Legislature(1999 - 2000)
03/17/1999 03:20 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
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HB 101 - CORPORATE PUBLIC UTILITY REINSTATEMENT
Number 1659
CHAIRMAN ROKEBERG announced the committee's next order of business
is HB 101, "An Act relating to the reinstatement of corporations
that are public utilities; and providing for an effective date."
Number 1670
REPRESENTATIVE HALCRO moved to adopt the proposed committee
substitute (CS) for HB 101, labeled 1-LS0469\D, Bannister, 3/16/99,
as the working document before the committee. There being no
objection, it was so ordered.
Number 1704
REPRESENTATIVE CARL MORGAN, Alaska State Legislature, came forward
as the bill sponsor. He read the following sponsor statement into
the record:
"This legislation is a vehicle to allow the Alaska
Department of Commerce and Economic Development the
discretion to reinstate, as a corporation, a local
telecommunications company that serves several
communities in western Alaska.
"After reviewing the facts and circumstances surrounding
the issue, I hope that you will agree that this measure
warrants our attention and support. The following are
the facts surrounding the involuntary dissolution of
Bush-Tell.
"Bush-Tell is a small, rural local telephone company
located in Aniak, Alaska, which provides local telephone
service to ten small villages in western Alaska.
Bush-Tell was incorporated on November 10, 1969 and has
been providing telecommunication service since 1970. Mr.
Bob Colliver, Jr., the President and sole shareholder of
Bush-Tell, recently contacted the Alaska Division of
Banking, Securities and Corporations [Department of
Commerce and Economic Development], to find out about
registering a 'dba' [doing business as] and was informed
that Bush-Tell was no longer registered as a corporation
with the division. Bush-Tell had been involuntarily
dissolved in 1993 for failing to file its biennial report
and/or failing to pay its biennial corporate tax for the
period ending December 31, 1992. Upon investigation, it
was discovered that Bush-Tell's registered agent had
failed to follow the proper statutory procedures for
resigning as a registered agent and his omission resulted
in the involuntary dissolution of Bush-Tell."
Number 1815
"Bush-Tell's designated agent was a sole practitioner in
Anchorage, Alaska who also served as Bush-Tell's general
counsel. In the early 1980s, Bush-Tell hired another law
firm to do its legal work but continued to retain the
sole practitioner as its registered agent. The forms for
Bush-Tell's biennial reports were sent to the registered
agent and were filed by the registered agent up to and
including the period ending December 31, 1990
In 1991, the registered agent left the private practice
of law, closed his office and left a forwarding address
for his mail with the U.S. Postal Service. The
registered agent did not inform the Alaska Division of
Banking, Securities and Corporations that his address was
changing or that he was resigning as Bush-Tell's
registered agent. State Statute 10.06.170(b) requires
that, if a registered agent resigns, the registered agent
must file a written notice with the commissioner setting
out the latest address of the principal's office of the
corporation and the names, addresses and the title of the
most recent officers of the corporation. The commission
must then immediately mail a copy of the notice to the
corporation at its principal office."
Number 1903
"On July 12, 1993, the Alaska Division of Banking,
Securities and Corporations sent a notice by certified
mail to Bush-Tell, care of the registered agent,
informing Bush-Tell that it had not filed its biennial
report and/or tax for the period ending December 31, 1992
and that, if the biennial report and/or tax are not
mailed by September 19, 1993, the Certificate of
Involuntary Dissolution will be issued and the
corporation will cease to exist as of September 20, 1993.
This notice was returned to the Alaska Division of
Banking, Securities and Corporations because the
registered agent's forwarding notice had expired. On
September 20, 1993, Bush-Tell was involuntarily
dissolved.
"Since the time of this dissolution, and even after
discovering the involuntary dissolution, Bush-Tell has
observed all of the corporate procedures required by its
bylaws and Alaska law including holding regular board of
directors meetings and paying corporate income taxes."
Number 1997
REPRESENTATIVE MORGAN mentioned the suggestion that HB 101 be
amended to include all corporations had been brought up in the last
hearing. He explained that HB 101 was drafted on a narrow bias
because it is his understanding that this is the way the
legislature has handled these types of issues in the past. He
believes this to be the best approach.
CHAIRMAN ROKEBERG said the original bill only included Sections 10
and 11. When it was before the House Special Committee on Utility
Restructuring, there were recommendations to see if the legislature
could develop a method which would avoid this type of situation in
the future.
REPRESENTATIVE MORGAN agreed.
CHAIRMAN ROKEBERG further noted that the other provisions of the
bill relate to trying to ameliorate the problem that occurred by
setting the mailing requirements, and so forth, in statute. This
was a request of the House Special Committee on Utility
Restructuring. Those suggested changes have been added to HB 101
in the proposed CS.
Number 2060
REPRESENTATIVE MURKOWSKI referred to Representative Morgan's
comment that he drafted his legislation very narrowly for a
specific purpose. She asked Representative Morgan how he viewed
the changes which expand the legislation beyond its initial
purpose.
REPRESENTATIVE MORGAN replied that he has no problem with the
amendments. However, his biggest concern is that other
corporations will have to follow the strict guidelines.
REPRESENTATIVE HALCRO referred to Representative Morgan's statement
that after Bush-Tell was involuntarily dissolved, board meetings
were still held and income taxes were still paid. He asked if the
owner knew that Bush-Tell was involuntarily dissolved. Did the
owner get receipts or notification while continuing to pay income
tax?
Number 2138
HEATHER GRAHAME, Partner, Dorsey and Whitney LLP, testified via
teleconference from Anchorage. She noted her firm represents
Bush-Tell. Ms. Grahame responded that Bush-Tell did continue to
follow all corporate formalities including holding scheduled board
meetings. However, she does not believe Bush-Tell filed a biennial
report. In fact, Dorsey and Whitney tried to file one on
Bush-Tell's behalf this year and the Division of Banking,
Securities and Corporations rejected it.
REPRESENTATIVE HALCRO again referred to the statement that
Bush-Tell continued to pay income tax. Representative Halcro hoped
that Bush-Tell is not faced with a penalty even though it was
involuntarily dissolved.
MS. GRAHAME remarked that if this legislation doesn't pass there
will be significant issues relating to income taxes.
CHAIRMAN ROKEBERG asked if those issues would result because
Bush-Tell would lose its corporate status which would necessitate
the recalculation all taxes and other obligations under a different
organizational structure.
Number 2194
MS. GRAHAME replied that is correct. One of her biggest fears is
that, for example, the IRS [Internal Revenue Service] would then
attribute any income that Bush-Tell received from 1993 on, to Mr.
Colliver himself.
CHAIRMAN ROKEBERG interjected that Mr. Colliver's business could
possibly be constructed as a sole proprietorship.
MS. GRAHAME agreed.
REPRESENTATIVE HALCRO said he wanted to get back to the penalty
aspect. He asked if Bush-Tell, due to the involuntary dissolution
of the corporation, would face any kind of a penalty for failing to
communicate with the state.
Number 2282
MS. GRAHAME responded that there is a penalty, 10 percent of the
amount of the biennial tax assessed, for failure to pay a biennial
report which is set forth under AS 10.06.815. She believed the
biennial tax in this period of time was $60.00. If that is
correct, that penalty is quite nominal.
REPRESENTATIVE HARRIS reiterated that, "All the other sections,
besides Sections 10 and 11 are referring to the method that they
will notice in the future ... and they have been doing that -- but
whether that qualifies. So, that's Representative Morgan's bill
and the bill for Bush-Tell is really that one section. And not to
move too fast -- but the amendments on our desk have to do with
that subject as well."
CHAIRMAN ROKEBERG agreed that the mailing procedure has nothing to
do with the substantive portion of the bill. He asked Ms. Grahame
if she could have gone to the courts under the corporate code and
received a reinstatement.
Number 2344
MS. GRAHAME responded absolutely not. She noted that the reason
Bush-Tell couldn't go to court is because the timely demand in
response to the notice of the dissolution is a 60-day period after
the notice was sent out. In this case, it was mailed in 1993.
Therefore, there is no remedy other than a statutory remedy. Ms.
Grahame pointed out that this has been conducted several times in
the past. She referred to AS 10.06.960(i) and (k) and noted that
amendments have been made to the corporations' code to
legislatively reinstate Alaska Native corporations that were
involuntarily dissolved. She reiterated that this is the only
remedy for Bush-Tell, a small rural telephone company.
CHAIRMAN ROKEBERG asked if the Alaska Statute allowed reinstatement
within a two-year period.
MS. GRAHAME responded that it did, however, when the state
dissolved Bush-Tell, the notice was sent only to the registered
agent. As Representative Morgan stated, the registered agent's
address had expired so the notice was returned to the state and the
state never contacted Bush-Tell itself, or anyone associated with
the public utility. The latest that it could have been reinstated
by the Division of Banking, Securities and Corporations would have
been 1995. Bush-Tell didn't discover its dissolution until 1998.
CHAIRMAN ROKEBERG indicated that the two-year window did not work
for Ms. Grahame but that it is available in the law.
MS. GRAHAME replied that is correct.
Number 2453
CHAIRMAN ROKEBERG further stated that, "As one of the issues that
was before the [House ] Special Committee [on Utility
Restructuring] was the potentiality of deviating from the two years
and expanding that window to allow a pleading in court ... for
reinstatement - under a longer window, for example, say, four years
to help remedy this problem in the future. But I think we'll bring
that up with the department [Department of Commerce and Economic
Development], and they would object to that. But would that have
helped you? Or could that help other corporations in the same
straights?"
MS. GRAHAME responded that it might help other corporations. She
noted that the Division of Banking, Securities and Corporations,
felt that might dissuade corporations from acting responsibly. She
thinks the division's view is that if notice was actually given to
the corporation, that should cure the problem. However, on this
sort of an issue, Ms. Grahame to deferred to the Division of
Banking, Securities and Corporations.
CHAIRMAN ROKEBERG asked Ms. Grahame, as counsel to Bush-Tell, if
she would like to see other corrections in the law that would help
other corporations in the future.
Number 2486
MS. GRAHAME replied, "I think the bill -- as long as notice has to
be given to the corporation..." [TESTIMONY INTERRUPTED BY TAPE
CHANGE]
[From tape log notes: "as well as registered agent"]
TAPE 99-25, SIDE B
Number 0001
MS. GRAHAME continued, "I think your amendment that I saw today
[will] cure the problem."
Number 0021
REPRESENTATIVE MURKOWSKI referred to Section 10, regarding the
reinstatement, which allows a public utility corporation until the
end of the year to do the reinstatement. She asked if there is
anybody else in a similar circumstance.
MS. GRAHAME replied that she is not aware of any corporation in
this circumstance other than Bush-Tell.
CHAIRMAN ROKEBERG said, "Well, it's a potentiality and that's why
it's broad enough not to ask for a public utilities as opposed to
doing something that might be characterized as special legislation
which is unconstitutional in the state of Alaska."
Number 0061
CHAIRMAN ROKEBERG asked Ms. Grahame to draft a letter of support
that might help people understand the new section - how it fits in
and makes the bill whole.
MS. GRAHAME acknowledged that she will provide the letter. She
added that the legislature has an opportunity to fix a serious
legal problem for a small rural telephone company that has been
providing high-quality service in rural Alaska since 1970.
Number 0111
FRANKLIN TERRY ELDER, Director, Division of Banking, Securities and
Corporations, Department of Commerce and Economic Development, came
forward in Juneau. He mentioned that he is substituting for Dawn
Williams, the corporations supervisor [Dawn Williams, Records and
Licensing Supervisor, Department of Commerce and Economic
Development], and that the division continues to support HB 101.
Mr. Elder noted he has made suggestions for the proposed CS. His
understanding is that the committee's intention is to essentially
codify the division's current practice. He said, "Except for the
couple of suggestions I made, you do that. And, I agree that ...
the current practice, and what is in this bill, would lessen the
likelihood of these problems in the future."
Number 0172
REPRESENTATIVE MURKOWSKI asked if the committee substitute would
change the fiscal note.
MR. ELDER replied, "With a couple of the suggestions I made to
staff, it would not change the fiscal note with..."
CHAIRMAN ROKEBERG interjected (indisc.) amendment to the amendment.
MR. ELDER continued, "Yes, without those arguably there could be a
small fiscal note that would be required."
REPRESENTATIVE MURKOWSKI reiterated that there could be a small
fiscal note with the proposed CS, however, if the amendments to the
Version D are adopted, the fiscal note does not change.
MR. ELDER agreed.
CHAIRMAN ROKEBERG noted that, following the testimony, Mr. Elder
will come back to the table to address the amendments to CSHB 101.
Number 0218
REPRESENTATIVE HALCRO said, "I noticed in your statement of support
for HB 101 you say that, 'We've increased our diligence in working
with corporations to avoid the maximum extent possible inadvertent
dissolving of businesses.' Does this mean that when mail comes
back to you that you actually physically look up where the
corporation's headquartered - or the utility's headquartered and
call them and say, 'What's the deal, how can we get this to you?'
I mean can you explain to me how we're making sure that this
doesn't happen in the future?"
MR. ELDER explained that it is his understanding that the mailing
used to be sent only to the registered agent. By statute every
corporation has to have a registered agent and that agent is
supposed to keep the Division of Banking, Securities and
Corporations informed as to the name of that person and the proper
address. Mr. Elder said the division currently sends the mail to
the corporation's office and then to the agent, however, it's also
a matter of staff-time and availability. Primarily information is
checked: have they provided an address for the corporation's
office, is it different from the agent's address, have they
provided an address for an officer or a director, and if they have
then they make those mailings.
Number 0309
REPRESENTATIVE SANDERS said it seems to him that it would the
simplest thing in the world for Mr. Elder to write a letter to
where the check came from - when people are paying the tax. He
asked, "How do you accept my income tax check when I don't have a
corporation."
MR. ELDER responded the income tax goes to the Department of
Revenue and not to the Department of Commerce and Economic
Development.
REPRESENTATIVE SANDERS questioned that the division does not know
anything about that, the division is not connected to it.
MR. ELDER replied no, the division is not.
REPRESENTATIVE SANDERS questioned that the division does not have
any access to it.
Number 0334
MR. ELDER said he doesn't know what the department's access is to
tax records and would have to look into that. He pointed out that
the payment of income tax is separated from the payment of the
biennial tax.
REPRESENTATIVE SANDERS suggested that somebody in the state
government figure out how to find out where that income tax check
came from because it's a disadvantage to the business people.
MR. ELDER replied that he will discuss that with division staff and
see if there are any problems or prohibitions of having access to
that type of information.
REPRESENTATIVE BRICE said he would appreciate hearing the outcome
because HB 101 has five pages of statute changes, with the
possibility of another three. He also agreed with Representative
Sanders that the address on the check is obviously going to be an
accurate address. Representative Brice remarked that there has to
be coordination between the governmental agencies on issues like
this.
Number 0421
REPRESENTATIVE CISSNA stated that she could see a situation where
the income tax would be paid by an accountant or an attorney.
REPRESENTATIVE SANDERS interjected that they would know where the
person was and would notify him.
REPRESENTATIVE CISSNA pointed out that in this case, the counsel,
the agent who left the corporation, could have even done that and
the same problem would result.
REPRESENTATIVE SANDERS indicated that they continued to pay their
income tax each year.
REPRESENTATIVE CISSNA believed that it would be a good thing to
track down. She recognized that this is an enormous amount of
detail and wondered if this could be remedied by making this policy
of the division.
Number 0477
CHAIRMAN ROKEBERG understood that this merely codifies the current
policy.
MR. ELDER agreed that HB 101 would merely codify the division's
current policy.
CHAIRMAN ROKEBERG inquired as to whether the registered agent
language could be tightened by mandating the responsibility of the
registered agent to be current. He acknowledged the difficulty in
disciplining the agent in this case because the registered agent
just seemed to retire and disappear.
MR. ELDER said there is only so much that could be done.
Number 0527
CHAIRMAN ROKEBERG noted that there was much discussion on this in
the House Special Committee on Utility Restructuring. The main
objective is that notice is provided to someone.
REPRESENTATIVE MURKOWSKI commented, as a registered agent for
several corporations, that there is a fee associated with every
change with the exception of the change in mailing address for the
registered agent. She indicated that perhaps the fees for simple
changes may have to be eliminated.
CHAIRMAN ROKEBERG noted that Mr. Elder would be able to provide
further testimony after talking with Mr. Rowe.
Number 0600
JIM ROWE, Director, Alaska Telephone Association, came forward to
testify in support of HB 101. Mr. Rowe informed the committee that
Bush-Tell serves about 800 access lines in rural Alaska and has
provided high quality service for a number of years. The testimony
from the APUC [Alaska Public Utilities Commission], in the last
committee, did not have any complaints regarding certification.
Mr. Rowe pointed out that they are looking at advanced
telecommunications infrastructure. This takes money, which
necessitates loans. A noncorporation will not be able to receive
loans from the rural utility service, "co-bank," et cetera.
Therefore, this would have to be reviewed if this matter is not
resolved soon. He appreciated the speedy consideration of HB 101
for this particular situation. With regards to the amendments, Mr.
Rowe said the amendments seem to address this situation in order to
avoid such in the future.
CHAIRMAN ROKEBERG asked if any one else wished to testify. There
being no one, the chairman closed the public testimony and invited
Mr. Elder back before the committee.
Number 0668
REPRESENTATIVE MURKOWSKI asked if there were any other corporations
that are similarly situated to Bush-Tell which should be notified
of this legislation.
MR. ELDER said not to his knowledge.
CHAIRMAN ROKEBERG directed the committee to amendment D.1, labeled
1-LS0469\D.1, Bannister, 3/17/99.
Number 0713
JANET SEITZ, Legislative Assistant for Representative Rokeberg,
Alaska State Legislature came forward. She explained that
amendment D.1 would require the department to provide the first
notice by certified mail. Amendment D.1 would not require mail
returned to be re-mailed to a duplicate address. For example, if
the notice mailed to the registered agent was returned then the
notice would not be mailed to the next person on the list if that
person had the same address. The notice would be mailed to the
next person on the list with a different address. Amendment D.1
was sent from Ms. Bannister, Legislative Counsel, Legislative Legal
and Research, Legislative Affairs Agency. Ms. Seitz noted that Mr.
Elder had some concerns with regard to some of the deletions and
placements of "certified".
Number 0779
MR. ELDER explained that HB 101 is to codify the current practice.
Currently, the first mailing is certified and the subsequent
mailings are first class mailings. He believed that Ms. Bannister
took that a bit further than necessary with the first two items of
amendment D.1. He stated that the deletion of "certified" and
insertion of "[CERTIFIED]" on page 1, line 10 of amendment D.1
should not be made because that language refers to the initial
mailing.
REPRESENTATIVE BRICE referred to amendment D.1 where on page 2,
line 22, following "item", "by certified mail" is inserted. He
pointed out that both subsections (b) and (d) reference "as
provided by (i) of this section", therefore it is a different
manner to achieve the same goal.
MR. ELDER said that would be fine if that is the intent. After
further discussion regarding Mr. Elder's concern with amendment
D.1, Mr. Elder did not have any objection to the amendment.
CHAIRMAN ROKEBERG reviewed the sections to ensure the language
referring to mailing followed the intent to only require a
certified mailing for the first notice.
Number 1118
MR. ELDER concluded that amendment D.1 was agreeable to him.
CHAIRMAN ROKEBERG asked if the new subsection (i) is consistent
with the current practice and would therefore, not necessitate a
fiscal note.
MR. ELDER agreed that the new subsection (i) would be consistent
with the current practice.
Number 1148
CHAIRMAN ROKEBERG confirmed there were no further questions on the
amendment. He noted that amendment D.1 would be marked Amendment
1. Amendment 1, labeled 1-LS0469\D.1, Bannister, 3/17/99, read:
Page 1, line 10:
Delete "certified"
Insert "[CERTIFIED]"
Page 2, line 22, following "item":
Insert "by certified mail"
Page 2, line 25, following "item":
Insert "by first class mail"
Page 2, line 28, following "item":
Insert "by first class mail"
Page 2, line 31, following "item":
Insert "by first class mail"
Page 3, line 3, following "item":
Insert "by first class mail"
Page 3, line 8, following "again.":
Insert "If the address shown on the records of the
commissioner for a mailing after the initial certified
mailing is not different from the address for the
previous mailing, the commissioner is not required to
mail the item to the same address, but shall mail the
item to the next required addressee whose address is
different from the address for the returned mailing, and,
if none of the mailings required after a returned mailing
has an address that is different from the address for the
returned mailing, the commissioner is not required to
mail the item again."
Page 3, line 14:
Delete "certified"
Insert "[CERTIFIED]"
Page 3, line 24:
Delete "by certified mail"
Page 3, line 31:
Delete "by certified mail"
Page 4, line 6:
Delete "certified"
Insert "[CERTIFIED]"
Page 4, line 10:
Delete "certified mail"
Insert "[CERTIFIED] mail as required under this
subsection"
Page 4, line 29, following "item":
Insert "by certified mail"
Page 5, line 1, following "item":
Insert "by certified mail"
Page 5, line 4, following "item":
Insert "by certified mail"
Page 5, line 10, following "again.":
Insert "If the address shown on the records of the
commissioner for a mailing after the initial certified
mailing is not different from the address for the
previous mailing, the commissioner is not required to
mail the item to the same address, but shall mail the
item to the next required addressee whose address is
different from the address for the returned mailing, and,
if none of the mailings required after a returned mailing
has an address that is different from the address for the
returned mailing, the commissioner is not required to
mail the item again."
REPRESENTATIVE BRICE moved that Amendment 1 be adopted. There
being no objection, Amendment 1 was adopted.
Number 1162
REPRESENTATIVE BRICE made a motion to move CSHB 101, version
1-LS0469\D, Bannister, 3/16/99, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSHB 101(L&C) moved out of the House
Labor and Commerce Standing Committee.
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