NRAI Compliance Updates - August 2007



Delaware has been active in the last month fine tuning their commercial statutes to remain the incorporation state of choice. Otherwise it is a fairly quiet summer.

Enjoy the rest of your summer.

Robert K. Rowell
General Counsel


New, Pending and Passed Legislation


Alaska

SB 141

An Act relating to limited liability companies. 

Full Text available at: http://www.legis.state.ak.us/basis/get_bill_text.asp?hsid=SB0141Z&session=25

Current Bill Status: June 16, 2007 Signed Into Law 7/12 Chapter 52 Sla 07, effective October 10, 2007.


Delaware

HB 160

Section 1. The amendment to § 141(d) clarifies that when a provision of the certificate of incorporation endows some directors with greater or lesser voting power than other directors, that differentiation of voting power applies both in voting by the board of directors and in voting by committees of the board and in subcommittees, unless otherwise provided in the certificate of incorporation or bylaws.

Section 2. This amendment revises the specifications regarding the application of § 203, in order to accommodate ongoing changes in the structure and identification of securities trading markets, including recent changes in the configuration and status of securities trading markets administered by The NASDAQ Stock Market, Inc.

Section 3. The amendment to § 216(4) clarifies that, unless otherwise provided in the certificate of incorporation or the bylaws, a plurality vote (and not a majority of the quorum) is the vote required to elect directors where one or more classes or series of stock votes as a separate class or series on the election of directors.

Sections 4 through 9. The amendments to § 251 and § 255 eliminate the requirement that an agreement of merger or consolidation include a certification by the secretary or assistant secretary of the corporation that the agreement has been adopted by the requisite vote of the stockholders or members, as applicable, or otherwise approved in accordance with § 251 without a vote of the stockholders, if a certificate of merger or consolidation is filed in lieu of filing the agreement. The certification requirement for a Delaware corporation is also eliminated from § § 252, 254, 256, 257, 258, 263 and 264 by virtue of the cross-references to § 251 and § 255. Any certification required under other applicable law is not affected by the amendments to § 251 and § 255.

Section 10. The amendment to § 258(b) clarifies that the agreement of merger or consolidation must also be certified by each of the constituent foreign corporations in accordance with the laws under which each was formed.

Sections 11-12. These amendments revise the specifications regarding the application of § 262 and the availability of appraisal rights, in order to accommodate ongoing changes in the structure and identification of securities trading markets, including recent changes in the configuration and status of securities trading markets administered by The National Association of Securities Dealers, Inc.

Sections 13 and 16. The amendment to § 262(k) and an amendment to § 262(e) clarify the right of a stockholder who has demanded appraisal to withdraw that demand and receive the merger consideration at any time within 60 days after the effective date of the merger, even if a petition for appraisal has been filed, as long as that stockholder has not filed such a petition or otherwise joined the proceeding as a named party. Another amendment to § 262(e) enables beneficial holders of shares of stock held in street name to (i) file petitions for appraisal, and (ii) request a statement of shares with respect to which demands for appraisal have been received, in their own name rather than in the name of the stockholder of record.

Sections 14 and 15. These Sections amend the approach to awarding interest in appraisal proceedings, principally by establishing a presumption that interest is to be awarded for the period from the effective date of the merger until the date of payment of judgment, compounded quarterly and accruing at the rate of 5% over the Federal Reserve discount rate, giving effect to any variation in that rate during that period. The Court of Chancery may depart from this presumptive approach for good cause, in order, for example, to avoid an inequitable result such as rewarding, or insufficiently compensating for, improper delay of the proceeding or unreasonable or bad faith assertion of valuation claims. The amendments to § 262(h) also clarify that the Court of Chancery in appraisal proceedings does not determine the fair value of shares on its own initiative, and that appraisal proceedings are adversary proceedings to be litigated in accordance with generally applicable rules of the Court of Chancery.

Section 17. The amendment describes the effective time for the amendments.

Full Text available at: http://www.legis.state.de.us/LIS/lis144.nsf/vwLegislation/HB+160/$file/legis.html?open

Current Bill Status: July 17, 2007 signed by Governor.

HB 214

An Act To Amend Title 18 Of The Delaware Code Relating To Captive Insurance Companies.

Section 1 adds the definition of a special purpose financial captive insurance company to the chapter.

Section 2 requires that the costs for experts retained by the Commissioner are paid for by the insurer.

Section 3 removes a duplicate license fee that is unnecessary.

Section 4 adds new minimum surplus requirements for special purpose financial captive insurance companies.

Section 5 provides for the renumbering of a subsection required by other amendments.
Section 6 allows a special purpose captive insurance company or a special purpose financial captive insurance company to use certain business organization forms permitted by Delaware law.

Section 7 amends §6909 relating to activities of captive insurers under suspension.

Section 8 makes the investment restrictions applicable to special purpose financial captive insurance companies.

Section 9 amends §6914 to add special purpose financial captive insurance companies.

Section 10 amends the confidentiality provisions based on the addition of new subchapter III.

Section 11 adds new § 6923 governing the management and location of an insurer’s books and records.

Section 12 rewrites §6932 based on the addition of new subchapter III.

Section 13 rewrites §6937 based on the addition of new subchapter III.

Section 14 redesignates subchapter III as subchapter IV and renumbers the sections of the subchapter accordingly.

Section 15 adds new subchapter III to provide for special purpose financial captive insurance companies as part of the chapter. Special purpose financial captive insurance companies are specialized captive insurers typically designed to act as special reinsurance vehicles for life or property and casualty insurers whereby insurance business transferred to such special purpose captive insurance companies can be funded through capital markets offerings. Significant growth in the number of these captive insurance companies has occurred in other jurisdictions; however, Delaware’s position as the domicile of choice for business entities makes Delaware an ideal domicile for special purpose financial captive insurance companies. Delaware corporate entity law has been used as the basis for forming many of the special purpose financial captive insurance companies in these other jurisdictions. This is a key consideration for the market participants because the agreements are written for terms up to 30 years. This legislation will permit the transfer of insurance risk and associated premium to a special purpose captive insurance company, which will be authorized to fund its obligations with respect to such risk by means of appropriately structured capital markets transactions. This legislation will further provide a detailed description of the requirements for application and approval for a special purpose financial captive insurance company and will provide certainty as to the treatment for accounting and regulatory purposes of certain assets involved in the special purpose captive insurance company’s insurance securitization transaction. Accordingly, this legislation will enhance Delaware’s position as a captive insurance domicile by aligning its existing financial services capabilities to meet insurance market needs while providing appropriate regulatory oversight.

Full Text available at: http://www.legis.state.de.us/LIS/lis144.nsf/vwLegislation/HB+214/$file/legis.html?open

Current Bill Status: July 18, 2007 Signed by Governor.

SB 95

This bill continues the practice of amending periodically the Delaware Revised Uniform Limited Partnership Act (the “Act”) to keep it current and to maintain its national preeminence. The following is a section-by-section review of the proposed amendments of the Act.

Section 1. This section amends § 17-101(5) of the Act to clarify the intended meaning of such subsection.

Section 2. This section amends § 17-101(8) of the Act to clarify the intended meaning of such subsection.

Section 3. This section amends § 17-101(12) of the Act to conform the definition of partnership agreement to the definition of partnership agreement under the Delaware Revised Uniform Partnership Act to include implied agreements.

Section 4. This section amends § 17-104(a)(2) of the Act to confirm that the business office of a limited partnership’s registered agent shall be identical to the registered office of the limited partnership in the State of Delaware.

Section 5. This section amends § 17-104(d) of the Act to make a technical change.

Section 6. This section amends § 17-104(e)(3) of the Act to confirm that such subsection also applies to a foreign limited partnership.

Section 7. This section amends § 17-104(e)(4) of the Act to confirm that such subsection also applies to a foreign limited partnership.

Section 8. This section amends § 17-104(g) of the Act to confirm that such subsection also applies to a foreign limited partnership.

Section 9. This section amends § 17-104(i)(4) of the Act to make technical changes.

Section 10. This section amends § 17-201 of the Act to add a new subsection (d) conforming to revised § 18-201(d) of the Delaware Limited Liability Company Act.

Section 11. This section amends § 17-203 of the Act to make technical changes and to confirm that a certificate of good standing shall not be issued for a limited partnership if its certificate of limited partnership is cancelled.

Sections 12, 13, 14, 15, 16, 17, and 39. Sections 12, 13, 14, 15, 16, 17, and 39 amend §§17-204, 17-206, 17-207 and 17-1107 of the Act to make technical changes.
Section 18. This section amends § 17-211(a) of the Act to confirm the flexibility that exists under § 17-211.

Section 19. This section amends § 17-211(c)(8) of the Act to provide that a certificate of merger need not contain a consent to jurisdiction where the surviving or resulting entity is a Delaware general partnership, and to simplify the wording of such subsection.

Section 20. This section amends § 17-211(h) of the Act to confirm that a merger or consolidation of a domestic limited partnership does not constitute a dissolution of such limited partnership unless otherwise agreed.

Sections 21, 24, and 33. Sections 21, 24, and 33 amend §§ 17-211, 17-216 and 17-219 of the Act by adding new subsections that confirm the ability to provide in the partnership agreement that a limited partnership does not have power to merge or consolidate under § 17-211 of the Act, transfer, domesticate or continue under § 17-216 of the Act, or convert under § 17-219 of the Act. These amendments are not intended to imply that the partnership agreement may not deny other powers to the limited partnership.

Section 22. This section amends § 17-212 of the Act to make technical changes and to confirm the flexibility that exists under § 17-212.

Section 23. This section amends § 17-216(g) of the Act to make a technical change.

Sections 25 and 26. These sections amend § 17-218 of the Act to provide that a partnership agreement may establish a series of assets.

Section 27. This section amends § 17-218(b) of the Act to clarify the requirements regarding the manner in which assets must be accounted for pursuant to such subsection and to confirm the flexibility that exists thereunder.

Section 28. This section redesignates existing subsections and adds a new subsection (c) to § 17-218 of the Act to confirm the broad purposes and powers permitted of a series established under subsection 17-218(b) of the Act.

Section 29. This section amends newly designated § 17-218(i) of the Act to make conforming changes.

Section 30. This section amends newly designated § 17-218(k)(5) of the Act to make a conforming change.

Section 31. This section amends newly designated § 17-218(n) of the Act to make conforming changes and to make technical changes.

Section 32. This section amends § 17-219(h) of the Act to make a technical change.

Section 34. This section amends § 17-702(b) of the Act to provide that a limited partnership shall not have the power to issue a certificate of partnership interest in bearer form.

Section 35. This section amends § 17-904(b)(2) of the Act to conform such section to § 17-104 regarding the types of entities that may serve as registered agents and confirm that the business office of a foreign limited partnership’s registered agent shall be identical to the registered office of the foreign limited partnership in the State of Delaware.

Section 36. This section amends § 17-904(c) of the Act to use gender neutral language in referring to the Delaware Secretary of State.

Section 37. This section amends § 17-904(e) of the Act to make a technical change.

Section 38. This section amends § 17-906 of the Act to make a technical change.

Section 40. This section amends § 17-1110(a) of the Act to make a technical change.

Section 41. This section provides that the proposed amendments of the Act shall become effective August 1, 2007.

Full Text available at: http://www.legis.state.de.us/LIS/lis144.nsf/vwLegislation/SB+95/$file/legis.html?open

Current Bill Status: Signed by Governor July 10, 2007 with an effective date of August 1, 2007.

SB 96

This bill continues the practice of amending periodically the Delaware Limited Liability Company Act (the “Act”) to keep it current and to maintain its national preeminence. The following is a section-by-section review of the proposed amendments of the Act.

Section 1. This section amends § 18-101(7) of the Act to conform the definition of limited liability company agreement to the definition of partnership agreement under the Delaware Revised Uniform Partnership Act to include implied agreements.

Section 2. This section amends § 18-101(11) of the Act to clarify the intended meaning of such subsection.

Section 3. This section amends § 18-104(a)(2) of the Act to confirm that the business office of a limited liability company’s registered agent shall be identical to the registered office of the limited liability company in the State of Delaware.

Section 4. This section amends § 18-104(d) of the Act to make a technical change.

Section 5. This section amends § 18-104(e)(3) of the Act to confirm that such subsection also applies to a foreign limited liability company.

Section 6. This section amends § 18-104(e)(4) of the Act to confirm that such subsection also applies to a foreign limited liability company.

Section 7. This section amends § 18-104(g) of the Act to confirm that such subsection also applies to a foreign limited liability company.

Section 8. This section amends § 18-104(i)(4)b. of the Act to make technical changes.
Section 9. This section amends § 18-201(d) of the Act to confirm that a limited liability company agreement is required by the Act and to make changes conforming to the amendments to § 18-101(7).

Section 10. This section amends § 18-203 of the Act to make technical changes, and to confirm that a certificate of good standing shall not be issued for a limited liability company if its certificate of formation is cancelled.

Sections 11, 12, 13, 14, and 35. Sections 11, 12, 13, 14, and 35 amend §§ 18-206 and 18-1105 of the Act to make technical changes.

Section 15. This section amends § 18-209(a) of the Act to confirm the flexibility that exists under § 18-209.

Section 16. This section amends § 18-209(c)(8) of the Act to provide that a certificate of merger need not contain a consent to jurisdiction where the surviving or resulting entity is a Delaware general partnership, and to simplify the wording of such subsection.

Section 17. This section amends § 18-209(g) of the Act to confirm that a merger or consolidation of a domestic limited liability company does not constitute a dissolution of such limited liability company unless otherwise agreed.

Sections 18, 21 and 30. Sections 18, 21 and 30 amend §§ 18-209, 18-213 and 18-216 of the Act by adding new subsections that confirm the ability to provide in the limited liability company agreement that a limited liability company does not have power to merge or consolidate under § 18-209 of the Act, transfer, domesticate or continue under § 18-213 of the Act, or convert under § 18-216 of the Act. These amendments are not intended to imply that the limited liability company agreement may not deny other powers to the limited liability company.

Section 19. This section amends § 18-210 of the Act to make technical changes and to confirm the flexibility that exists under § 18-210.

Section 20. This section amends § 18-213(g) of the Act to make a technical change.
Sections 22 and 23. These sections amend § 18-215 of the Act to provide that a limited liability company agreement may establish a series of assets.

Section 24. This section amends § 18-215(b) of the Act to clarify the requirements regarding the manner in which assets must be accounted for pursuant to such subsection and to confirm the flexibility that exists thereunder.

Section 25. This section redesignates existing subsections and adds a new subsection (c) to § 18-215 of the Act to confirm the broad purposes and powers permitted of a series established under subsection 18-215(b) of the Act.

Section 26. This section amends newly designated § 18-215(h) to make conforming changes.

Section 27. This section amends newly designated § 18-215(k)(4) to make a conforming change.

Section 28. This section amends newly designated § 18-215(n) of the Act to make conforming changes and to make technical changes.

Section 29. This section amends § 18-216(h) of the Act to make a technical change.

Section 31. This section amends § 18-702(c) of the Act to provide that a limited liability company shall not have the power to issue a certificate of limited liability company interest in bearer form.

Section 32. This section amends § 18-904(b)(2) of the Act to conform such subsection to § 18-104 regarding the types of entities that may serve as registered agents and confirm that the business office of a foreign limited liability company’s registered agent shall be identical to the registered office of the foreign limited liability company in the State of Delaware.

Section 33. This section amends § 18-904(e) of the Act to make a technical change.

Section 34. This section amends § 18-906 of the Act to make a technical change.

Section 36. This section amends § 18-1108(a) of the Act to make a technical change.

Section 37. This section provides that the proposed amendments of the Act shall become effective August 1, 2007.

Full Text available at: http://www.legis.state.de.us/LIS/lis144.nsf/vwLegislation/SB+96/$file/legis.html?open

Current Bill Status: Signed by Governor July 10, 2007 with an effective date of August 1, 2007.

SB 98

This bill continues the practice of amending periodically the Delaware Revised Uniform Partnership Act (the “Act”) to keep it current and to maintain its national preeminence. The following is a section-by-section review of the proposed amendments of the Act.

Section 1. This section amends § 15-101(2) of the Act to make a technical change.

Section 2. This section amends § 15-101(10) of the Act to clarify the intended meaning of this subsection.

Section 3. This section amends § 15-103(b) of the Act to provide that the prohibition against a partnership’s having power to issue a certificate of partnership interest in bearer form, under new § 15-503(h), is not subject to contractual variation.

Section 4. This section amends § 15-105(d) of the Act to make technical changes and to confirm that a certificate of good standing shall not be issued for a domestic partnership if its statement of partnership existence is cancelled
.
Section 5. This section amends § 15-111(a)(2) of the Act to confirm that the business office of a partnership’s registered agent shall be identical to the registered office of the partnership in the State of Delaware.

Section 6. This section amends § 15-111(d) of the Act to make a technical change.

Section 7. This section amends § 15-111(i)(4)b. of the Act to make technical changes.

Section 8. This section amends § 15-120 of the Act to make a technical change.

Section 9. This section amends § 15-201(b) of the Act to clarify the intended meaning of this subsection.

Section 10. This section amends § 15-503(h) of the Act to provide that a partnership shall not have the power to issue a certificate of partnership interest in bearer form.

Section 11. This section amends § 15-901(h) of the Act to delete the requirement for obtaining the approval of all persons who will be partners in connection with a conversion of an other entity to a Delaware general partnership, where the continuing partnership will be a limited liability partnership.

Section 12. This section amends § 15-902(a) of the Act to confirm the flexibility that exists under § 15-902.

Section 13. This section amends § 15-902(h) of the Act to confirm that a merger or consolidation of a domestic partnership does not constitute a dissolution of such partnership unless otherwise agreed.

Sections 14, 15, and 19. Sections 14, 15, and 19 amend §§ 15-902, 15-903, and 15-905 of the Act by inserting new subsections that confirm the ability to provide in the partnership agreement that a domestic partnership does not have power to merge or consolidate under § 15-902 of the Act, transfer, domesticate or continue under § 15-905 of the Act, or convert under § 15-903 of the Act. These amendments are not intended to imply that the partnership agreement may not deny other powers to the domestic partnership.

Section 16. This section amends § 15-904(g) of the Act to delete the requirement for obtaining the approval of all persons who will be partners in connection with a domestication of a non-United States entity to a Delaware general partnership, where the continuing partnership will be a limited liability partnership.

Section 17. This section amends the heading of § 15-905 to make a technical change.

Section 18. This section amends § 15-905(g) of the Act to make a technical change.

Section 20. This section amends § 15-1003(c) of the Act to confirm that a certificate of good standing shall not be issued for a limited liability partnership or foreign limited liability partnership that has not filed an annual report and paid the required filing fee or if its statement of qualification or statement of foreign qualification is canceled or revoked (although a certificate of good standing may be issued for a domestic partnership if its statement of partnership existence is not cancelled), and to make technical changes.

Section 21. This section amends § 15-1209(a) of the Act to make a technical change.

Section 22. This section provides that the proposed amendments of the Act shall become effective August 1, 2007.

Full Text available at: http://www.legis.state.de.us/LIS/lis144.nsf/vwLegislation/SB+98/$file/legis.html?open

Current Bill Status: Signed by Governor July 10, 2007 with an effective date of August 1, 2007.


Ohio

HB 134

To amend sections 1701.55, 1701.782, 1701.792, 1705.21, and 1775.14 of the Revised Code to modify corporation law relating to the election of directors and to conform conversion provisions of Chapter 1701. of the Revised Code with parallel provisions in Chapters 1705., 1775., and 1782. of the Revised Code. 

• Authorizes alternative standards for the election of directors of business corporations.
• Requires that conversions of domestic corporations into other business entities and conversions of other business entities into domestic corporations be permitted by the Revised Code chapter or by the laws under which the converting entities will exist.
• Allows a limited liability company to provide in its operating agreement or its articles of organization for the exercise of the rights of a member who dies or becomes incompetent for the purpose of settling the member's estate or administering the member's property.
• Extends the shield of a partner of a registered limited liability partnership from personal liability for the obligations of the partnership.
• Validates meetings and votes of nonprofit corporations held by authorized telecommunications equipment on and after August 19, 2005.


Full Text available at: http://www.legislature.state.oh.us/bills.cfm?ID=127_HB_134

Current Bill Status: Signed by Governor July 19, 2007 with an effective date of October 18, 2007.


North Carolina

SB 576

An Act to amend the laws governing business entities to make various clarifying and technical changes regarding mergers and the authority of board committees. 

Full Text available at: http://www.ncga.state.nc.us/Sessions/2007/Bills/Senate/HTML/S576v2.html

Current Bill Status: Presented to Governor July 24, 2007.


Rhode Island

HB 5911

An Act relating to Corporations, Associations, and Partnerships -- the Rhode Island Limited Liability Company Act. This act would mandate that the Secretary of State not accept for filing any article of dissolution, cancellation of registration, article of merger, unless the surviving entity is a domestic entity of record with the office of the secretary of state, or the reinstatement of a limited liability company's certificate of organization or registration until all required filing and other fees have been paid to the Secretary of State and all fees and franchise taxes have been paid.

Full Text available at: http://www.rilin.state.ri.us/BillText07/HouseText07/H5911A.pdf

Current Bill Status: July 7, 2007 effective without Governor's signature.

SB 834

This Act would expand the types of business entities that must provide certain information
when applying for a registration of a trademark.

Full Text available at: http://www.rilin.state.ri.us//BillText07/SenateText07/S0834.pdf

Current Bill Status: July 6, 2007 Effective without Governor's signature.





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