Bill Text: IA SSB1076 | 2015-2016 | 86th General Assembly | Introduced

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Bill Title: A study bill for an act relating to nonprofit corporations' powers and duties, document filings, meetings, mergers, voting procedures, and the functions of directors and officers.

Spectrum: Unknown

Status: (Introduced - Dead) 2015-01-22 - Judiciary: Hogg Chair,Kinney, and Schneider. [SSB1076 Detail]

Download: Iowa-2015-SSB1076-Introduced.html

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Senate Study Bill 1076 - Introduced
SENATE FILE _____
BY (PROPOSED COMMITTEE
ON JUDICIARY BILL BY
CHAIRPERSON SODDERS)
A BILL FOR
An Act relating to nonprofit corporations’ powers and duties,
document filings, meetings, mergers, voting procedures, and
the functions of directors and officers.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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Section 1. Section 504.111, Code 2015, is amended by adding
the following new subsection:
NEW SUBSECTION . 12. Whenever a provision of this chapter
permits any of the terms of a plan or a filed document to be
dependent on facts objectively ascertainable outside the plan
or filed document, all of the following provisions apply:
a. The manner in which the facts will operate upon the terms
of the plan or filed document shall be set forth in the plan or
filed document.
b. The facts may include any of the following:
(1) Any of the following that is available in a nationally
recognized news or information medium either in print or
electronically: statistical or market indices, market prices
of any security or group of securities, interest rates,
currency exchange rates, or similar economic or financial data.
(2) A determination or action by any person or body,
including the corporation or any other party to a plan or filed
document.
(3) The terms of, or actions taken under, an agreement to
which the corporation is a party, or any other agreement or
document.
c. As used in this subsection, all of the following apply:
(1) “Filed document” means a document filed with the
secretary of state under any provision of this chapter except
subchapter XV or section 504.1613.
(2) “Plan” means a plan of entity conversion or merger.
Sec. 2. Section 504.302, Code 2015, is amended by adding the
following new subsection:
NEW SUBSECTION . 16A. Serve as a trustee of a trust of which
the corporation is a beneficiary.
Sec. 3. Section 504.701, subsection 1, Code 2015, is amended
to read as follows:
1. A Except in the case of a corporation with members
that holds meetings only of delegates and not of the members,
a corporation with members shall hold a membership meeting
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annually at a time stated in or fixed in accordance with
the bylaws. The articles of incorporation or bylaws of a
corporation with members that holds meetings only of delegates
and not of members may provide for meetings of delegates to be
held less frequently than annually but at least once every six
years.
Sec. 4. Section 504.712, subsection 1, Code 2015, is amended
to read as follows:
1. The right of the members of a corporation, or any class
or classes of members, to vote may be limited, enlarged, or
denied to the extent specified Except as provided in the
articles of incorporation or , if the articles of incorporation
so provide, by the bylaws . Unless so limited, enlarged, or
denied , each member , regardless of class, shall be entitled to
one vote on each matter submitted to a vote of members.
Sec. 5. Section 504.805, subsection 1, Code 2015, is amended
to read as follows:
1. The articles or bylaws of a corporation must may specify
the terms of directors. If the term is not specified in the
articles or bylaws, the term of a director is one year. Except
for designated or appointed directors, and except as otherwise
provided in the articles or bylaws, the terms of directors
shall not exceed five years. In the absence of any term
specified in the articles or bylaws, the term of each director
shall be one year. Directors may be elected for successive
terms.
Sec. 6. Section 504.825, Code 2015, is amended to read as
follows:
504.825 Quorum and voting.
1. Except as otherwise provided in this chapter , or the
articles or bylaws of a corporation, a quorum of a board of
directors consists of a majority of the directors in office
immediately before a meeting begins.
2. The articles or bylaws shall not authorize a quorum of
fewer than one-third of the number of directors in office.
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2. 3. If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors present is the act
of the board unless a greater vote is required by this chapter ,
the articles of incorporation , or bylaws require the vote of
a greater number of directors .
4. A director who is present at a meeting of the board
of directors when corporate action is taken is considered to
have assented to the action taken unless any of the following
applies:
a. The director objects at the beginning of the meeting, or
promptly upon arrival, to holding the meeting or transacting
business at the meeting.
b. The director dissents or abstains from the action and any
of the following applies:
(1) The dissent or abstention is entered in the minutes of
the meeting.
(2) The director delivers notice in the form of a record of
the director’s dissent or abstention to the presiding officer
of the meeting before the meeting’s adjournment or to the
corporation promptly after adjournment of the meeting.
5. The right of dissent or abstention is not available to a
director who votes in favor of the action taken.
Sec. 7. Section 504.831, Code 2015, is amended by adding the
following new subsection:
NEW SUBSECTION . 2A. In discharging board or committee
duties, a director shall disclose, or cause to be disclosed,
to the other board or committee members information which
the director knows is not already known by them but is known
by the director to be material to the discharge of their
decision-making or oversight functions, except that disclosure
is not required to the extent that the director reasonably
believes that doing so would violate a duty imposed under law,
a legally enforceable obligation of confidentiality, or a
professional ethics rule.
Sec. 8. Section 504.834, Code 2015, is amended to read as
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follows:
504.834 Loans to or guarantees for directors and officers.
1. A corporation shall not lend money to or guarantee the
obligation of a director or officer of the corporation.
2. This section does not apply to the situation where the
director or officer is a full-time employee of the corporation
and involves any of the following:
a. An advance to pay reimbursable expenses reasonably
expected to be incurred by a director or officer.
b. An advance to pay premiums on a policy of life insurance
if the advance is secured by the cash value of the policy.
c. Advances pursuant to part 5.
d. Loans or advances pursuant to employee benefit plans.
e. A loan secured by the principal residence of an officer.
f. A loan to pay relocation expenses of an officer.
3. The fact that a loan or guarantee is made in violation of
this section does not affect the borrower’s liability on the
loan.
Sec. 9. Section 504.854, subsection 3, paragraph a,
subparagraph (2), Code 2015, is amended to read as follows:
(2) If there are fewer than two disinterested directors,
by the vote necessary for action by the board in accordance
with section 504.825, subsection 2 3 , in which authorization
directors who do not qualify as disinterested directors may
participate.
Sec. 10. Section 504.1104, Code 2015, is amended to read as
follows:
504.1104 Articles of merger.
1. After a plan of merger is has been adopted and approved
by the board of directors, and if as required by section
504.1103 , by the members and any other persons, the surviving
or acquiring corporation shall deliver to the secretary of
state this chapter, articles of merger setting shall be signed
on behalf of each party to the merger by an officer or other
duly authorized representative. The articles shall set forth
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all of the following , as applicable :
1. a. The plan of names of the parties to the merger.
2. b. If approval of members was not required, a statement
to that effect and a statement that the plan was approved
by a sufficient vote of the board of directors articles of
incorporation of the survivor of a merger are amended, or if
a new corporation is created as a result of the merger, the
amendments to the articles of incorporation of the survivor or
the articles of incorporation of the new corporation .
3. c. If the plan of merger required approval by the
members was required, both of the following: of a domestic
nonprofit corporation that was a party to the merger, a
statement that the plan was duly approved by the members and,
if voting by any separate voting group was required, by each
such separate voting group, in the manner required by this
chapter and the articles of incorporation or bylaws.
a. The designation, number of memberships outstanding,
number of votes entitled to be cast by each class entitled to
vote separately on the plan, and number of votes of each class
indisputably voting on the plan.
b. Either the total number of votes cast for and against the
plan by each class entitled to vote separately on the plan or
the total number of undisputed votes cast for the plan by each
class and a statement that the number of votes cast for the
plan by each class was sufficient for approval by that class.
d. If the plan of merger did not require approval by the
members of the domestic nonprofit corporation that was a party
to the merger, a statement to that effect.
4. e. If approval of the plan by some person or persons
other than the members of the board is required pursuant to
section 504.1103, subsection 1 , paragraph “c” , a statement that
the approval was obtained.
f. As to each foreign nonprofit corporation or eligible
entity that was a party to the merger, a statement that the
participation of the foreign corporation or eligible entity
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was duly authorized as required by the organic law of the
corporation or eligible entity.
2. Terms of the articles of merger may be dependent on facts
objectively ascertainable outside the articles in accordance
with section 504.111, subsection 12.
3. Articles of merger must be delivered to the secretary
of state for filing by the survivor of the merger and shall
take effect at the effective time provided in section 504.114.
Articles of merger filed under this section may be combined
with any filing required under the organic law of any domestic
eligible entity involved in the transaction if the combined
filing satisfies the requirements of both this section and the
other organic law.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
BILL’S PROVISIONS. This bill amends a number of provisions
affecting nonprofit corporations. It provides for filing
procedures (Code section 504.111) and the filing of articles
of merger (Code section 504.1104). The bill provides for the
powers of a nonprofit corporation, including by allowing it
to serve as both a trustee and beneficiary of a trust (Code
section 504.302). It also provides for the powers and duties
of members and its delegates as well as its directors and
officers. This includes requirements relating to meetings of
delegates (Code section 504.701), member voting (Code section
504.712), the terms of directors (Code section 504.805),
the voting of directors (Code section 504.825), the duty
of directors to disclose information material to corporate
action (Code section 504.831), and loans made by a nonprofit
corporation to full-time directors or officers (Code section
504.834).
BACKGROUND. The model nonprofit corporation Act (MNCA)
as drafted by the American Bar Association was enacted by
the general assembly in 2004 Iowa Acts, ch 1049, codified
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in Code chapter 504, and now referred to as the “Revised
Iowa Nonprofit Corporation Act” (Code section 504.101). A
nonprofit corporation is required to file a number of items
with the secretary of state including articles of incorporation
(subchapter I, part 2). It is managed by a board of directors
and operated by its officers and employees. Instead of
shareholders, the corporation may, but is not required to,
have members who may exercise their powers through delegates,
including the power to elect directors (Code sections 504.141
and 504.641).
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