Legislature(2011 - 2012)SENATE FINANCE 532
04/08/2011 09:00 AM FINANCE
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SENATE BILL NO. 101 "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." 10:11:47 AM SENATOR JOE PASKVAN, SPONSOR, provided a synopsis of the legislation. He discussed that during the past 20 years many new types of business entities, including limited liability companies and limited liability partnerships, had been recognized under state law. Consequently, many businesses used various types of entities in their organizational structures. He detailed that the relaxation of federal tax rules that governed entity classification had led to an increase in the volume of restructuring and acquisition transactions throughout the various entity forms. The companies were required to initiate transactions out-of-state and multiple indirect steps were required because of the lack of clear statutory structure in Alaska. The legislation conformed to the Uniform Law Commissioners' Model Entity Transaction Act (META) and would help to facilitate transactions between more than one form of business entity, improve the existing business climate, and help reduce unnecessary administrative and legal burdens that were currently imposed. The bill would provide businesses in Alaska with the opportunity to engage in cross-entity transactions in-state. The legislation was initially introduced during the prior session; due to the complexity of the bill the Departments of Commerce, Community and Economic Development (DCCED) and Law (DOL) had worked to fine tune it during the interim. Senator Paskvan discussed the contents of members' committee packets and pointed out the zero fiscal note from DCCED. The packet included a memo drafted by an attorney that advocated for the update of the Alaska business statutes and depicted the necessary steps an Alaska corporation had to take to merge with a limited liability company: (1) A business was required to form an out of state or "foreign" limited liability company; (2) The business's Alaska limited liability company was required to merge with the foreign company; (3) The surviving entity of the merger was converted into a foreign corporation pursuant to the provisions of the other state; and (4) The corporation would then be merged with the Alaskan corporation. The intent was to establish a business- friendly statutory structure that would allow a single transaction to take place. He quoted from a META summary that had been prepared by the Uniform Law Commission, which provided "non-partisan, well-conceived, and well drafted legislation that brings clarity and stability to critical areas of state statutory law." He communicated that the bill had been vetted by the commission, which provided services that most states could not otherwise afford or duplicate. Member packets also contained the 2011 suggested state legislation by the Council of State Governments (CSG); the council "alerts state elected and appointed officials to emerging social, economic, and political trends; offers innovative state policy responses to rapidly changing conditions; and advocates multi-state problem solving to maximize resource and competitiveness." He quoted from a letter from the President and Chief Executive Officer of Doyon: "As Doyon has grown, its corporate structure has grown more complex. The passage of this legislation will help to make some unnecessary complexity out of transactions and will avoid the need to incorporate in other jurisdictions where laws are better defined for complex transactions." He summarized that the bill would help bring Alaska into mainstream statutory business law. Co-Chair Stedman referred to the zero fiscal note by DCCED. 10:18:37 AM DON HABEGER, DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, relayed that the division had spent a significant amount of time comparing the bill from the prior session with existing statute. The division and DOL and had worked through their concerns and were comfortable with the current legislation. He added that the division would be able to absorb the legislation with no additional costs. Senator Stedman asked whether DCCED supported the legislation. Mr. Habeger replied that the department was comfortable with the bill. Senator Olson queried whether there was opposition to the bill. Senator Paskvan was not aware of any opposition to the legislation. He noted that a significant amount of work had gone into the bill to make it acceptable to all parties. 10:21:14 AM Senator McGuire wondered whether there were any small entities that would be negatively impacted by the legislation. She recalled that the Senate Judiciary Committee had focused on the requirement that transactions had to be approved by all interest holders to prevent items such as hostile takeovers. Senator Paskvan detailed that no creditors, secured interests, or consumers would be harmed. The bill worked to protect the interest of all parties through a business- friendly, single transaction. SB 101 was HEARD and HELD in committee for further consideration.