See other bills
under the
same topic
PRIOR PRINTER'S NO. 1895
PRINTER'S NO. 2375
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1398
Session of
2015
INTRODUCED BY A. HARRIS, THOMAS, MACKENZIE, STAATS, MILLARD,
LONGIETTI, GIBBONS, ROZZI, McGINNIS, GREINER, BARBIN, COHEN,
MILNE, MARSICO, PETRI, DeLISSIO, DAVIDSON, JAMES, PEIFER,
DAY, GROVE, FARRY, ELLIS, BENNINGHOFF, P. COSTA, F. KELLER,
R. BROWN, D. PARKER, KORTZ, EVERETT AND SCHEMEL,
JUNE 24, 2015
AS REPORTED FROM COMMITTEE ON COMMERCE, HOUSE OF
REPRESENTATIVES, AS AMENDED, OCTOBER 19, 2015
AN ACT
Amending Titles 15 (Corporations and Unincorporated
Associations) and 54 (Names) of the Pennsylvania Consolidated
Statutes, modernizing the law on limited liability
partnerships, general partnerships, limited partnerships and
limited liability companies; and making conforming changes
with respect to associations, corporations, unincorporated
nonprofit associations and business trusts by doing the
following:
As to general provisions, making conforming changes by
revising definitions. PROVISIONS ON APPLICATION OF TITLE,
DEFINITIONS, DEFENSE OF USURY, TAX CLEARANCE OF CERTAIN
FUNDAMENTAL TRANSACTIONS AND FEE SCHEDULE.
AS TO ENTITIES GENERALLY, MAKING CONFORMING CHANGES BY
REVISING REQUIREMENTS FOR FOREIGN ASSOCIATION NAMES.
AS TO ENTITY TRANSACTIONS, MAKING CONFORMING CHANGES BY
REVISING PROVISIONS ON REGULATORY CONDITIONS AND REQUIRED
NOTICES AND APPROVALS, NATURE OF TRANSACTIONS, APPROVAL BY
LIMITED PARTNERSHIP, EFFECT OF MERGER, STATEMENT OF DIVISION
AND EFFECTIVENESS, EFFECT OF DIVISION AND EFFECT OF
DOMESTICATION.
AS TO FOREIGN ASSOCIATIONS, MAKING CONFORMING CHANGES BY
REVISING PROVISIONS ON GOVERNING LAW.
As to corporations, making conforming changes by revising
provisions on distributions by business corporations and by
adding provisions on the use of special litigation committees
by business corporations and nonprofit corporations.
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
As to partnerships generally:
extensively revising provisions on:
interchangeability of partnership, limited
liability company and corporate forms of
organization; and
ownership of certain professional partnerships;
and
adding a provision on failure to observe formalities.
As to limited liability partnerships:
extensively revising provisions on:
scope;
definitions;
limitation on liability of partners;
extraterritorial application of subchapter;
foreign registered limited liability
partnerships; and
annual registration; and
adding provisions on:
distributions; and
dissolution.
As to general partnerships, repealing existing Chapter 83
and replacing it with a new Chapter 84 relating to:
general provisions;
nature of partnership;
relations of partners to persons dealing with
partnership;
relations of partners to each other and to
partnership;
transferable interests and rights of transferees and
creditors;
dissociation;
dissociation as partner if business not wound up; and
dissolution and winding up.
As to limited partnerships, repealing existing Chapter 85
and replacing it with a new Chapter 86 relating to:
general provisions;
formation and filings;
limited partners;
general partners;
contributions and distributions;
dissociation;
transferable interests and rights of transferees and
creditors;
dissolution and winding up; and
actions by partners.
As to limited liability companies, repealing existing
Chapter 89 and replacing it with a new Chapter 88 relating
to:
general provisions;
formation and filings;
relations of members and managers to persons dealing
20150HB1398PN2375 - 2 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
with limited liability company;
relations of members to each other and to limited
liability company;
transferable interests and rights of transferees and
creditors;
dissociation;
dissolution and winding up; and
actions by members.
As to unincorporated nonprofit associations, making
conforming amendments by revising provisions on ownership and
transfer of property.
As to business trusts, making conforming changes by
revising provisions on application and effect of chapter and
liability of trustees and beneficiaries.
As to names, revising provisions on register established.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definitions of "association," "general
partnership," "limited liability company" and "limited
partnership" in section 102(a) of Title 15 of the Pennsylvania
Consolidated Statutes, amended October 22, 2014 (P.L.2640,
No.172), are amended and the section is amended by adding
definitions to read:
SECTION 1. SECTION 101(C) OF TITLE 15 OF THE PENNSYLVANIA
CONSOLIDATED STATUTES IS AMENDED TO READ:
§ 101. SHORT TITLE AND APPLICATION OF TITLE.
* * *
(C) REFERENCES TO PRIOR STATUTES.--A REFERENCE IN THE
[ARTICLES OR BYLAWS OR OTHER ORGANIC DOCUMENTS] ORGANIC RULES OF
AN ASSOCIATION TO ANY PROVISION OF LAW SUPPLIED OR REPEALED BY
THIS TITLE SHALL BE DEEMED TO BE A REFERENCE TO THE SUPERSEDING
PROVISION OF THIS TITLE.
SECTION 1.1. THE DEFINITIONS OF "ASSOCIATION," "GENERAL
PARTNERSHIP," "LIMITED LIABILITY COMPANY" AND "LIMITED
PARTNERSHIP" IN SECTION 102(A) OF TITLE 15, AMENDED OCTOBER 22,
2014 (P.L.2640, NO.172), ARE AMENDED AND THE SECTION IS AMENDED
20150HB1398PN2375 - 3 -
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
BY ADDING DEFINITIONS TO READ:
§ 102. Definitions.
(a) Defined terms.--Subject to additional or inconsistent
definitions contained in subsequent provisions of this title
that are applicable to specific provisions of this title, the
following words and phrases when used in this title shall have,
unless the context clearly indicates otherwise, the meanings
given to them in this section:
* * *
"Association." A corporation, for profit or not-for-profit,
a partnership, a limited liability company, a business or
statutory trust, an entity or two or more persons associated in
a common enterprise or undertaking. The term does not include:
(1) a testamentary trust or an inter vivos trust as
defined in 20 Pa.C.S. § 711(3) (relating to mandatory
exercise of jurisdiction through orphans' court division in
general);
(2) an association or relationship that:
(i) is not a person that has:
(A) a legal existence separate from any interest
holder of the person; or
(B) the power to acquire an interest in real
property in its own name; and
(ii) is not a partnership under the rules stated in
section [8312 (relating to rules for determining the
existence of partnership)] 8422(c) (relating to formation
of partnership) or a similar provision of the laws of
another jurisdiction;
(3) a decedent's estate; or
(4) a government or a governmental subdivision, agency
20150HB1398PN2375 - 4 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
or instrumentality.
* * *
"Charitable purposes." The relief of poverty, the
advancement and provision of education, including postsecondary
education, the advancement of religion, the prevention and
treatment of disease or injury, including mental retardation and
mental disorders, governmental or municipal purposes and any
other purpose the accomplishment of which is recognized as
important and beneficial to the public.
* * *
"Debtor in bankruptcy." A person that is the subject of:
(1) an order for relief under 11 U.S.C. (relating to
bankruptcy) or a comparable order under a successor statute
of general application; or
(2) a comparable order under Federal, State or foreign
law governing insolvency.
* * *
"General partnership." [A domestic or foreign partnership as
defined in section 8311 (relating to partnership defined),
whether or not it is a limited liability partnership or electing
partnership.] Either of the following:
(1) A partnership as defined in section 8412 (relating
to definitions).
(2) An association whose internal affairs are governed
by the laws of a jurisdiction other than this Commonwealth
which would be a partnership if its internal affairs were
governed by the laws of this Commonwealth.
* * *
"Limited liability company." [A domestic or foreign limited
liability company as defined in section 8903 (relating to
20150HB1398PN2375 - 5 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
definitions and index of definitions).] Either of the following:
(1) A limited liability company as defined in section
8812 (relating to definitions).
(2) An association whose internal affairs are governed
by the laws of a jurisdiction other than this Commonwealth
which would be a limited liability company if its internal
affairs were governed by the laws of this Commonwealth.
* * *
"Limited partnership." [A domestic or foreign limited
partnership as defined in section 8503 (relating to definitions
and index of definitions), whether or not it is a limited
liability limited partnership or electing partnership.] Either
of the following:
(1) A limited partnership as defined in section 8612
(relating to definitions).
(2) An association whose internal affairs are governed
by the laws of a jurisdiction other than this Commonwealth
which would be a limited partnership if its internal affairs
were governed by the laws of this Commonwealth.
* * *
Section 2. Section 152 of Title 15, amended October 22, 2014
(P.L.2640, No.172), is amended to read:
SECTION 1.2. TITLE 15 IS AMENDED BY ADDING A SECTION TO
READ:
§ 114. DEFENSE OF USURY.
A DOMESTIC ASSOCIATION OTHER THAN A BUSINESS CORPORATION
SHALL BE SUBJECT TO SECTION 1510 (RELATING TO CERTAIN
SPECIFICALLY AUTHORIZED DEBT TERMS) WITH RESPECT TO OBLIGATIONS,
AS DEFINED IN THAT SECTION, GOVERNED BY THE LAWS OF THIS
COMMONWEALTH OR AFFECTING REAL PROPERTY SITUATED IN THIS
20150HB1398PN2375 - 6 -
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
COMMONWEALTH, TO THE SAME EXTENT AS IF THE DOMESTIC ASSOCIATION
WERE A DOMESTIC BUSINESS CORPORATION.
SECTION 2. SECTIONS 139(A) AND (C), 152, 153(A)(2) AND (3),
206, 314(A), (D) AND (E), 315, 324(A) AND (C) AND 336(A)(2) OF
TITLE 15, AMENDED OR ADDED OCTOBER 22, 2014 (P.L.2640, NO.172),
ARE AMENDED TO READ:
§ 139. TAX CLEARANCE OF CERTAIN FUNDAMENTAL TRANSACTIONS.
(A) REQUIREMENT.--EXCEPT AS PROVIDED IN SUBSECTION (C) OR
(D), CLEARANCE CERTIFICATES FROM THE DEPARTMENT OF REVENUE AND
THE DEPARTMENT OF LABOR AND INDUSTRY, EVIDENCING THE PAYMENT BY
THE ASSOCIATION OF ALL TAXES AND CHARGES DUE THE COMMONWEALTH
REQUIRED BY LAW, MUST BE DELIVERED TO THE DEPARTMENT FOR FILING
WHEN ANY OF THE FOLLOWING IS DELIVERED TO THE DEPARTMENT FOR
FILING:
(1) ARTICLES OR A STATEMENT OR CERTIFICATE OF MERGER
MERGING A DOMESTIC ASSOCIATION INTO A NONREGISTERED FOREIGN
ASSOCIATION.
(2) ARTICLES OR A STATEMENT OR CERTIFICATE OF CONVERSION
OR DOMESTICATION EFFECTING A CONVERSION OR DOMESTICATION OF A
DOMESTIC ASSOCIATION INTO A NONREGISTERED FOREIGN
ASSOCIATION.
(3) ARTICLES [OR] OF DISSOLUTION, A CERTIFICATE OF
DISSOLUTION OR TERMINATION OR A STATEMENT OF REVIVAL OF A
DOMESTIC ASSOCIATION.
(4) AN APPLICATION FOR TERMINATION OF REGISTRATION,
STATEMENT OF WITHDRAWAL OR SIMILAR DOCUMENT BY A REGISTERED
FOREIGN ASSOCIATION.
(5) ARTICLES OR A STATEMENT OR CERTIFICATE OF DIVISION
DIVIDING A DOMESTIC ASSOCIATION SOLELY INTO FOREIGN
ASSOCIATIONS.
20150HB1398PN2375 - 7 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
* * *
(C) [ALTERNATIVE PROVISIONS.--IF CLEARANCE CERTIFICATES ARE
FILED WITH THE COURT AS REQUIRED UNDER SUBSECTION (B), IT SHALL
NOT BE NECESSARY TO FILE THE CLEARANCE CERTIFICATES WITH THE
DEPARTMENT OF STATE.] EXCEPTIONS.--IT SHALL NOT BE NECESSARY TO
FILE TAX CLEARANCE CERTIFICATES WITH THE DEPARTMENT OF STATE:
(1) IF CLEARANCE CERTIFICATES ARE FILED WITH THE COURT
AS REQUIRED UNDER SUBSECTION (B).
(2) WITH ARTICLES OF DISSOLUTION UNDER SECTION 1971
(RELATING TO VOLUNTARY DISSOLUTION BY SHAREHOLDERS OR
INCORPORATORS).
(3) WITH A CERTIFICATE OF DISSOLUTION UNDER SECTION
8482(B)(2)(I) (RELATING TO WINDING UP AND FILING OF OPTIONAL
CERTIFICATES).
(4) WITH A CERTIFICATE OF TERMINATION UNDER SECTION
8681.1 (RELATING TO VOLUNTARY TERMINATION BY PARTNERS).
(5) WITH A CERTIFICATE OF DISSOLUTION UNDER SECTION
8872(B)(2)(I) (RELATING TO WINDING UP AND FILING OF OPTIONAL
CERTIFICATES).
(6) WITH A CERTIFICATE OF TERMINATION UNDER SECTION 8878
(RELATING TO VOLUNTARY TERMINATION BY MEMBERS OR ORGANIZERS).
* * *
§ 152. Definitions.
The following words and phrases when used in this subchapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Ancillary transaction." Includes:
(1) preclearance of document;
(2) amendment of articles, charter, certificate or other
organic document, restatement of articles, charter,
20150HB1398PN2375 - 8 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
certificate or other organic document;
(3) dissolution, cancellation or termination of an
association;
(3.1) rescission of dissolution;
(4) withdrawal OR TRANSFER OF REGISTRATION by foreign
association;
(5) [withdrawal by] DISSOCIATION AS a partner;
(5.1) statement or certificate of authority and denial
or negation of authority;
(6) any transaction similar to any item listed in
paragraphs (1) through [(5)] (5.1);
(6.1) withdrawal, abandonment or termination of a
document which has been delivered to the department for
filing but has not yet become effective; or
(7) delivery to the department for filing in, by or with
the department or the Secretary of the Commonwealth of any
articles, statements, proceedings, agreements or any similar
papers affecting associations under the statutes of this
Commonwealth for which a specific fee is not set forth in
section 153 (relating to fee schedule) or other applicable
statute.
§ 153. FEE SCHEDULE.
(A) GENERAL RULE.--THE NONREFUNDABLE FEES OF THE BUREAU,
INCLUDING FEES FOR THE PUBLIC ACTS AND TRANSACTIONS OF THE
SECRETARY OF THE COMMONWEALTH ADMINISTERED THROUGH THE BUREAU,
SHALL BE AS FOLLOWS:
* * *
(2) FOREIGN ASSOCIATIONS:
(I) REGISTRATION STATEMENT OR SIMILAR
QUALIFICATIONS TO DO BUSINESS..................... 250
20150HB1398PN2375 - 9 -
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(II) AMENDMENT OF REGISTRATION STATEMENT OR
SIMILAR CHANGE IN QUALIFICATION TO DO BUSINESS.... 250
(III) DOMESTICATION OF ALIEN ASSOCIATION
UNDER SECTION 161 (RELATING TO DOMESTICATION OF
CERTAIN ALIEN ASSOCIATIONS)....................... 250
[(IV) STATEMENT OF MERGER, DIVISION OR
CONVERSION OR SIMILAR INSTRUMENT REPORTING
OCCURRENCE OF MERGER, DIVISION OR CONVERSION NOT
EFFECTED BY A FILING IN THE DEPARTMENT............ 70]
(V) ADDITIONAL FEE FOR EACH [QUALIFIED]
REGISTERED FOREIGN ASSOCIATION WHICH IS NAMED IN A
STATEMENT OF MERGER OR SIMILAR INSTRUMENT......... 40
(VI) EACH ANCILLARY TRANSACTION.............. 70
(3) PARTNERSHIPS AND LIMITED LIABILITY COMPANIES:
(I) CERTIFICATE OF LIMITED PARTNERSHIP OR
CERTIFICATE OF ORGANIZATION OF A LIMITED LIABILITY
COMPANY........................................... 125
(II) STATEMENT OF REGISTRATION OF
[REGISTERED] LIMITED LIABILITY PARTNERSHIP OR
LIMITED LIABILITY LIMITED PARTNERSHIP OR STATEMENT
OF ELECTION AS AN ELECTING PARTNERSHIP............ 125
(III) EACH ANCILLARY TRANSACTION............. 70
* * *
§ 206. REQUIREMENTS FOR FOREIGN ASSOCIATION NAMES.
(A) GENERAL RULE.--THE DEPARTMENT SHALL NOT FILE A
REGISTRATION STATEMENT PURSUANT TO SECTION 412 (RELATING TO
FOREIGN REGISTRATION STATEMENT) FOR A FOREIGN ASSOCIATION THAT,
EXCEPT AS PROVIDED UNDER SUBSECTION (B), HAS A NAME THAT IS
RENDERED UNAVAILABLE FOR USE BY A COVERED ASSOCIATION [UNDER
SECTION 202(A), (B) OR (C)(1)(I), (III), (IV) OR (V) OR (2)
20150HB1398PN2375 - 10 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(RELATING TO REQUIREMENTS FOR NAMES GENERALLY)] BY ANY PROVISION
OF THIS SUBCHAPTER.
(B) EXCEPTION.--THE PROVISIONS OF SECTION 202(B) AND (C)
(RELATING TO REQUIREMENTS FOR NAMES GENERALLY) SHALL NOT PREVENT
THE FILING OF A REGISTRATION STATEMENT OF A FOREIGN ASSOCIATION
[SETTING FORTH A NAME THAT IS PROHIBITED] WHOSE NAME IN ITS
JURISDICTION OF FORMATION WOULD BE PROHIBITED FROM USE IN THIS
COMMONWEALTH BY SECTION 202(B) AND (C) IF THE FOREIGN
ASSOCIATION [DELIVERS TO THE DEPARTMENT FOR FILING A RESOLUTION
OF ITS GOVERNORS ADOPTING] ADOPTS A NAME FOR USE IN REGISTERING
TO DO BUSINESS IN THIS COMMONWEALTH THAT IS AVAILABLE FOR USE BY
A COVERED ASSOCIATION.
§ 314. REGULATORY CONDITIONS AND REQUIRED NOTICES AND
APPROVALS.
(A) REGULATORY APPROVALS.--IF [LAWS] THE LAW OF THIS
COMMONWEALTH OTHER THAN THIS CHAPTER REQUIRES NOTICE TO OR THE
APPROVAL OF A GOVERNMENTAL AGENCY OR OFFICER OF THE COMMONWEALTH
IN CONNECTION WITH THE PARTICIPATION UNDER AN ORGANIC LAW THAT
IS NOT PART OF THIS TITLE BY A DOMESTIC OR FOREIGN ASSOCIATION
IN A TRANSACTION WHICH IS A FORM OF TRANSACTION AUTHORIZED BY
THIS CHAPTER, THE NOTICE MUST BE GIVEN OR THE APPROVAL OBTAINED
BY THE ASSOCIATION BEFORE IT MAY PARTICIPATE IN ANY FORM OF
TRANSACTION UNDER THIS CHAPTER.
* * *
(D) PRESERVATION OF TRANSFERS.--[A] SUBJECT TO SUBSECTION
(C) AND SECTION 5550 (RELATING TO DEVISES, BEQUESTS AND GIFTS
AFTER CERTAIN FUNDAMENTAL CHANGES), A BEQUEST, DEVISE, GIFT,
GRANT OR PROMISE CONTAINED IN A WILL OR OTHER INSTRUMENT OF
DONATION, SUBSCRIPTION OR CONVEYANCE THAT IS MADE TO:
(1) A MERGING ASSOCIATION THAT IS NOT THE SURVIVING
20150HB1398PN2375 - 11 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
ASSOCIATION AND THAT TAKES EFFECT OR REMAINS PAYABLE AFTER
THE MERGER INURES TO THE SURVIVING ASSOCIATION[.]; AND
(2) A DIVIDING ASSOCIATION MAY BE ALLOCATED IN THE
DIVISION AS IF IT WERE AN ASSET OF THE DIVIDING ASSOCIATION
AND, IF THE BEQUEST, DEVISE, GIFT, GRANT OR PROMISE TAKES
EFFECT OR REMAINS PAYABLE AFTER THE DIVISION, VESTS AS
PROVIDED IN SECTION 367(A)(4) (RELATING TO EFFECT OF
DIVISION).
(E) TRUST OBLIGATIONS.--A TRUST OBLIGATION THAT WOULD GOVERN
PROPERTY:
(1) IF TRANSFERRED TO A MERGING ASSOCIATION THAT IS NOT
THE SURVIVING ASSOCIATION APPLIES TO PROPERTY THAT IS
TRANSFERRED AFTER A MERGER TO THE SURVIVING ASSOCIATION[.];
AND
(2) IF TRANSFERRED TO A DIVIDING ASSOCIATION THAT IS NOT
A RESULTING ASSOCIATION APPLIES TO PROPERTY THAT IS
TRANSFERRED AFTER A DIVISION TO A RESULTING ASSOCIATION.
[(E)] (F) CROSS REFERENCE.--SEE SECTION 318 (RELATING TO
EXCLUDED ENTITIES AND TRANSACTIONS).
§ 315. NATURE OF TRANSACTIONS.
(A) GENERAL RULE.--THE FACT THAT A SALE OR CONVERSION OF THE
INTERESTS IN OR ASSETS OF AN ASSOCIATION OR A TRANSACTION UNDER
A PARTICULAR SUBCHAPTER PRODUCES A RESULT THAT COULD BE
ACCOMPLISHED IN ANY OTHER MANNER PERMITTED BY A DIFFERENT
SUBCHAPTER OR OTHER LAW SHALL NOT BE A BASIS FOR
RECHARACTERIZING THE SALE, CONVERSION OR TRANSACTION AS A
DIFFERENT FORM OF SALE, CONVERSION OR TRANSACTION UNDER ANY
OTHER SUBCHAPTER OR OTHER LAW.
(B) BUSINESS PURPOSE NOT REQUIRED.--A TRANSACTION UNDER THIS
CHAPTER DOES NOT REQUIRE AN INDEPENDENT BUSINESS PURPOSE IN
20150HB1398PN2375 - 12 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
ORDER FOR THE TRANSACTION TO BE LAWFUL.
§ 324. APPROVAL BY LIMITED PARTNERSHIP.
(A) PROPOSAL OF PLAN.--[A] EXCEPT AS PROVIDED IN THE ORGANIC
RULES, A PLAN SHALL BE PROPOSED IN THE CASE OF A DOMESTIC
LIMITED PARTNERSHIP BY THE ADOPTION BY A UNANIMOUS VOTE OF THE
GENERAL PARTNERS OF A RESOLUTION APPROVING THE PLAN. EXCEPT
WHERE THE APPROVAL OF THE LIMITED PARTNERS IS UNNECESSARY UNDER
THIS CHAPTER OR THE ORGANIC RULES, THE GENERAL PARTNERS SHALL
SUBMIT THE PLAN TO A VOTE OF THE LIMITED PARTNERS ENTITLED TO
VOTE THEREON AT A REGULAR OR SPECIAL MEETING OF THE LIMITED
PARTNERS.
* * *
(C) REQUIRED VOTE BY LIMITED PARTNERS.--[THE] EXCEPT AS
PROVIDED IN THE ORGANIC RULES:
(1) A PLAN SHALL BE ADOPTED UPON RECEIVING [A MAJORITY
OF THE VOTES CAST BY ALL LIMITED PARTNERS, IF ANY, ENTITLED
TO VOTE THEREON] THE AFFIRMATIVE VOTE OR CONSENT OF LIMITED
PARTNERS OWNING THE RIGHTS TO RECEIVE A MAJORITY OF THE
DISTRIBUTIONS AS LIMITED PARTNERS OF EACH DOMESTIC LIMITED
PARTNERSHIP THAT IS A PARTY TO THE PROPOSED TRANSACTION UNDER
THE PLAN AND, IF ANY CLASS OF LIMITED PARTNERS IS ENTITLED TO
VOTE THEREON AS A CLASS, [A MAJORITY OF THE VOTES CAST] THE
AFFIRMATIVE VOTE OR CONSENT OF LIMITED PARTNERS OWNING THE
RIGHTS TO RECEIVE A MAJORITY OF THE DISTRIBUTIONS AS LIMITED
PARTNERS IN EACH CLASS VOTE.
(2) A PROPOSED PLAN [MAY] SHALL NOT BE DEEMED TO HAVE
BEEN ADOPTED BY THE LIMITED PARTNERSHIP UNLESS IT HAS ALSO
BEEN APPROVED BY THE GENERAL PARTNERS, REGARDLESS OF THE FACT
THAT THE GENERAL PARTNERS HAVE DIRECTED OR SUFFERED THE
SUBMISSION OF THE PLAN TO THE LIMITED PARTNERS FOR ACTION.
20150HB1398PN2375 - 13 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
* * *
§ 336. EFFECT OF MERGER.
(A) GENERAL RULE.--WHEN A MERGER UNDER THIS SUBCHAPTER
BECOMES EFFECTIVE, ALL OF THE FOLLOWING APPLY:
* * *
(2) [EACH] THE SEPARATE EXISTENCE OF EACH MERGING
ASSOCIATION THAT IS NOT THE SURVIVING ASSOCIATION CEASES [TO
EXIST].
* * *
SECTION 2.1. SECTION 366(H) OF TITLE 15, ADDED OCTOBER 22,
2014 (P.L.2640, NO.172), IS AMENDED AND THE SECTION IS AMENDED
BY ADDING A SUBSECTION TO READ:
§ 366. STATEMENT OF DIVISION; EFFECTIVENESS.
* * *
(H) COORDINATION OF TRANSACTIONS.--A NEW ASSOCIATION MAY BE
A PARTY TO ANOTHER TRANSACTION UNDER THIS CHAPTER THAT TAKES
EFFECT SIMULTANEOUSLY WITH THE DIVISION. THE NEW ASSOCIATION
SHALL BE DEEMED TO EXIST BEFORE THE EFFECTIVENESS OF THE OTHER
TRANSACTION, BUT SOLELY FOR THE PURPOSE OF BEING A PARTY TO THE
OTHER TRANSACTION. THE PLAN RELATING TO THE OTHER TRANSACTION
SHALL BE DEEMED TO HAVE BEEN APPROVED BY THE NEW ASSOCIATION IF
THE PLAN IS APPROVED BY THE DIVIDING ASSOCIATION IN CONNECTION
WITH ITS APPROVAL OF THE PLAN OF DIVISION. THE STATEMENT THAT IS
DELIVERED TO THE DEPARTMENT FOR FILING WITH RESPECT TO THE OTHER
TRANSACTION SHALL STATE THAT IT WAS APPROVED BY THE NEW
ASSOCIATION UNDER THIS SUBSECTION.
[(H)] (I) CROSS REFERENCES.--SEE SECTIONS 134 (RELATING TO
DOCKETING STATEMENT) AND 135 (RELATING TO REQUIREMENTS TO BE MET
BY FILED DOCUMENTS).
SECTION 2.2. SECTIONS 367(A)(2) AND (6) AND 376(F) OF TITLE
20150HB1398PN2375 - 14 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
15, ADDED OCTOBER 22, 2014 (P.L.2640, NO.172), ARE AMENDED TO
READ:
§ 367. EFFECT OF DIVISION.
(A) GENERAL RULE.--WHEN A DIVISION BECOMES EFFECTIVE, ALL OF
THE FOLLOWING APPLY:
* * *
(2) IF THE DIVIDING ASSOCIATION IS NOT TO SURVIVE THE
DIVISION, THE SEPARATE EXISTENCE OF THE DIVIDING ASSOCIATION
CEASES [TO EXIST].
* * *
(6) THE LIABILITIES OF THE DIVIDING ASSOCIATION ARE
ALLOCATED BETWEEN OR AMONG THE RESULTING ASSOCIATIONS AS
PROVIDED IN SECTION 368 (RELATING TO ALLOCATION OF
LIABILITIES IN DIVISION)[.] AND THE RESULTING ASSOCIATIONS TO
WHICH LIABILITIES ARE ALLOCATED ARE LIABLE FOR THOSE
LIABILITIES AS SUCCESSORS TO THE DIVIDING ASSOCIATION, AND
NOT BY TRANSFER, WHETHER DIRECTLY, INDIRECTLY OR BY OPERATION
OF LAW.
* * *
§ 376. EFFECT OF DOMESTICATION.
* * *
[(F) SERVICE OF PROCESS.--WHEN A DOMESTICATION BECOMES
EFFECTIVE, A FOREIGN DOMESTICATED ENTITY MAY BE SERVED WITH
PROCESS IN THIS COMMONWEALTH FOR THE COLLECTION AND ENFORCEMENT
OF ANY OF ITS DEBTS, OBLIGATIONS AND OTHER LIABILITIES IN
ACCORDANCE WITH APPLICABLE LAW.]
* * *
SECTION 2.3. SECTION 402 OF TITLE 15 IS AMENDED BY ADDING A
SUBSECTION TO READ:
§ 402. GOVERNING LAW.
20150HB1398PN2375 - 15 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
* * *
(G) DEFENSE OF USURY.--A FOREIGN ASSOCIATION SHALL BE
SUBJECT TO SECTION 1510 (RELATING TO CERTAIN SPECIFICALLY
AUTHORIZED DEBT TERMS) WITH RESPECT TO OBLIGATIONS, AS DEFINED
IN THAT SECTION, GOVERNED BY THE LAWS OF THIS COMMONWEALTH OR
AFFECTING REAL PROPERTY SITUATED IN THIS COMMONWEALTH, TO THE
SAME EXTENT AS IF THE FOREIGN ASSOCIATION WERE A DOMESTIC
BUSINESS CORPORATION.
Section 3. Sections 521, 522 and 523(a) AND (B) of Title 15
are amended to read:
§ 521. Pensions and allowances.
A banking institution [or a savings association] may grant
allowances or pensions to officers, directors and employees for
faithful and long-continued services and, after the death of the
officer, director or employee either while in the service of the
corporation or after retirement, pensions or allowances may be
granted or continued to their dependents. The allowances to
dependents shall be reasonable in amount and paid only for a
limited time and, unless part of an employee benefit plan or
employment contract in effect at the time of retirement or death
of the officer, director or employee, shall not exceed in total
the amount of the compensation paid to the officer, director or
employee during the 12 months preceding retirement or death.
§ 522. Indemnification of authorized representatives.
A banking institution [or a savings association] shall be
governed by the provisions of Subchapter D of Chapter 17
(relating to indemnification).
§ 523. Actions by shareholders or members to enforce a
secondary right.
(a) General rule.--In any action brought to enforce a
20150HB1398PN2375 - 16 -
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
secondary right on the part of one or more shareholders or
members against any officer or director or former officer or
director of a banking institution [or a savings association],
because the corporation refuses to enforce rights which may
properly be asserted by it, the plaintiff or plaintiffs must
aver and it must be made to appear that the plaintiff or each
plaintiff was a shareholder or was a member of the corporation
at the time of the transaction of which he complains or that his
stock or membership devolved upon him by operation of law from a
person who was a shareholder or member at that time.
(B) SECURITY FOR COSTS.--IN ANY SUCH ACTION INSTITUTED OR
MAINTAINED BY A HOLDER OR HOLDERS OF LESS THAN 5% OF THE
OUTSTANDING SHARES OF ANY CLASS OF THE CORPORATION OR VOTING
TRUST CERTIFICATES THEREFOR, OR BY A MEMBER OR MEMBERS OF A
CORPORATION ORGANIZED WITHOUT CAPITAL STOCK WHICH HAS
OUTSTANDING CONTRACTS OR ACCOUNTS WITH ITS MEMBERS IF THE VALUE
OF THE CONTRACTS OR ACCOUNTS HELD OR OWNED BY THE MEMBER OR
MEMBERS INSTITUTING OR MAINTAINING THE SUIT IS LESS THAN 5% OF
THE VALUE OF ALL THE CONTRACTS OR ACCOUNTS OUTSTANDING, THE
CORPORATION IN WHOSE RIGHT THE ACTION IS BROUGHT SHALL BE
ENTITLED, AT ANY STAGE OF THE PROCEEDINGS, TO REQUIRE THE
PLAINTIFF OR PLAINTIFFS TO GIVE SECURITY FOR THE REASONABLE
EXPENSES, INCLUDING ATTORNEYS' FEES, WHICH MAY BE INCURRED BY
[IT] THE CORPORATION IN CONNECTION THEREWITH [AND] OR FOR WHICH
IT MAY BECOME LIABLE PURSUANT TO SECTION 522 (RELATING TO
INDEMNIFICATION OF AUTHORIZED REPRESENTATIVES) (BUT ONLY INSOFAR
AS RELATES TO MANDATORY INDEMNIFICATION IN ACTIONS BY OR IN THE
RIGHT OF THE CORPORATION) TO WHICH SECURITY THE CORPORATION
SHALL HAVE RECOURSE IN SUCH AMOUNT AS THE COURT HAVING
JURISDICTION SHALL DETERMINE UPON THE TERMINATION OF THE ACTION.
20150HB1398PN2375 - 17 -
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
THE AMOUNT OF THE SECURITY MAY, FROM TIME TO TIME, BE INCREASED
OR DECREASED IN THE DISCRETION OF THE COURT HAVING JURISDICTION
OF THE ACTION UPON SHOWING THAT THE SECURITY PROVIDED HAS OR
[MAY] IS LIKELY TO BECOME INADEQUATE OR EXCESSIVE. THE SECURITY
MAY BE DENIED OR LIMITED BY THE COURT IF THE COURT FINDS AFTER
AN EVIDENTIARY HEARING THAT UNDUE HARDSHIP ON PLAINTIFFS AND
SERIOUS INJUSTICE WOULD RESULT.
* * *
Section 4. Section 1551(b) of Title 15 is amended and the
section is amended by adding a subsection to read:
§ 1551. Distributions to shareholders.
* * *
(b) Limitation.--A distribution, including a distribution
under Subchapter F (relating to voluntary dissolution and
winding up) or H (relating to postdissolution provision for
liabilities) of Chapter 19, may not be made if, after giving
effect thereto:
(1) the corporation would be unable to pay its debts as
they become due in the usual course of its business; or
(2) the total assets of the corporation would be less
than the sum of its total liabilities plus (unless otherwise
provided in the articles) the amount that would be needed, if
the corporation were to be dissolved at the time as of which
the distribution is measured, to satisfy the preferential
rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution.
* * *
(d.1) Distribution in winding up.--In measuring the effect
of a distribution under Subchapter F or H of Chapter 19, the
liabilities of a dissolved corporation do not include any
20150HB1398PN2375 - 18 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
liabilities for which adequate provision has been made or any
claim that has been barred under those subchapters.
* * *
Section 5. Sections 1781 and 1782 heading AND (C) of Title
15 are amended to read:
§ 1781. [(Reserved).] Derivative action.
(a) General rule.--Subject to section 1782 (relating to
eligible derivative SHAREHOLDER plaintiffs and security for
costs) and subsection (b), a shareholder PLAINTIFF may maintain
a derivative action to enforce a right of a business corporation
only if:
(1) the shareholder PLAINTIFF first makes a demand on
THE CORPORATION OR the board of directors requesting that it
cause the corporation to bring an action to enforce the
right, unless demand is excused under subsection (b); and
(2) both:
(i) a special litigation committee is not appointed
under section 1783 (relating to special litigation
committee); and
(ii) the board does not bring the action within a
reasonable time. AND:
(I) IF A SPECIAL LITIGATION COMMITTEE IS NOT
APPOINTED UNDER SECTION 1783 (RELATING TO SPECIAL
LITIGATION COMMITTEE), THE CORPORATION DOES NOT BRING THE
ACTION WITHIN A REASONABLE TIME; OR
(II) IF A SPECIAL LITIGATION COMMITTEE IS APPOINTED
UNDER SECTION 1783, A DETERMINATION IS MADE:
(A) UNDER SECTION 1783(E)(1) THAT THE
CORPORATION NOT OBJECT TO THE ACTION; OR
(B) UNDER SECTION 1783(E)(5)(I) THAT THE
20150HB1398PN2375 - 19 -
<--
<--
<--
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
PLAINTIFF CONTINUE THE ACTION;
(2) DEMAND IS EXCUSED UNDER SUBSECTION (B);
(3) THE ACTION IS MAINTAINED FOR THE LIMITED PURPOSE OF
SEEKING COURT REVIEW UNDER SECTION 1783(F); OR
(4) THE COURT HAS ALLOWED THE ACTION TO CONTINUE UNDER
THE CONTROL OF THE PLAINTIFF UNDER SECTION 1783(F)(3)(II).
(b) Prior demand excused.--
(1) A demand under subsection (a)(1) is excused only if
the shareholder PLAINTIFF makes a specific showing that
IMMEDIATE AND irreparable harm to the business corporation
would otherwise result.
(2) If demand is excused under paragraph (1), demand
shall be made promptly after UPON commencement of the action.
(c) Contents of demand.--A demand under this section shall
MUST BE IN RECORD FORM AND give notice with reasonable
specificity of the essential facts relied upon to support each
of the claims made in the demand.
(d) Additional claims.--If a derivative action is commenced
after a demand has been made under this section and includes a
claim that was not fairly subsumed under the demand, a new
demand must be made with respect to that claim. THE NEW DEMAND
SHALL NOT RELATE BACK TO THE DATE OF THE ORIGINAL DEMAND FOR
PURPOSES OF SUBSECTION (E).
(e) Statute of limitations.--The making of a demand tolls
any applicable statute of limitations with respect to a claim
asserted in the demand until the later EARLIER of the date:
(1) the shareholder PLAINTIFF making the demand is
notified either:
(i) that the board of directors has decided not to
bring an action and not to appoint a special litigation
20150HB1398PN2375 - 20 -
<--
<--
<--
<--
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
committee; or
(ii) of the determination under section 1783(e) of a
special litigation committee that has been appointed as
provided in section 1783; or
(II) OF A DETERMINATION UNDER SECTION 1783(E) AFTER
THE APPOINTMENT OF A SPECIAL LITIGATION COMMITTEE UNDER
SECTION 1783; OR
(2) the court determines under section 1783(f) either
to:
(i) enforce the determination of the special
litigation committee; or
(ii) allow the action to continue under the control
of the plaintiff. PLAINTIFF COMMENCES AN ACTION ASSERTING
THE CLAIM.
(f) Certain provisions of articles ineffective.--This
section may not be relaxed by any provision of the articles.
§ 1782. [Actions against directors and officers] Eligible
derivative SHAREHOLDER plaintiffs and security for
costs.
* * *
(C) SECURITY FOR COSTS.--IN ANY ACTION OR PROCEEDING
INSTITUTED OR MAINTAINED BY HOLDERS OR OWNERS OF LESS THAN 5% OF
THE OUTSTANDING SHARES OF ANY CLASS OF THE CORPORATION, UNLESS
THE SHARES HELD OR OWNED BY THE HOLDERS OR OWNERS HAVE AN
AGGREGATE FAIR MARKET VALUE IN EXCESS OF $200,000, THE
CORPORATION IN WHOSE RIGHT THE ACTION OR PROCEEDING IS BROUGHT
SHALL BE ENTITLED AT ANY STAGE OF THE PROCEEDINGS TO REQUIRE THE
PLAINTIFFS TO GIVE SECURITY FOR THE REASONABLE EXPENSES,
INCLUDING ATTORNEYS' FEES, THAT MAY BE INCURRED BY [IT] THE
CORPORATION IN CONNECTION THEREWITH OR FOR WHICH IT MAY BECOME
20150HB1398PN2375 - 21 -
<--
<--
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
LIABLE PURSUANT TO SECTION 1743 (RELATING TO MANDATORY
INDEMNIFICATION) (BUT ONLY INSOFAR AS RELATES TO ACTIONS BY OR
IN THE RIGHT OF THE CORPORATION) TO WHICH SECURITY THE
CORPORATION SHALL HAVE RECOURSE IN SUCH AMOUNT AS THE COURT
DETERMINES UPON THE TERMINATION OF THE ACTION OR PROCEEDING. THE
AMOUNT OF SECURITY MAY, FROM TIME TO TIME, BE INCREASED OR
DECREASED IN THE DISCRETION OF THE COURT UPON SHOWING THAT THE
SECURITY PROVIDED HAS OR [MAY] IS LIKELY TO BECOME INADEQUATE OR
EXCESSIVE. THE SECURITY MAY BE DENIED OR LIMITED [IN THE
DISCRETION OF] BY THE COURT [UPON PRELIMINARY SHOWING TO THE
COURT, BY APPLICATION AND UPON SUCH VERIFIED STATEMENTS AND
DEPOSITIONS AS MAY BE REQUIRED BY THE COURT, ESTABLISHING PRIMA
FACIE THAT THE REQUIREMENT OF FULL OR PARTIAL SECURITY WOULD
IMPOSE] IF THE COURT FINDS AFTER AN EVIDENTIARY HEARING THAT
UNDUE HARDSHIP ON PLAINTIFFS AND SERIOUS INJUSTICE WOULD RESULT.
* * *
Section 6. Title 15 is amended by adding sections to read:
§ 1783. Special litigation committee.
(a) General rule.--If a business corporation receives a
demand to bring an action to enforce a right of the corporation,
or if a derivative action is commenced before demand has been
made on the corporation, the corporation may appoint a special
litigation committee to investigate the claims asserted in the
demand or action and to determine on the basis of that
investigation whether pursuing any of the claims asserted is in
the best interests of the corporation. A committee may not be
appointed under this section if every shareholder of the
corporation is also a director of the corporation.
(b) Discovery stay.--If the corporation appoints a special
litigation committee and an action is commenced before the
20150HB1398PN2375 - 22 -
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
committee has made a determination under subsection (e):
(1) On motion by the committee made in the name of the
corporation, except for good cause shown, the court shall
stay discovery for the time reasonably necessary to permit
the committee to complete its investigation.
(2) The time for the defendants to plead shall be tolled
until the process provided for under subsection (f) has been
completed.
(c) Composition of committee.--A special litigation
committee shall be composed of two or more individuals who:
(1) are not interested in the action;
(2) are capable as a group of objective judgment in the
circumstances; and
(3) may, but need not, be shareholders or directors.
(d) Appointment of committee.--A special litigation
committee may be appointed:
(1) by a majority of the directors not named as actual
or potential parties in the demand or action; or
(2) if all the directors are named as actual or
potential parties in the demand or action, by a majority of
the directors so named.
(e) Determination by committee.--After appropriate
investigation, a special litigation committee may determine that
it is in the best interests of the business corporation that:
(1) an action based on some or all the claims asserted
in the demand not be brought by the corporation but that the
corporation not object to an action being brought by the
party that made the demand;
(2) an action based on some or all of the claims
asserted in the demand be brought by the corporation;
20150HB1398PN2375 - 23 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(3) some or all of the claims asserted in the demand be
settled on terms approved by the committee;
(4) an action not be brought based on any of the claims
asserted in the demand;
(5) an action already commenced continue under the
control of:
(i) the plaintiff; or
(ii) the committee;
(6) some or all of the claims asserted in an action
already commenced be settled on terms approved by the
committee; or
(7) an action already commenced be dismissed.
(f) Court review and action.--If a special litigation
committee is appointed and an action is commenced before the
committee makes a determination under subsection (e):
(1) The business corporation shall file with the court
after the committee makes a determination under subsection
(e) a statement of the committee's determination and a report
supporting the determination. The corporation shall serve
each party with a copy of the determination and report. If
the corporation moves to file the report under seal, the
report shall be served on the parties subject to an
appropriate protective order agreed to by the parties or
ordered by the court.
(2) The corporation shall file with the court a motion,
pleading or notice consistent with the determination of the
committee under subsection (e).
(3) If the committee makes a determination described in
subsection (e)(2), (3), (4), (5)(ii), (6) or (7), the court
shall determine whether the members of the committee met the
20150HB1398PN2375 - 24 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
qualifications required under subsection (c)(1) and (2) and
whether the committee conducted its investigation and made
its recommendation in good faith, independently and with
reasonable care. If the court finds that the members of the
committee met the qualifications required under subsection
(c)(1) and (2) and that the committee acted in good faith,
independently and with reasonable care, the court shall
enforce the determination of the committee. Otherwise, the
court shall:
(i) dissolve any stay of discovery entered under
subsection (b);
(ii) allow the action to continue under the control
of the plaintiff; and
(iii) permit the defendants to file preliminary
objections and other appropriate motions and pleadings.
(g) Certain provisions of articles ineffective.--The
provisions of this section may not be varied by the articles.
§ 1783. SPECIAL LITIGATION COMMITTEE.
(A) GENERAL RULE.--IF A BUSINESS CORPORATION OR THE BOARD OF
DIRECTORS RECEIVES A DEMAND TO BRING AN ACTION TO ENFORCE A
RIGHT OF THE CORPORATION, OR IF A DERIVATIVE ACTION IS COMMENCED
BEFORE DEMAND HAS BEEN MADE ON THE CORPORATION OR THE BOARD, THE
BOARD MAY APPOINT A SPECIAL LITIGATION COMMITTEE TO INVESTIGATE
THE CLAIMS ASSERTED IN THE DEMAND OR ACTION AND TO DETERMINE ON
BEHALF OF THE CORPORATION OR RECOMMEND TO THE BOARD WHETHER
PURSUING ANY OF THE CLAIMS ASSERTED IS IN THE BEST INTERESTS OF
THE CORPORATION. THE CORPORATION SHALL SEND A NOTICE IN RECORD
FORM TO THE PLAINTIFF PROMPTLY AFTER THE APPOINTMENT OF A
COMMITTEE UNDER THIS SECTION NOTIFYING THE PLAINTIFF THAT A
COMMITTEE HAS BEEN APPOINTED AND IDENTIFYING BY NAME THE MEMBERS
20150HB1398PN2375 - 25 -
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
OF THE COMMITTEE. A COMMITTEE MAY NOT BE APPOINTED UNDER THIS
SECTION IF EVERY SHAREHOLDER OF THE CORPORATION IS ALSO A
DIRECTOR OF THE CORPORATION.
(B) DISCOVERY STAY.--IF THE BOARD OF DIRECTORS APPOINTS A
SPECIAL LITIGATION COMMITTEE AND AN ACTION IS COMMENCED BEFORE A
DETERMINATION HAS BEEN MADE UNDER SUBSECTION (E):
(1) ON MOTION BY THE COMMITTEE MADE IN THE NAME OF THE
BUSINESS CORPORATION, THE COURT SHALL STAY DISCOVERY FOR THE
TIME REASONABLY NECESSARY TO PERMIT THE COMMITTEE TO COMPLETE
ITS INVESTIGATION, EXCEPT FOR GOOD CAUSE SHOWN.
(2) THE TIME FOR THE DEFENDANTS TO PLEAD SHALL BE TOLLED
UNTIL THE PROCESS PROVIDED FOR UNDER SUBSECTION (F) HAS BEEN
COMPLETED.
(C) COMPOSITION OF COMMITTEE.--A SPECIAL LITIGATION
COMMITTEE SHALL BE COMPOSED OF TWO OR MORE INDIVIDUALS WHO:
(1) ARE NOT INTERESTED IN THE CLAIMS ASSERTED IN THE
DEMAND OR ACTION;
(2) ARE CAPABLE AS A GROUP OF OBJECTIVE JUDGMENT IN THE
CIRCUMSTANCES; AND
(3) MAY, BUT NEED NOT, BE SHAREHOLDERS OR DIRECTORS.
(D) APPOINTMENT OF COMMITTEE.--A SPECIAL LITIGATION
COMMITTEE MAY BE APPOINTED:
(1) BY A MAJORITY OF THE DIRECTORS NOT NAMED AS ACTUAL
OR POTENTIAL PARTIES IN THE DEMAND OR ACTION; OR
(2) IF ALL THE DIRECTORS ARE NAMED AS ACTUAL OR
POTENTIAL PARTIES IN THE DEMAND OR ACTION, BY A MAJORITY OF
THE DIRECTORS SO NAMED.
(E) DETERMINATION.--AFTER APPROPRIATE INVESTIGATION BY A
SPECIAL LITIGATION COMMITTEE, THE COMMITTEE OR THE BOARD OF
DIRECTORS MAY DETERMINE THAT IT IS IN THE BEST INTERESTS OF THE
20150HB1398PN2375 - 26 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
BUSINESS CORPORATION THAT:
(1) AN ACTION BASED ON SOME OR ALL OF THE CLAIMS
ASSERTED IN THE DEMAND NOT BE BROUGHT BY THE CORPORATION BUT
THAT THE CORPORATION NOT OBJECT TO AN ACTION BEING BROUGHT BY
THE PARTY THAT MADE THE DEMAND;
(2) AN ACTION BASED ON SOME OR ALL OF THE CLAIMS
ASSERTED IN THE DEMAND BE BROUGHT BY THE CORPORATION;
(3) SOME OR ALL OF THE CLAIMS ASSERTED IN THE DEMAND BE
SETTLED ON TERMS APPROVED BY THE COMMITTEE;
(4) AN ACTION NOT BE BROUGHT BASED ON ANY OF THE CLAIMS
ASSERTED IN THE DEMAND;
(5) AN ACTION ALREADY COMMENCED CONTINUE UNDER THE
CONTROL OF:
(I) THE PLAINTIFF;
(II) THE CORPORATION; OR
(III) THE COMMITTEE;
(6) SOME OR ALL THE CLAIMS ASSERTED IN AN ACTION ALREADY
COMMENCED BE SETTLED ON TERMS APPROVED BY THE COMMITTEE; OR
(7) AN ACTION ALREADY COMMENCED BE DISMISSED.
(F) COURT REVIEW AND ACTION.--IF A SPECIAL LITIGATION
COMMITTEE IS APPOINTED AND A DERIVATIVE ACTION IS COMMENCED
EITHER BEFORE OR AFTER A DETERMINATION IS MADE UNDER SUBSECTION
(E):
(1) THE BUSINESS CORPORATION SHALL FILE WITH THE COURT
AFTER A DETERMINATION IS MADE UNDER SUBSECTION (E) A
STATEMENT OF THE DETERMINATION AND A REPORT OF THE COMMITTEE
SUPPORTING THE DETERMINATION. THE CORPORATION SHALL SERVE
EACH PARTY WITH A COPY OF THE DETERMINATION AND REPORT. IF
THE CORPORATION MOVES TO FILE THE REPORT UNDER SEAL, THE
REPORT SHALL BE SERVED ON THE PARTIES SUBJECT TO AN
20150HB1398PN2375 - 27 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
APPROPRIATE STIPULATION AGREED TO BY THE PARTIES OR A
PROTECTIVE ORDER ISSUED BY THE COURT.
(2) THE CORPORATION SHALL FILE WITH THE COURT A MOTION,
PLEADING OR NOTICE CONSISTENT WITH THE DETERMINATION UNDER
SUBSECTION (E).
(3) IF THE DETERMINATION IS ONE DESCRIBED IN SUBSECTION
(E)(2), (3), (4), (5)(II), (6) OR (7), THE COURT SHALL
DETERMINE WHETHER THE MEMBERS OF THE COMMITTEE MET THE
QUALIFICATIONS REQUIRED UNDER SUBSECTION (C)(1) AND (2) AND
WHETHER THE COMMITTEE CONDUCTED ITS INVESTIGATION AND MADE
ITS RECOMMENDATION IN GOOD FAITH, INDEPENDENTLY AND WITH
REASONABLE CARE. IF THE COURT FINDS THAT THE MEMBERS OF THE
COMMITTEE MET THE QUALIFICATIONS REQUIRED UNDER SUBSECTION
(C)(1) AND (2) AND THAT THE COMMITTEE ACTED IN GOOD FAITH,
INDEPENDENTLY AND WITH REASONABLE CARE, THE COURT SHALL
ENFORCE THE DETERMINATION OF THE COMMITTEE. OTHERWISE, THE
COURT SHALL:
(I) DISSOLVE ANY STAY OF DISCOVERY ENTERED UNDER
SUBSECTION (B);
(II) ALLOW THE ACTION TO CONTINUE UNDER THE CONTROL
OF THE PLAINTIFF; AND
(III) PERMIT THE DEFENDANTS TO FILE PRELIMINARY
OBJECTIONS, OTHER APPROPRIATE PLEADINGS AND MOTIONS.
(G) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE.--THE
PROVISIONS OF THIS SECTION MAY NOT BE VARIED BY THE ARTICLES.
§ 1784. Proceeds and expenses.
(a) Proceeds.--Except as provided in subsection (b):
(1) any proceeds or other benefits of a derivative
action, whether by judgment, compromise or settlement, belong
to the business corporation and not to the plaintiff; and
20150HB1398PN2375 - 28 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(2) if the plaintiff OR ITS COUNSEL receives any
proceeds, the plaintiff shall remit them PROCEEDS SHALL BE
REMITTED immediately to the corporation.
(b) Expenses.--If a derivative action is successful in whole
or in part, the court may award the plaintiff reasonable
expenses, including reasonable attorney fees and costs, from the
recovery of the business corporation . , BUT IN NO EVENT SHALL THE
ATTORNEY FEES AWARDED EXCEED A REASONABLE PROPORTION OF THE
VALUE OF THE RELIEF, INCLUDING NONPECUNIARY RELIEF, OBTAINED BY
THE PLAINTIFF FOR THE CORPORATION.
(c) Certain provisions of articles ineffective.--This
section may not be relaxed by any provision of the articles.
Section 7. Section 1907 4146 of Title 15 is amended to read:
§ 1907. Purpose of fundamental transactions.
A transaction under Chapter 3 (relating to entity
transactions) or this chapter does not require an independent
business purpose in order for the transaction to be lawful.
§ 4146. PROVISIONS APPLICABLE TO ALL FOREIGN CORPORATIONS.
THE FOLLOWING PROVISIONS OF THIS SUBPART SHALL, EXCEPT AS
OTHERWISE PROVIDED IN THIS SECTION, BE APPLICABLE TO EVERY
FOREIGN CORPORATION FOR PROFIT, WHETHER OR NOT REQUIRED TO
[PROCURE A CERTIFICATE OF AUTHORITY UNDER THIS CHAPTER] REGISTER
UNDER CHAPTER 4 (RELATING TO FOREIGN ASSOCIATIONS):
SECTION 1503 (RELATING TO DEFENSE OF ULTRA VIRES), AS TO
CONTRACTS AND CONVEYANCES GOVERNED BY THE LAWS OF THIS
COMMONWEALTH AND CONVEYANCES AFFECTING REAL PROPERTY SITUATED IN
THIS COMMONWEALTH.
SECTION 1506 (RELATING TO FORM OF EXECUTION OF INSTRUMENTS),
AS TO INSTRUMENTS OR OTHER DOCUMENTS GOVERNED BY THE LAWS OF
THIS COMMONWEALTH OR AFFECTING REAL PROPERTY SITUATED IN THIS
20150HB1398PN2375 - 29 -
<--
<--
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
COMMONWEALTH.
SECTION 1510 (RELATING TO CERTAIN SPECIFICALLY AUTHORIZED
DEBT TERMS), AS TO OBLIGATIONS (AS DEFINED IN THE SECTION)
GOVERNED BY THE LAWS OF THIS COMMONWEALTH OR AFFECTING REAL
PROPERTY SITUATED IN THIS COMMONWEALTH.
SECTION 1782 (RELATING TO [ACTIONS AGAINST DIRECTORS AND
OFFICERS] ELIGIBLE SHAREHOLDER PLAINTIFFS AND SECURITY FOR
COSTS), AS TO ANY DERIVATIVE ACTION [OR PROCEEDING] BROUGHT IN A
COURT OF THIS COMMONWEALTH.
SUBCHAPTER F OF CHAPTER 25 (RELATING TO BUSINESS
COMBINATIONS), TO THE EXTENT PROVIDED IN SECTION 2551(C)
(RELATING TO CONTINUING APPLICABILITY).
Section 8. The definition of "charitable purposes" in
section 5103(a) of Title 15 is amended to read:
§ 5103. Definitions.
(a) General definitions.--Subject to additional definitions
contained in subsequent provisions of this subpart that are
applicable to specific provisions of this subpart, the following
words and phrases when used in this subpart shall have the
meanings given to them in this section unless the context
clearly indicates otherwise:
* * *
["Charitable purposes." The relief of poverty, the
advancement and provision of education, including postsecondary
education, the advancement of religion, the prevention and
treatment of disease or injury, including mental retardation and
mental disorders, governmental or municipal purposes, and any
other purpose the accomplishment of which is recognized as
important and beneficial to the public.]
* * *
20150HB1398PN2375 - 30 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Section 9. Title 15 is amended by adding a section to read:
§ 5781. Derivative action.
(a) General rule.--Subject to section 5782 (relating to
eligible derivative MEMBER plaintiffs and security for costs)
and subsection (b), a member PLAINTIFF may maintain a derivative
action to enforce a right of a nonprofit corporation only if:
(1) the member PLAINTIFF first makes a demand on THE
CORPORATION OR the board of directors, requesting that it
cause the corporation to bring an action to enforce the
right, unless demand is excused under subsection (b); and
(2) both:
(i) a special litigation committee is not appointed
under section 5783 (relating to special litigation
committee); and
(ii) the board does not bring the action within a
reasonable time. AND:
(I) IF A SPECIAL LITIGATION COMMITTEE IS NOT
APPOINTED UNDER SECTION 5783 (RELATING TO SPECIAL
LITIGATION COMMITTEE), THE CORPORATION DOES NOT BRING THE
ACTION WITHIN A REASONABLE TIME; OR
(II) IF A SPECIAL LITIGATION COMMITTEE IS APPOINTED
UNDER SECTION 5783, A DETERMINATION IS MADE:
(A) UNDER SECTION 5783(E)(1) THAT THE
CORPORATION NOT OBJECT TO THE ACTION; OR
(B) UNDER SECTION 5783(E)(5)(I) THAT THE
PLAINTIFF CONTINUE THE ACTION;
(2) DEMAND IS EXCUSED UNDER SUBSECTION (B);
(3) THE ACTION IS MAINTAINED FOR THE LIMITED PURPOSE OF
SEEKING COURT REVIEW UNDER SECTION 5783(F); OR
(4) THE COURT HAS ALLOWED THE ACTION TO CONTINUE UNDER
20150HB1398PN2375 - 31 -
<--
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
THE CONTROL OF THE PLAINTIFF UNDER SECTION 5783(F)(3)(II).
(b) Prior demand excused.--
(1) A demand under subsection (a)(1) is excused only if
the member makes a specific showing that IMMEDIATE AND
irreparable harm to the business NONPROFIT corporation would
otherwise result.
(2) If demand is excused under paragraph (1), demand
shall be made promptly after commencement of the action.
(c) Contents of demand.--A demand under this section shall
MUST BE IN RECORD FORM AND give notice with reasonable
specificity of the essential facts relied upon to support each
of the claims made in the demand.
(d) Additional claims.--If a derivative action is commenced
after a demand has been made under this section and includes a
claim that was not fairly subsumed under the demand, a new
demand must be made with respect to that claim. THE NEW DEMAND
SHALL NOT RELATE BACK TO THE DATE OF THE ORIGINAL DEMAND FOR
PURPOSES OF SUBSECTION (E).
(e) Statute of limitations.--The making of a demand tolls
any applicable statute of limitations with respect to a claim
asserted in the demand until the later EARLIER of the date:
(1) the member PLAINTIFF making the demand is notified
either:
(i) that the board of directors has decided not to
bring an action and not to appoint a special litigation
committee; or
(ii) of the determination under section 5783(e)
(relating to special litigation committee) of a special
litigation committee that has been appointed as provided
in section 5783; or
20150HB1398PN2375 - 32 -
<--
<--
<--
<--
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(2) the court determines under section 5783(f) either
to:
(i) enforce the determination of the special
litigation committee; or
(ii) allow the action to continue under the control
of the plaintiff.
(II) OF A DETERMINATION UNDER SECTION 5783(E) AFTER
THE APPOINTMENT OF A SPECIAL LITIGATION COMMITTEE UNDER
SECTION 5783; OR
(2) THE PLAINTIFF COMMENCES AN ACTION ASSERTING THE
CLAIM.
Section 10. Section 5782 heading AND (C) of Title 15 is ARE
amended to read:
§ 5782. [Actions against directors, members of an other body
and officers] Eligible derivative MEMBER plaintiffs
and security for costs .
* * *
(C) SECURITY FOR COSTS.--IN ANY ACTION OR PROCEEDING
INSTITUTED OR MAINTAINED BY LESS THAN THE SMALLER OF 50 MEMBERS
OF ANY CLASS OR 5% OF THE MEMBERS OF ANY CLASS OF THE
CORPORATION, THE CORPORATION IN WHOSE RIGHT THE ACTION OR
PROCEEDING IS BROUGHT SHALL BE ENTITLED AT ANY STAGE OF THE
PROCEEDINGS TO REQUIRE THE PLAINTIFFS TO GIVE SECURITY FOR THE
REASONABLE EXPENSES, INCLUDING ATTORNEY FEES, THAT MAY BE
INCURRED BY [IT] THE CORPORATION IN CONNECTION THEREWITH OR FOR
WHICH IT MAY BECOME LIABLE PURSUANT TO SECTION 5743 (RELATING TO
MANDATORY INDEMNIFICATION), BUT ONLY INSOFAR AS RELATES TO
ACTIONS BY OR IN THE RIGHT OF THE CORPORATION, TO WHICH SECURITY
THE CORPORATION SHALL HAVE RECOURSE IN SUCH AMOUNT AS THE COURT
DETERMINES UPON THE TERMINATION OF THE ACTION OR PROCEEDING. THE
20150HB1398PN2375 - 33 -
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
AMOUNT OF SECURITY MAY FROM TIME TO TIME BE INCREASED OR
DECREASED IN THE DISCRETION OF THE COURT UPON SHOWING THAT THE
SECURITY PROVIDED HAS OR [MAY] IS LIKELY TO BECOME INADEQUATE OR
EXCESSIVE. THE SECURITY MAY BE DENIED OR LIMITED [IN THE
DISCRETION OF] BY THE COURT [UPON PRELIMINARY SHOWING TO THE
COURT, BY APPLICATION AND UPON SUCH VERIFIED STATEMENTS AND
DEPOSITIONS AS MAY BE REQUIRED BY THE COURT, ESTABLISHING PRIMA
FACIE THAT THE REQUIREMENT OF FULL OR PARTIAL SECURITY WOULD
IMPOSE] IF THE COURT FINDS AFTER AN EVIDENTIARY HEARING THAT
UNDUE HARDSHIP ON PLAINTIFFS AND SERIOUS INJUSTICE WOULD RESULT.
* * *
Section 11. Title 15 is amended by adding sections to read:
§ 5783. Special litigation committee.
(a) General rule.--If a nonprofit corporation receives a
demand to bring an action to enforce a right of the corporation,
or if a derivative action is commenced before demand has been
made on the corporation, the corporation may appoint a special
litigation committee to investigate the claims asserted in the
demand or action and to determine on the basis of that
investigation whether pursuing any of the claims asserted is in
the best interests of the corporation.
(b) Discovery stay.--If the corporation appoints a special
litigation committee and an action is commenced before the
committee has made a determination under subsection (e):
(1) On motion by the committee made in the name of the
corporation, except for good cause shown, the court shall
stay discovery for the time reasonably necessary to permit
the committee to complete its investigation.
(2) The time for the defendants to plead shall be tolled
until the process provided for under subsection (f) has been
20150HB1398PN2375 - 34 -
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
completed.
(c) Composition of committee.--A special litigation
committee shall be composed of two or more individuals who:
(1) are not interested in the action;
(2) are capable as a group of objective judgment in the
circumstances; and
(3) may, but need not, be members, directors or members
of an other body.
(d) Appointment of committee.--A special litigation
committee may be appointed:
(1) by a majority of the directors not named as actual
or potential parties in the demand or action; or
(2) if all the directors are named as actual or
potential parties in the demand or action, by a majority of:
(i) the members of an other body not named as
parties in the proceeding if the other body has the
authority to appoint a special litigation committee; or
(ii) the directors so named.
(e) Determination by committee.--After appropriate
investigation, a special litigation committee may determine that
it is in the best interests of the nonprofit corporation that:
(1) an action based on some or all of the claims
asserted in the demand not be brought by the corporation but
that the corporation not object to an action being brought by
the party that made the demand:
(2) an action based on some or all of the claims
asserted in the demand be brought by the corporation;
(3) some or all of the claims asserted in the demand be
settled on terms approved by the committee;
(4) an action not be brought based on any of the claims
20150HB1398PN2375 - 35 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
ass