SB 24-VIRTUAL MEETINGS FOR CORPORATIONS  7:14:26 PM CO-CHAIR SPOHNHOLZ announced that the next order of business would be CS FOR SENATE BILL NO. 24(L&C), "An Act relating to holding corporate meetings by remote communication; allowing voting by remote communication at corporate meetings; making shareholder lists available electronically; relating to for- profit and nonprofit corporations; relating to business and industrial development corporations; relating to Native corporations; relating to the Alaska Banking Code; and providing for an effective date." 7:14:44 PM SENATOR DAVID WILSON, Alaska State Legislature, as prime sponsor, introduced SB 24. He paraphrased from the sponsor statement [included in committee packets], which read as follows [original punctuation provided]: The events of this past year have caused many hardships but have also inspired innovation. It is imperative that we use these innovations to improve our operations and laws in the future. Senate Bill 24 capitalizes on one such of these innovations. Senate Bill 24 allows corporations' shareholder meetings and nonprofit member meetings to be held virtually. Section 12 of SB 241 of the 31st Legislature and subsequent emergency orders have allowed for these virtual meetings, but that authorization has expired. The ability to meet virtually, as would be permanently allowed by the passage of this bill, has proved invaluable to these organizations. Senate Bill 24 enables corporations and nonprofit organizations to operate more efficiently and with greater flexibility than in the past. 7:16:21 PM JASMIN MARTIN, Staff, Senator David Wilson, Alaska State Legislature, presented the sectional analysis for SB 24 on behalf of Senator Wilson, prime sponsor. She explained that SB 24 would affect three different parts of law: the Alaska Corporation Code, the Business and Industrial Development Code, and the Alaska Nonprofit Corporation Act. She read through the sectional analysis, which read as follows [original punctuation provided]: Section 1: Modifies AS 10.06.223 ? Relates to organizational meetings of Alaska Corporations. Allows these to be held via remote communication or via a hybrid of remote communications and in person and modifies the notice requirements to reflect this change. Section 2: Modifies AS 10.06.230(e) ? Relates to the bylaws of a corporation. Allows corporations to write bylaws pertaining to remote communications. Section 3: Modifies AS 10.06.405(a) ? Relates to meetings of shareholders. Allows meetings of shareholders to be held via remote communication. Section 4: Modifies AS 10.06.405(b) ? Relates to meetings of shareholders. Allows the board of a corporation to set a time for meetings if the time is not set in the bylaws. Section 5: Modifies AS 10.06.410(a) ? Relate to notice of shareholder meetings. Directs corporations to include the manner and definition of "present" in meeting notices. Section 6: Modifies AS 10.06.413(a) ? Relates to the list of shareholders entitled to vote at a meeting or on adjournment. Allows this list to be available electronically to shareholders. Section 7: Modifies AS 10.06.415(a) Interim: ? Relates to quorums in meetings. Allows shareholders present through remote communication to be a counted towards a quorum. Section 8: Modifies AS 10.06.418(b) ? Relates to voting by proxy. Allows proxies to be revoked by attending meetings remotely in addition to in person. Section 9: Modifies AS 10.06.420(c) ? Relates to voting shares. Allows a shareholder to vote virtually. Section 10: Modifies AS 10.06.420(d) ? Relates to voting shares. Allows a virtual attendee to vote at an election for directors. Section 11: Modifies AS 10.06.420(f) ? Relates to voting shares. Allows shares held by an administrator, executor, guardian, or conservator to be voted by remote communication. Allows shares standing in the name of a trustee to be voted by remote communication. Section 12: Modifies AS 10.06.420(j) ? Relates to voting shares. Adds conforming language pertaining to voting by proxy via remote communication. Section 13: Adds a new section (k) to AS 10.06.420 ? Relates to voting shares. Allows shareholders and shareholder proxies to participate in meetings via remote communication. Section 14: Modifies AS 10.06.470(a) ? Relating to meetings of executive and other board committees. Allows these meetings to be held via remote communication. Section 15: Modifies AS 10.06.960(n) ? Relates to corporations organized under Alaska Native Claims Settlement Act. Allows amendments to the articles of incorporation for corporations organized under ANCSA and incorporated under former AS 10.05.005 to add a provision relating to the personal liability for monetary damages to the corporation or stockholders to be voted on via remote communication. Section 16: Modifies AS 10.06.960(o) ? Relates to corporations organized under Alaska Native Claims Settlement Act. Allows amendments to the articles of incorporation of a village corporation organized under ANCSA and incorporated under former AS 10.05.005 to add a provision authorizing the classification of directors under AS 10.06.455 to be voted on via remote communication. Section 17: Modifies AS 10.06.960(p) ? Relates to corporations organized under Alaska Native Claims Settlement Act. Allows Native corporations incorporate under former AS 10.05 prior to July 1, 1989 to vote to modify quorum requirements via remote communication. Section: 18 Adds a new definition to AS 10.06.990 ? Defines "remote communication". Section 19: Modifies AS 10.10.100(b) ? Relates to entities organized under the Business and Industrial Development Corporations Act. Allows stockholders to vote by remote communication. Section 20: Adds a new section (c) to AS 10.10.100 ? Relates to executing a proxy by electronic transmission. Outlines how a proxy is to be executed by electronic transmission. Section 21: Modifies AS 10.20.066 ? Relates to nonprofit meetings notices. Establishes that meeting notices should include the manner by which the meeting will be held. Section 22: Modifies AS 10.20.071(b) ? Relates to voting by proxy. Allows a member to vote by remote communication or by proxy executed by electronic transmission. Section 23: Modifies AS 10.20.071(e) ? Relates to establishing a quorum. Allows members present through remote communication to be a counted towards a quorum. Section 24: Adds a new section (f) to AS 10.20.071 ? Relates to establishing a proxy. Defines how a proxy could be established by remote communication. Section 25: Modifies AS 10.20.076 ? Relates to establishing a proxy. Conforming to allow members present via remote communication to count towards a quorum. Section 26: Modifies AS 10.20.116(a) ? Relates to regular and special meetings of boards of directors. Allows meetings to be held in person, by remote communications, or a hybrid of both. Section 27: Modifies AS 10.20.166(a) ? Relates to organizational meetings. Allows organizational meetings to be held via remote communication. Section 28: Adds a new definition to AS 10.20.920 ? Defines "remote communication". Section 29: Adds a section to uncodified law. ? Adds a saving clause for retroactivity in section 30. Section 30: Adds a section to uncodified law. ? Makes this act retroactive to March 11, 2020. Section 31: Adds an immediate effective date. 7:21:13 PM MS. MARTIN, in response to Co-Chair Spohnholz, gave the definition of "remote communication" found in Section 18, on page 7, lines 25-30, of CSSB 24(L&C), which read as follows: *Sec. 18. AS 10.06.990 is amended by adding a new paragraph to read: (51) "remote communication" means communication by means of electronic communication, conference telephone, videoconference, the Internet, electronic transmission, or other means by which persons not physically present in the same location may communicate with each other on a substantially simultaneous basis. 7:21:51 PM REPRESENTATIVE SCHRAGE shared his understanding that, prior to the COVID-19 emergency declaration, electronic meetings were a possibility, and under the lapse of the declaration, "there was some error to where it was no longer allowed." He asked for clarification on whether that was true. MS. MARTIN responded that it was permissible for nonprofit corporations but not permissible for corporations that work for profit. 7:23:02 PM REPRESENTATIVE KAUFMAN asked whether there was any concern about verification regarding signatures for voting remotely. SENATOR WILSON responded that he has not received any of those types of complaint. He shared that he has actually received a lot of support from a variety of shareholders, corporations, and nonprofits. He said that the signature authentication process is up to an entity's bylaws and that [under CSSB 24(L&C)], that decision would remain that of an individual entity. 7:24:25 PM CO-CHAIR SPOHNHOLZ offered clarification that bylaws are similar to a constitution for a corporation, and each corporation has its own bylaws to which to adhere. She said that the proposed legislation would allow that to continue. She noted that the committee would be hearing some testimony from the Foraker Group as to why CSSB 24(L&C) was necessary to clear up any ambiguity. 7:25:34 PM LAURIE WOLF, President and CEO, Foraker Group, explained that the Foraker Group has been advising nonprofits on how to hold meetings, based on Alaska law, for the past twenty years. She noted that each nonprofit is required to have both articles of incorporation and bylaws, which are legally binding documents that can't supersede state or federal law. She explained that bylaws govern nonprofits and are vetted by the revenue service when granting nonprofit exempt status. Important rules for establishing meetings are included in bylaws, she said, and state law needs to be "simple, broad, and flexible" enough for every corporation to follow it. She continued that Alaska law has been broad enough to allow for remote meetings for three decades; however, during 2020 the legislature passed a measure authorizing remote meetings for corporate boards as part of the disaster declaration in the thought that the state law was prohibiting remote meetings. She said Foraker viewed this as "a solution in search of a problem." MS. WOLF recommended that two aspects be present in any forthcoming proposals: a quorum of board members as defined by bylaws must be gathered to make lawful decisions, and all persons participating can hear and speak to each other at the same time in real time. She said that only when these two characteristics are present can there be certainty that an entity is operating as "one voice." She noted that CSSB 24(L&C) would need to allow every group to be consistent with its bylaws. She urged the committee to act broadly, to deter to the bylaws of each organization as much as possible, and to create a flexible framework for all of Alaska's corporations, which she stated has been the case for many decades. She said that the easy, simple, and complete solution would be to add a definition of "in person" to AS 10.20.290, which would mean a physical presence or where a person may participate by means of conference, telephone, or similar communication equipment, by means of which all persons participating in the meeting can hear each other at the same time. 7:31:15 PM CO-CHAIR SPOHNHOLZ asked Ms. Wolf to send in the proposed addition to the bill to ensure that the language included in the bill meets the Ms. Wolf's criteria. MS. WOLF responded that her understanding was the phrase "substantially simultaneous" was currently in CSSB 24(L&C), and she emphasized that is not what the Foraker Group is recommending. In response to Co-Chair Spohnholz, she explained there could be confusion. She said, for example, that the Foraker Group has had many questions about whether this would include voting by e-mail. She said that "the previous law" was clear that e-mail voting was not simultaneous communication and was not a place where a quorum could be established. An advisory vote with unanimous consent could be taken through email, she continued, but it would still need to be ratified in a meeting where there was simultaneous communication and the opportunity to vet, defend, and update a decision. CO-CHAIR SPOHNHOLZ clarified that an e-mail communication is not simultaneous, because not everyone is hearing the same thing at the same time, thus it can lead to miscommunications and may exclude individuals who are not able to communicate in a timely manner. MS. WOLF added that a quorum cannot be established over e-mail and a meeting cannot be called to order via e-mail. 7:35:13 PM FRANCES MAHONEY, Foraker Group, noted that he has been practicing law in Alaska for forty years and that most of his practice for the last twenty of those years has related to nonprofits. He said that he applauds Senator Wilson and his staff for the drafting of CSSB 24(L&C), because it's important for nonprofits. He noted that if there is a change in legislation, there is a presumption that the prior law did not allow what was amended in the new law. He continued that it is important to have an allowance for conducting meetings that are not physically present to qualify as a quorum or as physically present to vote. He said that he would prefer a more simplified process and that "the least change is usually the best change." He agreed that Ms. Wolf's suggestion to add a definition of "in person" to AS 10.20.290 seems appropriate and would achieve the same goal as Sections 21-23 of CSSB 24(L&C). He emphasized the importance of ensuring discussion during a meeting, and he said the proposals made would allow that to occur and would help avoid possible confusion. 7:38:17 PM CO-CHAIR SPOHNHOLZ announced that SB 24 was held over.