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NRAI
Compliance Updates - December
2007
Greetings,
November has been an
active month with a lot of legislation moving through
the process. None of the legislation reported for this
month has passed in its jurisdiction. However, Michigan
Bills HB 5356, HB 5357, HB 5353 and SB 942 have all
passed at least one house and are moving toward passage.
Most of these Michigan Bills address professional
services. However, HB 5356 deals in depth with
conversions.
We begin a new year with our
January Newsletter. And, from all indications, it looks
to be another active one in the Business Entity
arena.
Happy Holidays and a very Happy New
Year.
Robert K. Rowell
General
Counsel
New, Pending and Passed Legislation
Florida
SB
698
Revises provisions relating to articles
of mergers and certificates of conversion for domestic
corporations, limited liability corporations, not for
profit corporations, and partnerships. Includes a
corporation within the definition of "other business
entity" or "another business entity" as it relates to
limited liability companies. Provides that the expulsion
of a limited partner requires the consent of all the
other limited partners, etc.
Full Text available
at: http://www.myfloridahouse.gov/Sections/Documents/loaddoc.aspx?FileName=_s0698__.DOC&DocumentType=Bill&BillNumber=0698&Session=2008
Current
Bill Status: November 29, 2007
filed.
Michigan
HB
5356
This Bill would amend the Business
Corporation Act (MCL 450.1108 et al) to define
"professional service" to mean a type of personal
service to the public that requires as a condition
precedent to the rendering of the service the obtaining
of a license or other legal authorization. The bill
would define "services in a learned profession" to mean
services rendered by a dentist, an osteopathic
physician, a physician, a surgeon, a doctor of divinity
or other clergy, or an attorney-at-law. The bill would
modify the definition for the term "person" to mean an
individual, a partnership, a domestic or foreign
corporation, "a limited liability company" or any other
association, corporation, trust, or legal
entity.
The bill specifies that the Business
Corporation Act would be applicable to corporations
organized under Michigan's statutory law governing the
formation and internal affairs of profession service
corporations, unless there were conflicts with this act,
in which case the statutory law would apply. The bill
also specifies that a corporation that provides one or
more services in a learned profession could not
incorporate under the Business Corporation Act. Further,
under the bill, a corporation that currently provides
professional services that was organized under this act
before the effective date of this legislation, and not
providing any services in a learned profession, would
not be considered to be improperly organized.
The
bill adds two new substantially similar sections to the
act--the first governing the occasion when a domestic
corporation converts to a business organization (Section
745), and the second governing the occasion when a
business organization converts to a domestic corporation
(Section 746). Under the bill, a conversion can occur if
all of the following requirements are
satisfied:
The conversion is permitted by the
law that will govern the internal affairs of the
business organization or domestic corporation after
conversion and the surviving business organization
complies with that law in converting.
The board
of the domestic corporation or business organization
proposing to convert adopts a plan of conversion that
includes all of the following:
o The name of the domestic corporation or
business organization, the name of the business
organization into which the domestic corporation is
converted or the reverse, the type of business
organization into which the domestic corporation is
converting or the reverse, identification of the
statue that will govern the internal affairs for the
surviving business organization, the street address of
the surviving business organization or domestic
corporation, the street address of the domestic
corporation or business organization if different, and
the principal place of business of the surviving
business organization or domestic
corporation.
o For the domestic corporation or
the business organization, the designation and number
of outstanding shares of each class and series,
specifying the classes and series entitled to vote,
each class and series entitled to vote as a class,
and, if the number of shares is subject to change
before the effective date of the conversion, the
manner in which they change may occur.
o The
terms and conditions of the proposed conversion,
including the manner and basis of converting the
shares into ownership interests or obligations of the
surviving business organization, into cash, into other
consideration that may include ownership interest or
obligations of an entity that is not a party to the
conversion, or into a combination of cash and other
considerations.
o The terms and conditions of
the organizational documents that are to govern the
surviving business organization.
o Any other
provision with respect to the proposed conversion that
the board considers necessary or
desirable.
If the board of a domestic
corporation adopts the plan of conversion, it is
submitted for approval in the same manner required for a
merger (under Section 7031(2), including the procedures
pertaining to dissenters' rights, if any shareholder has
the right to dissent. If a plan of conversion is adopted
by a business organization, the plan is submitted for
approval in the manner required by the law governing the
internal affairs of that business
organization.
If a domestic corporation has not
commenced business, has not issued any shares, and has
not elected a board, then the incorporators may approve
of the conversion into a business organization by
unanimous consent. To effect the conversion, the
majority of the incorporators must execute and file a
certificate of conversion. After the plan of conversion
is approved, the domestic corporation files any
formation documents under the laws governing the
internal affairs of the surviving business
organization.
The bill specifies that the
certificate of conversion include five statements,
including but not limited to a statement concerning the
manner and basis of converting the shares; whether the
corporation has commenced business, issued any shares,
or elected a board; whether the corporation has
furnished a copy of the plan of conversion to any
shareholders; whether the plan was approved by the
shareholders; and specifying each assumed name of the
domestic corporation to be used by the surviving
business organization.
When a conversion takes
place under Section 745, all of the following (among
other things) apply:
The domestic corporation
converts into the surviving business organization, and
the articles of incorporation of the domestic
corporation are canceled.
The surviving
business organization has all of the liabilities of the
domestic corporation.
The title to all real
estate and other property and rights owned by the
domestic corporation remain vested in the surviving
business organization without reversion or
impairment.
The surviving business organization
may use the name and the assumed names of the domestic
corporation if the filings are made under the
law.
A proceeding pending against the domestic
corporation may be continued as if the conversion had
not occurred, or the surviving business organization may
be substituted in the proceedings for the domestic
corporation.
The surviving business
organization is considered to be the same entity that
existed before the conversion and is considered to be
organized on the date that the domestic corporation was
originally incorporated.
The shares of the
domestic corporation that were to be converted into
ownership interests or obligations of the surviving
business organization or into cash or other property are
converted.
Unless otherwise provided in a plan
of conversion, the domestic corporation is not required
to wind up its affairs or pay its liabilities and
distribute its assets on account of the conversion, and
the conversion does not constitute a dissolution of the
domestic corporation.
If the surviving business
organization of a conversion is a foreign business
organization, it is subject to Michigan laws. The
surviving business organization is liable, and is
subject to service of process in a proceeding in
Michigan, for the enforcement of an obligation of the
domestic corporation, and in a proceeding for the
enforcement of a right of a dissenting shareholder of
the domestic corporation against the surviving business
organization.
When a plan of conversion is
approved under Section 746, the business organization
files a certificate of conversion with the
administrator, and the bill specifies what that
certificate must include. When a certificate takes
effect, all of the following apply:
The
business organization converts into the surviving
domestic corporation.
The surviving domestic
corporation has all of the liabilities of the business
organization.
The title to all real estate and
other property and rights owned by the business
organization remain vested in the surviving domestic
corporation without reversion or impairment.
The surviving domestic corporation may use the name and
the assumed names of the business organization if the
filings are made and the laws regarding use and form of
names are followed.
A proceeding pending
against the business organization may be continued as if
the conversion had not occurred, or the surviving
domestic corporation may be substituted in the
proceedings for the business organization.
The
surviving domestic corporation is considered to be the
same entity that existed before the conversion and is
considered to be organized on the date that the business
organization was originally organized.
The
ownership interests of the business organization that
were to be converted into shares or obligations of the
surviving domestic corporation or into cash or other
property are converted.
Unless otherwise
provided for in a conversion plan, the business
organization is not required to wind up its affairs or
pay its liabilities and distribute its assets on account
of the conversion, and the conversion does not
constitute a dissolution of the business
organization.
Currently under the law, a
shareholder is entitled to dissent from a conversion,
and obtain payment of the fair value of his or her
shares, in the event of any of seven corporate actions.
House Bill 5356 would modify the list of corporate
actions. It would eliminate as a reason for shareholder
dissent "the approval of a control share acquisition."
The bill would add as a reason for shareholder dissent
the "consummation of a plan of conversion to which the
corporation is a party as the corporation that is being
converted, if the shareholder is entitled to vote on the
plan." However, the bill specifies that any rights
provided would not be available if the corporation was
converted into a foreign corporation, and the
shareholder received shares that had terms as favorable
in all material respects, and represented at least the
same percentage interest of the total voting rights of
the outstanding shares of the corporation, as the shares
held before the conversion.
Also, House Bill 5356
would repeal Chapter 7B of the act, which deals with
"control share acquisitions." (Generally speaking, these
provisions were enacted to address hostile takeovers of
Michigan corporations.)
Full Text available at:
http://www.legislature.mi.gov/documents/2007-2008/billengrossed/House/pdf/2007-HEBH-5356.pdf
Current
Bill Status: December 11, 2007 having passed the House
the Bill has been referred to the Senate and is referred
to the Committee on Economic Development and Regulatory
Reform.
HB 5357
This Bill would
amend the Professional Service Corporation Act (CL
450.222 et
al) to modify the definition of the term
"professional service" to mean a type of
personal
service to the public that requires as a
condition precedent to the rendering of the service the
obtaining of a license or other legal authorization.
Under the bill, the following
provision would be
eliminated from the current definition: Professional
service includes,
but is not limited to, services
rendered by certified and other public
accountants,
chiropractors, dentists, optometrists,
veterinarians, osteopaths, physicians and
surgeons,
doctors of medicine, doctors of dentistry,
podiatrist, chiropodists, architects,
professional
engineers, land surveyors, and attorneys
at law.
The bill would also define the term
"services in a learned profession" to mean
services
rendered by a dentist, an osteopathic
physician, a physician, a surgeon, a doctor
of
divinity or other clergy, or an
attorney-at-law.
The bill specifies that the
Professional Service Corporation Act would not apply to
any
corporation providing professional services that
was previously organized under the
Business
Corporation Act before the effective date of this
legislation, if none of the
professional services
provided by the corporation were services in a learned
profession.
A corporation could bring itself within
the provisions of the Professional Services Corporation
Act by amending its articles of incorporation so they
are consistent with the
act, and by affirmatively
stating in the amended articles that the shareholders
had elected to bring the corporation within the
provisions of the Professional Service Corporation
Act.
The bill would also specify a corporation
for pecuniary profit that provided one or
more
professional services that were services in a
learned profession could only incorporate
under the
Professional Service Corporation Act and could not elect
to incorporate under
the Business Corporation Act.
However, a corporation that provided one or
more
professional services could elect to incorporate
under this act or the Business Corporation
Act, if it
did not provide any professional services that were
services in a learned
profession.
Finally, the
bill specifies that Michigan statutory law governing the
formation and
internal affairs of business
corporations, rather than only the Business Corporation
Act,
would be applicable to a corporation organized
under this act, and in the case of conflict,
the
provision of this act would apply with respect to a
corporation organized under it.
Full Text
available at: http://www.legislature.mi.gov/documents/2007-2008/billengrossed/House/pdf/2007-HEBH-5357.pdf
Current
Bill Status: December 11, 2007 having passed the House
the Bill has been referred to the Senate and is referred
to the Committee on Economic Development and Regulatory
Reform.
HB 5358
This Bill would
amend the Michigan Limited Liability Company Act to
revise the definition of the term "professional service"
to mean a type of personal service to the public that
requires as a condition precedent to the rendering of
the service the obtaining of a license or other legal
authorization. Under the bill, the following provision
would be eliminated from the current definition:
Professional service includes, but is not limited to,
services rendered by a certified or other public
accountant, chiropractor, dentist, optometrist,
veterinarian, osteopathic physician, physician, surgeon,
podiatrist, chiropodist, architect, professional
engineer, land surveyor, and attorney at
law.
Full Text available at: http://www.legislature.mi.gov/documents/2007-2008/billengrossed/House/pdf/2007-HEBH-5358.pdf
Current
Bill Status: December 11, 2007 having passed the House
the Bill has been referred to the Senate and is referred
to the Committee on Economic Development and Regulatory
Reform.
HB 5461
A bill to amend
2007 PA 36, entitled "Michigan business tax act," by
amending section 111 (MCL 208.1111). This Bill would
amend the MBT to exclude from "gross receipts" proceeds
from the sale or other disposition of media property and
amounts received by the taxpayer from any transaction
involving media property as long as the sale,
transaction, or other disposition is treated as a loan
or lease for federal income tax purposes and is intended
to finance or share the risk related to the production
of media property.
Full Text available at: http://www.legislature.mi.gov/documents/2007-2008/billintroduced/House/pdf/2007-HIB-5461.pdf
Current
Bill Status: November 26, 2007 referred to Committee on
Tax Policy.
HB 5462
A bill to amend
2007 PA 36, entitled "Michigan business tax act," by
amending section 113 (MCL 208.1113). This Bill would
amend the definition of "purchases from other firms" in
the MBT. Under the bill, such purchases would include
assets that are media property for which the taxpayer
incurred costs to acquire, produce, or use that media
property, including without limitation, costs incurred
for the right to broadcast live or delayed coverage of
events such as concerts, plays, sporting events, and
other performances without regard to the method of
depreciation, amortization, or other form of cost
recovery applicable to that media property. This would
apply, generally speaking, to firms in the following
industry groups: periodicals and publishing, books,
radio and television stations, cable and pay television,
computer programming and data processing, motion picture
distribution, theatrical production (other than movies),
and physical fitness facilities.
Full Text
available at: http://www.legislature.mi.gov/documents/2007-2008/billintroduced/House/pdf/2007-HIB-5462.pdf
Current
Bill Status: November 26, 2007 referred to Committee on
Tax Policy.
SB 942
A bill to amend
1972 PA 284, entitled "Business corporation act," by
amending sections 911 and 1062 (MCL 450.1911 and
450.2062), section 911 as amended by 1996 PA 197 and
section 1062 as amended by 2005 PA
212.
Full Text available at: http://www.legislature.mi.gov/documents/2007-2008/billengrossed/Senate/pdf/2007-SEBS-0942.pdf
Current
Bill Status: December 13, 2007 having passed both the
Senate and the House the Bill was ordered
Enrolled.
New Hampshire
HB
1152
This bill establishes a grace period for
annual reports filed by business corporations if April 1
is not a business day.
Full Text available at: http://www.gencourt.state.nh.us/legislation/2008/HB1152.html
Current
Bill Status: Prefiled December 6, 2007 and referred to
Commerce
Committee.
Wisconsin
HB
615
An Act to amend 995.12 (3) (c) of the
statutes; relating to: service on foreign corporations
(suggested as remedial legislation by the Office of the
Secretary of State).
Full Text available at: http://www.legis.state.wi.us/2007/data/AB-615.pdf
Current
Bill Status: Introduced December 6, 2007 and referred to
committee on Financial
Institutions.
Wyoming
HB
30
An Act relating to business entities;
providing a penalty for signing a false document;
providing for forfeiture of limited liability company
articles of organization; providing for administrative
dissolution of corporations; providing for a fee;
providing for revocation of authority for foreign
corporations; providing for interim classifications; and
providing for an effective date.
Full Text
available at: Not currently available
Current
Bill Status: July 31, 2007 Draft Text Released.
For an
archive of NRAI Compliance Updates, visit http://www.nrai.com/ and select
Research Center.
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As
the holidays are an important time to reflect on
the past year and give thanks, we would like to
take this opportunity to thank you for your
business. We wish you and your family a safe and
joyous holiday season.
Your friends at
National Registered Agents
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