Legislature(1999 - 2000)
03/03/1999 08:04 AM House URS
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 101 - CORPORATE PUBLIC UTILITY REINSTATEMENT Number 0228 HEATHER GRAHAM, Attorney, Dorsey and Whitney, testified on behalf of a client, Bush-Tell Inc., a small telephone company that provides local telephone service in Western Alaska. She testified strongly in support of HB 101. She said that Bush-Tell was involuntarily dissolved by the state of Alaska through no fault of its own back in 1993. As a result of that, it has a serious legal problem that can only be resolved through an act of the legislature. She said that the title of the bill includes the words "public utilities" and she wanted to assure the committee that this bill should not be controversial and should not be part of any telephone or utility restructuring wars this legislative session. This committee and the legislature has an opportunity here to solve a large problem for a small company and any other public utilities that are similarly situated. MS. GRAHAME provided some background on Bush-Tell. It was started in 1969 by Harry Colliver and is headquartered in Aniak, Alaska. Mr. Colliver still lives in Aniak, is still the president and has lived out there for approximately 40 years. Bush-Tell serves several communities including Kalskag, Stony River, Holy Cross and Red Devil. Throughout the 1970's and 1980's Bush-Tell followed the state requirement of filing a biennial report. The biennial report is a one or two page form sent out by the state to a corporation's registered agent every other year. The company has to file it with the state, the form identifies who the officers of the company are, the number of outstanding shares and things like that. Throughout the 1970's and 1980's Bush-Tell always filed its biennial report. However, in 1991 the registered agent for Bush-Tell closed his law practice and took a job with a government agency. He never told the state or Bush-Tell that he was no longer going to be Bush-Tell's registered agent. When the state sent the form in 1992 to the registered agent, the form didn't reach him because he had closed his office and the forwarding address had expired. The forms went back to the state and in 1993, when the state sent a notice of dissolution again to the registered agent, it was simply returned to the state of Alaska. Mr. Colliver and Bush-Tell had no knowledge about any of this. Similarly, the state simply took the unopened mail and never notified Bush-Tell, even though it would have been easy for the state to find a public utility. Mr. Colliver and his company didn't know the State had dissolved the corporation. In 1998, Mr. Colliver called the Division of Banking, Securities and Corporations with a question about registering his corporation as a "dba" [doing business as] and was told that wasn't possible because he didn't have a corporation; that it had actually been dissolved in 1993. Number 0564 MS. GRAHAME said this can be solved by enacting HB 101. Under AS 10.06.965, the legislature has the power to amend any provision of the corporation code for any corporation whether or not that corporation exists or not. The legislature has in fact re-extended the reinstatement period for corporations in the past and that can be found in AS 10.06.960 (k) where the reinstatement period was extended for an Alaska Native corporation. MS. GRAHAME cited the following reasons to enact HB 101: the dissolution was no fault of Bush-Tell's or Mr. Colliver's; this serious problem arose as the result of a very serious error by the registered agent of the corporation; Bush-Tell didn't profit from this in any way; the public was not harmed in any way; Bush-Tell has followed all of its corporate formalities since 1993, except for filing its biennial report; and it is necessary. The courts can't do anything at this point. The only solution is a legislative solution. Bush-Tell has been a very good corporate citizen and it provides a very important service to residents of rural Alaska. With the knowledge that Bush-Tell has been dissolved, Bush-Tell is unable to do things, such as close a loan, which it happens to be in the process of doing. The loan can't be closed because Bush-Tell can't be certified as a corporation in good standing. Bush-Tell needs assistance immediately. Number 0717 REPRESENTATIVE COWDERY asked when did this lapse. MS. GRAHAME said it was dissolved in September of 1993 for failure to file its biennial report by the end of 1992. REPRESENTATIVE COWDERY asked what has happened during the interim. MS. GRAHAME answered that Bush-Tell didn't know there had been a problem until recently so nothing has happened. The corporation has functioned as it always has; it has filed its reports with the Alaska Public Utilities Commission (APUC); it has paid its income tax and its employees. Because Bush-Tell was unaware of the problem, it has conducted its business in the normal way. Number 0763 REPRESENTATIVE COWDERY asked whether it has the financial ability to continue doing what they have been doing in the past. MS. GRAHAME said absolutely, and Mr. Colliver has been a tremendous corporate citizen as well as providing great service. He hires high school students in Aniak so they have something on their resume. He goes out of his way to help people in the community. Number 0813 REPRESENTATIVE KOTT said it was his understanding in statute that a registered agent has a responsibility to notify the Division of Banking, Securities and Corporations once that agent is no longer an agent. He wanted to know if that is correct and what type of action has or should have been taken. MS. GRAHAME said, when a registered agent resigns, that agent has to follow requirements set forth in the statutes for notifying the Division of Banking, Securities and Corporations that that agent is no longer going to be the registered agent. If the registered agent isn't there to receive the papers, or unless somebody takes the additional step of notifying the corporation, the corporation never learns of any legal action. The statute says when a registered agent is no longer the registered agent, that agent has to notify the state in writing, and then the state notifies the corporation. None of that took place. Number 0895 REPRESENTATIVE KOTT asked whether there was any penalty against the registered agent for not notifying the division. MS. GRAHAME said there was no penalty by the state against the registered agent. REPRESENTATIVE KOTT said if the division sends out a notification that a biennial report is required and it is returned back to them, it seems like the division should forward that biennial report and notification to one of the officers listed for that corporation. MS. GRAHAME said that did not occur and it is her understanding that the Division of Banking, Securities and Corporations has changed its practice and now notifies the corporation itself. When important legal matters like this occur, the division finds the president or an officer, but back in 1993 the division only notified the registered agent. Number 0972 CHAIRMAN HUDSON asked whether this is the only instance where there has been a requirement to reinstate. MS. GRAHAME said it is the only instance right now where this has happened to a public utility, but she has looked at the statutes and knows that the legislature has enacted similar acts for other companies over the years - most recently for an Alaska Native corporation. Number 1001 REPRESENTATIVE ROKEBERG asked whether a law could be drafted to be applicable to all corporations who find themselves in this circumstance. MS. GRAHAME said on behalf of Bush-Tell, they wouldn't have a problem with that, but she hasn't spoken to the Division of Banking, Securities and Corporations about that, so she doesn't know if there would be any additional issues by doing that. What happened to Bush-Tell could have happened to other corporations. REPRESENTATIVE COWDERY asked what the APUC's position is on this. MS. GRAHAME said she had not spoken to the APUC about its position on this bill, but would be happy to do so and get back to the committee. REPRESENTATIVE COWDERY said he would like to get the position of the APUC and the Division of Banking, Securities and Corporations on this before it is wrapped up. Number 1191 JIM ROWE, Director, Alaska Telephone Association, testified via teleconference from Anchorage that he supported HB 101. There are 800 access lines served by Bush-Tell which is a member of the Alaska Telephone Association. He thinks it is important for the legislature to consider the needs of those rural telephone customers and their families because if that corporation is not able to serve them, they will be very disadvantaged. He hopes the committee will consider strongly and quickly getting this measure through. REPRESENTATIVE KOTT asked whether Mr. Rowe had any problem with broadening the bill to blanket all those corporations that may fall into the same category. MR. ROWE answered he would have no problem as long as the time frame wasn't extended substantially. Number 1381 BOB LOHR, Executive Director, Alaska Public Utilities Commission, testified via teleconference from Anchorage. He said the APUC has not adopted a formal position. The APUC, in the process of deciding whether to issue a certificate of public convenience of necessity to a utility, does review its corporate status to ensure that it is in compliance with all applicable rules and regulations of other agencies. At the time Bush-Tell was certificated, that was the case. The APUC had no reason to check on corporate status on any on-going basis so this was not a regulatory issue at the time. From the perspective of the commission, Bush-Tell is a public utility in good standing providing service to the communities within its service area. To date, this has not become a regulatory issue for the commission. REPRESENTATIVE ROKEBERG said the APUC can issue a certificate to a business organization that is not a corporation. In other words, if there was a partnership in LLCs [limited liability companies], LLPs [limited liability partnerships] or some other form authorized under state law, a certificate could be issued. MR. LOHR said there is a zero fiscal note for the bill and it would not require any expenditure by the APUC. Number 1518 REPRESENTATIVE ROKEBERG said one of the charges of the APUC is to look after consumer protection and asked whether the failure to register as a corporation has had a negative impact on the consumers. MR. LOHR said this has not affected the consumers in the area served by the utility to the best of his knowledge. He said the APUC has not received any complaints that relate to the corporate status. They have operated in every respect as if they had valid corporate status which is what they believed. REPRESENTATIVE BERKOWITZ asked whether the certification in any way affects the regulatory authority or oversight of the APUC. MR. LOHR said the certification is extremely important and the absence of the certificate would be a serious violation of public utilities law, but the lack of corporate status has not affected the certificate in any way to date. REPRESENTATIVE BERKOWITZ asked whether it affects their ability to do business as a phone company, if there is no corporate status. MR. LOHR said he couldn't say that based on what they have indicated. It affects their ability to attain loans and other considerations, but to date they have not used the knowledge of their lack of corporate status to begin any sort of regulatory enforcement. To the best of his knowledge, it has not affected their residential operations. If this were left unaddressed for a long time and their inability to get loans became an issue, they would have to take a look at that. Number 1638 REPRESENTATIVE BERKOWITZ asked whether the APUC has encountered anything like this in the past. MR. LOHR said not in his time which goes back about seven years, and he is not familiar with any cases reported by the commission that relate to this type of involuntary dissolution. To his knowledge, this is the first time it has occurred. CHAIRMAN HUDSON said he thought the question about expanding the legislation beyond public utilities to all corporations is legitimate so he will hold the bill over. Number 1720 GINNY FAY, Legislative Liaison, Department of Commerce and Economic Development, said there have been cases where corporations have inadvertently been dissolved. There have been times where a corporation uses its address as that of its agent and that agent moves and does not leave a forwarding address so the papers never get to the corporation. The division changed its procedures a few years ago and now they send the paperwork to the address of the corporation, not to any of the agents. If it is returned from the corporation address, then they send it to their agent and continue to try to find the people who should be doing the filing. Number 1821 CHAIRMAN HUDSON asked whether they have statutory authority to take care of the other entities. MS. FAY said it is her understanding that all corporations face this potential problem if they don't get their biennial reports in every two years. CHAIRMAN HUDSON asked Ms. Fay whether she thought this should be extended to all corporations. MS. FAY said she would have to talk to someone in the Division of Banking, Securities and Corporations to confirm that. She thinks, if public utilities who provide a necessary public service go out of business, the lights go out in those communities. She thinks there are other corporations who are in better positions to avoid being dissolved, especially since the department has changed the way they go about it. Number 1886 REPRESENTATIVE BERKOWITZ cited AS 10.06.633, "Involuntary dissolution by the commissioner: grounds, procedures, reinstatement", and stated subsection (c) reads, "If, following a hearing, the commissioner determines the presence of neglect, omission, delinquency, or noncompliance providing grounds for involuntary dissolution under this section, the corporation may appeal". He said as he reads that, if there is negligence on the part of the agent or one of the corporate officers, then the superior court has the authority to reverse a decision of the commissioner which would negate the necessity of the legislature to change the law. He asked Ms. Grahame whether the superior court is reading that differently. MS. GRAHAME replied an appeal to the superior court is not an avenue available to Bush-Tell because too much time has passed. Under AS 10.06.633, the state sends out a notice of dissolution saying if it is not contested within 60 days, it is dissolved and it has to be contested in the 60 days. Number 1959 REPRESENTATIVE BERKOWITZ said, if the commissioner determines the presence of neglect and the commissioner has determined neglect, that should open the court doors again. MS. GRAHAME said according to her understanding it is not for neglect or failing to file biennial reports, it is for other corporate misdeeds to be dissolved. CHAIRMAN HUDSON said they would be holding this bill over because they need the prime sponsor there, something from the APUC as to the position, the fiscal note, the ability to respond to questions by the committee members and the answer to extending it to everyone.
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