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.