, of this Act, or the foreign
nonprofit corporation that approves a domestication pursuant to the applicable laws
of the foreign jurisdiction;
(6) "Domestication," a transaction authorized by sections 18 to 22, inclusive, of this Act;
(7) "Surviving corporation," the corporation as it continues in existence immediately
after consummation of a for-profit conversion pursuant to sections 18 to 37,
inclusive, of this Act;
(8) "Surviving entity," the unincorporated entity as it continues in existence immediately
after consummation of an entity conversion pursuant to sections 18 to 37, inclusive,
of this Act.
Section 17. That the code be amended by adding a NEW SECTION to read:
If a domestic or foreign nonprofit corporation may not be a party to a merger or sale of its
assets without the approval of the attorney general, the Division of Insurance, or the Public
Utilities Commission, the corporation may not be a party to a conversion or domestication
without the prior approval of that agency.
Section 18. That the code be amended by adding a NEW SECTION to read:
(a) A foreign nonprofit corporation may become a domestic nonprofit corporation only if
the domestication is authorized by the laws of the foreign jurisdiction.
(b) A domestic nonprofit corporation may become a foreign nonprofit corporation if the
domestication is permitted by the laws of the foreign jurisdiction. Regardless of whether the
laws of the foreign jurisdiction require the adoption of a plan of domestication, the
domestication must be approved by the adoption by the corporation of a plan of domestication.
(c) The plan of domestication must include:
(1) A statement of the jurisdiction in which the corporation is to be domesticated;
(2) The terms and conditions of the domestication;
(3) The manner and basis of canceling or reclassifying the memberships of the
corporation following its domestication into memberships, obligations, rights to
acquire memberships, cash, other property, or any combination of the foregoing; and
(4) Any desired amendments to the articles of incorporation or bylaws of the corporation
following its domestication.
(d) The plan of domestication may also include a provision that the plan may be amended
prior to filing the document required by the laws of this state or the other jurisdiction to
consummate the domestication; except that, subsequent to approval of the plan by the members,
the plan may not be amended without the approval of the members to change:
(1) The amount or kind of memberships, obligations, rights to acquire memberships,
cash, or other property to be received by the members under the plan;
(2) The articles of incorporation to be in effect immediately following the domestication;
or
(3) Any of the other terms or conditions of the plan if the change would adversely affect
any of the members in any material respect.
(e) If any debt security, note or similar evidence of indebtedness for money borrowed,
whether secured or unsecured, or a contract of any kind, issued, incurred or executed by a
domestic nonprofit corporation before the effective date of this Act contains a provision
applying to a merger of the corporation and the document does not refer to a domestication of
the corporation, the provision shall be deemed to apply to a domestication of the corporation
until such time as the provision is amended subsequent to that date.
Section 19. That the code be amended by adding a NEW SECTION to read:
In the case of a domestication of a domestic nonprofit corporation in a foreign jurisdiction:
(1) The plan of domestication must be adopted by the board of directors;
(2) After adopting the plan of domestication the board of directors must submit the plan
to the members for their approval, if there are members entitled to vote on the plan.
The board of directors must also transmit to the members a recommendation that the
members approve the plan, unless the board of directors makes a determination that
because of conflicts of interest or other special circumstances it should not make such
a recommendation, in which case the board of directors must transmit to the members
the basis for that determination;
(3) The board of directors may condition its submission of the plan of domestication to
the members on any basis;
(4) If the approval of the members is to be given at a meeting, the corporation must
notify each member, whether or not entitled to vote, of the meeting of members at
which the plan of domestication is to be submitted for approval. The notice must
state that the purpose, or one of the purposes, of the meeting is to consider the plan
and must contain or be accompanied by a copy or summary of the plan. The notice
must include or be accompanied by a copy of the proposed articles of incorporation
and bylaws to be in effect immediately after the domestication;
(5) Unless the articles of incorporation or bylaws, or the board of directors acting
pursuant to subdivision (3) of this section, requires a greater vote or a greater number
of votes to be present, the approval of the plan of domestication by the members
requires the approval of the members at a meeting at which a quorum exists, and, if
any class of members is entitled to vote as a separate group on the plan, the approval
of each such separate class at a meeting at which a quorum of the class exists;
(6) Separate voting by classes is required by each class of members that:
(i) Are to be reclassified under the plan of domestication into a different class of
memberships, or into obligations, rights to acquire memberships, cash, other
property, or any combination of the foregoing;
(ii) Would be entitled to vote as a separate group on a provision of the plan that,
if contained in a proposed amendment to articles of incorporation, would
require action by separate classes; or
(iii) Is entitled under the articles of incorporation or bylaws to vote as a class to
approve an amendment of the articles of incorporation;
(7) If any provision of the articles of incorporation, bylaws, or an agreement to which
any of the directors, members of a designated body, or members are parties, adopted
or entered into before the effective date of this Act, applies to a merger of the
corporation and that document does not refer to a domestication of the corporation,
the provision shall be deemed to apply to a domestication of the corporation until
such time as the provision is amended subsequent to that date.
Section 20. That the code be amended by adding a NEW SECTION to read:
(a) Articles of domestication must be signed on behalf of the domesticating corporation by
any officer or other duly authorized representative. The articles of domestication must set forth:
(1) The name and jurisdiction of incorporation of the domesticating corporation;
(2) The name and jurisdiction of incorporation of the domesticated entity; and
(3) If the domesticating corporation is a domestic nonprofit corporation, a statement that
the plan of domestication was approved in accordance with the laws of this state, or,
if the domesticating corporation is a foreign nonprofit corporation, a statement that
the domestication was approved in accordance with the laws of its jurisdiction of
incorporation.
(b) If the domesticated corporation is a domestic nonprofit corporation, the articles of
domestication shall contain all of the provisions required to be contained in the articles of
incorporation of a nonprofit corporation as set forth in § 47-22-6. The name of the domesticated
corporation must satisfy the requirements of §§ 47-22-7 and 47-22-8.1.
(c) The articles of domestication must be delivered to the Office of the Secretary of State
for filing.
(d) If the domesticating corporation is a qualified foreign nonprofit corporation, its
certificate of authority is cancelled automatically on the effective date of its domestication.
Section 21. That the code be amended by adding a NEW SECTION to read:
(a) Except as otherwise prohibited by law, when a domestication becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the
domesticating corporation remains in the domesticated corporation without reversion
or impairment;
(2) The liabilities of the domesticating corporation remain the liabilities of the
domesticated corporation;
(3) An action or proceeding pending against the domesticating corporation continues
against the domesticated corporation as if the domestication had not occurred;
(4) The articles of domestication, or the articles of incorporation attached to the articles
of domestication, constitute the articles of incorporation of a foreign corporation
domesticating in this state;
(5) The memberships in the domesticating corporation are reclassified into memberships,
obligations, rights to acquire memberships, or cash or other property in accordance
with the terms of the domestication, and the members are entitled only to the rights
provided by those terms; and
(6) The domesticating corporation is deemed to:
(i) Be incorporated under and subject to the same body of law of as the
domesticated corporation for all purposes; and
(ii) Be the same corporation without interruption as the domesticating corporation.
(b) The personal liability of a member in a foreign nonprofit corporation that is domesticated
in this state is as follows:
(1) The domestication does not discharge any personal liability under the laws of the
foreign jurisdiction to the extent any such personal liability arose before the effective
time of the articles of domestication;
(2) The member does not have personal liability under the laws of the foreign
jurisdiction for any debt, obligation, or liability of the corporation that arises after the
effective time of the articles of domestication;
(3) The provisions of the laws of the foreign jurisdiction continue to apply to the
collection or discharge of any personal liability preserved by subdivision (1), as if the
domestication had not occurred;
(4) The member has whatever rights of contribution from other members are provided
by the laws of the foreign jurisdiction with respect to any personal liability preserved
by subdivision (1), as if the domestication had not occurred.
Section 22. That the code be amended by adding a NEW SECTION to read:
(a) Unless otherwise provided in a plan of domestication of a domestic nonprofit
corporation, after the plan has been adopted and approved, and at any time before the
domestication has become effective, it may be abandoned by the board of directors without
action by the members.
(b) If a domestication is abandoned under paragraph (a) after articles of domestication have
been filed with the Office of the Secretary of State but before the domestication has become
effective, a statement that the domestication has been abandoned in accordance with this
section, signed by an officer or other duly authorized representative, must be delivered to the
Office of the Secretary of State for filing prior to the effective date of the domestication. The
statement takes effect upon filing and the domestication is abandoned and does not become
effective.
(c) If the domestication of a foreign nonprofit corporation in this state is abandoned in
accordance with the laws of the foreign jurisdiction after articles of domestication are filed with
the Office of the Secretary of State, a statement that the domestication has been abandoned,
signed by an officer or other duly authorized representative, must be delivered to the Office of
the Secretary of State for filing. The statement takes effect upon filing and the domestication
is abandoned and does not become effective.
Section 23. That the code be amended by adding a NEW SECTION to read:
(a) A domestic nonprofit corporation may become a domestic business corporation pursuant
to a plan of for-profit conversion.
(b) A domestic nonprofit corporation may become a foreign business corporation if the
for-profit conversion is permitted by the laws of the foreign jurisdiction. Regardless of whether
the laws of the foreign jurisdiction require the adoption of a plan of for-profit conversion, the
foreign for-profit conversion shall be approved by the adoption by the domestic nonprofit
corporation of a plan of for-profit conversion.
(c) The plan of for-profit conversion must include:
(1) The terms and conditions of the conversion;
(2) The manner and basis of:
(i) Issuing at least one share in the corporation following its conversion; and
(ii) Otherwise reclassifying the memberships in the corporation, if any, following
its conversion into shares and other securities, obligations, rights to acquire
shares or other securities, cash, other property, or any combination of the
foregoing;
(3) Any desired amendments to the articles of incorporation or bylaws of the corporation
following its conversion; and
(4) If the domestic nonprofit corporation is to be converted to a foreign business
corporation, a statement of the jurisdiction in which the corporation will be
incorporated after the conversion.
(d) The plan of for-profit conversion may also include a provision that the plan may be
amended prior to filing articles of for-profit conversion, except that subsequent to approval of
the plan by the members the plan may not be amended without the approval of the members to
change:
(1) The amount or kind of shares and other securities, obligations, rights to acquire
shares or other securities, cash, or other property to be received by the members
under the plan;
(2) The articles of incorporation to be in effect immediately following the conversion;
or
(3) Any of the other terms or conditions of the plan if the change would adversely affect
any of the members in any material respect.
(e) If any debt security, note, or similar evidence of indebtedness for money borrowed,
whether secured or unsecured, or a contract of any kind, issued, incurred, or executed by a
domestic nonprofit corporation before the effective date of this Act contains a provision
applying to a merger of the corporation and the document does not refer to a for-profit
conversion of the corporation, the provision shall be deemed to apply to a for-profit conversion
of the corporation until such time as the provision is amended subsequent to that date.
(f) The attorney general shall be provided with notice of the proposed for-profit conversion
at least ten days prior to any conversion.
Section 24. That the code be amended by adding a NEW SECTION to read:
In the case of a conversion of a domestic nonprofit corporation to a domestic or foreign
business corporation:
(1) The plan of for-profit conversion must be adopted by the board of directors;
(2) After adopting the plan of for-profit conversion, the board of directors must submit
the plan to the members for their approval if there are members entitled to vote on
the plan. The board of directors must also transmit to the members a recommendation
that the members approve the plan, unless the board of directors makes a
determination that because of conflicts of interest or other special circumstances it
should not make such a recommendation, in which case the board of directors must
transmit to the members the basis for that determination;
(3) The board of directors may condition its submission of the plan of for-profit
conversion to the members on any basis;
(4) If the approval of the members is to be given at a meeting, the corporation must
notify each member of the meeting of members at which the plan of for-profit
conversion is to be submitted for approval. The notice must state that the purpose,
or one of the purposes, of the meeting is to consider the plan and must contain or be
accompanied by a copy or summary of the plan. The notice shall include or be
accompanied by a copy of the proposed articles of incorporation to be in effect
immediately after the for-profit conversion;
(5) Unless the articles of incorporation, or the board of directors acting pursuant to
subdivision (3), require a greater vote or a greater number of votes to be present, the
approval of the plan of for-profit conversion by the members requires the approval
of each class of members of the corporation voting as a separate class at a meeting
at which a quorum of the class exists; and
(6) If any provision of the articles of incorporation, bylaws, or an agreement to which
any of the directors or members are parties, adopted or entered into before the
effective date of this Act, applies to a merger of the corporation and the document
does not refer to a for-profit conversion of the corporation, the provision shall be
deemed to apply to a for-profit conversion of the corporation until such time as the
provision is amended subsequent to that date.
Section 25. That the code be amended by adding a NEW SECTION to read:
(a) Articles of for-profit conversion must be signed on behalf of the converting corporation
by any officer or other duly authorized representative. The articles must set forth:
(1) If the surviving corporation is a domestic business corporation, the name of the
corporation immediately before the filing of the articles of for-profit conversion and
if that name does not satisfy the requirements of the business corporation act, or the
corporation desires to change its name in connection with the conversion, a name that
satisfies the requirements of the business corporation act;
(2) If the surviving corporation is a foreign business corporation, its name after the
conversion and its jurisdiction of incorporation; and
(3) A statement that the plan of for-profit conversion was duly approved by the members
in the manner required by this Act and the articles of incorporation.
(b) If the surviving corporation is a domestic business corporation, the articles of for-profit
conversion shall either contain all of the provisions that the business corporation act requires
to be set forth in the articles of incorporation of a domestic business corporation and any other
desired provisions permitted by the business corporation act, or shall have attached articles of
incorporation that satisfy the requirements of the business corporation act. In either case,
provisions that would not be required to be included in restated articles of incorporation of a
domestic business corporation may be omitted, except that the name and address of the initial
registered agent of the business corporation must be included.
(c) The articles of for-profit conversion must be delivered to the Office of the Secretary of
State for filing.
Section 26. That the code be amended by adding a NEW SECTION to read:
(a) Except as otherwise prohibited by law, when a conversion of a domestic nonprofit
corporation to a domestic or foreign business corporation becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the
corporation remains in the corporation without reversion or impairment;
(2) The liabilities of the corporation remain the liabilities of the corporation;
(3) An action or proceeding pending against the corporation continues against the
corporation as if the conversion had not occurred;
(4) The articles of incorporation of the domestic or foreign business corporation become
effective;
(5) The memberships of the corporation are reclassified into shares or other securities,
obligations, rights to acquire shares or other securities, or into cash or other property
in accordance with the plan of conversion, and the members are entitled only to the
rights provided in the plan of for-profit conversion; and
(6) The corporation is deemed to:
(i) Be a domestic or foreign business corporation for all purposes; and
(ii) Be the same corporation without interruption as the nonprofit corporation.
(b) The personal liability of a member in a domestic nonprofit corporation that converts to
a domestic business corporation is as follows:
(1) The conversion does not discharge any personal liability of the member as a member
of the nonprofit corporation to the extent any such personal liability arose before the
effective time of the articles of for-profit conversion;
(2) The member does not have personal liability for any debt, obligation, or liability of
the business corporation that arises after the effective time of the articles of for-profit
conversion;
(3) The laws of this state continue to apply to the collection or discharge of any personal
liability preserved by subdivision (1), as if the conversion had not occurred;
(4) The member has whatever rights of contribution from other members are provided
by the laws of this state with respect to any personal liability preserved by
subdivision (1), as if the conversion had not occurred.
(c) A member who becomes subject to personal liability for some or all of the debts,
obligations, or liabilities of the business corporation has personal liability only for those debts,
obligations, or liabilities of the business corporation that arise after the effective time of the
articles of for-profit conversion.
Section 27. That the code be amended by adding a NEW SECTION to read:
(a) Unless otherwise provided in a plan of for-profit conversion of a domestic nonprofit
corporation, after the plan has been adopted and approved, and at any time before the for-profit
conversion has become effective, it may be abandoned by the board of directors without action
by the members.
(b) If a for-profit conversion is abandoned under paragraph (a) after articles of for-profit
conversion are filed with the Office of the Secretary of State but before the for-profit conversion
has become effective, a statement that the for-profit conversion has been abandoned in
accordance with this section, signed by an officer or other duly authorized representative, must
be delivered to the Office of the Secretary of State for filing prior to the effective date of the
for-profit conversion. The statement takes effect upon filing and the for-profit conversion is
abandoned and does not become effective.
Section 28. That the code be amended by adding a NEW SECTION to read:
A foreign business corporation may become a domestic nonprofit corporation if the
domestication and conversion is permitted by the laws of the foreign jurisdiction.
Section 29. That the code be amended by adding a NEW SECTION to read:
(a) After the conversion of a foreign business corporation to a domestic nonprofit
corporation is authorized as required by the laws of the foreign jurisdiction, articles of
domestication and conversion shall be signed by any officer or other duly authorized
representative. The articles shall set forth:
(1) The name of the corporation immediately before the filing of the articles of
domestication and conversion and, if that name is unavailable for use in this state or
the corporation desires to change its name in connection with the domestication and
conversion, a name that satisfies the requirements §§ 47-22-7 and 47-22-8.1;
(2) The jurisdiction of incorporation of the corporation immediately before the filing of
the articles of domestication and conversion and the date the corporation was
incorporated in that jurisdiction; and
(3) A statement that the domestication and conversion of the corporation in this state was
duly authorized as required by the laws of the jurisdiction in which the corporation
was incorporated immediately before its domestication and conversion in this state.
(b) The articles of domestication and conversion shall contain all of the provisions required
to be contained in the articles of incorporation of a nonprofit corporation as set forth in
§ 47-22-6. The name of the domesticated corporation must satisfy the requirements of
§§ 47-22-7 and 47-2-2-8.1.
(c) The articles of domestication and conversion must be delivered to the Office of the
Secretary of State for filing.
Section 30. That the code be amended by adding a NEW SECTION to read:
(a) When a domestication and conversion of a foreign business corporation to a domestic
nonprofit corporation becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the
corporation remains in the corporation without reversion or impairment;
(2) The liabilities of the corporation remain the liabilities of the corporation;
(3) An action or proceeding pending against the corporation continues against the
corporation as if the domestication and conversion had not occurred;
(4) The articles of domestication and conversion, or the articles of incorporation attached
to the articles of domestication and conversion, constitute the articles of
incorporation of the corporation;
(5) Memberships, securities, obligations, rights to acquire memberships or securities of
the corporation, or cash or other property shall be issued or paid as provided pursuant
to the laws of the foreign jurisdiction; and
(6) The corporation is deemed to:
(i) Be a domestic corporation for all purposes; and
(ii) Be the same corporation without interruption as the foreign business
corporation.
(b) The personal liability of a shareholder of the foreign business corporation who becomes
a member of the domestic nonprofit corporation in the domestication and conversion is as
follows:
(1) The domestication and conversion does not discharge any personal liability under the
laws of the foreign jurisdiction to the extent any such personal liability arose before
the effective time of the articles of domestication and conversion;
(2) The member does not have personal liability under the laws of the foreign
jurisdiction for any debt, obligation, or liability of the corporation that arises after the
effective time of the articles of domestication and conversion;
(3) The provisions of the laws of the foreign jurisdiction continue to apply to the
collection or discharge of any personal liability preserved by subdivision (1), as if the
domestication and conversion had not occurred;
(4) The member has whatever rights of contribution from other members are provided
by the laws of the foreign jurisdiction with respect to any personal liability preserved
by subdivision (1), as if the domestication and conversion had not occurred.
(c) A shareholder of a foreign business corporation who becomes subject to personal liability
for some or all of the debts, obligations, or liabilities of the corporation as a result of its
domestication and conversion in this state has personal liability only for those debts, obligations,
or liabilities of the corporation that arise after the effective time of the articles of domestication
and conversion.
Section 31. That the code be amended by adding a NEW SECTION to read:
If the domestication and conversion of a foreign business corporation to a domestic
nonprofit corporation is abandoned in accordance with the laws of the foreign jurisdiction after
articles of domestication and conversion have been filed with the Office of the Secretary of
State, a statement that the domestication and conversion has been abandoned, signed by an
officer or other duly authorized representative, must be delivered to the Office of the Secretary
of State for filing. The statement takes effect upon filing and the domestication and conversion
is abandoned and does not become effective.
Section 32. That the code be amended by adding a NEW SECTION to read:
(a) Except as otherwise prohibited by law, when a conversion under sections 28 to 37,
inclusive, of this Act, becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the
converting entity remains in the surviving entity without reversion or impairment;
(2) The liabilities of the converting entity remain the liabilities of the surviving entity;
(3) An action or proceeding pending against the converting entity continues against the
surviving entity as if the conversion had not occurred;
(4) In the case of a surviving entity that is a filing entity, its articles of incorporation or
governing documents and rules become effective;
(5) The memberships or interests of the converting entity are reclassified into
memberships, interests, other securities, obligations, rights to acquire memberships,
interests or securities, or into cash or other property in accordance with the plan of
conversion; and the members or of the converting entity are entitled only to the rights
provided to them under the terms of the conversion and to any appraisal rights they
may have under the governing law of the converting entity; and
(6) The surviving entity is deemed to:
(i) Be incorporated or organized under and subject to the governing law of the
converting entity for all purposes; and
(ii) Be the same nonprofit corporation or unincorporated entity without
interruption as the converting entity.
(b) A member who is subject to personal liability for some or all of the debts, obligations,
or liabilities of the surviving entity has personal liability only for those debts, obligations, or
liabilities of the surviving entity that arise after the effective time of the articles of entity
conversion.
Section 33. That the code be amended by adding a NEW SECTION to read:
(a) Unless otherwise provided in a plan of entity conversion of a domestic nonprofit
corporation, after the plan is adopted and at any time before the entity conversion has become
effective, it may be abandoned by the board of directors without action by the members.
(b) If an entity conversion is abandoned after articles of entity conversion are filed with the
Office of the Secretary of State but before the entity conversion becomes effective, a statement
that the entity conversion has been abandoned in accordance with this section, signed by an
officer or other duly authorized representative, must be delivered to the Office of the Secretary
of State for filing prior to the effective date of the entity conversion. Upon filing, the statement
takes effect and the entity conversion is abandoned and does not become effective.
Section 34. That the code be amended by adding a NEW SECTION to read:
A domestic business corporation may become a domestic nonprofit corporation pursuant to
a plan of nonprofit conversion only if incorporating pursuant to this Act is not prohibited by any
other law of this state. If the law of a domestic business corporation does not provide procedures
for the approval of either a nonprofit conversion or a merger, a plan of nonprofit conversion
must be adopted and approved, and the conversion effectuated in accordance with this Act.
Section 35. That the code be amended by adding a NEW SECTION to read:
(a) The plan of nonprofit conversion must be adopted by the shareholders. The plan for
nonprofit conversion must include:
(1) The terms and conditions of the conversion;
(2) The manner and basis of reclassifying the shareholders in the corporation;
(3) Any desired amendments to the articles of incorporation or bylaws of the corporation
following its conversion;
(4) The articles of incorporation to be in effect immediately following the conversion;
and
(5) Any of the terms or conditions of the plan if the change would adversely affect any
of the shareholders in any material respect.
The plan for nonprofit conversion may also include a provision that the plan may be
amended prior to filing articles of nonprofit conversion.
(b) After the plan for nonprofit conversion is authorized, the articles of conversion must be
signed on behalf of the converting corporation by any officer or other duly authorized
representative.
The articles shall set forth:
(1) The name of the corporation immediately before the filing of the articles of
conversion and, if that name is unavailable for use in this state or the corporation
desires to change its name in connection with the conversion, a name that satisfies
the requirements of §§ 47-22-7 and 47-2-8.1;
(2) The jurisdiction of incorporation of the corporation immediately before the filing of
the articles of conversion and the date the corporation was incorporated; and
(3) A statement that the conversion of the corporation in this state was duly authorized
as required by the laws of this state.
(c) The articles of conversion shall contain all of the provisions required to be contained in
the articles of incorporation of a nonprofit corporation as set forth in § 47-22-6 and any other
desired provisions permitted to be included. Provisions that would not be required to be
included in restated articles of incorporation may be omitted, except that the name and address
of the initial registered agent of the domestic business corporation must be included.
(d) The articles of nonprofit conversion must be delivered to the Office of the Secretary of
State for filing.
Section 36. That the code be amended by adding a NEW SECTION to read:
(a) When a conversion of a domestic business corporation to a domestic nonprofit
corporation becomes effective:
(1) The title to all real and personal property, both tangible and intangible, of the
corporation remains in the corporation without reversion or impairment;
(2) The liabilities of the corporation remain the liabilities of the corporation;
(3) An action or proceeding pending against the corporation continues against the
corporation as if the conversion had not occurred;
(4) The articles of conversion, or the articles of incorporation attached to the articles of
conversion, constitute the articles of incorporation of the corporation;
(5) Memberships, securities, obligations, rights to acquire memberships or securities of
the corporation, or cash or other property shall be issued or paid as provided pursuant
to the laws of this state; and
(6) The corporation is deemed to:
(i) Be a domestic nonprofit corporation for all purposes; and
(ii) Be the same corporation without interruption.
(b) The personal liability of a shareholder of the domestic business corporation who
becomes a member of the domestic nonprofit corporation in the conversion is as follows:
(1) The conversion does not discharge any personal liability under the laws of this state
to the extent any such personal liability arose before the effective time of the articles
of conversion;
(2) The member does not have personal liability under the laws of this state for any debt,
obligation, or liability of the corporation that arises after the effective time of the
articles of conversion;
(3) The provisions of the laws of this state continue to apply to the collection or
discharge of any personal liability preserved by subdivision (1), as if the conversion
had not occurred;
(4) The member has whatever rights of contribution from other members are provided
by the laws of this state with respect to any personal liability preserved by
subdivision (1), as if the conversion had not occurred.
(c) A shareholder of a domestic business corporation who becomes subject to personal
liability for some or all of the debts, obligations, or liabilities of the corporation as a result of
its conversion in this state has personal liability only for those debts, obligations, or liabilities
of the corporation that arise after the effective time of the articles of conversion.
Section 37. That the code be amended by adding a NEW SECTION to read:
If the conversion of a domestic business corporation to a domestic nonprofit corporation is
abandoned in accordance with the laws of this state after articles of conversion have been filed
with the Office of the Secretary of State, a statement that the conversion has been abandoned,
signed by an officer or other duly authorized representative, must be delivered to the Office of
the Secretary of State for filing. The statement takes effect upon filing and the conversion is
abandoned and does not become effective.