Legislature(2013 - 2014)CAPITOL 120
03/13/2013 01:00 PM JUDICIARY
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|Confirmation Hearing(s): || Select Committee on Legislative Ethics|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.