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HF 13

1st Engrossment - 90th Legislature (2017 - 2018) Posted on 02/20/2018 12:12pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 1st Engrossment

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A bill for an act
relating to business organizations; nonprofit corporations; modifying the definition
of certain terms; providing certain powers and duties of incorporators and directors;
regulating certain mergers and conversions; amending Minnesota Statutes 2016,
sections 317A.011, subdivisions 13, 20; 317A.171, subdivisions 1, 2; 317A.203;
317A.241, subdivision 1; 317A.311; 317A.443, subdivision 1; 317A.671; 317A.811,
subdivisions 1, 2, 6; proposing coding for new law in Minnesota Statutes, chapter
317A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2016, section 317A.011, subdivision 13, is amended to
read:


Subd. 13.

Members with voting rights.

"Members with voting rights" deleted text beginor "voting
members"
deleted text end means members or a class of members that has voting rights with respect to the
purpose or matter involved.

Sec. 2.

Minnesota Statutes 2016, section 317A.011, subdivision 20, is amended to read:


Subd. 20.

Written action.

"Written action" means a deleted text beginwritten documentdeleted text endnew text begin recordnew text end signednew text begin by
all persons required to take the action or consented to by authenticated electronic
communication
new text end by all deleted text beginof thedeleted text end persons required to take the action. The term also means the
counterparts of a deleted text beginwritten documentdeleted text endnew text begin recordnew text end signednew text begin or consented to by authenticated electronic
communication
new text end by any of the persons taking the action. A counterpart is the action of the
persons signing new text beginor consenting to new text endit, and all deleted text beginthedeleted text end counterparts are one written action by all deleted text beginof
the
deleted text end persons signing new text beginor consenting to new text endthem.

Sec. 3.

Minnesota Statutes 2016, section 317A.171, subdivision 1, is amended to read:


Subdivision 1.

Role of incorporators.

If the first board is not named in the articles, the
incorporators may elect the first board or may act as directors with the powers, rights, duties,
and liabilities of directors, until directors are elected.new text begin Upon the election and qualification
of the first director, the power of the incorporator or incorporators terminates. If the persons
who are to serve as directors until the first annual meeting have been named in the articles
of incorporation, the power of the incorporator or incorporators to act for the corporation
terminates upon filing of the articles.
new text end

Sec. 4.

Minnesota Statutes 2016, section 317A.171, subdivision 2, is amended to read:


Subd. 2.

Meeting.

After the issuance of the certificate of incorporation, the incorporators
or the directors named in the articles shall, within a reasonable time, hold an organizational
meeting at the call of a majority of the incorporators or of the directors named in the articles,
or take written action, for the purposes of new text beginelecting directors, new text endtransacting businessnew text begin,new text end and taking
actions necessary or appropriate to complete the organization of the corporation. If a meeting
is held, the persons calling the meeting shall give at least three days' notice of the meeting
to each incorporator or director named, stating the date, time, and place of the meeting.

Sec. 5.

Minnesota Statutes 2016, section 317A.203, is amended to read:


317A.203 NUMBER.

A board of directors must consist of three or more individuals, with the number specified
in or fixed in accordance with the articles or bylaws. Notwithstanding section 317A.227, if
the power to elect or appoint directors is vested in the board of directors and if the number
of directors deleted text beginfalls belowdeleted text endnew text begin is fewer thannew text end three, or such greater minimum number set forth in
the articles or bylaws, a majority of the directors in office may appoint or elect the number
of additional directors necessary to increase the board to three directors or such greater
minimum set forth in the articles or bylaws.

Sec. 6.

Minnesota Statutes 2016, section 317A.241, subdivision 1, is amended to read:


Subdivision 1.

Generally.

A resolution approved by the affirmative vote of a majority
of the board may establish committees having the authority of the board in the management
of the business of the corporation new text beginonly new text endto the extent provided in the resolution.new text begin Committees
may include a special litigation committee consisting of one or more independent directors
or other independent persons to consider legal rights or remedies of the corporation and
whether those rights and remedies should be pursued.
new text end Committeesnew text begin other than special litigation
committees
new text end are subject at all times to the direction and control of the board.

Sec. 7.

Minnesota Statutes 2016, section 317A.311, is amended to read:


317A.311 OTHER OFFICERS.

Except to the extent that the articles or bylaws provide that the members may exercise
the powers under this section, the board may elect or appoint, in a manner set forth in the
articles or bylaws or in a resolution adopted by the board, other officers the board considers
necessary for the operation and management of the corporation, each of whom has the
powers, rights, duties, responsibilities, and terms in office provided for in the articles or
bylaws or determined by the board. Unless reserved to the members with deleted text beginthedeleted text end voting rights,
to the extent authorized in the articles, the bylaws, or a resolution approved by the affirmative
vote of a majority of the directors present, the president may appoint one or more officers,
other than the treasurer.

Sec. 8.

Minnesota Statutes 2016, section 317A.443, subdivision 1, is amended to read:


Subdivision 1.

General.

new text beginExcept for the election of directors, which is governed by section
317A.205,
new text endunless this chapter or the articles or bylaws require a greater vote or voting by
class, if a quorum is present, or if a quorum has been present at a meeting, the affirmative
vote of the majority of the members with voting rights present and entitled to vote, which
must also be a majority of the required quorum, is the act of the members.

Sec. 9.

new text begin [317A.621] MERGER OF SUBSIDIARY.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the terms in paragraphs
(b) and (c) have the meanings given.
new text end

new text begin (b) "Parent" means a corporation that directly, or indirectly through related organizations,
owns all of the governance and financial interests in a subsidiary.
new text end

new text begin (c) "Subsidiary" means an organization having all of its governance and financial interests
owned directly, or indirectly through related organizations, by a corporation.
new text end

new text begin Subd. 2. new text end

new text begin When authorized; contents of plan. new text end

new text begin A corporation that is a parent of a
subsidiary may merge the subsidiary into itself. The merger may be approved by a resolution
approved by the affirmative vote of a majority of the directors or other members of the
governing body of the parent. The resolution must set forth a plan of merger that contains:
new text end

new text begin (1) the names of the parent and subsidiary proposing to merge;
new text end

new text begin (2) the name of the surviving corporation;
new text end

new text begin (3) the terms and conditions of the proposed merger; and
new text end

new text begin (4) the manner and basis of converting the governance and financial interests of the
subsidiary into membership interest of the surviving corporation, if applicable.
new text end

new text begin Subd. 3. new text end

new text begin Approval by board and members with voting rights. new text end

new text begin (a) When a parent has
members with voting rights, the board of directors of the parent shall adopt a resolution by
the affirmative vote of a majority of all directors approving a proposed plan of merger and
directing that the plan be submitted to a vote at a meeting of the members with voting rights.
Notice of the meeting must be given to each member with voting rights, accompanied by
a copy or summary of the proposed plan. Unless the articles or bylaws require a greater
vote, the plan of merger is adopted upon receiving the affirmative vote of a majority of the
members with voting rights voting on the action.
new text end

new text begin (b) When a parent does not have members with voting rights, and unless the articles or
bylaws require a greater vote, a plan of merger under this section is adopted at a meeting
of the board of directors of the parent upon receiving the affirmative votes of a majority of
the directors. Notice of the meeting must be given, accompanied by a copy of the proposed
plan of merger.
new text end

new text begin Subd. 4. new text end

new text begin Articles of merger; contents of articles. new text end

new text begin Articles of merger must be prepared
that contain:
new text end

new text begin (1) the plan of merger;
new text end

new text begin (2) a statement that the parent owns directly, or indirectly through related organizations,
all of the governance and financial interests of each subsidiary that is a party to the merger;
new text end

new text begin (3) a statement that the plan of merger has been approved by the parent under this section;
and
new text end

new text begin (4) a statement that the notice to the attorney general required by section 317A.811 has
been given and the waiting period has expired or has been waived by the attorney general
or a statement that section 317A.811 is not applicable.
new text end

new text begin Subd. 5. new text end

new text begin Articles signed, filed. new text end

new text begin The articles of merger must be signed on behalf of the
parent and filed with the secretary of state.
new text end

new text begin Subd. 6. new text end

new text begin Certificate. new text end

new text begin The secretary of state shall issue a certificate of merger to the
parent or the parent's legal representative.
new text end

Sec. 10.

Minnesota Statutes 2016, section 317A.671, is amended to read:


317A.671 CERTAIN ASSETS NOT TO BE DIVERTED.

Except as provided in section 501B.31, when a corporationnew text begin:
new text end

new text begin (1) converts;
new text end

new text begin (2)new text end dissolvesdeleted text begin,deleted text endnew text begin;
new text end

new text begin (3)new text end mergesdeleted text begin,deleted text endnew text begin;
new text end

new text begin (4)new text end substantially changes the use or purposes for which it will use its assetsdeleted text begin, ordeleted text endnew text begin;
new text end

new text begin (5)new text end consolidatesdeleted text begin,deleted text endnew text begin;
new text end

new text begin (6)new text end transfers its assetsdeleted text begin,deleted text endnew text begin;new text end or

new text begin (7)new text end grants a mortgage or other security interest in its assets,

assets of the corporation or a constituent corporationnew text begin or converting corporationnew text end, and assets
subsequently received by a single new text beginor converted new text endcorporation after a merger or consolidation,
new text begin or held by a converted organization after a conversion new text endmay not be diverted from the uses
and purposes for which the assets have been received and held, or from the uses and purposes
expressed or intended by the original donor.

Sec. 11.

new text begin [317A.681] CONVERSION.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of sections 317A.671 to 317A.689, the
terms in this section have the meanings given.
new text end

new text begin (b) "Organizational document" means:
new text end

new text begin (1) for a domestic or foreign limited liability company, its articles or certificate of
organization;
new text end

new text begin (2) for a trust, its agreement of trust or declaration of trust;
new text end

new text begin (3) for a domestic or foreign corporation, its articles or certificate of incorporation; and
new text end

new text begin (4) for any other organization, the basic record that creates the organization.
new text end

new text begin (c) "Converted organization" means the organization into which a converting organization
converts pursuant to sections 317A.681 to 317A.689.
new text end

new text begin (d) "Converting organization" means an organization that converts into another
organization pursuant to sections 317A.681 to 317A.689.
new text end

new text begin (e) "Converting corporation" means a corporation governed under this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Conversion requirements. new text end

new text begin An organization other than a corporation may
convert to a corporation, and a corporation may convert to another organization, pursuant
to this section, sections 317A.683 to 317A.689, and a plan of conversion if:
new text end

new text begin (1) the converting organization's governing statute authorizes the conversion;
new text end

new text begin (2) the conversion is not prohibited by another law of this state or the law of the
jurisdiction that enacted the converting organization's governing statute;
new text end

new text begin (3) the converting organization complies with its governing statute in effecting the
conversion;
new text end

new text begin (4) the converting organization and the converted organization's governing statute
prohibits the organization from:
new text end

new text begin (i) being formed for a purpose involving pecuniary gain to its members, other than to
members that are nonprofit organizations or subdivisions, units, or agencies of the United
States or a state or local government; and
new text end

new text begin (ii) paying dividends or other pecuniary remuneration, directly or indirectly, to its
members, other than to members that are nonprofit organizations or subdivisions, units, or
agencies of the United States or a state or local government; and
new text end

new text begin (5) the attorney general has been notified, to the extent applicable under section 317A.811,
and any applicable waiting periods under that section have expired.
new text end

new text begin Subd. 3. new text end

new text begin Contents of plan of conversion. new text end

new text begin A plan of conversion must include:
new text end

new text begin (1) the name and form of the converting organization and the jurisdiction of the converting
organization's governing statute before conversion;
new text end

new text begin (2) the name and form of the converted organization and the jurisdiction of the converted
organization's governing statute after conversion;
new text end

new text begin (3) the terms and conditions of the conversion, including the manner and basis for
converting interests in the converting organization into interests in the converted organization;
and
new text end

new text begin (4) the organizational documents of the converted organization as they are to be in effect
upon completion of the conversion.
new text end

Sec. 12.

new text begin [317A.683] ACTION ON PLAN OF CONVERSION BY CONVERTING
CORPORATION.
new text end

new text begin Subdivision 1. new text end

new text begin Approval. new text end

new text begin A plan of conversion must be approved and adopted by a
converting corporation as provided in this section.
new text end

new text begin Subd. 2. new text end

new text begin Approval by board and members with voting rights. new text end

new text begin When a corporation
has members with voting rights, the board of directors of the corporation shall adopt a
resolution by the affirmative vote of a majority of all directors approving a proposed plan
of conversion and directing that the plan be submitted to a vote at a meeting of the members
with voting rights. Notice of the meeting must be given to each member with voting rights,
accompanied by a copy or summary of the proposed plan. Unless the articles or bylaws
require a greater vote, the plan of conversion is adopted upon receiving the affirmative vote
of a majority of the members with voting rights voting on the action.
new text end

new text begin Subd. 3. new text end

new text begin Approval by board. new text end

new text begin When a corporation does not have members with voting
rights, and unless the articles or bylaws require a greater vote, a plan of conversion is adopted
at a meeting of the board of directors of the corporation upon receiving the affirmative votes
of a majority of all directors. Notice of the meeting must be given, accompanied by a copy
of the proposed plan of conversion.
new text end

Sec. 13.

new text begin [317A.685] FILINGS REQUIRED FOR CONVERSION; EFFECTIVE
DATE AND TIME.
new text end

new text begin Subdivision 1. new text end

new text begin Articles of conversion. new text end

new text begin After a plan of conversion is approved:
new text end

new text begin (1) if the converting organization is a converting corporation, the converting corporation
shall file articles of conversion with the secretary of state, which must be signed as provided
in section 317A.011, subdivision 19, and must include:
new text end

new text begin (i) the plan of conversion;
new text end

new text begin (ii) a statement that the corporation is converting into another organization;
new text end

new text begin (iii) the name and form of the converted organization and the jurisdiction of its governing
statute;
new text end

new text begin (iv) the time the conversion is effective under the governing statute of the converted
organization;
new text end

new text begin (v) a statement that the conversion was approved as required by this chapter;
new text end

new text begin (vi) a statement that the conversion was approved as required by the governing statute
of the converted organization;
new text end

new text begin (vii) if the converted organization is a domestic organization, the organizational document
of the converted organization;
new text end

new text begin (viii) if the converted organization is a foreign organization not authorized to transact
business in this state, the street address of an office that the secretary of state may use for
the purposes of section 317A.689, subdivision 3; and
new text end

new text begin (ix) if applicable, a statement that the notice to the attorney general required by section
317A.811 has been given and any applicable period has expired or has been waived by the
attorney general, or a statement that section 317A.811 is not applicable; and
new text end

new text begin (2) if the converting organization is not a converting corporation, the converting
organization shall file articles of conversion with the secretary of state, which must be signed
as provided in section 317A.011, subdivision 19, and must include:
new text end

new text begin (i) articles of incorporation for the corporation into which the converting organization
is converting, which must include the information required by section 317A.111, subdivision
1, clauses (1) and (2);
new text end

new text begin (ii) the plan of conversion;
new text end

new text begin (iii) a statement that the converting organization is converting into a corporation;
new text end

new text begin (iv) the name and form of the converting organization and the jurisdiction of its governing
statute;
new text end

new text begin (v) a statement that the conversion was approved in a manner that complied with the
converting organization's governing statute; and
new text end

new text begin (vi) if applicable, a statement that the notice to the attorney general required by section
317A.811 has been given and any applicable waiting period has expired or has been waived
by the attorney general, or a statement that section 317A.811 is not applicable.
new text end

new text begin Subd. 2. new text end

new text begin Effective date and time of conversion. new text end

new text begin A conversion becomes effective:
new text end

new text begin (1) if the converted organization is a corporation, when the articles of conversion are
filed with the secretary of state or on a later date or at a later time specified in the articles
of conversion; or
new text end

new text begin (2) if the converted organization is not a corporation, as provided by the governing
statute of the converted organization.
new text end

new text begin Subd. 3. new text end

new text begin Certificate. new text end

new text begin The secretary of state shall issue to the converted organization or
its legal representative a certificate of conversion and, if the converted organization is a
corporation, a certificate of incorporation.
new text end

Sec. 14.

new text begin [317A.687] ABANDONMENT.
new text end

new text begin Subject to any contractual rights, after a conversion is approved, and at any time before
articles of conversion are delivered to the secretary of state for filing under section 317A.685,
a converting corporation may amend the plan or abandon the conversion:
new text end

new text begin (1) as provided in the plan; or
new text end

new text begin (2) except as otherwise prohibited in the plan, by the same consent as was required to
approve the plan.
new text end

Sec. 15.

new text begin [317A.689] EFFECT OF CONVERSION.
new text end

new text begin Subdivision 1. new text end

new text begin Effect on corporation; general. new text end

new text begin When a conversion becomes effective,
an organization that has been converted pursuant to sections 317A.681 to 317A.687 is for
all purposes the same entity that existed before the conversion, and:
new text end

new text begin (1) all property owned by the converting organization remains vested in the converted
organization and no assignment by operation of law or otherwise of its assets, properties,
or contracts shall be deemed to have occurred;
new text end

new text begin (2) all debts, obligations, or other liabilities of the converting organization continue as
debts, obligations, or other liabilities of the converted organization;
new text end

new text begin (3) an action or proceeding pending by or against the converting organization may be
continued as if the conversion had not occurred or as actions or proceedings by or against
the converted organization;
new text end

new text begin (4) except as prohibited by law other than this chapter, all rights, privileges, immunities,
powers, and purposes of the converting organization remain vested in the converted
organization; and
new text end

new text begin (5) the conversion does not dissolve a converting corporation for the purposes of sections
317A.701 to 317A.791.
new text end

new text begin Subd. 2. new text end

new text begin Effect on fiduciary capacity. new text end

new text begin (a) For purposes of this subdivision, "fiduciary
capacity" means the capacities of a trustee, executor, administrator, personal representative,
guardian, conservator, receiver, escrow agent, agent for the investment of money,
attorney-in-fact, or a similar capacity.
new text end

new text begin (b) Except where the will, declaration of trust, or other instrument provides otherwise,
the converted organization is, without further act or deed, the successor of the converting
organization in fiduciary capacities in which a corporation was acting at the time of the
conversion and is liable to the beneficiaries as fully as if the corporation had continued its
prior corporate existence.
new text end

new text begin (c) If a converting organization or converting corporation is or has been nominated and
appointed in a fiduciary capacity in a will, declaration of trust, or other instrument, order,
or judgment before or after the conversion, then even if the will or other instrument, order,
or judgment does not become operative or effective until after the conversion becomes
effective, every fiduciary capacity and the rights, powers, privileges, duties, discretions,
and responsibilities provided for in the nomination or appointment fully vest in and are to
be exercised by the converting corporation, whether there are one or more successive
conversions.
new text end

new text begin Subd. 3. new text end

new text begin Foreign organization. new text end

new text begin A converted organization that is a foreign organization
consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other
liability for which the converting corporation is liable if, before the conversion, the converting
corporation was subject to suit in this state on the debt, obligation, or other liability. A
converted organization that is a foreign organization and not authorized to transact business
in this state appoints the secretary of state as its agent for service of process for purposes
of enforcing a debt, obligation, or other liability under this subdivision.
new text end

Sec. 16.

Minnesota Statutes 2016, section 317A.811, subdivision 1, is amended to read:


Subdivision 1.

When required.

(a) Except as provided in subdivision 6, the following
corporations shall notify the attorney general of their intent to dissolve, merge, deleted text beginordeleted text end consolidate,
new text begin or convert, new text endor to transfer all or substantially all of their assets:

(1) a corporation that holds assets for a charitable purpose as defined in section 501B.35,
subdivision 2
; or

(2) a corporation that is exempt under section 501(c)(3) of the Internal Revenue Code
of 1986, or any successor section.

(b) The notice must include:

(1) the purpose of the corporation that is giving the notice;

(2) a list of assets owned or held by the corporation for charitable purposes;

(3) a description of restricted assets and purposes for which the assets were received;

(4) a description of debts, obligations, and liabilities of the corporation;

(5) a description of tangible assets being converted to cash and the manner in which
they will be sold;

(6) anticipated expenses of the transaction, including attorney fees;

(7) a list of persons to whom assets will be transferred, if knownnew text begin, or the name of the
converted organization
new text end;

(8) the purposes of persons receiving the assetsnew text begin or of the converted organizationnew text end; and

(9) the terms, conditions, or restrictions, if any, to be imposed on the transferred new text beginor
converted
new text endassets.

The notice must be signed on behalf of the corporation by an authorized person.

Sec. 17.

Minnesota Statutes 2016, section 317A.811, subdivision 2, is amended to read:


Subd. 2.

Restriction on transfers.

Subject to subdivision 3, a corporation described in
subdivision 1 may not transfer or convey assets as part of a dissolution, merger deleted text beginordeleted text endnew text begin,new text end
consolidation, or transfer of assets under section 317A.661new text begin, and it may not convert new text enduntil 45
days after it has given written notice to the attorney general, unless the attorney general
waives all or part of the waiting period.

Sec. 18.

Minnesota Statutes 2016, section 317A.811, subdivision 6, is amended to read:


Subd. 6.

Exception.

Subdivisions 1 to 4 do not apply to a merger with, consolidation
into,new text begin conversion into,new text end or transfer of assets to an organization exempt under section 501(c)(3)
of the Internal Revenue Code of 1986, or any successor section. A corporation that is exempt
under this subdivision shall send a copy of the certificate of merger deleted text beginordeleted text endnew text begin,new text end certificate of
consolidation and incorporationnew text begin, or certificate of conversionnew text end to the attorney general.

Sec. 19. new text beginREVISOR'S INSTRUCTION.
new text end

new text begin The revisor of statutes shall change the term "voting members" or a similar term to
"members with voting rights" or a similar term wherever it appears in the following sections
of Minnesota Statutes: sections 317A.011, subdivision 18; 317A.111, subdivision 3;
317A.133, subdivision 4; 317A.431; 317A.433; 317A.434; 317A.435, subdivision 1;
317A.437, subdivision 1; 317A.450, subdivision 2; and 317A.631.
new text end