03/22/2011 02:00 PM Senate LABOR & COMMERCE

3:03:40 PM                                                                                                                    
             SB  78-LIQUOR LICENSE HOLDER LIABILITY                                                                         
                                                                                                                                
CHAIR  EGAN announced  SB 78  to  be up  for consideration.  [27-                                                               
LS0282\M version was before the committee.]                                                                                     
                                                                                                                                
ESTHER TEMPLE, staff  to Senator McGuire, sponsor of  SB 78, said                                                               
the intent of this bill is  to provide equal treatment to limited                                                               
liability  companies  (LLC)  and   foreign  LLCs  in  the  liquor                                                               
liability context as they are treated in the business generally.                                                                
                                                                                                                                
She  explained  that  presently  persons  engaged  in  businesses                                                               
commonly use  LLCs instead of  corporations while  leaving intact                                                               
the limited liability  of the LLC members for  all other business                                                               
purposes.  Currently,  AS  04.21.035   is  an  exception  to  the                                                               
protections against  individual liability offered to  partners of                                                               
properly  registered  and  maintained  LLPs and  LLCs.  In  other                                                               
words, partners and members of LLPs  and LLCs are not relieved of                                                               
the obligation or  the liability otherwise imposed  upon a liquor                                                               
license holder under  Title 4. So, in order to  avoid that result                                                               
owners of liquor businesses that  hold a liquor license that seek                                                               
limited  liability  protection  have  to do  business  through  a                                                               
corporate entity.                                                                                                               
                                                                                                                                
She said  that businesses have  increasingly turned to LLCs  as a                                                               
preferred  entity for  doing business  in order  to have  greater                                                               
management  and   efficiency  without  sacrificing   the  limited                                                               
liability protection  from business  creditors that  are afforded                                                               
to owners of corporations.                                                                                                      
                                                                                                                                
MS. TEMPLE said that LLCs are  commonly used in Alaska as well as                                                               
in the United  State as limited liability  protection entities in                                                               
place  of corporations.  Therefore,  SB 78  would amend  existing                                                               
statute  to state  that the  liability  will be  imposed only  on                                                               
partners of a limited liability  partnership or a foreign limited                                                               
liability  partnership, but  will  no  longer apply  a  LLC or  a                                                               
foreign  LLC.   If  passed,  SB   78  would   encourage  business                                                               
development by reflecting the fact  that LLCs are more similar to                                                               
those  used   in  the  business   world  as  an   alternative  to                                                               
corporations and are  less commonly used as  alternatives to sole                                                               
proprietorships or  general partnerships,  which pass  on general                                                               
liability to their owners.                                                                                                      
                                                                                                                                
3:06:55 PM                                                                                                                    
SENATOR PASKVAN asked  if a foreign corporation can  own a liquor                                                               
license.  He  knows  that state-formed  corporations  can  own  a                                                               
liquor license.  The reason  he asked  is because  "foreign LLPs"                                                               
are included in the language of SB 78.                                                                                          
                                                                                                                                
MS. TEMPLE answered  that she didn't know that  answer, but would                                                               
look into it for him.                                                                                                           
                                                                                                                                
CHAIR EGAN asked if anyone in the audience could answer.                                                                        
                                                                                                                                
3:08:30 PM                                                                                                                    
BOB KLEIN,  chairman, Alcohol Beverage Control  Board (ABC), said                                                               
he  is an  industry member  because he  is the  Brown Jug  Liquor                                                               
Stores director  of sales in  Anchorage. He  is also a  member of                                                               
CHARR and serves on their Government Affairs Committee.{                                                                        
                                                                                                                                
MR. KLEIN  related that he  was on the  ABC board when  LLCs were                                                               
first introduced into Title 4  language. Their intent at the time                                                               
was  to  give  LLCs  the same  protections  as  partnerships  and                                                               
corporations.  Recently  he  found  that they  missed  the  mark,                                                               
because of inexperience and it  now makes sense to insert Senator                                                               
McGuire's changes.                                                                                                              
                                                                                                                                
SENATOR PASKVAN  said he agreed with  him. He asked if  a foreign                                                               
LLP could own a liquor license.                                                                                                 
                                                                                                                                
MR. KLEIN responded that he didn't know the answer.                                                                             
                                                                                                                                
3:11:08 PM                                                                                                                    
DICK  ROSTEN, Attorney,  Dorsey &  Whitney, representing  Alyeska                                                               
Resort  as well  as other  holders  of liquor  licenses said  the                                                               
answer is yes;  foreign corporations can own a  liquor license if                                                               
they are qualified to do business in Alaska.                                                                                    
                                                                                                                                
SENATOR  PASKVAN  asked if  they  do  it  by forming  an  Alaskan                                                               
entity.                                                                                                                         
                                                                                                                                
MR.  ROSTEN  replied  that  they use  a  different  process.  Any                                                               
corporation  that is  not formed  in  Alaska is  known under  our                                                               
statutes as a  "foreign corporation" whether they  were formed in                                                               
Canada or  in Nevada  or Delaware. They  go through  a qualifying                                                               
process followed by a certificate  of authority to own a business                                                               
in Alaska.                                                                                                                      
                                                                                                                                
SENATOR PASKVAN asked if the  assets of either the foreign entity                                                               
or an Alaskan entity are equally subject to a judgment.                                                                         
                                                                                                                                
MR.  ROSTEN  answered  yes:  whoever   holds  a  liquor  license,                                                               
regardless of whether  it's an Alaskan domestic  corporation or a                                                               
Nevada corporation, for example, those assets would be at risk.                                                                 
                                                                                                                                
SENATOR PASKVAN asked if that is established as part of the                                                                     
process of qualifying to do business in Alaska by the foreign                                                                   
entity.                                                                                                                         
                                                                                                                                
MR. ROSTEN answered yes.                                                                                                        
                                                                                                                                
3:13:44 PM                                                                                                                    
CHAIR EGAN thanked everyone for  their comments and closed public                                                               
testimony. He announced that SB 78  would be held, and finding no                                                               
further business to  come before the committee,  he adjourned the                                                               
meeting at 3:15 p.m.