04/09/2015 01:30 PM Senate LABOR & COMMERCE

              HB 149-NATIVE CORP. ART. AMENDMENTS                                                                           
                                                                                                                                
1:31:59 PM                                                                                                                    
CHAIR  COSTELLO announced  the consideration  of HB  149. "An Act                                                               
relating  to an  amendment of  the articles  of incorporation  of                                                               
certain  Native   corporations  to   establish  a   lower  quorum                                                               
requirement for shareholder meetings."                                                                                          
                                                                                                                                
1:32:04 PM                                                                                                                    
REPRESENTATIVE LANCE PRUITT,  sponsor of HB 149,  stated that the                                                               
legislation was at the request  of the Native Corporation, Doyon,                                                               
Limited. He introduced the legislation  speaking to the following                                                               
sponsor statement:                                                                                                              
                                                                                                                                
     Passage  of HB  149  am seeks  to  allow Alaska  Native                                                                    
     Corporations (ANCs)  to lower their  quorum requirement                                                                    
     for  future meetings  by  reducing  the voter  approval                                                                    
     needed to amend their articles of incorporation.                                                                           
                                                                                                                                
     AS 10.06.415 allows a corporation  to reduce its quorum                                                                    
     to  one-third  of  the  shares   eligible  to  vote  by                                                                    
     amending its articles  of incorporation. Because nearly                                                                    
     all ANCs were formed before  July 1, 1989, the standard                                                                    
     for  amending   their  articles  of   incorporation  is                                                                    
     approval by two-thirds of the  shares eligible to vote.                                                                    
     For most  other Alaska  corporations formed  after July                                                                    
     1,  1989  the standard  is  a  majority of  the  shares                                                                    
     eligible to  vote. Many  Alaska Native  Corporations do                                                                    
     not achieve  a quorum of two-thirds,  thus amendment of                                                                    
     the articles  of incorporation is  virtually impossible                                                                    
     as a practical matter.                                                                                                     
                                                                                                                                
     There  is   a  substantial  cost  to   rescheduling  or                                                                    
     postponing an  annual meeting because  of a  failure to                                                                    
     obtain a quorum.  Most ANCs have seen  a downward trend                                                                    
     over  time  in  the  quorum achieved  at  their  annual                                                                    
     meeting, as  shares are  passed on  through inheritance                                                                    
     and   new  shareholders   become  more   geographically                                                                    
     dispersed. Many  ANCs need  to be  able to  amend their                                                                    
     articles  of  incorporation  to  provide  for  a  lower                                                                    
     quorum, such  as the one-third  quorum permitted  by AS                                                                    
     10.06.415.  However, lowering  the quorum  will require                                                                    
     the  amendment   of  ANC   articles  by   a  reasonably                                                                    
     achievable standard.                                                                                                       
                                                                                                                                
     HB 149  am amends 10.06.960 to  allow ANCs incorporated                                                                    
     under  former AS  10.05 before  July 1,  1989 to  amend                                                                    
     their articles  of incorporation  to reduce  the quorum                                                                    
     requirements  for a  meeting  of  shareholders to  one-                                                                    
     third of the  outstanding shares entitled to  vote at a                                                                    
     meeting, represented in person or by proxy.                                                                                
                                                                                                                                
REPRESENTATIVE PRUITT  noted that  Doyon, Limited  spent $100,000                                                               
to achieve a quorum of 55.9 percent for their last meeting.                                                                     
                                                                                                                                
SENATOR STEVENS  observed that this  problem will  be exacerbated                                                               
as  time  goes on  because  lots  of corporation  members  reside                                                               
outside the  state. He asked  for clarification of  the one-third                                                               
and two-thirds  requirements to  achieve a  quorum and  to change                                                               
the bylaws.                                                                                                                     
                                                                                                                                
REPRESENTATIVE  PRUITT explained  that a  Native corporation  has                                                               
the option to change the  quorum requirement to one-third. But to                                                               
make that  change, 50  percent plus  one of  the members  have to                                                               
attend the meeting  and two-thirds of the attendees  have to vote                                                               
in favor  of the change.  Quorum requirement is the  only article                                                               
of incorporation that can be changed under HB 149.                                                                              
                                                                                                                                
1:42:14 PM                                                                                                                    
CHAIR COSTELLO asked  if there has been public  opposition to the                                                               
legislation.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRUITT answered  yes; some  people have  concerns                                                               
about   the   dynamic   between  shareholders   and   corporation                                                               
leadership. Some  shareholders also  expressed concern  that this                                                               
allows management  to cut  the shareholder  out. The  House floor                                                               
amendment  addressed that  concern  by raising  the  bar to  two-                                                               
thirds  affirmative votes  to make  the  quorum change.  Sealaska                                                               
Corporation has indicated  it doesn't intend to  use this option,                                                               
but it  does apply to  all Native corporations  established under                                                               
the Alaska Native Claims Settlement Act (ANCSA).                                                                                
                                                                                                                                
1:44:36 PM                                                                                                                    
SENATOR GIESSEL asked how proxies are handled.                                                                                  
                                                                                                                                
REPRESENTATIVE   PRUITT  deferred   the  question   to  a   Doyon                                                               
representative.                                                                                                                 
                                                                                                                                
SENATOR MEYER  asked if shareholders  can participate  via Skype,                                                               
FaceTime or the telephone.                                                                                                      
                                                                                                                                
REPRESENTATIVE   PRUITT  deferred   the  question   to  a   Doyon                                                               
representative.                                                                                                                 
                                                                                                                                
CHAIR COSTELLO asked him to review the fiscal note.                                                                             
                                                                                                                                
1:47:01 PM                                                                                                                    
REPRESENTATIVE  PRUITT said  the bill  has no  cost attached.  It                                                               
changes statute that  applies only to Native  corporations and is                                                               
optional.                                                                                                                       
                                                                                                                                
CHAIR COSTELLO opened public testimony.                                                                                         
                                                                                                                                
1:47:31 PM                                                                                                                    
ALLEN TODD,  General Counsel, Doyon, Limited,  Fairbanks, Alaska,                                                               
addressed the  question about participating in  an annual meeting                                                               
via Skype  or some other  remote method. He explained  that Doyon                                                               
meetings are  webcast so shareholders can  watch and participate,                                                               
but they  aren't able  to vote. A  proxy is how  they vote  for a                                                               
proposition that  has been  sent out  or how  they vote  to elect                                                               
members of the board of directors.                                                                                              
                                                                                                                                
SENATOR  STEVENS asked  what  the requirement  is  to change  the                                                               
bylaws.                                                                                                                         
                                                                                                                                
MR. TODD  explained that for  any corporation organized  prior to                                                               
1989  that  doesn't already  have  a  specific provision  in  its                                                               
articles,  a  two-thirds  vote  is required  of  all  the  shares                                                               
eligible to  vote. The  Doyon board  of directors  can vote  on a                                                               
change to its  bylaws, but the measure has to  be ratified by the                                                               
shareholders  at  the  next  annual   meeting.  That  requires  a                                                               
majority of the shares eligible to vote.                                                                                        
                                                                                                                                
SENATOR  STEVENS  asked  if this  legislation  only  changes  the                                                               
number of votes required to call a meeting.                                                                                     
                                                                                                                                
MR.  TODD explained  that the  bill allows  a Native  corporation                                                               
incorporated  before  July  1,  1989 to  amend  its  articles  of                                                               
incorporation to reduce the quorum  required to hold a meeting to                                                               
one-third of  the outstanding shareholders. The  amendment may be                                                               
adopted  by  an affirmative  vote  of  two-thirds of  the  shares                                                               
represented  at an  annual meeting  at  which a  valid quorum  is                                                               
present.                                                                                                                        
                                                                                                                                
SENATOR STEVENS asked  if Doyon has had trouble  getting a quorum                                                               
for an annual meeting.                                                                                                          
                                                                                                                                
MR. TODD  said that in his  17-year tenure the lowest  quorum for                                                               
an annual meeting  was 53 percent, but the  records indicate that                                                               
the corporation  wasn't able  to achieve 50  percent in  the late                                                               
1970s and early 1980s.                                                                                                          
                                                                                                                                
SENATOR STEVENS asked  if an out migration  of shareholders might                                                               
become a larger problem in the future.                                                                                          
                                                                                                                                
MR.  TODD confirmed  that Doyon  shareholders are  moving out  of                                                               
villages and outside the state of Alaska.                                                                                       
                                                                                                                                
1:57:08 PM                                                                                                                    
CINDY ALLRED,  Deputy Director,  Alaska Native  Claims Settlement                                                               
Act  (ANCSA) Regional  Association, Anchorage,  Alaska, testified                                                               
in support of  HB 149 am to establish a  lower quorum requirement                                                               
for annual shareholder meetings  for certain Native corporations.                                                               
This  would help  to stem  the five-year  trend showing  a marked                                                               
decline in  voter turnout. She  noted that while shares  in these                                                               
corporations are  limited, the shareholder base  is expanding due                                                               
to  inheritance  and  broadening eligibility  requirements.  Data                                                               
shows that  younger shareholders  and those  living out  of state                                                               
are  less likely  to turn  out  to vote  than older  shareholders                                                               
living in the region and  those demographics are growing. Efforts                                                               
to  increase participation  through prizes  and other  incentives                                                               
only   offer  incremental   improvements.   HB   149  offers   an                                                               
opportunity  to address  this impending  problem by  changing the                                                               
current law to allow Native  corporations to amend their articles                                                               
of  incorporation to  lower the  quorum  requirements. The  ANCSA                                                               
Regional  Association members  voted unanimously  to support  the                                                               
change.                                                                                                                         
                                                                                                                                
2:02:09 PM                                                                                                                    
NICHOLA  RUEDY,  Director,   Alaska  Native  Village  Corporation                                                               
Association  (ANVCA), Anchorage,  Alaska,  stated  that the  nine                                                               
ANVCA board members  support HB 149. She explained  that ANVCA is                                                               
a  nonprofit organization  whose mission  is to  provide services                                                               
that will improve the efficiency,  profitability and stability of                                                               
its member  village corporations  and help  shareholders succeed.                                                               
The ANVCA membership  is made up of  representatives from village                                                               
corporations  that  work  collaboratively to  contribute  to  the                                                               
future  health   of  these  groups   by  sharing   knowledge  and                                                               
resources.   She  related   that  HB   149  would   help  village                                                               
corporations  and  regional  corporations address  challenges  in                                                               
terms of voter turnout by  allowing them to change their articles                                                               
of incorporation related to quorum requirements.                                                                                
                                                                                                                                
2:03:37 PM                                                                                                                    
AARON  SHUTT, President,  Doyon,  Limited,  testified that  Doyon                                                               
supports HB 149. He offered to answer questions.                                                                                
                                                                                                                                
2:04:08 PM                                                                                                                    
CHAIR COSTELLO  closed public testimony  and announced  she would                                                               
hold HB 149 for further consideration.