Legislature(2013 - 2014)CAPITOL 120
03/13/2013 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s): || Select Committee on Legislative Ethics | |
| HB9 | |
| HB57 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 9 | TELECONFERENCED | |
| *+ | HB 57 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 57 - ENTITY TRANSACTIONS ACT
1:47:24 PM
CHAIR KELLER announced that the final order of business would
be, HOUSE BILL NO. 57, "An Act adopting the Alaska Entity
Transactions Act; relating to changing the form of entities,
including corporations, partnerships, limited liability
companies, business trusts, and other organizations; amending
Rule 79, Alaska Rules of Civil Procedure, and Rules 602(b)(2),
602(c), and 605.5, Alaska Rules of Appellate Procedure; and
providing for an effective date."
1:47:56 PM
REPRESENTATIVE LINDSEY HOLMES, Alaska State Legislature, as one
of HB 57's joint prime sponsors, explained that HB 57 is
designed to make it easier to do business in Alaska by reducing
unnecessary burdens. Over time businesses merge and morph, HB
57 aims to allow the aforementioned to be done more efficiently.
The bill applies to the following four transactions: mergers
between different entities; conversions; an interest exchange;
and domestication. Current Alaska law would require multiple
steps and could cost a lot of money to perform the
aforementioned transactions. This bill, HB 57, will make it
easier to accomplish the aforementioned transactions in one
single step. She explained that the point is to conclude with a
sole entity that retains all the assets and liabilities of the
business, which would also protect creditors.
1:50:12 PM
REPRESENTATIVE GRUENBERG moved to adopt the proposed committee
substitute (CS) for HB 57, Version 28-LS0255\O,
Kirsch/Bannister, 3/12/13, as the working document. There being
no objection, Version O was before the committee.
REPRESENTATIVE HOLMES informed the committee that the one change
encompassed in Version O is the change from 5 days to 10 days on
page 35, line 25. The change was made per the request of the
Department of Commerce, Community & Economic Development (DCCED)
and would provide the department five more days to respond to
certain filings.
1:51:17 PM
JAMES R. WALDO, Staff, Representative Lindsey Holmes, Alaska
State Legislature, related that HB 57 is about creating an
efficient marketplace for the various types of
businesses/entities that can exist in Alaska including a limited
liability company (LLC), a limited liability partnership, and a
corporation. The various types of business entities often need
to communicate with each other and engage in other transactions.
This legislation establishes an environment such that the
various business entities can engage in transactions without
having to "jump through extra hoops." For example, in order for
an Alaska limited liability company to merge with an Alaska
corporation both of which were created, formed, and do business
in Alaska, the businesses would first have to create another
limited liability company in another state under that state's
laws, merge the Alaska limited liability company with that
state's new limited liability company. The now merged limited
liability company would need to then be converted to a
corporation under that state's laws. The next step would be to
transfer the new corporation back to Alaska and merge with the
Alaska corporation. The goal of HB 57 is to create an efficient
marketplace in Alaska such that businesses can perform all of
the aforementioned in Alaska without all of the extra time,
legal work, and costs. Mr. Waldo informed the committee that HB
57 is also a piece of legislation that's the result of the
Uniform Law Commission. He acknowledged the complexity of the
issue and the law surrounding it, but highlighted its importance
in keeping Alaska businesses competitive and growing.
1:56:37 PM
MR. WALDO, in response to questions, opined that HB 57 won't add
additional burdens to entities in Alaska, which will still
operate under the statute under which they were originally
created. This legislation, he said, merely adds an additional
"super highway" for businesses to engage in transactions with
other businesses.
1:57:41 PM
HARRY HAYNSWORTH, Commissioner, the National Conference of
Commissioners on Uniform State Laws (NCCUSL), began by informing
the committee that he is a retired law professor and was a dean
of various law schools during his career. He then informed the
committee that he was the chair of the committee that drafted
the Model Entity Transactions Act (META). He concurred with the
explanations of the overall purpose of [HB 57]. While one may
think it's lengthy and complicated, it's not as it simply sets
forth the procedures to follow to enact the aforementioned four
types of transactions. The pattern is the same in all
[transactions], just the voting to approve it is different. The
act [HB 57] very much simplifies the process for any of the
transactions and clarifies the legal effect of each of them in
such a way that it applies to any state or transaction. Mr.
Haynsworth noted the act is a joint project of the Commissioners
of the Uniform State Laws and the American Bar Association
(ABA), which is why it's a model act rather than a uniform act;
it involves corporations, both for-profit and not for-profit,
allowing them to merge, convert, and domesticate to have
interest exchanges as well as the unincorporated entities such
as the partnerships and LLCs. The ABA has jurisdiction over the
corporate codes, both the Model Business Corporation Act and the
Model Nonprofit Corporation Act. This joint effort provides a
"junction box" statute that allows all these transactions to
take place between and among the various entities wherever they
may be located. Therefore, it facilitates these transactions,
substantially reduces the costs, and clarifies a lot of issues
that previously existed about these various transactions.
2:01:02 PM
MR. HAYNSWORTH, in response to Representative Gruenberg,
specified that at least six states have adopted this act and
it's pending in about six others. He didn't recall there ever
being objection to this rather the issue has been getting folks
interested enough to propose it. Every time that it has been
considered by legislatures it has been adopted unanimously as
members have realized the benefits.
2:02:40 PM
REPRESENTATIVE GRUENBERG, noting that he supports HB 57, asked
why the fact that it is a joint effort between the Commissioners
of the Uniform State Laws and the ABA preclude it from being a
uniform act rather than a model act.
MR. HAYNSWORTH explained that a decision was made that it needed
to be a model act rather than a uniform act because of its
involvement with the Model Business Corporation Act and the
Model Nonprofit Corporation Act.
2:04:16 PM
REPRESENTATIVE GRUENBERG asked whether the adoption of HB 57
necessitates the adoption of various other laws to allow the
creation of these entities within the state.
MR. HAYNSWORTH stated that Alaska statute already provides for
most of the types of entities, including the general partnership
statute, the limited partnership statute, a limited liability
company act, the for-profit and nonprofit corporation codes, as
well as some cooperative act. A uniform limited cooperative
act, which allows cooperatives to engage in any type of
business, is the only one that Alaska may not have and want to
consider. He noted that cooperatives aren't covered by this act
as many states don't want to allow them to convert or merge.
2:06:05 PM
REPRESENTATIVE GRUENBERG asked Representative Holmes whether
HB 57 includes the Uniform Limited Cooperative Act. If not, he
asked why. He then asked whether it would be appropriate to
allow some of the other entities to be established in Alaska.
REPRESENTATIVE HOLMES clarified that to the best of her
knowledge Alaska doesn't yet have a Uniform Limited Cooperative
Act, and thus it wasn't included in HB 57. All the entities
referenced in HB 57 are already referenced in Alaska law, and
therefore there should be no need to update. With regard to
whether there would be a desire to create a Uniform Limited
Cooperative Act in Alaska, she said she didn't know since she is
very unfamiliar with such entities.
2:08:30 PM
CHAIR KELLER, noting that business contract law is
Representative Holmes' expertise, asked how often she
encountered a problem.
REPRESENTATIVE HOLMES explained that she introduced HB 57
because she has been told in her role as a member of the ABA's
Committee of Corporate Council that these [transactions] happen
frequently in Alaska. She then provided examples. In further
response to Chair Keller, Representative Holmes relayed that HB
57 will make it easier and cheaper to do business in Alaska.
Therefore, she opined that it will make Alaska a more attractive
place. She noted that HB 57 provides an option along with
current law.
2:12:38 PM
REPRESENTATIVE GRUENBERG asked whether there is any serious
opposition to the bill.
MR. HAYNSWORTH related his understanding that there has never
been opposition to this. There aren't more enactments [of the
act] because the bar association of the particular states
haven't been interested enough to push it. However, whenever it
has come forward, it sails through, he stated.
MR. WALDO, in further response to Representative Gruenberg,
explained that although HB 57 is a new bill in the Twenty-Eighth
Alaska State Legislature it was also dealt with in the Twenty-
Seventh Alaska State Legislature. He recalled that in 2011 the
Council of State Governments recommended it as model legislation
for the states. Mr. Waldo also related the lack of opposition.
REPRESENTATIVE HOLMES added that the bill addressing this in the
Twenty-Seventh Alaska State Legislature was slowed in order to
ensure it was correct because it deals with many different
statutes. She, too, related that she knew of no opposition [to
HB 57].
2:17:39 PM
DON HABEGER, Director, Division of Corporations, Business, and
Professional Licensing, Department of Commerce, Community &
Economic Development, noted that the division worked with the
Department of Law on a number of issues that were of [concern
with the bill last session], including an administrative change
so that the department would have 10 days rather than 5 days to
respond to certain filings. Mr. Habeger then related
satisfaction with [Version O] and the division's role in it.
2:20:11 PM
REPRESENTATIVE GRUENBERG inquired as to whether anything in
Version O is so different from the model act that it wouldn't be
considered a model act.
2:21:40 PM
MR. HAYNSWORTH, regarding the change in Version O from 5 days to
10 days on page 35, line 25, related that the [Uniform Law
Commission] believes that whatever is necessary for the filing
offices of the state to have consistent procedures across the
spectrum [of entities] should be followed. Therefore, if the
other statutes provide for 10 days, then this statute should as
well. The filing statutes in HB 57 should be consistent with
the other filing provisions for other entities. After reviewing
the bill, Mr. Haynsworth said that he didn't find anything in it
to the contrary. Furthermore, nothing in the bill would be
inconsistent with what is in the model act or authorized to be
in the model act. Therefore, he commended the drafters as
[HB 57] is totally parallel and consistent with existing state
statute.
CHAIR KELLER announced that HB 57 [Version O] would be held
over.