House Study Bill 609 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON JUDICIARY BILL BY CHAIRPERSON NUNN) A BILL FOR An Act relating to certain corporations doing business in this 1 state, including restrictions and requirements imposed on 2 nonprofit corporations acquiring agricultural land used in 3 farming, and the duties and liabilities of directors of 4 for-profit and nonprofit corporations. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5183YC (5) 87 da/rn

H.F. _____ DIVISION I 1 NONPROFIT CORPORATIONS ACQUIRING AGRICULTURAL LAND 2 Section 1. Section 9H.1, subsection 20, Code 2018, is 3 amended to read as follows: 4 20. “Nonprofit corporation” means any of the following : 5 a. Corporations organized under the provisions of chapter 6 504 , Code 1989, or current chapter 504 ; or A corporation as 7 defined in section 504.141 that is not a foreign corporation 8 as described in paragraph “b” . 9 b. Corporations which qualify under 26 U.S.C. §501(c)(3) A 10 foreign corporation as defined in section 504.141 . 11 Sec. 2. Section 9H.4, subsection 1, paragraph b, 12 subparagraph (3), subparagraph division (a), subparagraph 13 subdivisions (i) and (iv), Code 2018, are amended to read as 14 follows: 15 (i) The corporation or limited liability company must not 16 hold the agricultural land other than as a lessee. The term 17 of the lease must be for not more than twelve years. The 18 corporation or limited liability company shall not renew a 19 lease. The corporation or limited liability company shall not 20 enter into a lease under this subparagraph subdivision, if the 21 corporation or limited liability company has ever entered into 22 another lease under this subparagraph (3), whether or not the 23 lease is in effect. However, this subparagraph subdivision 24 does not apply to a domestic nonprofit corporation organized 25 under chapter 504, Code 1989 , or current chapter 504 as defined 26 in section 9H.1, subsection 20, paragraph “a” . 27 (iv) The corporation or limited liability company must 28 deliver a copy of the lease to the secretary of state. The 29 secretary of state shall notify the lessee of receipt of the 30 copy of the lease. However, this subparagraph division does 31 not apply to a domestic nonprofit corporation organized under 32 chapter 504, Code 1989 , or current chapter 504 as defined in 33 section 9H.1, subsection 20, paragraph “a” . 34 Sec. 3. Section 9H.4, subsection 1, paragraph c, Code 2018, 35 -1- LSB 5183YC (5) 87 da/rn 1/ 4

H.F. _____ is amended to read as follows: 1 c. Agricultural land, including a leasehold interests 2 interest , acquired by a nonprofit corporation organized 3 under the provisions of chapter 504, Code 1989 , and current 4 chapter 504 as defined in section 9H.1, subsection 20, 5 paragraph “a” , including land acquired and operated by or for 6 a state university for research, experimental, demonstration, 7 foundation seed increase or test purposes and land acquired 8 and operated by or for nonprofit corporations organized 9 specifically for research, experimental, demonstration, 10 foundation seed increase or test purposes in support of or in 11 conjunction with a state university. 12 Sec. 4. Section 10B.1, subsection 9, Code 2018, is amended 13 by striking the subsection and inserting in lieu thereof the 14 following: 15 9. “Nonprofit corporation” means the same as defined in 16 section 9H.1. 17 DIVISION II 18 CORPORATIONS FOR PECUNIARY PROFIT 19 Sec. 5. Section 491.16A, Code 2018, is amended to read as 20 follows: 21 491.16A Directors and officers —— duties and liabilities. 22 Sections 490.830 , 490.831, and 490.833, sections 490.840 23 through 490.842 , sections 490.860 through 490.863, and section 24 490.870 apply to corporations organized under or subject to 25 this chapter . 26 DIVISION III 27 REVISED IOWA NONPROFIT CORPORATION ACT 28 Sec. 6. Section 504.832, subsection 1, paragraph a, Code 29 2018, is amended to read as follows: 30 a. That section 504.202, subsection 2 , paragraph “d” , or 31 section 504.901 or the protection afforded by section 504.833 32 or 504.836 , if interposed as a bar to the proceeding by the 33 director, does not preclude liability. 34 EXPLANATION 35 -2- LSB 5183YC (5) 87 da/rn 2/ 4

H.F. _____ The inclusion of this explanation does not constitute agreement with 1 the explanation’s substance by the members of the general assembly. 2 GENERAL. This bill makes changes to statutes involving 3 corporations operating on a for-profit basis under Code chapter 4 490, the “Iowa Business Corporation Act” or Code chapter 491, 5 or on a nonprofit basis under Code chapter 504, the “Revised 6 Iowa Nonprofit Corporation Act”. 7 NONPROFIT CORPORATIONS —— RESTRICTIONS AND REQUIREMENTS 8 CONCERNING AGRICULTURAL LAND HOLDINGS. The bill amends Code 9 chapter 9H which restricts certain business entities, including 10 corporations, from acquiring agricultural land suitable for 11 use in farming (Code section 9H.1(2)(14)). The bill also 12 amends related provisions in Code chapter 10B that require such 13 entities to file landholding reports with the secretary of 14 state (Code section 10B.1). Specifically, the bill replaces 15 language defining a nonprofit corporation as a business entity 16 “organized under” former Code chapter 504 as published in the 17 1989 edition of the Code (prior to its repeal) or current 18 Code chapter 504 with language that adopt by reference the 19 definition of a corporation as set forth in current Code 20 chapter 504, including a domestic nonprofit corporation 21 incorporated under its provisions and a foreign corporation 22 authorized to intersect business in this state (Code sections 23 504.141 and 504.119). A domestic corporation incorporated 24 under Code chapter 524A is subject to current Code chapter 504 25 (Code section 504.17a)The bill also makes the same change to 26 another statute that allows a nonprofit corporation to acquire 27 agricultural land for research or experimental purposes under 28 two exceptions: first, by a domestic nonprofit corporation for 29 research or experimental purposes (Code section 9H.4(1)(b)), 30 and second, by a domestic or foreign nonprofit corporation when 31 acting in association with a state university (Code section 32 9H.4(1)(c)). 33 CORPORATIONS FOR PECUNIARY PROFIT —— DIRECTOR’S CONFLICT 34 OF INTEREST TRANSACTIONS AND BUSINESS OPPORTUNITY EXCEPTION 35 -3- LSB 5183YC (5) 87 da/rn 3/ 4

H.F. _____ —— IOWA BUSINESS CORPORATION ACT. The bill provides that in 1 the case of a corporation organized under Code chapter 491, a 2 director’s “conflict of interest transaction” is subject to 3 the same requirements as provided for a corporation organized 4 under and therefor subject to Code chapter 490 (Code sections 5 490.860 through 490.863), including a so-called “safe harbor” 6 exception. The bill also allows a director of a corporation 7 organized under and subject to Code chapter 491 to take 8 advantage of another safe harbor known as the “business 9 opportunity” exception according to the same requirements that 10 apply to a director of a corporation organized and subject to 11 Code chapter 490 (Code section 490.870). 12 NONPROFIT CORPORATIONS SUBJECT TO REVISED IOWA NONPROFIT 13 CORPORATION ACT —— STANDARD OF LIABILITY FOR DIRECTORS —— 14 BUSINESS OPPORTUNITY EXCEPTION. The bill provides that for 15 a plaintiff to move forward in a legal or equitable action 16 alleging a director is liable for violating the duty of care 17 owed to the nonprofit corporation, the plaintiff must establish 18 that the director’s liability is not precluded by the director 19 having acted under the business opportunity exception if such 20 a defense is raised (“interposed as a bar to the proceeding”) 21 (Code sections 504.832 and 504.836). 22 -4- LSB 5183YC (5) 87 da/rn 4/ 4