Legislature(2013 - 2014)CAPITOL 120

03/13/2013 01:00 PM JUDICIARY


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01:06:23 PM Start
01:07:12 PM Confirmation Hearing(s): || Select Committee on Legislative Ethics
01:14:16 PM HB9
01:47:24 PM HB57
02:25:30 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Confirmation Hearings: TELECONFERENCED
- Commission on Judicial Conduct
<Above Item Removed from Agenda>
- Select Committee on Legislative Ethics
-- Testimony <Invitation Only> --
+ HB 9 SECURED TRANSACTIONS AND FUNDS TRANSFERS TELECONFERENCED
Moved Out of Committee
*+ HB 57 ENTITY TRANSACTIONS ACT TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled 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.                                                                                                                           

Document Name Date/Time Subjects
HB 57 Sponsor Statement.pdf HJUD 3/13/2013 1:00:00 PM
HB 57
HB 57 Sectional Summary.pdf HJUD 3/13/2013 1:00:00 PM
HB 57
HB 57 ver U.PDF HJUD 3/13/2013 1:00:00 PM
HB 57
HB 57 Fiscal Note-Dept. of Commerce.pdf HJUD 3/13/2013 1:00:00 PM
HB 57
HB 57 Uniform Law Commission Summary.pdf HJUD 3/13/2013 1:00:00 PM
HB 57
HB 9 Dept. of Law Hearing Request.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 Sponsor Statement.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 Sectional Rep. Gruenberg.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB 9 Dept. of Law Sectional Analysis.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 ver. N.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 Fiscal Note-DNR-REC-2-15-13.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 Fiscal Note- LAW-CIV-02-15-13.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 Supporting Document- UCC Article 9 Amendments Legislative Fact Sheet.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 Supporting Document- UCC Article 4A Amendments Legislative Fact Sheet.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 Supporting Document- UCC Article 4A Amendments (2012) Summary.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 Spporting Document- UCC Article 9 Amendments (2010) Summary.pdf HJUD 3/13/2013 1:00:00 PM
HB 9
HB 9 Supporting Document- Letter Deborah Behr 2-21-2013.PDF HJUD 3/13/2013 1:00:00 PM
HB 9
HB9 Supporting Documents- Letter Joe Everhart 1-28-13.pdf HJUD 3/13/2013 1:00:00 PM
HB 9