PRIOR PRINTER'S NO. 402 PRINTER'S NO. 2193
No. 393 Session of 1999
INTRODUCED BY GREENLEAF, WAGNER, LEMMOND, O'PAKE, BOSCOLA, HART,
WHITE, FUMO, MURPHY, SALVATORE, STOUT, THOMPSON AND SLOCUM,
FEBRUARY 12, 1999
SENATOR TILGHMAN, APPROPRIATIONS, RE-REPORTED AS AMENDED,
OCTOBER 3, 2000
AN ACT
1 Amending Titles 15 (Corporations and Unincorporated
2 Associations) and 54 (Names) of the Pennsylvania Consolidated
3 Statutes, relating to associations; making revisions,
4 corrections and additions; and making repeals.
5 The General Assembly of the Commonwealth of Pennsylvania
6 hereby enacts as follows:
7 Section 1. Short title.
8 This act shall be known and may be cited as the GAA
9 Amendments Act of (in preparing this act for printing in the
10 Laws of Pennsylvania, the Legislative Reference Bureau shall
11 insert here, in lieu of this statement, the calendar year of
12 enactment of this act).
13 Section 2. Amendment of Title 15.
14 As much of Title 15 as is hereinafter set forth is amended or
15 added to read:
16 § 102. Definitions.
17 Subject to additional or inconsistent definitions contained
18 in subsequent provisions of this title that are applicable to
1 specific provisions of this title, the following words and
2 phrases when used in this title shall have, unless the context
3 clearly indicates otherwise, the meanings given to them in this
4 section:
5 * * *
6 "Limited liability company." A domestic or foreign limited
7 liability company as defined in section 8903 (relating to
8 definitions and index of definitions).
9 "Profession." Includes the performance of any type of
10 personal service to the public that requires as a condition
11 precedent to the performance of the service the obtaining of a
12 license or admission to practice or other legal authorization
13 from the Supreme Court of Pennsylvania or a licensing board or
14 commission under the Bureau of Professional and Occupational
15 Affairs in the Department of State. Except as otherwise
16 expressly provided by law, this definition shall be applicable
17 to this title only and shall not affect the interpretation of
18 any other statute or any local zoning ordinance or other
19 official document heretofore or hereafter enacted or
20 promulgated.
21 "Professional services." Any type of services that may be
22 rendered by a member of a profession within the purview of his
23 profession.
24 * * *
25 § 133. POWERS OF DEPARTMENT OF STATE. <--
26 * * *
27 (F) ADMINISTRATIVE REVIEW.--IF THE DEPARTMENT DETERMINES
28 THAT A SUBMISSION OR FILING UNDER 13 PA.C.S. IS FRAUDULENT, THE
29 DEPARTMENT SHALL REJECT THE SUBMISSION OR REMOVE THE FILING FROM
30 ITS RECORDS, SUBJECT TO THE RIGHT OF THE FILING PARTY RECEIVING
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1 NOTICE AND, IF REQUESTED, A HEARING. ANY SUCH HEARING SHALL BE
2 CONDUCTED IN ACCORDANCE WITH THE PROVISIONS OF 2 PA.C.S. CHS. 5
3 SUBCH. A (RELATING TO PRACTICE AND PROCEDURE OF COMMONWEALTH
4 AGENCIES) AND 7 (RELATING TO JUDICIAL REVIEW OF COMMONWEALTH
5 AGENCY ACTION).
6 (1) FOR A FILING TO BE FOUND FRAUDULENT, THE HEARING
7 EXAMINER MUST DETERMINE THAT THE FILING LACKS ANY VALID
8 BASIS.
9 (2) SUBJECT TO THE RIGHT OF NOTICE, AND IF AFTER A
10 HEARING AND ADJUDICATION BY THE DEPARTMENT, IT IS DETERMINED
11 THAT A FILING OR SUBMISSION IS FRAUDULENT, THE FILING PARTY
12 SHALL BE RESPONSIBLE FOR ALL COSTS INCURRED BY THE DEPARTMENT
13 IN REACHING SUCH A FINAL DETERMINATION, INCLUDING
14 REIMBURSEMENT FOR THE COSTS OF ANY HEARING. THE FILING PARTY
15 MAY ALSO BE SUBJECT TO A CIVIL PENALTY NOT EXCEEDING $500 PER
16 FRAUDULENT FILING. THE IMPOSITION OF CIVIL PENALTIES SHALL BE
17 IN ADDITION TO THE ASSESSMENT OF COSTS INCURRED BY THE
18 DEPARTMENT.
19 § 134. Docketing statement.
20 (a) General rule.--The Department of State may, but shall
21 not be required to, prescribe by regulation one or more official
22 docketing statement forms designed to elicit from a person
23 effecting a filing under this title information that the
24 department has found to be necessary or desirable in connection
25 with the processing of a filing. [A docketing statement
26 submitted with the articles of incorporation or division of a
27 proposed domestic corporation for profit or not-for-profit, the
28 articles of domestication or application for a certificate of
29 authority of a foreign corporation for profit or not-for-profit
30 or the certificate of election of an electing partnership shall
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1 set forth, inter alia, the kind or kinds of business in which
2 the association actually intends to engage in this Commonwealth
3 within one year of the submission of the docketing statement. A
4 docketing statement submitted with articles of incorporation,
5 consolidation or division of a domestic corporation not-for-
6 profit or an application for a certificate of authority of a
7 foreign corporation not-for-profit shall set forth with respect
8 to the new corporation or corporations resulting therefrom,
9 inter alia, the statute by or under which it was incorporated,
10 the date of incorporation, the names and residence addresses of
11 its chief executive officer, secretary and treasurer, regardless
12 of the names or titles by which they may be designated, the
13 address of its principal place of business and the amount, if
14 any, of its authorized and issued capital stock.] A form of
15 docketing statement prescribed under this subsection:
16 (1) Shall be published in the Pennsylvania Code.
17 (2) Shall not be integrated into a single document
18 covering the requirements of the filing and its related
19 docketing statement.
20 (3) May be required by the department in connection with
21 a filing only if notice of the requirement appears on the
22 official format for the filing prescribed under section
23 133(d) (relating to physical characteristics and copies of
24 documents).
25 (4) Shall not be required to be submitted on department-
26 furnished forms.
27 (5) Shall not constitute a document filed in, with or by
28 the department for the purposes of this title or any other
29 provision of law except 18 Pa.C.S. § 4904 (relating to
30 unsworn falsification to authorities).
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1 (b) Transmission to Department of Revenue.--The department
2 shall note on the docketing statement the fact and date of the
3 filing [of articles of incorporation, consolidation, merger,
4 division, conversion or domestication or certificate of election
5 or issuance of the certificate of authority, as the case may be,
6 upon the docketing statement] to which the docketing statement
7 relates and shall transmit a copy of [it] the docketing
8 statement or the information contained therein to the Department
9 of Revenue. If a docketing statement is not required for a
10 particular filing, the Department of State may transmit a copy
11 of the filing or the information contained therein to the
12 Department of Revenue at no cost to the person effecting the
13 filing.
14 (c) Transmission to other agencies.--If the docketing
15 statement delivered to the Department of State sets forth any
16 kind of business in which a corporation, partnership or other
17 association may not engage without the approval of or a license
18 from any department, board or commission of the Commonwealth,
19 the Department of State shall, upon [the filing of articles of
20 incorporation, consolidation, division or domestication or
21 certificate of election or issuance of the certificate of
22 authority] processing the filing, promptly transmit a copy of
23 the docketing statement or the information contained therein to
24 each such department, board or commission.
25 § 135. Requirements to be met by filed documents. <--
26 * * *
27 (e) Distinguishable names.--A name shall not be considered
28 distinguishable upon the records of the department from another
29 name for purposes of this title and Title 54 (relating to names)
30 solely because the names differ from each other in any or all of
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1 the following respects:
2 (1) the use of punctuation marks;
3 (2) the use of the definite or indefinite article; or
4 (3) the use of any of the following terms to designate
5 the status of an association: "corporation," "company,"
6 "incorporated," "limited," "association," "fund,"
7 "syndicate," "limited partnership," "limited liability
8 company," "trust" or "business trust" or abbreviations of any
9 of the foregoing terms or words or abbreviations of like
10 import in languages other than English.
11 § 138. Statement of correction.
12 * * *
13 (b) Effect of filing.--
14 * * *
15 (2) A filing under this section shall not have the
16 effect of causing original articles of incorporation of a
17 corporation or a similar type of document creating any other
18 form of association to be stricken from the records of the
19 department but the articles or other document may be
20 corrected under this section.
21 * * *
22 (d) Cross reference.--See section 135 (relating to
23 requirements to be met by filed documents).
24 § 139. Tax clearance of certain fundamental transactions.
25 [A] (a) General rule.--Except as provided in subsection (c),
26 a domestic association shall not file articles or a certificate
27 of merger or consolidation effecting a merger or consolidation
28 into a nonqualified foreign association or articles or a
29 certificate of dissolution or a statement of revival, a
30 qualified foreign association shall not file an application for
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1 termination of authority or similar document in the Department
2 of State and a domestic association shall not file articles or a
3 certificate of division dividing solely into nonqualified
4 foreign associations unless the articles, certificate,
5 application or other document are accompanied by clearance
6 certificates from the Department of Revenue and the Office of
7 Employment Security of the Department of Labor and Industry,
8 evidencing the payment by the association of all taxes and
9 charges due the Commonwealth required by law.
10 (b) Tax clearance in judicial proceedings.--Until the
11 clearance certificates described in subsection (a) have been
12 filed with the court:
13 (1) The court shall not order the dissolution of a
14 domestic business corporation, nonprofit corporation or
15 business trust.
16 (2) The court shall not approve a final distribution of
17 the assets of a domestic general partnership, limited
18 partnership, electing partnership or limited liability
19 company if the court is supervising the winding up of the
20 association.
21 (c) Alternative provisions.--If clearance certificates are
22 filed with the court as required under subsection (b), it shall
23 not be necessary to file the clearance certificates with the
24 Department of State.
25 § 161. Domestication of certain alien associations.
26 * * *
27 (b) Statement of domestication.--The statement of
28 domestication shall be executed by the association and shall set
29 forth in the English language:
30 (1) The name of the association. If the name is in a
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1 foreign language, it shall be set forth in Roman letters or
2 characters or Arabic or Roman numerals. If the name is one
3 that is rendered unavailable for use by a corporation by any
4 provision of section 1303(b) or (c) (relating to corporate
5 name), the association shall adopt a new name, in accordance
6 with any procedures for changing the name of the association
7 that are applicable prior to the domestication of the
8 association, and shall set forth the new name in the
9 statement.
10 (2) The name of the jurisdiction under the laws of which
11 and the date on which it was first formed, incorporated or
12 otherwise came into being.
13 (3) The name of the jurisdiction that constituted the
14 seat, siege social or principal place of business or control
15 administration of the association, or any equivalent under
16 applicable law, immediately prior to the filing of the
17 statement.
18 (4) A statement [that upon domestication the association
19 will be a domestic association under the laws of this
20 Commonwealth] of the type of domestic association that the
21 association will be upon domestication.
22 (5) A statement that the filing of the statement of
23 domestication and, if desired, the renunciation of the prior
24 domicile has been authorized (unless its charter or other
25 organic documents require a greater vote) by a majority in
26 interest of the shareholders, members or other proprietors of
27 the association.
28 (6) If the association will be a type of domestic
29 association that is created by a filing in the department,
30 such other provisions as are required to be included in an
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1 initial filing to create that type of domestic association,
2 except that it shall not be necessary to set forth the name
3 of the person organizing the association.
4 (7) Any other provision that the association may choose
5 to insert unless this title prohibits the inclusion of such a
6 provision in a filing that creates the type of domestic
7 association that the association will be upon domestication.
8 (c) Execution.--The statement shall be signed on behalf of
9 the association by any authorized person.
10 (d) Effect of domestication.--Upon the filing of the
11 statement of domestication, the association shall be
12 domesticated in this Commonwealth and the association shall
13 thereafter be subject to any applicable provisions of this
14 title[, except Subpart B of Part II (relating to business
15 corporations),] and [to] any other provisions of law applicable
16 to associations existing under the laws of this Commonwealth. If
17 the association will be a type of domestic association that is
18 created by a filing in the department, the statement of
19 domestication shall constitute that filing. The domestication of
20 any association in this Commonwealth pursuant to this section
21 shall not be deemed to affect any obligations or liabilities of
22 the association incurred prior to its domestication.
23 (e) Exclusion.--An association that can be domesticated
24 under [section 4161 (relating to domestication) or 6161
25 (relating to domestication)] any of the following sections shall
26 not be domesticated under this section:
27 Section 4161 (relating to domestication).
28 Section 6161 (relating to domestication).
29 Section 8590 (relating to domestication).
30 Section 8982 (relating to domestication).
19990S0393B2193 - 9 -
1 Section 9501(a)(1)(ii) (relating to application and
2 effect of chapter).
3 (f) Definition.--As used in this section, the term
4 "association," except as restricted by subsection (e), includes
5 any alien incorporated organization, private law corporation
6 (whether or not organized for business purposes), public law
7 corporation, partnership, proprietorship, joint venture,
8 foundation, trust, association or similar organization or entity
9 existing under the laws of any jurisdiction other than this
10 Commonwealth.
11 (g) Cross [reference] references.--See [section] sections
12 134 (relating to docketing statement) and 135 (relating to
13 requirements to be met by filed documents).
14 § 162. Contingent domestication of certain alien associations.
15 * * *
16 (c) Statement of consummation of domestication.--At any time
17 after the filing of a statement of contingent domestication, the
18 association may file in the department a statement of
19 consummation of domestication which shall be executed by the
20 association and shall set forth:
21 (1) The name of the association[. If the name is in a
22 foreign language, it shall be set forth in Roman letters or
23 characters or Arabic or Roman numerals.] as set forth in its
24 statement of contingent domestication.
25 * * *
26 (j) Cross [reference] references.--See [section] sections
27 134 (relating to docketing statement) and 135 (relating to
28 requirements to be met by filed documents).
29 § 1106. UNIFORM APPLICATION OF SUBPART. <--
30 * * *
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1 (B) EXCEPTIONS.--
2 * * *
3 (3) SUBSECTION (A) SHALL NOT ADVERSELY AFFECT THE RIGHTS
4 SPECIFICALLY PROVIDED FOR OR SAVED IN THIS SUBPART. SEE:
5 THE PROVISIONS OF SECTION 1524(E) (RELATING TO
6 TRANSITIONAL PROVISION).
7 THE PROVISIONS OF SECTION 1554(C) (RELATING TO
8 TRANSITIONAL PROVISION).
9 THE CUMULATIVE VOTING RIGHTS SET FORTH IN SECTION
10 1758(C)(2) (RELATING TO CUMULATIVE VOTING).
11 THE SPECIAL VOTING REQUIREMENTS SPECIFIED IN SECTION
12 1931(H) (RELATING TO SPECIAL REQUIREMENTS).
13 THE [SPECIAL VOTING REQUIREMENTS SPECIFIED IN SECTION
14 1952(H) (RELATING TO SPECIAL REQUIREMENTS).] PROVISIONS
15 OF SECTION 1952(G) AND (H) (RELATING TO PROPOSAL AND
16 ADOPTION OF PLAN OF DIVISION).
17 THE PROVISIONS OF SECTION 2301(D) (RELATING TO
18 TRANSITIONAL PROVISIONS).
19 THE PROVISIONS OF SECTION 2541(A)(2) AND (3) AND (C)
20 (RELATING TO APPLICATION AND EFFECT OF SUBCHAPTER).
21 THE PROVISIONS OF SECTION 2543(B)(1) AND (2)
22 (RELATING TO EXCEPTIONS GENERALLY).
23 THE PROVISIONS OF SECTION 2551(B)(3)(I), (5) AND (6)
24 (RELATING TO EXCEPTIONS).
25 THE PROVISIONS OF SECTION 2553(B)(2) (RELATING TO
26 EXCEPTION).
27 * * *
28 § 1303. Corporate name.
29 * * *
30 (b) Duplicate use of names.--The corporate name shall [not <--
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1 be the same as or confusingly similar to] be distinguishable
2 upon the records of the Department of State from:
3 (1) The name of any other domestic corporation for
4 profit or not-for-profit which is either in existence or for
5 which articles of incorporation have been filed but have not
6 yet become effective, or of any foreign corporation for
7 profit or not-for-profit which is either authorized to do
8 business in this Commonwealth or for which an application for
9 a certificate of authority has been filed but has not yet
10 become effective, [or of any domestic or foreign limited
11 partnership that has filed in the Department of State a
12 certificate or qualified under Chapter 85 (relating to
13 limited partnerships) or under corresponding provisions of
14 prior law,] or the name of any association registered at any
15 time under 54 Pa.C.S. Ch. 5 (relating to corporate and other
16 association names), unless[: (i) where the name is the same
17 or confusingly similar,] the other association:
18 [(A)] (i) has stated that it is about to change
19 its name, or to cease to do business, or is being
20 wound up, or is a foreign association about to
21 withdraw from doing business in this Commonwealth,
22 and the statement and [the] a written consent [of the
23 other association] to the adoption of the name
24 executed by the other association is filed in the
25 Department of State;
26 [(B)] (ii) has filed with the Department of
27 Revenue a certificate of out of existence, or has
28 failed for a period of three successive years to file
29 with the Department of Revenue a report or return
30 required by law and the fact of such failure has been
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1 certified by the Department of Revenue to the
2 Department of State;
3 [(C)] (iii) has abandoned its name under the
4 laws of its jurisdiction of incorporation, by
5 amendment, merger, consolidation, division,
6 expiration, dissolution or otherwise, without its
7 name being adopted by a successor in a merger,
8 consolidation, division or otherwise, and an official
9 record of that fact, certified as provided by 42
10 Pa.C.S. § 5328 (relating to proof of official
11 records), is presented by any person to the
12 department; or
13 [(D)] (iv) has had the registration of its name
14 under 54 Pa.C.S. Ch. 5 terminated and, if the
15 termination was effected by operation of 54 Pa.C.S. §
16 504 (relating to effect of failure to make decennial
17 filings), the application for the use of the name is
18 accompanied by a verified statement stating that at
19 least 30 days' written notice of intention to
20 appropriate the name was given to the delinquent
21 association at its [registered office] last known
22 place of business and that, after diligent search by
23 the affiant, the affiant believes the association to
24 be out of existence.[; or
25 (ii) where the name is confusingly similar, the
26 consent of the other association to the adoption of the
27 name is filed in the Department of State.
28 The consent of the association shall be evidenced by a
29 statement to that effect executed by the association.]
30 * * *
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1 (e) Remedies for violation of section.--The use of a name in
2 violation of this section shall not vitiate or otherwise affect
3 the corporate existence but any court having jurisdiction may
4 enjoin the corporation from using or continuing to use a name in
5 violation of this section, upon the application of:
6 (1) the Attorney General, acting on his own motion or at
7 the instance of any administrative department, board or
8 commission of this Commonwealth; or
9 (2) any person adversely affected.[;
10 may enjoin the corporation from using or continuing to use a
11 name in violation of this section.]
12 (f) Cross references.--See sections 135(e) (relating to
13 distinguishable names) and 1106(b)(2) (relating to uniform
14 application of subpart).
15 § 1304. Required name changes by senior corporations.
16 * * *
17 (b) Enforcement of undertaking to release name.--If a
18 corporation has used a name [the same as or confusingly similar <--
19 to] that is not distinguishable upon the records of the
20 Department of State from the name of another corporation or
21 other association as permitted by section [1303(b)(1)(i)]
22 1303(b)(1) [WHICH] THAT IS NOT DISTINGUISHABLE UPON THE RECORDS <--
23 OF THE [DEPARTMENT] DEPARTMENT OF STATE FROM THE NAME OF ANOTHER
24 CORPORATION OR OTHER ASSOCIATION AS PERMITTED BY SECTION
25 1303(B)(1) (relating to duplicate use of names) and the other
26 corporation or other association continues to use its name in
27 this Commonwealth and does not change its name, cease to do
28 business, be wound up or withdraw as it proposed to do in its
29 consent or change its name as required by subsection (a), any
30 court having jurisdiction may enjoin the other corporation or
19990S0393B2193 - 14 -
1 other association from continuing to use its name or a name that
2 is not distinguishable therefrom, upon the application of:
3 (1) the Attorney General, acting on his own motion or at
4 the instance of any administrative department, board or
5 commission of this Commonwealth; or
6 (2) any person adversely affected.[; <--
7 may enjoin the other corporation or other association from
8 continuing to use its name or a confusingly similar name.]
9 (2) ANY PERSON ADVERSELY AFFECTED[; <--
10 MAY ENJOIN THE OTHER CORPORATION OR OTHER ASSOCIATION FROM
11 CONTINUING TO USE ITS NAME].
12 § 1311. Filing of statement of summary of record by certain
13 corporations.
14 (a) General rule.--Where any of the [valid] charter
15 documents of a business corporation are not on file in the
16 Department of State or there is an error in any such document as
17 transferred to the department pursuant to section 140 (relating
18 to custody and management of orphan corporate and business
19 records), and the corporation desires to file any document in
20 the department under any other provision of this subpart or the
21 corporation desires to secure from the department any
22 certificate to the effect that the corporation is a corporation
23 duly incorporated and existing under the laws of this
24 Commonwealth or a certified copy of the articles of the
25 corporation or the corporation desires to correct the text of
26 its charter documents as on file in the department, the
27 corporation shall file in the department a statement of summary
28 of record which shall be executed by the corporation and shall
29 set forth:
30 (1) The name of the corporation and, subject to section
19990S0393B2193 - 15 -
1 109 (relating to name of commercial registered office
2 provider in lieu of registered address), the location,
3 including street and number, if any, of its registered
4 office.
5 (2) The statute by or under which the corporation was
6 incorporated.
7 (3) The name under which, the manner in which and the
8 date on which the corporation was originally incorporated,
9 including the date when and the place where the original
10 articles were recorded.
11 (4) The place or places, including volume and page
12 numbers or their equivalent, where the documents
13 [constituting the currently effective articles are] that are
14 not on file in the department or that require correction in
15 the records of the department were originally filed or
16 recorded, the date or dates of each filing or recording and
17 the correct text of the [currently effective articles.]
18 documents. The information specified in this paragraph may be
19 omitted in a statement of summary of record that is delivered
20 to the department contemporaneously with amended and restated
21 articles of the corporation filed under this subpart.
22 [(5) Each name by which the corporation was known, if
23 any, other than its original name and its current name, and
24 the date or dates on which each change of name of the
25 corporation became effective.
26 (6) In the case of any entity brought within the scope
27 of Chapter 29 (relating to professional corporations) by or
28 pursuant to section 2905 (relating to election of
29 professional associations to become professional
30 corporations), amended and restated articles of incorporation
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1 which shall include all of the information required to be set
2 forth in restated articles of a professional corporation.
3 A corporation shall be required to make only one filing under
4 this subsection.]
5 (b) Validation of prior defects in incorporation.--Upon the
6 filing of a statement by a corporation under this section or the
7 transfer to the department of the records relating to a
8 corporation pursuant to section 140, the corporation [named in
9 the statement] shall be deemed to be a validly subsisting
10 corporation to the same extent as if it had been duly
11 incorporated and was existing under this subpart and the
12 department shall so certify regardless of any absence of or
13 defect in the prior proceedings relating to incorporation.
14 (c) Cross [reference] references.--See [section] sections
15 134 (relating to docketing statement), 135 (relating to
16 requirements to be met by filed documents) and 1106(b)(2)
17 (relating to uniform application of subpart).
18 § 1505. Persons bound by bylaws.
19 Except as otherwise provided by section 1713 (relating to
20 personal liability of directors) or any similar provision of
21 law, the bylaws of a business corporation shall operate only as
22 regulations among the shareholders, directors and officers of
23 the corporation and shall not affect contracts or other dealings
24 with other persons unless those persons have actual knowledge of
25 the bylaws.
26 § 1508. Corporate records; inspection by shareholders.
27 (a) Required records.--Every business corporation shall keep
28 complete and accurate books and records of account, minutes of
29 the proceedings of the incorporators, shareholders and directors
30 and a share register giving the names and addresses of all
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1 shareholders and the number and class of shares held by each.
2 The share register shall be kept at [either] any of the
3 following locations:
4 (1) the registered office of the corporation in this
5 Commonwealth [or at its];
6 (2) the principal place of business of the corporation
7 wherever situated;
8 (3) any actual business office of the corporation; or
9 [at]
10 (4) the office of [its] the registrar or transfer agent
11 of the corporation. [Any books, minutes or other records may
12 be in written form or any other form capable of being
13 converted into written form within a reasonable time.]
14 (b) Right of inspection by a shareholder.--Every shareholder
15 shall, upon written verified demand stating the purpose thereof,
16 have a right to examine, in person or by agent or attorney,
17 during the usual hours for business for any proper purpose, the
18 share register, books and records of account, and records of the
19 proceedings of the incorporators, shareholders and directors and
20 to make copies or extracts therefrom. A proper purpose shall
21 mean a purpose reasonably related to the interest of the person
22 as a shareholder. In every instance where an attorney or other
23 agent is the person who seeks the right of inspection, the
24 demand shall be accompanied by a verified power of attorney or
25 other writing that authorizes the attorney or other agent to so
26 act on behalf of the shareholder. The demand shall be directed
27 to the corporation:
28 (1) at its registered office in this Commonwealth [or];
29 (2) at its principal place of business wherever
30 situated; or
19990S0393B2193 - 18 -
1 (3) in care of the person in charge of an actual
2 business office of the corporation.
3 (c) Proceedings for the enforcement of inspection by a
4 shareholder.--If the corporation, or an officer or agent
5 thereof, refuses to permit an inspection sought by a shareholder
6 or attorney or other agent acting for the shareholder pursuant
7 to subsection (b) or does not reply to the demand within five
8 business days after the demand has been made, the shareholder
9 may apply to the court for an order to compel the inspection.
10 The court shall determine whether or not the person seeking
11 inspection is entitled to the inspection sought. The court may
12 summarily order the corporation to permit the shareholder to
13 inspect the share register and the other books and records of
14 the corporation and to make copies or extracts therefrom, or the
15 court may order the corporation to furnish to the shareholder a
16 list of its shareholders as of a specific date on condition that
17 the shareholder first pay to the corporation the reasonable cost
18 of obtaining and furnishing the list and on such other
19 conditions as the court deems appropriate. Where the shareholder
20 seeks to inspect the books and records of the corporation, other
21 than its share register or list of shareholders, he shall first
22 establish:
23 (1) That he has complied with the provisions of this
24 section respecting the form and manner of making demand for
25 inspection of the document.
26 (2) That the inspection he seeks is for a proper
27 purpose.
28 Where the shareholder seeks to inspect the share register or
29 list of shareholders of the corporation and he has complied with
30 the provisions of this section respecting the form and manner of
19990S0393B2193 - 19 -
1 making demand for inspection of the documents, the burden of
2 proof shall be upon the corporation to establish that the
3 inspection he seeks is for an improper purpose. The court may,
4 in its discretion, prescribe any limitations or conditions with
5 reference to the inspection or award such other or further
6 relief as the court deems just and proper. The court may order
7 books, documents and records, pertinent extracts therefrom, or
8 duly authenticated copies thereof, to be brought into this
9 Commonwealth and kept in this Commonwealth upon such terms and
10 conditions as the order may prescribe.
11 (d) Certain provisions of articles ineffective.--This
12 section may not be relaxed by any provision of the articles.
13 (e) Cross [reference] references.--See [section] sections
14 107 (relating to form of records), 1512 (relating to
15 informational rights of a director) and 1763(c) (relating to
16 certification by nominee).
17 § 1512. Informational rights of a director.
18 (a) General rule.--To the extent reasonably related to the
19 performance of the duties of the director, including those
20 arising from service as a member of a committee of the board of
21 directors, a director of a business corporation is entitled:
22 (1) in person or by any attorney or other agent, at any
23 reasonable time, to inspect and copy corporate books, records
24 and documents and, in addition, to inspect, and receive
25 information regarding, the assets, liabilities and operations
26 of the corporation and any subsidiaries of the corporation
27 incorporated or otherwise organized or created under the laws
28 of this Commonwealth that are controlled directly or
29 indirectly by the corporation; and
30 (2) to demand that the corporation exercise whatever
19990S0393B2193 - 20 -
1 rights it may have to obtain information regarding any other
2 subsidiaries of the corporation.
3 (b) Proceedings for enforcement of inspection by a
4 director.--If the corporation, or an officer or agent thereof,
5 refuses to permit an inspection or obtain or provide information
6 sought by a director or attorney or other agent acting for the
7 director pursuant to subsection (a) or does not reply to the
8 request within two business days after the request has been
9 made, the director may apply to the court for an order to compel
10 the inspection or the obtaining or providing of the information.
11 The court shall summarily order the corporation to permit the
12 requested inspection or to obtain the information unless the
13 corporation establishes that the information to be obtained by
14 the exercise of the right is not reasonably related to the
15 performance of the duties of the director or that the director
16 or the attorney or agent of the director is likely to use the
17 information in a manner that would violate the duty of the
18 director to the corporation. The order of the court may contain
19 provisions protecting the corporation from undue burden or
20 expense and prohibiting the director from using the information
21 in a manner that would violate the duty of the director to the
22 corporation.
23 (c) Cross references.--See sections 107 (relating to form of
24 records) and 1508 (relating to corporate records; inspection by
25 shareholders) and 42 Pa.C.S. § 2503(7) (relating to right of
26 participants to receive counsel fees).
27 § 1521. Authorized shares.
28 * * *
29 (b) Provisions specifically authorized.--
30 (1) Without limiting the authority contained in
19990S0393B2193 - 21 -
1 subsection (a), a corporation, when so authorized in its
2 articles, may issue classes or series of shares:
3 (i) Subject to the right or obligation of the
4 corporation to redeem any of the shares for the
5 consideration, if any, fixed by or in the manner provided
6 by the articles for the redemption thereof. Unless
7 otherwise provided in the articles, any shares subject to
8 redemption shall be redeemable only pro rata or by lot or
9 by such other equitable method as may be selected by the
10 corporation. [An amendment of the articles to add or
11 amend a provision permitting the redemption of any shares
12 by a method that is not pro rata nor by lot nor otherwise
13 equitable may be effected only pursuant to section 1906
14 (relating to special treatment of holders of shares of
15 same class or series).]
16 (ii) Entitling the holders thereof to cumulative,
17 noncumulative or partially cumulative dividends.
18 (iii) Having preference over any other shares as to
19 dividends or assets or both.
20 (iv) Convertible into shares of any other class or
21 series, or into obligations of the corporation.
22 (2) Any of the terms of a class or series of shares may
23 be made dependent upon:
24 (i) Facts ascertainable outside of the articles if
25 the manner in which the facts will operate upon the terms
26 of the class or series is set forth in the articles. Such
27 facts may include, without limitation, actions or events
28 within the control of or determinations made by the
29 corporation or a representative of the corporation.
30 * * *
19990S0393B2193 - 22 -
1 (d) Status and rights.--Shares of a business corporation
2 shall be deemed personal property. Except as otherwise provided
3 by the articles or, when so permitted by subsection (c), by one
4 or more bylaws adopted by the shareholders, each share shall be
5 in all respects equal to every other share. See section
6 1906(d)(4) (relating to special treatment of holders of shares
7 of same class or series).
8 § 1526. Liability of [subscribers and] shareholders.
9 [A subscriber to, or holder or owner of, shares of a business
10 corporation shall not be under any liability to the corporation
11 or any creditor thereof with respect to the shares other than
12 the personal obligation of a shareholder who has acquired his
13 shares by subscription to comply with the terms of the
14 subscription.] (a) General rule.--A shareholder of a business
15 corporation shall not be liable, solely by reason of being a
16 shareholder, under an order of a court or in any other manner
17 for a debt, obligation or liability of the corporation of any
18 kind or for the acts of any shareholder or representative of the
19 corporation.
20 (b) Professional relationship unaffected.--Subsection (a)
21 shall not afford the shareholders of a business corporation that
22 is not a professional corporation, but that provides
23 professional services, with greater immunity than is available
24 to the officers, shareholders, employees or agents of a business
25 corporation that is a professional corporation. See section 2925
26 (relating to professional relationship retained).
27 (c) Disciplinary jurisdiction unaffected.--A business
28 corporation providing professional services shall be subject to
29 the applicable rules and regulations adopted by, and all the
30 disciplinary powers of, the court, department, board, commission
19990S0393B2193 - 23 -
1 or other government unit regulating the profession in which the
2 corporation is engaged. The court, department, board or other
3 government unit may require that a corporation include in its
4 articles provisions that conform to any rule or regulation
5 heretofore or hereafter promulgated for the purpose of enforcing
6 the ethics of a profession. This subpart shall not affect or
7 impair the disciplinary powers of the court, department, board,
8 commission or other government unit over licensed persons or any
9 law, rule or regulation pertaining to the standards for
10 professional conduct of licensed persons or to the professional
11 relationship between any licensed person rendering professional
12 services and the person receiving professional services.
13 § 1554. FINANCIAL REPORTS TO SHAREHOLDERS. <--
14 (A) GENERAL RULE.--EXCEPT AS OTHERWISE PROVIDED IN
15 SUBSECTION (D) OR UNLESS OTHERWISE AGREED BETWEEN A BUSINESS
16 CORPORATION AND A SHAREHOLDER, EVERY CORPORATION SHALL FURNISH
17 TO ITS SHAREHOLDERS ANNUAL FINANCIAL STATEMENTS, INCLUDING AT
18 LEAST A BALANCE SHEET AS OF THE END OF EACH FISCAL YEAR AND A
19 STATEMENT OF INCOME AND EXPENSES FOR THE FISCAL YEAR. THE
20 FINANCIAL STATEMENTS SHALL BE PREPARED ON THE BASIS OF GENERALLY
21 ACCEPTED ACCOUNTING PRINCIPLES, IF THE CORPORATION PREPARES
22 FINANCIAL STATEMENTS FOR THE FISCAL YEAR ON THAT BASIS FOR ANY
23 PURPOSE, AND MAY BE CONSOLIDATED STATEMENTS OF THE CORPORATION
24 AND ONE OR MORE OF ITS SUBSIDIARIES. THE FINANCIAL STATEMENTS
25 SHALL BE MAILED BY THE CORPORATION TO EACH OF ITS SHAREHOLDERS
26 ENTITLED THERETO WITHIN 120 DAYS AFTER THE CLOSE OF EACH FISCAL
27 YEAR AND, AFTER THE MAILING AND UPON WRITTEN REQUEST, SHALL BE
28 MAILED BY THE CORPORATION TO ANY SHAREHOLDER OR BENEFICIAL OWNER
29 ENTITLED THERETO TO WHOM A COPY OF THE MOST RECENT ANNUAL
30 FINANCIAL STATEMENTS HAS NOT PREVIOUSLY BEEN MAILED. IN LIEU OF
19990S0393B2193 - 24 -
1 MAILING THE STATEMENTS, THE CORPORATION MAY SEND THEM BY
2 FACSIMILE, E-MAIL OR OTHER ELECTRONIC TRANSMISSION TO ANY
3 SHAREHOLDER WHO HAS SUPPLIED THE CORPORATION WITH A FACSIMILE
4 NUMBER OR ADDRESS FOR ELECTRONIC TRANSMISSIONS FOR THE PURPOSE
5 OF RECEIVING FINANCIAL STATEMENTS FROM THE CORPORATION.
6 STATEMENTS THAT ARE AUDITED OR REVIEWED BY A CERTIFIED PUBLIC
7 ACCOUNTANT OR A PUBLIC ACCOUNTANT SHALL BE ACCOMPANIED BY THE
8 REPORT OF THE ACCOUNTANT; IN OTHER CASES, EACH COPY SHALL BE
9 ACCOMPANIED BY A STATEMENT OF THE PERSON IN CHARGE OF THE
10 FINANCIAL RECORDS OF THE CORPORATION:
11 (1) STATING HIS REASONABLE BELIEF AS TO WHETHER OR NOT
12 THE FINANCIAL STATEMENTS WERE PREPARED IN ACCORDANCE WITH
13 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND, IF NOT,
14 DESCRIBING THE BASIS OF PRESENTATION.
15 (2) DESCRIBING ANY MATERIAL RESPECTS IN WHICH THE
16 FINANCIAL STATEMENTS WERE NOT PREPARED ON A BASIS CONSISTENT
17 WITH THOSE PREPARED FOR THE PREVIOUS YEAR.
18 * * *
19 § 1571. Application and effect of subchapter.
20 (a) General rule.--Except as otherwise provided in
21 subsection (b), any shareholder (as defined in section 1572
22 (relating to definitions)) of a business corporation shall have
23 the right to dissent from, and to obtain payment of the fair
24 value of his shares in the event of, any corporate action, or to
25 otherwise obtain fair value for his shares, only where this part
26 expressly provides that a shareholder shall have the rights and
27 remedies provided in this subchapter. See:
28 Section 1906(c) (relating to dissenters rights upon
29 special treatment).
30 Section 1930 (relating to dissenters rights).
19990S0393B2193 - 25 -
1 Section 1931(d) (relating to dissenters rights in share
2 exchanges).
3 Section 1932(c) (relating to dissenters rights in asset
4 transfers).
5 Section 1952(d) (relating to dissenters rights in
6 division).
7 Section 1962(c) (relating to dissenters rights in
8 conversion).
9 Section 2104(b) (relating to procedure).
10 Section 2324 (relating to corporation option where a
11 restriction on transfer of a security is held invalid).
12 Section 2325(b) (relating to minimum vote requirement).
13 Section 2704(c) (relating to dissenters rights upon
14 election).
15 Section 2705(d) (relating to dissenters rights upon
16 renewal of election).
17 Section 2904(b) (relating to procedure).
18 Section 2907(a) (relating to proceedings to terminate
19 breach of qualifying conditions).
20 Section 7104(b)(3) (relating to procedure).
21 (b) Exceptions.--
22 (1) Except as otherwise provided in paragraph (2), the
23 holders of the shares of any class or series of shares [that,
24 at] shall not have the right to dissent and obtain payment of
25 the fair value of the shares under this subchapter if, on the
26 record date fixed to determine the shareholders entitled to
27 notice of and to vote at the meeting at which a plan
28 specified in any of section 1930, 1931(d), 1932(c) or 1952(d)
29 is to be voted on, or on the date of the first public
30 announcement that such a plan has been approved by the
19990S0393B2193 - 26 -
1 shareholders by written consent without a meeting, the shares <--
2 are either:
3 (i) listed on a national securities exchange or
4 designated as a national market system security on an
5 interdealer quotation system by the National Association
6 of Securities Dealers, Inc.; or
7 (ii) held beneficially or of record by more than
8 2,000 [shareholders;
9 shall not have the right to obtain payment of the fair value
10 of any such shares under this subchapter.] persons.
11 (2) Paragraph (1) shall not apply to and dissenters
12 rights shall be available without regard to the exception
13 provided in that paragraph in the case of:
14 (i) [Shares converted by a plan if the shares are
15 not converted solely into shares of the acquiring,
16 surviving, new or other corporation or solely into such
17 shares and money in lieu of fractional shares.]
18 (Repealed.)
19 (ii) Shares of any preferred or special class or
20 series unless the articles, the plan or the terms of the
21 transaction entitle all shareholders of the class or
22 series to vote thereon and require for the adoption of
23 the plan or the effectuation of the transaction the
24 affirmative vote of a majority of the votes cast by all
25 shareholders of the class or series.
26 (iii) Shares entitled to dissenters rights under
27 section 1906(c) (relating to dissenters rights upon
28 special treatment).
29 (3) The shareholders of a corporation that acquires by
30 purchase, lease, exchange or other disposition all or
19990S0393B2193 - 27 -
1 substantially all of the shares, property or assets of
2 another corporation by the issuance of shares, obligations or
3 otherwise, with or without assuming the liabilities of the
4 other corporation and with or without the intervention of
5 another corporation or other person, shall not be entitled to
6 the rights and remedies of dissenting shareholders provided
7 in this subchapter regardless of the fact, if it be the case,
8 that the acquisition was accomplished by the issuance of
9 voting shares of the corporation to be outstanding
10 immediately after the acquisition sufficient to elect a
11 majority or more of the directors of the corporation.
12 * * *
13 (g) Computation of beneficial ownership.--For purposes of
14 subsection (b)(1)(ii), shares that are held beneficially as
15 joint tenants, tenants by the entireties, tenants in common or
16 in trust by two or more persons, as fiduciaries or otherwise,
17 shall be deemed to be held beneficially by one person.
18 [(g)] (h) Cross references.--See sections 1105 (relating to
19 restriction on equitable relief), 1904 (relating to de facto
20 transaction doctrine abolished), 1763(c) (relating to
21 determination of shareholders of record) and 2512 (relating to
22 dissenters rights procedure).
23 § 1572. Definitions.
24 The following words and phrases when used in this subchapter
25 shall have the meanings given to them in this section unless the
26 context clearly indicates otherwise:
27 "Corporation." The issuer of the shares held or owned by the
28 dissenter before the corporate action or the successor by
29 merger, consolidation, division, conversion or otherwise of that
30 issuer. A plan of division may designate which one or more of
19990S0393B2193 - 28 -
1 the resulting corporations is the successor corporation for the
2 purposes of this subchapter. The designated successor
3 corporation or corporations in a division shall have sole
4 responsibility for payments to dissenters and other liabilities
5 under this subchapter except as otherwise provided in the plan
6 of division.
7 "Dissenter." A shareholder [or beneficial owner] who is
8 entitled to and does assert dissenters rights under this
9 subchapter and who has performed every act required up to the
10 time involved for the assertion of those rights.
11 * * *
12 "Shareholder." A shareholder as defined in section 1103
13 (relating to definitions), or an ultimate beneficial owner of
14 shares, including without limitation a holder of depository
15 receipts, where the beneficial interest owned includes an
16 interest in the assets of the corporation upon dissolution.
17 § 1702. MANNER OF GIVING NOTICE. <--
18 (A) GENERAL RULE.--[WHENEVER WRITTEN]
19 (1) ANY NOTICE [IS] REQUIRED TO BE GIVEN TO ANY PERSON
20 UNDER THE PROVISIONS OF THIS SUBPART OR BY THE ARTICLES OR
21 BYLAWS OF ANY BUSINESS CORPORATION[, IT MAY] SHALL BE GIVEN
22 TO THE PERSON EITHER PERSONALLY OR BY SENDING A COPY THEREOF
23 [BY] :
24 (I) BY FIRST CLASS OR EXPRESS MAIL, POSTAGE PREPAID,
25 [OR BY TELEGRAM (WITH MESSENGER SERVICE SPECIFIED), TELEX
26 OR TWX (WITH ANSWERBACK RECEIVED)] OR COURIER SERVICE,
27 CHARGES PREPAID, [OR BY FACSIMILE TRANSMISSION,] TO HIS
28 POSTAL ADDRESS [(OR TO HIS TELEX, TWX OR FACSIMILE
29 NUMBER)] APPEARING ON THE BOOKS OF THE CORPORATION OR, IN
30 THE CASE OF DIRECTORS, SUPPLIED BY HIM TO THE CORPORATION
19990S0393B2193 - 29 -
1 FOR THE PURPOSE OF NOTICE. [IF THE NOTICE IS SENT BY
2 MAIL, TELEGRAPH OR COURIER SERVICE, IT SHALL BE DEEMED TO
3 HAVE BEEN GIVEN TO THE PERSON ENTITLED THERETO WHEN
4 DEPOSITED IN THE UNITED STATES MAIL OR WITH A TELEGRAPH
5 OFFICE OR COURIER SERVICE FOR DELIVERY TO THAT PERSON OR,
6 IN THE CASE OF TELEX OR TWX, WHEN DISPATCHED.] NOTICE
7 PURSUANT TO THIS SUBPARAGRAPH SHALL BE DEEMED TO HAVE
8 BEEN GIVEN TO THE PERSON ENTITLED THERETO WHEN DEPOSITED
9 IN THE UNITED STATES MAIL OR WITH A COURIER SERVICE FOR
10 DELIVERY TO THAT PERSON.
11 (II) BY FACSIMILE TRANSMISSION, E-MAIL OR OTHER
12 ELECTRONIC COMMUNICATION TO HIS FACSIMILE NUMBER OR
13 ADDRESS FOR E-MAIL OR OTHER ELECTRONIC COMMUNICATIONS
14 SUPPLIED BY HIM TO THE CORPORATION FOR THE PURPOSE OF
15 NOTICE. NOTICE PURSUANT TO THIS SUBPARAGRAPH SHALL BE
16 DEEMED TO HAVE BEEN GIVEN TO THE PERSON ENTITLED THERETO
17 WHEN SENT.
18 (2) A NOTICE OF MEETING SHALL SPECIFY THE [PLACE,] DAY
19 AND HOUR AND GEOGRAPHIC LOCATION, IF ANY, OF THE MEETING AND
20 ANY OTHER INFORMATION REQUIRED BY ANY OTHER PROVISION OF THIS
21 SUBPART.
22 * * *
23 § 1704. Place and notice of meetings of shareholders.
24 (a) Place.--Meetings of shareholders may be held at such
25 [place] GEOGRAPHIC LOCATION within or without this Commonwealth <--
26 as may be provided in or fixed pursuant to the bylaws. Unless
27 otherwise provided in or pursuant to the bylaws, all meetings of
28 the shareholders shall be held [in this Commonwealth at the
29 registered office of the corporation] at the executive office of
30 the corporation wherever situated. IF A MEETING OF THE <--
19990S0393B2193 - 30 -
1 SHAREHOLDERS IS HELD BY MEANS OF THE INTERNET OR OTHER
2 ELECTRONIC COMMUNICATIONS TECHNOLOGY IN A FASHION PURSUANT TO
3 WHICH THE SHAREHOLDERS HAVE THE OPPORTUNITY TO READ OR HEAR THE
4 PROCEEDINGS SUBSTANTIALLY CONCURRENTLY WITH THEIR OCCURRENCE,
5 VOTE ON MATTERS SUBMITTED TO THE SHAREHOLDERS AND POSE QUESTIONS
6 TO THE DIRECTORS, THE MEETING NEED NOT BE HELD AT A PARTICULAR
7 GEOGRAPHIC LOCATION.
8 * * *
9 § 1708. USE OF CONFERENCE TELEPHONE [AND SIMILAR EQUIPMENT] OR <--
10 OTHER ELECTRONIC TECHNOLOGY.
11 (A) INCORPORATORS AND DIRECTORS.--EXCEPT AS OTHERWISE
12 PROVIDED IN THE BYLAWS, ONE OR MORE PERSONS MAY PARTICIPATE IN A
13 MEETING OF THE INCORPORATORS[,] OR THE BOARD OF DIRECTORS [OR
14 THE SHAREHOLDERS] OF A BUSINESS CORPORATION BY MEANS OF
15 CONFERENCE TELEPHONE OR [SIMILAR COMMUNICATIONS EQUIPMENT] OTHER
16 ELECTRONIC TECHNOLOGY BY MEANS OF WHICH ALL PERSONS
17 PARTICIPATING IN THE MEETING CAN HEAR EACH OTHER. PARTICIPATION
18 IN A MEETING PURSUANT TO THIS SECTION SHALL CONSTITUTE PRESENCE
19 IN PERSON AT THE MEETING.
20 (B) SHAREHOLDERS.--EXCEPT AS OTHERWISE PROVIDED IN THE
21 BYLAWS, THE PRESENCE OR PARTICIPATION, INCLUDING VOTING AND
22 TAKING OTHER ACTION, AT A MEETING OF SHAREHOLDERS, OR THE
23 EXPRESSION OF CONSENT OR DISSENT TO CORPORATE ACTION, BY A
24 SHAREHOLDER BY CONFERENCE TELEPHONE OR OTHER ELECTRONIC MEANS,
25 INCLUDING, WITHOUT LIMITATION, THE INTERNET, SHALL CONSTITUTE
26 THE PRESENCE OF, OR VOTE OR ACTION BY, OR CONSENT OR DISSENT OF
27 THE SHAREHOLDER FOR THE PURPOSES OF THIS SUBPART.
28 § 1709. Conduct of shareholders meeting.
29 (a) Presiding officer.--There shall be a presiding officer
30 at every meeting of the shareholders. The presiding officer
19990S0393B2193 - 31 -
1 shall be appointed in the manner provided in the bylaws or, in
2 the absence of such provision, by the board of directors. If the
3 bylaws are silent on the appointment of the presiding officer
4 and the board fails to designate a presiding officer, the
5 president shall be the presiding officer.
6 (b) Authority of the presiding officer.--Except as otherwise
7 provided in the bylaws, the presiding officer shall determine
8 the order of business and shall have the authority to establish
9 rules for the conduct of the meeting.
10 (c) Procedural standard.--Any action by the presiding
11 officer in adopting rules for, and in conducting, a meeting
12 shall be fair to the shareholders.
13 (d) Closing of the polls.--The presiding officer shall
14 announce at the meeting when the polls close for each matter
15 voted upon. If no announcement is made, the polls shall be
16 deemed to have closed upon the final adjournment of the meeting.
17 After the polls close, no ballots, proxies or votes, nor any
18 revocations or changes thereto, may be accepted.
19 § 1721. BOARD OF DIRECTORS. <--
20 (A) GENERAL RULE.--UNLESS OTHERWISE PROVIDED BY STATUTE OR
21 IN A BYLAW ADOPTED BY THE SHAREHOLDERS, ALL POWERS ENUMERATED IN
22 SECTION 1502 (RELATING TO GENERAL POWERS) AND ELSEWHERE IN THIS
23 SUBPART OR OTHERWISE VESTED BY LAW IN A BUSINESS CORPORATION
24 SHALL BE EXERCISED BY OR UNDER THE AUTHORITY OF, AND THE
25 BUSINESS AND AFFAIRS OF EVERY BUSINESS CORPORATION SHALL BE
26 MANAGED UNDER THE DIRECTION OF, A BOARD OF DIRECTORS. IF ANY
27 SUCH PROVISION IS MADE IN THE BYLAWS, THE POWERS AND DUTIES
28 CONFERRED OR IMPOSED UPON THE BOARD OF DIRECTORS BY THIS SUBPART
29 SHALL BE EXERCISED OR PERFORMED TO SUCH EXTENT AND BY SUCH
30 PERSON OR PERSONS AS SHALL BE PROVIDED IN THE BYLAWS. PERSONS
19990S0393B2193 - 32 -
1 UPON WHOM THE LIABILITIES OF DIRECTORS ARE IMPOSED BY THIS
2 SECTION SHALL TO THAT EXTENT BE ENTITLED TO THE RIGHTS AND
3 IMMUNITIES CONFERRED BY OR PURSUANT TO THIS PART AND OTHER
4 PROVISIONS OF LAW UPON DIRECTORS OF A CORPORATION.
5 (B) CROSS REFERENCE.--SEE SECTION 2527 (RELATING TO
6 AUTHORITY OF BOARD OF DIRECTORS).
7 § 1727. QUORUM OF AND ACTION BY DIRECTORS.
8 * * *
9 (B) ACTION BY [WRITTEN] CONSENT.--UNLESS OTHERWISE
10 RESTRICTED IN THE BYLAWS, ANY ACTION REQUIRED OR PERMITTED TO BE
11 TAKEN AT A MEETING OF THE DIRECTORS MAY BE TAKEN WITHOUT A
12 MEETING IF, PRIOR OR SUBSEQUENT TO THE ACTION, A CONSENT OR
13 CONSENTS THERETO BY ALL OF THE DIRECTORS IN OFFICE IS FILED WITH
14 THE SECRETARY OF THE CORPORATION.
15 § 1729. Voting rights of directors.
16 (a) General rule.--Unless otherwise provided in a bylaw <--
17 adopted by the shareholders, every director of a business
18 corporation shall be entitled to one vote. Without limiting the
19 generality of the foregoing, a bylaw adopted by the shareholders
20 may provide that a class or other defined group of directors
21 shall have multiple or fractional voting rights, or no right to
22 vote, either generally or under specified circumstances.
23 (b) [Multiple and fractional voting] Application of
24 procedural requirements.--Any requirement of this subpart for
25 the presence of or vote or other action by a specified
26 percentage of directors shall be satisfied by the presence of or
27 vote or other action by directors entitled to cast the specified
28 percentage of the votes that all voting directors in office are
29 entitled to cast.
30 * * * <--
19990S0393B2193 - 33 -
1 (C) CROSS REFERENCE.--SEE SECTION 2526 (RELATING TO VOTING
2 RIGHTS OF DIRECTORS).
3 § 1731. Executive and other committees of the board.
4 (a) Establishment and powers.--Unless otherwise restricted
5 in the bylaws:
6 * * *
7 (2) Any committee, to the extent provided in the
8 resolution of the board of directors or in the bylaws, shall
9 have and may exercise all of the powers and authority of the
10 board of directors except that a committee shall not have any
11 power or authority as to the following:
12 (i) The submission to shareholders of any action
13 requiring approval of shareholders under this subpart.
14 (ii) The creation or filling of vacancies in the
15 board of directors.
16 (iii) The adoption, amendment or repeal of the
17 bylaws.
18 (iv) The amendment or repeal of any resolution of
19 the board that by its terms is amendable or repealable
20 only by the board.
21 (v) Action on matters committed by the bylaws or
22 resolution of the board of directors exclusively to
23 another committee of the board.
24 * * *
25 § 1745. Advancing expenses.
26 Expenses (including attorneys' fees) incurred in defending
27 any action or proceeding referred to in this subchapter may be
28 paid by a business corporation in advance of the final
29 disposition of the action or proceeding upon receipt of an
30 undertaking by or on behalf of the representative to repay the
19990S0393B2193 - 34 -
1 amount if it is ultimately determined that he is not entitled to
2 be indemnified by the corporation as authorized in this
3 subchapter or otherwise. Except as otherwise provided in the
4 bylaws, advancement of expenses shall be authorized by the board
5 of directors. Sections 1728 (relating to interested directors or
6 officers; quorum) and 2538 (relating to approval of transactions
7 with interested shareholders) shall not be applicable to the
8 advancement of expenses under this section.
9 § 1748. Application to surviving or new corporations.
10 [For] (a) General rule.--Except as provided in subsection
11 (b), for the purposes of this subchapter, references to "the
12 corporation" include all constituent corporations absorbed in a
13 consolidation, merger or division, as well as the surviving or
14 new corporations surviving or resulting therefrom, so that any
15 person who is or was a representative of the constituent,
16 surviving or new corporation, or is or was serving at the
17 request of the constituent, surviving or new corporation as a
18 representative of another domestic or foreign corporation for
19 profit or not-for-profit, partnership, joint venture, trust or
20 other enterprise, shall stand in the same position under the
21 provisions of this subchapter with respect to the surviving or
22 new corporation as he would if he had served the surviving or
23 new corporation in the same capacity.
24 (b) Divisions.--Notwithstanding subsection (a), the
25 obligations of a dividing corporation to indemnify and advance
26 expenses to its representatives, whether arising under this
27 subchapter or otherwise, may be allocated in a division in the
28 same manner and with the same effect as any other liability of
29 the dividing corporation.
30 § 1756. Quorum.
19990S0393B2193 - 35 -
1 (a) General rule.--A meeting of shareholders of a business
2 corporation duly called shall not be organized for the
3 transaction of business unless a quorum is present. Unless
4 otherwise provided in a bylaw adopted by the shareholders:
5 * * *
6 (4) If a proxy casts a vote on behalf of a shareholder
7 on any issue OTHER THAN A PROCEDURAL MOTION considered at a <--
8 meeting of shareholders, the shareholder shall be deemed to
9 be present during the entire meeting for purposes of
10 determining whether a quorum is present for consideration of
11 any other issue.
12 * * *
13 § 1758. Voting rights of shareholders.
14 * * *
15 (b) Procedures for election of directors.--[If the bylaws
16 provide a fair and reasonable procedure for the nomination of
17 candidates for any office, only candidates who have been duly
18 nominated in accordance therewith shall be eligible for
19 election.] Unless otherwise restricted in the bylaws, in
20 elections for directors, voting need not be by ballot unless
21 required by vote of the shareholders before the voting for
22 election of directors begins. The candidates for election as
23 directors receiving the highest number of votes from each class
24 or group of classes, if any, entitled to elect directors
25 separately up to the number of directors to be elected by the
26 class or group of classes shall be elected. If at any meeting of
27 shareholders, directors of more than one class are to be
28 elected, each class of directors shall be elected in a separate
29 election.
30 * * *
19990S0393B2193 - 36 -
1 (e) Advance notice of nominations and other business.--If
2 the bylaws provide a fair and reasonable procedure for the
3 nomination of candidates for election as directors, only
4 candidates who have been duly nominated in accordance therewith
5 shall be eligible for election. If the bylaws impose a fair and
6 reasonable requirement of advance notice of proposals to be made
7 by a shareholder at the annual meeting of the shareholders, only
8 proposals for which advance notice has been properly given may
9 be acted upon at the meeting.
10 § 1759. Voting and other action by proxy.
11 * * *
12 (b) Execution and filing.--Every proxy shall be executed [in
13 writing] or authenticated by the shareholder or by his duly
14 authorized attorney-in-fact and filed with or transmitted to the
15 secretary of the corporation or its designated agent. A
16 shareholder or his duly authorized attorney-in-fact may execute
17 or authenticate a writing or transmit an electronic message
18 authorizing another person to act for him by proxy. A telegram,
19 telex, cablegram, datagram, E-MAIL, INTERNET COMMUNICATION or <--
20 [similar] other means of electronic transmission from a
21 shareholder or attorney-in-fact, or a photographic, facsimile or
22 similar reproduction of a writing executed by a shareholder or
23 attorney-in-fact:
24 (1) may be treated as properly executed or authenticated
25 for purposes of this subsection; and
26 (2) shall be so treated if it sets forth or utilizes a
27 confidential and unique identification number or other mark
28 furnished by the corporation to the shareholder for the
29 purposes of a particular meeting or transaction.
30 (c) Revocation.--A proxy, unless coupled with an interest,
19990S0393B2193 - 37 -
1 shall be revocable at will, notwithstanding any other agreement
2 or any provision in the proxy to the contrary, but the
3 revocation of a proxy shall not be effective until [written]
4 notice thereof has been given to the secretary of the
5 corporation or its designated agent in writing or by electronic
6 transmission. An unrevoked proxy shall not be valid after three
7 years from the date of its execution, authentication or
8 transmission unless a longer time is expressly provided therein.
9 A proxy shall not be revoked by the death or incapacity of the
10 maker unless, before the vote is counted or the authority is
11 exercised, written notice of the death or incapacity is given to
12 the secretary of the corporation or its designated agent.
13 * * *
14 § 1766. CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. <--
15 * * *
16 (B) PARTIAL [WRITTEN] CONSENT.--IF THE BYLAWS SO PROVIDE,
17 ANY ACTION REQUIRED OR PERMITTED TO BE TAKEN AT A MEETING OF THE
18 SHAREHOLDERS OR OF A CLASS OF SHAREHOLDERS MAY BE TAKEN WITHOUT
19 A MEETING UPON THE [WRITTEN] CONSENT OF SHAREHOLDERS WHO WOULD
20 HAVE BEEN ENTITLED TO CAST THE MINIMUM NUMBER OF VOTES THAT
21 WOULD BE NECESSARY TO AUTHORIZE THE ACTION AT A MEETING AT WHICH
22 ALL SHAREHOLDERS ENTITLED TO VOTE THEREON WERE PRESENT AND
23 VOTING. THE CONSENTS SHALL BE FILED WITH THE SECRETARY OF THE
24 CORPORATION.
25 (C) EFFECTIVENESS OF ACTION BY PARTIAL [WRITTEN] CONSENT.--
26 AN ACTION TAKEN PURSUANT TO SUBSECTION (B) SHALL NOT BECOME
27 EFFECTIVE UNTIL AFTER AT LEAST TEN DAYS' [WRITTEN] NOTICE OF THE
28 ACTION HAS BEEN GIVEN TO EACH SHAREHOLDER ENTITLED TO VOTE
29 THEREON WHO HAS NOT CONSENTED THERETO. THIS SUBSECTION MAY NOT
30 BE RELAXED BY ANY PROVISION OF THE ARTICLES.
19990S0393B2193 - 38 -
1 * * *
2 § 1906. Special treatment of holders of shares of same class or
3 series.
4 (a) General rule.--Except as otherwise restricted in the
5 articles, [an amendment or] a plan may contain a provision
6 classifying the holders of shares of a class or series into one
7 or more separate groups by reference to any facts or
8 circumstances that are not manifestly unreasonable and providing
9 mandatory treatment for shares of the class or series held by
10 particular shareholders or groups of shareholders that differs
11 materially from the treatment accorded other shareholders or
12 groups of shareholders holding shares of the same class or
13 series (including a provision modifying or rescinding rights
14 previously created under this section) if:
15 (1) (i) such provision is specifically authorized by a
16 majority of the votes cast by all shareholders entitled
17 to vote on the [amendment or] plan, as well as by a
18 majority of the votes cast by any class or series of
19 shares any of the shares of which are so classified into
20 groups, whether or not such class or series would
21 otherwise be entitled to vote on the [amendment or] plan;
22 and
23 (ii) the provision voted on specifically enumerates
24 the type and extent of the special treatment authorized;
25 or
26 (2) under all the facts and circumstances, a court of
27 competent jurisdiction finds such special treatment is
28 undertaken in good faith, after reasonable deliberation and
29 is in the best interest of the corporation.
30 (b) Statutory voting rights upon special treatment.--Except
19990S0393B2193 - 39 -
1 as provided in subsection (c), if [an amendment or] a plan
2 contains a provision for special treatment, each group of
3 holders of any outstanding shares of a class or series who are
4 to receive the same special treatment under the [amendment or]
5 plan shall be entitled to vote as a special class in respect to
6 the plan regardless of any limitations stated in the articles or
7 bylaws on the voting rights of any class or series.
8 (c) Dissenters rights upon special treatment.--If any
9 [amendment or] plan contains a provision for special treatment
10 without requiring for the adoption of the [amendment or] plan
11 the statutory class vote required by subsection (b), the holder
12 of any outstanding shares the statutory class voting rights of
13 which are so denied, who objects to the [amendment or] plan and
14 complies with Subchapter D of Chapter 15 (relating to dissenters
15 rights), shall be entitled to the rights and remedies of
16 dissenting shareholders provided in that subchapter.
17 (d) Exceptions.--This section shall not apply to:
18 (1) The creation or issuance of securities, contracts,
19 warrants or other instruments evidencing any shares, option
20 rights, securities having conversion or option rights or
21 obligations authorized by section 2513 (relating to disparate
22 treatment of certain persons).
23 (2) A provision of [an amendment or] a plan that offers
24 to all holders of shares of a class or series the same option
25 to elect certain treatment.
26 (3) [An amendment or] A plan that contains an express
27 provision that this section shall not apply or that fails to
28 contain an express provision that this section shall apply.
29 The shareholders of a corporation that proposes [an amendment
30 or] a plan to which this section is not applicable by reason
19990S0393B2193 - 40 -
1 of this paragraph shall have the remedies contemplated by
2 section 1105 (relating to restriction on equitable relief).
3 (4) A provision of a plan that treats all of the holders
4 of a particular class or series of shares differently from
5 the holders of another class or series. A provision of a plan
6 that treats the holders of a class or series of shares
7 differently from the holders of another class or series of
8 shares shall not constitute a violation of section 1521(d)
9 (relating to authorized shares).
10 (e) Definition.--As used in this section, the term "plan"
11 includes:
12 (1) an amendment of the articles that effects a
13 reclassification of shares, whether or not the amendment is
14 accompanied by a separate plan of reclassification; and
15 (2) a resolution recommending that the corporation
16 dissolve voluntarily adopted under section 1972(a) (relating
17 to proposal of voluntary dissolution).
18 § 1912. Proposal of amendments.
19 * * *
20 (c) Terms of amendment.--The resolution or petition may set
21 forth the manner and basis of reclassifying the shares of the
22 corporation. Any of the terms of a plan of reclassification or
23 other action contained in an amendment may be made dependent
24 upon facts ascertainable outside of the amendment if the manner
25 in which the facts will operate upon the terms of the amendment
26 is set forth in the amendment. Such facts may include, without
27 limitation, actions or events within the control of or
28 determinations made by the corporation or a representative of
29 the corporation.
30 § 1914. Adoption of amendments.
19990S0393B2193 - 41 -
1 * * *
2 (b) Statutory voting rights.--Except as provided in this
3 subpart, the holders of the outstanding shares of a class or
4 series of shares shall be entitled to vote as a class in respect
5 of a proposed amendment regardless of any limitations stated in
6 the articles or bylaws on the voting rights of any class or
7 series if [a proposed] the amendment would:
8 (1) authorize the board of directors to fix and
9 determine the relative rights and preferences, as between
10 series, of any preferred or special class;
11 (2) make any change in the preferences, limitations or
12 special rights (other than preemptive rights or the right to
13 vote cumulatively) of the shares of a class or series adverse
14 to the class or series;
15 (3) authorize a new class or series of shares having a
16 preference as to dividends or assets which is senior to the
17 shares of a class or series; [or]
18 (4) increase the number of authorized shares of any
19 class or series having a preference as to dividends or assets
20 which is senior in any respect to the shares of a class or
21 series; or
22 (5) make the outstanding shares of a class or series
23 redeemable by a method that is not pro rata, by lot or
24 otherwise equitable.
25 [then the holders of the outstanding shares of the class or
26 series shall be entitled to vote as a class in respect to the
27 amendment regardless of any limitations stated in the articles
28 or bylaws on the voting rights of any class or series.]
29 (c) Adoption by board of directors.--Unless otherwise
30 restricted in the articles, an amendment of articles shall not
19990S0393B2193 - 42 -
1 require the approval of the shareholders of the corporation if:
2 (1) shares have not been issued;
3 (2) the amendment is restricted to [any] one or more of
4 the following:
5 (i) changing the corporate name;
6 (ii) providing for perpetual existence;
7 (iii) reflecting a reduction in authorized shares
8 effected by operation of section 1552(a) (relating to
9 power of corporation to acquire its own shares) and, if
10 appropriate, deleting all references to a class or series
11 of shares that is no longer outstanding; [or]
12 (iv) adding or deleting a provision authorized by
13 section 1528(f) (relating to uncertificated shares)[.];
14 or
15 (v) adding, changing or eliminating the par value of
16 any class or series of shares if the par value of that
17 class or series does not have any substantive effect
18 under the terms of that or any other class or series of
19 shares;
20 (3) (i) the corporation has only one class or series of
21 voting shares outstanding;
22 (ii) the corporation does not have any class or
23 series of shares outstanding that is:
24 (A) convertible into those voting shares;
25 (B) junior in any way to those voting shares; or
26 (C) entitled to participate on any basis in
27 distributions with those voting shares; and
28 (iii) the amendment is effective solely to
29 accomplish one of the following purposes with respect to
30 those voting shares:
19990S0393B2193 - 43 -
1 [(i)] (A) in connection with effectuating a stock
2 dividend of voting shares on the voting shares, to
3 increase the number of authorized shares [to the extent
4 necessary to permit the board of directors to effectuate
5 a stock dividend in the shares of the corporation] of the
6 voting shares in the same proportion that the voting
7 shares to be distributed in the stock dividend increase
8 the issued voting shares; or
9 [(ii) effectuate a] (B) to split the voting shares
10 and, if desired, increase the number of authorized shares
11 of the voting shares or change the par value of [the
12 authorized] the voting shares, or both, in proportion
13 thereto;
14 (4) to the extent the amendment has not been approved by
15 the shareholders, it restates without change all of the
16 operative provisions of the articles as theretofore amended
17 or as amended thereby; or
18 (5) the amendment accomplishes any combination of
19 purposes specified in this subsection.
20 Whenever a provision of this subpart authorizes the board of
21 directors to take any action without the approval of the
22 shareholders and provides that a statement, certificate, plan or
23 other document relating to such action shall be filed in the
24 Department of State and shall operate as an amendment of the
25 articles, the board upon taking such action may, in lieu of
26 filing the statement, certificate, plan or other document, amend
27 the articles under this subsection without the approval of the
28 shareholders to reflect the taking of such action. An amendment
29 of articles under this subsection shall be deemed adopted by the
30 corporation when it has been adopted by the board of directors
19990S0393B2193 - 44 -
1 pursuant to section 1912 (relating to proposal of amendments).
2 * * *
3 (f) Definition.--As used in this section, the term "voting
4 shares" has the meaning specified in section 2552 (relating to
5 definitions).
6 § 1922. Plan of merger or consolidation.
7 (a) Preparation of plan.--A plan of merger or consolidation,
8 as the case may be, shall be prepared, setting forth:
9 * * *
10 (5) Such other provisions as are deemed desirable.
11 [Any of the terms of the plan may be made dependent upon facts
12 ascertainable outside of the plan if the manner in which the
13 facts will operate upon the terms of the plan is set forth in
14 the plan.]
15 (b) Post-adoption amendment.--A plan of merger or
16 consolidation may contain a provision that the boards of
17 directors of the constituent corporations may amend the plan at
18 any time prior to its effective date, except that an amendment
19 made subsequent to the adoption of the plan by the shareholders
20 of any constituent domestic business corporation shall not
21 change:
22 (1) The amount or kind of shares, obligations, cash,
23 property or rights to be received in exchange for or on
24 conversion of all or any of the shares of the constituent
25 domestic business corporation adversely to the holders of
26 those shares.
27 (2) Any [term] provision of the articles of the
28 surviving or new corporation [to be effected by] as it is to
29 be in effect immediately following consummation of the merger
30 or consolidation, except provisions that may be amended
19990S0393B2193 - 45 -
1 without the approval of the shareholders under section
2 1914(c)(2) (relating to adoption of amendments).
3 (3) Any of the other terms and conditions of the plan if
4 the change would adversely affect the holders of any shares
5 of the constituent domestic business corporation.
6 (c) Proposal.--[Every] Except where the approval of the
7 board of directors is unnecessary under this subchapter, every
8 merger or consolidation shall be proposed in the case of each
9 domestic business corporation by the adoption by the board of
10 directors of a resolution approving the plan of merger or
11 consolidation. Except where the approval of the shareholders is
12 unnecessary under this subchapter, the board of directors shall
13 direct that the plan be submitted to a vote of the shareholders
14 entitled to vote thereon at a regular or special meeting of the
15 shareholders.
16 * * *
17 (e) Reference to outside facts.--Any of the terms of a plan
18 of merger or consolidation may be made dependent upon facts
19 ascertainable outside of the plan if the manner in which the
20 facts will operate upon the terms of the plan is set forth in
21 the plan. Such facts may include, without limitation, actions or
22 events within the control of or determinations made by a party
23 to the plan or a representative of a party to the plan.
24 § 1923. Notice of meeting of shareholders.
25 (a) General rule.--Written notice of the meeting of
26 shareholders that will act on the proposed plan shall be given
27 to each shareholder of record, whether or not entitled to vote
28 thereon, of each domestic business corporation that is a party
29 to the merger or consolidation. There shall be included in, or
30 enclosed with, the notice a copy of the proposed plan or a
19990S0393B2193 - 46 -
1 summary thereof and, if Subchapter D of Chapter 15 (relating to
2 dissenters rights) is applicable to the holders of shares of any
3 class or series, a copy of that subchapter and of section 1930
4 (relating to dissenters rights) shall be furnished to the
5 holders of shares of that class or series. The notice shall IF <--
6 THE SURVIVING OR NEW CORPORATION WILL BE A NONREGISTERED
7 CORPORATION, THE NOTICE SHALL state that a copy of the bylaws of <--
8 the surviving or new corporation ITS BYLAWS, AS THEY WILL BE IN <--
9 EFFECT IMMEDIATELY FOLLOWING THE MERGER OR CONSOLIDATION, will
10 be furnished to any shareholder on request and without cost.
11 * * *
12 § 1924. Adoption of plan.
13 * * *
14 (b) Adoption by board of directors.--
15 (1) Unless otherwise required by its bylaws, a plan of
16 merger or consolidation shall not require the approval of the
17 shareholders of a constituent domestic business corporation
18 if:
19 * * *
20 (ii) immediately prior to the adoption of the plan
21 and at all times thereafter prior to its effective date,
22 another corporation that is a party to the [merger or
23 consolidation] plan owns directly or indirectly 80% or
24 more of the outstanding shares of each class of the
25 constituent corporation; or
26 * * *
27 (3) If a merger or consolidation of a subsidiary
28 corporation with a parent corporation is effected pursuant to
29 paragraph (1)(ii), the plan of merger or consolidation shall
30 be deemed adopted by the subsidiary corporation when it has
19990S0393B2193 - 47 -
1 been adopted by the board of the parent corporation and
2 neither approval of the plan by the board of directors of the
3 subsidiary corporation nor execution of articles of merger or
4 consolidation by the subsidiary corporation shall [not] be
5 necessary.
6 (4) (i) Unless other required by its bylaws, a plan of
7 merger or consolidation providing for the merger or
8 consolidation of a domestic business corporation
9 (referred to in this paragraph as the "constituent
10 corporation") with or into a single indirect wholly owned
11 subsidiary (referred to in this paragraph as the
12 "subsidiary corporation") of the constituent corporation
13 shall not require the approval of the shareholders of
14 either the constituent corporation or the subsidiary
15 corporation if all of the provisions of this paragraph
16 are satisfied.
17 (ii) A merger or consolidation under this paragraph
18 shall satisfy the following conditions:
19 (A) The constituent corporation and the
20 subsidiary corporation are the only parties to the
21 merger or consolidation, other than the resulting
22 corporation, if any, in a consolidation (the
23 corporation that survives or results from the merger
24 or consolidation is referred to in this paragraph as
25 the "resulting subsidiary").
26 (B) Each share or fraction of a share of the
27 capital stock of the constituent corporation
28 outstanding immediately prior to the effective time
29 of the merger or consolidation is converted in the
30 merger or consolidation into a share or equal
19990S0393B2193 - 48 -
1 fraction of a share of capital stock of a holding
2 company having the same designations, rights, powers
3 and preferences and the qualifications, limitations
4 and restrictions as the share of stock of the
5 constituent corporation being converted in the merger
6 or consolidation.
7 (C) The holding company and the resulting
8 subsidiary are each domestic business corporations.
9 (D) Immediately following the effective time of
10 the merger or consolidation, the articles of
11 incorporation and bylaws of the holding company are
12 identical to the articles of incorporation and bylaws
13 of the constituent corporation immediately before the
14 effective time of the merger or consolidation, except
15 for changes that could be made without shareholder
16 approval under section 1914(c) (relating to adoption
17 by board of directors).
18 (E) Immediately following the effective time of
19 the merger or consolidation, the resulting subsidiary
20 is a direct or indirect wholly owned subsidiary of
21 the holding company.
22 (F) The directors of the constituent corporation
23 become or remain the directors of the holding company
24 upon the effective time of the merger or
25 consolidation.
26 (G) The board of directors of the constituent
27 corporation has made a good faith determination that
28 the shareholders of the constituent corporation will
29 not recognize gain or loss for United States Federal
30 Income Tax purposes.
19990S0393B2193 - 49 -
1 (iii) As used in this paragraph only, the term
2 "holding company" means a corporation that, from its
3 incorporation until consummation of the merger or
4 consolidation governed by this paragraph, was at all
5 times a direct wholly owned subsidiary of the constituent
6 corporation and whose capital stock is issued in the
7 merger or consolidation.
8 (iv) If the holding company is a registered
9 corporation, the shares of the holding company issued in
10 connection with the merger or consolidation shall be
11 deemed to have been acquired at the time that the shares
12 of the constituent corporation converted in the merger or
13 consolidation were acquired.
14 (5) A plan of merger or consolidation adopted by the
15 board of directors under this subsection without the approval
16 of the shareholders shall not, by itself, create or impair
17 any rights or obligations on the part of any person under
18 section 2538 (relating to approval of transactions with
19 interested shareholders) or under Subchapters E (relating to
20 control transactions), F (relating to business combinations),
21 G (relating to control-share acquisitions), H (relating to
22 disgorgement by certain controlling shareholders following
23 attempts to acquire control), I (relating to severance
24 compensation for employees terminated following certain
25 control-share acquisitions) and J (relating to business
26 combination transactions - labor contracts) of Chapter 25,
27 nor shall it change the standard of care applicable to the
28 directors under Subchapter B of Chapter 17 (relating to
29 fiduciary duty).
30 * * *
19990S0393B2193 - 50 -
1 § 1929. Effect of merger or consolidation.
2 * * *
3 (b) Property rights.--All the property, real, personal and
4 mixed, and franchises of each of the corporations parties to the
5 merger or consolidation, and all debts due on whatever account
6 to any of them, including subscriptions for shares and other
7 choses in action belonging to any of them, shall be deemed to be
8 [transferred to and] vested in and shall belong to the surviving
9 or new corporation, as the case may be, without further action,
10 and the title to any real estate, or any interest therein,
11 vested in any of the corporations shall not revert or be in any
12 way impaired by reason of the merger or consolidation. The
13 surviving or new corporation shall thenceforth be responsible
14 for all the liabilities of each of the corporations so merged or
15 consolidated. Liens upon the property of the merging or
16 consolidating corporations shall not be impaired by the merger
17 or consolidation and any claim existing or action or proceeding
18 pending by or against any of the corporations may be prosecuted
19 to judgment as if the merger or consolidation had not taken
20 place or the surviving or new corporation may be proceeded
21 against or substituted in its place.
22 (C) TAXES.--ANY TAXES, INTEREST, PENALTIES AND PUBLIC <--
23 ACCOUNTS OF THE COMMONWEALTH, CLAIMED AGAINST ANY OF THE MERGING
24 OR CONSOLIDATING CORPORATIONS [BUT NOT] THAT ARE SETTLED,
25 ASSESSED OR DETERMINED PRIOR TO OR AFTER THE MERGER OR
26 CONSOLIDATION, SHALL BE [SETTLED, ASSESSED OR DETERMINED
27 AGAINST] THE LIABILITY OF THE SURVIVING OR NEW CORPORATION AND,
28 TOGETHER WITH INTEREST THEREON, SHALL BE A LIEN AGAINST THE
29 FRANCHISES AND PROPERTY, BOTH REAL AND PERSONAL, OF THE
30 SURVIVING OR NEW CORPORATION.
19990S0393B2193 - 51 -
1 * * *
2 § 1930. Dissenters rights.
3 * * *
4 (b) Plans adopted by directors only.--Except as otherwise
5 provided pursuant to section 1571(c) (relating to grant of
6 optional dissenters rights), Subchapter D of Chapter 15 shall
7 not apply to any of the shares of a corporation that is a party
8 to a merger or consolidation pursuant to section 1924(b)(1)(i)
9 or (4) (relating to adoption by board of directors).
10 * * *
11 § 1931. Share exchanges.
12 (a) General rule.--All the outstanding shares of one or more
13 classes or series of a domestic business corporation, designated
14 in this section as the exchanging corporation, may, in the
15 manner provided in this section, be acquired by any person,
16 designated in this section as the acquiring person, through an
17 exchange of all the shares pursuant to a plan of exchange. The
18 plan of exchange may also provide for the conversion of any
19 other shares of the exchanging corporation into shares, other
20 securities or obligations of any person or cash, property or
21 rights. The procedure authorized by this section shall not be
22 deemed to limit the power of any person to acquire all or part
23 of the shares or other securities of any class or series of a
24 corporation through a voluntary exchange or otherwise by
25 agreement with the holders of the shares or other securities.
26 (b) Plan of exchange.--A plan of exchange shall be prepared,
27 setting forth:
28 (1) The terms and conditions of the exchange.
29 (2) The manner and basis of exchanging or converting the
30 shares of the exchanging corporation into shares or other
19990S0393B2193 - 52 -
1 securities or obligations of the acquiring person, and, if
2 any of the shares of the exchanging corporation are not to be
3 exchanged or converted solely into shares or other securities
4 or obligations of the acquiring person, the shares or other
5 securities or obligations of any other person or cash,
6 property or rights that the holders of the shares of the
7 exchanging corporation are to receive in exchange for, or
8 upon conversion of, the shares and the surrender of any
9 certificates evidencing them, which securities or
10 obligations, if any, of any other person or cash, property
11 and rights may be in addition to or in lieu of the shares or
12 other securities or obligations of the acquiring person.
13 (3) Any changes desired to be made in the articles of
14 the exchanging corporation, which may include a restatement
15 of the articles.
16 (4) Any provisions desired providing special treatment
17 of shares held by any shareholder or group of shareholders as
18 authorized by, and subject to the provisions of, section 1906
19 (relating to special treatment of holders of shares of same
20 class or series). Notwithstanding subsection (a), a plan that
21 provides special treatment may affect less than all of the
22 outstanding shares of a class or series.
23 (5) Such other provisions as are deemed desirable.
24 [Any of the terms of the plan may be made dependent upon facts
25 ascertainable outside of the plan if the manner in which the
26 facts will operate upon the terms of the plan is set forth in
27 the plan.]
28 (c) Proposal and adoption.--The plan of exchange shall be
29 proposed and adopted and may be amended after its adoption and
30 terminated by the exchanging corporation in the manner provided
19990S0393B2193 - 53 -
1 by this subchapter for the proposal, adoption, amendment and
2 termination of a plan of merger except section 1924(b) (relating
3 to adoption by board of directors). There shall be included in,
4 or enclosed with, the notice of the meeting of shareholders to
5 act on the plan a copy or a summary of the plan and, if
6 Subchapter D of Chapter 15 (relating to dissenters rights) is
7 applicable, a copy of the subchapter and of subsection (d). The
8 holders of any class of shares to be [acquired] exchanged or
9 converted pursuant to the plan of exchange shall be entitled to
10 vote as a class on the plan if they would have been entitled to
11 vote on a plan of merger that affects the class in substantially
12 the same manner as the plan of exchange.
13 (d) Dissenters rights in share exchanges.--Any holder of
14 shares that are to be [acquired] exchanged or converted pursuant
15 to a plan of exchange who objects to the plan and complies with
16 the provisions of Subchapter D of Chapter 15 shall be entitled
17 to the rights and remedies of dissenting shareholders therein
18 provided, if any. See section 1906(c) (relating to dissenter
19 rights upon special treatment).
20 (e) Articles of exchange.--Upon adoption of a plan of
21 exchange, as provided in this section, articles of exchange
22 shall be executed by the exchanging corporation and shall set
23 forth:
24 (1) The name and, subject to section 109 (relating to
25 name of commercial registered office provider in lieu of
26 registered address), the location of the registered office,
27 including street and number, if any, of the exchanging
28 corporation.
29 (2) If the plan is to be effective on a specified date,
30 the hour, if any, and the month, day and year of the
19990S0393B2193 - 54 -
1 effective date.
2 (3) The manner in which the plan was adopted by the
3 exchanging corporation.
4 (4) Except as provided in section 1901 (relating to
5 omission of certain provisions from filed plans), the plan of
6 exchange.
7 The articles of exchange shall be filed in the Department of
8 State. See [section] sections 134 (relating to docketing
9 statement) and 135 (relating to requirements to be met by filed
10 documents.
11 * * *
12 (i) Reference to outside facts.--Any of the terms of a plan
13 of exchange may be made dependent upon facts ascertainable
14 outside of the plan if the manner in which the facts will
15 operate upon the terms of the plan is set forth in the plan.
16 Such facts may include, without limitation, actions or events
17 within the control of or determinations made by a party to the
18 plan or a representative of a party to the plan.
19 § 1932. Voluntary transfer of corporate assets.
20 * * *
21 (b) Shareholder approval required.--
22 (1) A sale, lease, exchange or other disposition of all,
23 or substantially all, the property and assets, with or
24 without the goodwill, of a business corporation, if not made
25 pursuant to subsection (a) or (d) or to section 1551
26 (relating to distributions to shareholders) or Subchapter D
27 (relating to division), may be made only pursuant to a plan
28 of asset transfer[.] in the manner provided in this
29 subsection. A corporation selling, leasing or otherwise
30 disposing of all, or substantially all, its property and
19990S0393B2193 - 55 -
1 assets is referred to in this subsection and in subsection
2 (c) as the "transferring corporation."
3 (2) The property or assets of a direct or indirect
4 subsidiary corporation that is controlled by a parent
5 corporation shall also be deemed the property or assets of
6 the parent corporation for the purposes of this subsection
7 and of subsection (c). A merger or consolidation to which
8 such a subsidiary corporation is a party and in which a third
9 party acquires direct or indirect ownership of the property
10 or assets of the subsidiary corporation constitutes an "other
11 disposition" of the property or assets of the parent
12 corporation within the meaning of that term as used in this
13 section.
14 (3) The plan of asset transfer shall set forth the terms
15 and conditions of the sale, lease, exchange or other
16 disposition or may authorize the board of directors to fix
17 any or all of the terms and conditions, including the
18 consideration to be received by the corporation therefor. The
19 plan may provide for the distribution to the shareholders of
20 some or all of the consideration to be received by the
21 corporation, including provisions for special treatment of
22 shares held by any shareholder or group of shareholders as
23 authorized by, and subject to the provisions of, section 1906
24 (relating to special treatment of holders of shares of same
25 class or series). It shall not be necessary for the person
26 acquiring the property or assets of the transferring
27 corporation to be a party to the plan. Any of the terms of
28 the plan may be made dependent upon facts ascertainable
29 outside of the plan if the manner in which the facts will
30 operate upon the terms of the plan is set forth in the plan.
19990S0393B2193 - 56 -
1 Such facts may include, without limitation, actions or events
2 within the control of or determinations made by the
3 corporation or a representative of the corporation.
4 (4) The plan of asset transfer shall be proposed and
5 adopted, and may be amended after its adoption and
6 terminated, by [a business] the transferring corporation in
7 the manner provided in this subchapter for the proposal,
8 adoption, amendment and termination of a plan of merger,
9 except section 1924(b) (relating to adoption by board of
10 directors). The procedures of this subchapter shall not be
11 applicable to the person acquiring the property or assets of
12 the transferring corporation. There shall be included in, or
13 enclosed with, the notice of the meeting of the shareholders
14 of the transferring corporation to act on the plan a copy or
15 a summary of the plan and, if Subchapter D of Chapter 15
16 (relating to dissenters rights) is applicable, a copy of the
17 subchapter and of subsection (c).
18 (5) In order to make effective the plan of asset
19 transfer so adopted, it shall not be necessary to file any
20 articles or other documents in the Department of State.
21 (c) Dissenters rights in asset transfers.--
22 (1) If a shareholder of a transferring corporation that
23 adopts a plan of asset transfer objects to the plan and
24 complies with Subchapter D of Chapter 15, the shareholder
25 shall be entitled to the rights and remedies of dissenting
26 shareholders therein provided, if any.
27 (2) Paragraph (1) shall not apply to a sale pursuant to
28 an order of court having jurisdiction in the premises or a
29 sale [for money on terms requiring] pursuant to a plan of
30 asset transfer that requires that all or substantially all of
19990S0393B2193 - 57 -
1 the net proceeds of sale be distributed to the shareholders
2 in accordance with their respective interests within one year
3 after the date of sale or to a liquidating trust.
4 * * *
5 § 1952. Proposal and adoption of plan of division.
6 (a) Preparation of plan.--A plan of division shall be
7 prepared, setting forth:
8 (1) The terms and conditions of the division, including
9 the manner and basis of:
10 (i) The reclassification of the shares of the
11 surviving corporation, if there be one, and, if any of
12 the shares of the dividing corporation are not to be
13 converted solely into shares or other securities or
14 obligations of one or more of the resulting corporations,
15 the shares or other securities or obligations of any
16 other person, or cash, property or rights that the
17 holders of such shares are to receive in exchange for or
18 upon conversion of such shares, and the surrender of any
19 certificates evidencing them, which securities or
20 obligations, if any, of any other person or cash,
21 property or rights may be in addition to or in lieu of
22 shares or other securities or obligations of one or more
23 of the resulting corporations.
24 (ii) The disposition of the shares and other
25 securities or obligations, if any, of the new corporation
26 or corporations resulting from the division.
27 (2) A statement that the dividing corporation will, or
28 will not, survive the division.
29 (3) Any changes desired to be made in the articles of
30 the surviving corporation, if there be one, including a
19990S0393B2193 - 58 -
1 restatement of the articles.
2 (4) The articles of incorporation required by subsection
3 (b).
4 (5) Any provisions desired providing special treatment
5 of shares held by any shareholder or group of shareholders as
6 authorized by, and subject to the provisions of, section 1906
7 (relating to special treatment of holders of shares of same
8 class or series).
9 (6) Such other provisions as are deemed desirable.
10 [Any of the terms of the plan may be made dependent upon facts
11 ascertainable outside of the plan if the manner in which the
12 facts will operate upon the terms of the plan is set forth in
13 the plan.]
14 * * *
15 (g) [Action by] Rights of holders of indebtedness.--[Unless
16 otherwise provided by an indenture or other contract by which
17 the dividing corporation is bound, a plan of division shall not
18 require the approval of the holders of any debt securities or
19 other obligations of the dividing corporation or of any
20 representative of the holders, if the transfer of assets
21 effected by the division, if effected by means of a sale, lease,
22 exchange or other disposition, and any related distribution,
23 would not require the approval of the holders or representatives
24 thereof.] If any debt securities, notes or similar evidences of
25 indebtedness for money borrowed, whether secured or unsecured,
26 indentures or other contracts were issued, incurred or executed
27 by the dividing corporation before (the Legislative Reference
28 Bureau shall insert here the effective date of the amendments of
29 this section) and have not been amended subsequent to that date,
30 the liability of the dividing corporation thereunder shall not
19990S0393B2193 - 59 -
1 be affected by the division nor shall the rights of the obligees
2 thereunder be impaired by the division, and each of the
3 resulting corporations may be proceeded against or substituted
4 in place of the dividing corporation as joint and several
5 obligors on such liability, regardless of any provision of the
6 plan of division apportioning the liabilities of the dividing
7 corporations CORPORATION. <--
8 * * *
9 (i) Reference to outside facts.--Any of the terms of a plan
10 of division may be made dependent upon facts ascertainable
11 outside of the plan if the manner in which the facts will
12 operate upon the terms of the plan is set forth in the plan.
13 Such facts may include, without limitation, actions or events
14 within the control of or determinations made by the dividing
15 corporation or a representative of the dividing corporation.
16 § 1953. Division without shareholder approval.
17 (a) General rule.--Unless otherwise restricted by its bylaws
18 or required by section 1952(f) (relating to action by holders of
19 preferred or special shares), a plan of division that does not
20 alter the state of incorporation of a business corporation,
21 provide for special treatment nor amend in any respect the
22 provisions of its articles (except amendments which under
23 section 1914(c) (relating to adoption by board of directors) may
24 be made without shareholder action) shall not require the
25 approval of the shareholders of the corporation if:
26 (1) the dividing corporation has only one class of
27 shares outstanding and the shares and other securities, if
28 any, of each corporation resulting from the plan are
29 distributed pro rata to the shareholders of the dividing
30 corporation;
19990S0393B2193 - 60 -
1 (2) the dividing corporation survives the division and
2 all the shares and other securities and obligations, if any,
3 of all new corporations resulting from the plan are owned
4 solely by the surviving corporation; or
5 (3) the [transfers] allocation of assets among the
6 resulting corporations effected by the division, if effected
7 by means of a sale, lease, exchange or other disposition,
8 would not require the approval of shareholders under section
9 1932(b) (relating to shareholder approval required).
10 (b) Limitation.--A plan of division adopted by the board of
11 directors under this section without the approval of the
12 shareholders shall not, by itself, create or impair any rights
13 or obligations on the part of any person under section 2538
14 (relating to approval of transactions with interested
15 shareholders) or under Subchapters E (relating to control
16 transactions), F (relating to business combinations), G
17 (relating to control-share acquisitions), H (relating to
18 disgorgement by certain controlling shareholders following
19 attempts to acquire control), I (relating to severance
20 compensation for employees terminated following certain control-
21 share acquisitions) and J (relating to business combination
22 transactions - labor contracts) of Chapter 25, nor shall it
23 change the standard of care applicable to the directors under
24 Subchapter B of Chapter 17 (relating to fiduciary duty).
25 § 1955. Filing of articles of division.
26 (a) General rule.--The articles of division, and the
27 certificates or statement, if any, required by section 139
28 (relating to tax clearance of certain fundamental transactions)
29 shall be filed in the Department of State.
30 (b) Cross [reference] references.--See [section] sections
19990S0393B2193 - 61 -
1 134 (relating to docketing statement) and 135 (relating to
2 requirements to be met by filed documents).
3 § 1957. Effect of division.
4 * * *
5 (b) Property rights; allocations of assets and
6 liabilities.--
7 (1) (i) All the property, real, personal and mixed, and
8 franchises of the dividing corporation, and all debts due
9 on whatever account to it, including subscriptions for
10 shares and other choses in action belonging to it, shall
11 (except as otherwise provided in paragraph (2)), to the
12 extent [transfers] allocations of assets are contemplated
13 by the plan of division, be deemed without further action
14 to be [transferred] allocated to and vested in the
15 resulting corporations on such a manner and basis and
16 with such effect as is specified in the plan, or per
17 capita among the resulting corporations, as tenants in
18 common, if no specification is made in the plan, and the
19 title to any real estate, or interest therein, vested in
20 any of the corporations shall not revert or be in any way
21 impaired by reason of the division.
22 (ii) Upon the division becoming effective, the
23 resulting corporations shall each thenceforth be
24 responsible as separate and distinct corporations only
25 for such liabilities as each corporation may undertake or
26 incur in its own name but shall be liable for the
27 liabilities of the dividing corporation in the manner and
28 on the basis provided in subparagraphs (iv) and (v).
29 (iii) Liens upon the property of the dividing
30 corporation shall not be impaired by the division.
19990S0393B2193 - 62 -
1 (iv) [One] To the extent allocations of liabilities
2 are contemplated by the plan of division, the liabilities
3 of the dividing corporation shall be deemed without
4 further action to be allocated to and become the
5 liabilities of the resulting corporations on such a
6 manner and basis and with such effect as is specified in
7 the plan; and one or more, but less than all, of the
8 resulting corporations shall be free of the liabilities
9 of the dividing corporation to the extent, if any,
10 specified in the plan, if in either case:
11 (A) no fraud [of corporate creditors, or of] on
12 minority shareholders or shareholders without voting
13 rights or violation of law shall be effected thereby,
14 and [if applicable provisions of law are complied
15 with.]
16 (B) the plan does not constitute a fraudulent
17 transfer under 12 Pa.C.S. Ch. 51 (relating to
18 fraudulent transfers).
19 (v) If the conditions in subparagraph (iv) for
20 freeing one or more of the resulting corporations from
21 the liabilities of the dividing corporation, or for
22 allocating some or all of the liabilities of the dividing
23 corporation, are not satisfied, the liabilities of the
24 dividing corporation as to which those conditions are not
25 satisfied shall not be affected by the division nor shall
26 the rights of creditors [thereof or of any person dealing
27 with the corporation] thereunder be impaired by the
28 division and any claim existing or action or proceeding
29 pending by or against the corporation with respect to
30 those liabilities may be prosecuted to judgment as if the
19990S0393B2193 - 63 -
1 division had not taken place, or the resulting
2 corporations may be proceeded against or substituted in
3 [its] place of the dividing corporation as joint and
4 several obligors on [such liability] those liabilities,
5 regardless of any provision of the plan of division
6 apportioning the liabilities of the dividing corporation.
7 (vi) The conditions in subparagraph (iv) for freeing
8 one or more of the resulting corporations from the
9 liabilities of the dividing corporation and for
10 allocating some or all of the liabilities of the dividing
11 corporation shall be conclusively deemed to have been
12 satisfied if the plan of division has been approved by
13 the Department of Banking, the Insurance Department or
14 the Pennsylvania Public Utility Commission in a final
15 order issued after (the Legislative Reference Bureau
16 shall insert here the effective date of the amendments of
17 this section) that has become not subject to further
18 appeal.
19 (2) (i) The [transfer] allocation of any fee or
20 freehold interest or leasehold having a remaining term of
21 30 years or more in any tract or parcel of real property
22 situate in this Commonwealth owned by a dividing
23 corporation (including property owned by a foreign
24 business corporation dividing solely under the law of
25 another jurisdiction) to a new corporation resulting from
26 the division shall not be effective until one of the
27 following documents is filed in the office for the
28 recording of deeds of the county, or each of them, in
29 which the tract or parcel is situated:
30 (A) A deed, lease or other instrument of
19990S0393B2193 - 64 -
1 confirmation describing the tract or parcel.
2 (B) A duly executed duplicate original copy of
3 the articles of division.
4 (C) A copy of the articles of division certified
5 by the Department of State.
6 (D) A declaration of acquisition setting forth
7 the value of real estate holdings in such county of
8 the corporation as an acquired company.
9 (ii) The provisions of 75 Pa.C.S. § 1114 (relating
10 to transfer of vehicle by operation of law) shall not be
11 applicable to [a transfer] an allocation of ownership of
12 any motor vehicle, trailer or semitrailer [from a
13 dividing corporation] to a new corporation under this
14 section or under a similar law of any other jurisdiction
15 but any such [transfer] allocation shall be effective
16 only upon compliance with the requirements of 75 Pa.C.S.
17 § 1116 (relating to issuance of new certificate following
18 transfer).
19 (3) It shall not be necessary for a plan of division to
20 list each individual asset or liability of the dividing
21 corporation to be allocated to a new corporation so long as
22 those assets and liabilities are described in a reasonable
23 manner.
24 (4) Each new corporation shall hold any assets and
25 liabilities allocated to it as the successor to the dividing
26 corporation, and those assets and liabilities shall not be
27 deemed to have been assigned to the new corporation in any
28 manner, whether directly or indirectly or by operation of
29 law.
30 * * *
19990S0393B2193 - 65 -
1 (h) Conflict of laws.--It is the intent of the General
2 Assembly that:
3 (1) The effect of a division of a domestic business
4 corporation shall be governed solely by the laws of this
5 Commonwealth and any other jurisdiction under the laws of
6 which any of the resulting corporations is incorporated.
7 (2) The effect of a division on the assets and
8 liabilities of the dividing corporation shall be governed
9 solely by the laws of this Commonwealth and any other
10 jurisdiction under the laws of which any of the resulting
11 corporations is incorporated.
12 (3) The validity of any allocations of assets or
13 liabilities by a plan of division of a domestic business
14 corporation, regardless of whether or not any of the new
15 corporations is a foreign business corporation, shall be
16 governed solely by the laws of this Commonwealth.
17 (4) In addition to the express provisions of this
18 subsection, this subchapter shall otherwise generally be
19 granted the protection of full faith and credit under the
20 Constitution of the United States.
21 § 1962. Proposal and adoption of plan of conversion.
22 (a) Preparation of plan.--A plan of conversion shall be
23 prepared, setting forth:
24 (1) The terms and conditions of the conversion.
25 (2) A restatement of the articles of the resulting
26 corporation, which articles shall comply with the
27 requirements of this part relating to nonprofit corporations.
28 (3) Any provisions desired providing special treatment
29 of shares held by any shareholder or group of shareholders as
30 authorized by, and subject to the provisions of, section 1906
19990S0393B2193 - 66 -
1 (relating to special treatment of holders of shares of same
2 class or series).
3 (4) Such other provisions as are deemed desirable.
4 [Any of the terms of the plan may be made dependent upon facts
5 ascertainable outside of the plan if the manner in which the
6 facts will operate upon the terms of the plan is set forth in
7 the plan.]
8 * * *
9 (d) Reference to outside facts.--Any of the terms of a plan
10 of conversion may be made dependent upon facts ascertainable
11 outside of the plan if the manner in which the facts will
12 operate upon the terms of the plan is set forth in the plan.
13 Such facts may include, without limitation, actions or events
14 within the control of or determinations made by the corporation
15 or a representative of the corporation.
16 § 1972. Proposal of voluntary dissolution.
17 (a) General rule.--Any business corporation that has
18 commenced business may dissolve voluntarily in the manner
19 provided in this subchapter and wind up its affairs in the
20 manner provided in section 1975 (relating to predissolution
21 provision for liabilities) or Subchapter H (relating to
22 postdissolution provision for liabilities). Voluntary
23 dissolution shall be proposed by the adoption by the board of
24 directors of a resolution recommending that the corporation be
25 dissolved voluntarily. The resolution shall contain a statement
26 either that the dissolution shall proceed under section 1975 or
27 that the dissolution shall proceed under Subchapter H. The
28 resolution may set forth provisions for the distribution to
29 shareholders of any surplus remaining after paying or providing
30 for all liabilities of the corporation, including provisions for
19990S0393B2193 - 67 -
1 special treatment of shares held by any shareholder or group of
2 shareholders as authorized by, and subject to the provisions of,
3 section 1906 (relating to special treatment of holders of shares
4 of same class or series).
5 (b) Submission to shareholders.--The board of directors
6 shall direct that the [question of] resolution recommending
7 dissolution be submitted to a vote of the shareholders of the
8 corporation entitled to vote thereon at a regular or special
9 meeting of the shareholders.
10 * * *
11 § 1973. Notice of meeting of shareholders.
12 (a) General rule.--Written notice of the meeting of
13 shareholders that will consider the [advisability of voluntarily
14 dissolving a] resolution recommending dissolution of the
15 business corporation shall be given to each shareholder of
16 record entitled to vote thereon and the purpose shall be
17 included in the notice of the meeting.
18 * * *
19 § 1975. Predissolution provision for liabilities.
20 (a) Powers of board.--The board of directors of a business
21 corporation that has elected to proceed under this section shall
22 have full power to wind up and settle the affairs of [a
23 business] the corporation in accordance with this section prior
24 to filing articles of dissolution in accordance with section
25 1977 (relating to articles of dissolution).
26 (b) Notice to creditors and taxing authorities.--After the
27 approval by the shareholders of the [proposal] resolution
28 recommending that the corporation dissolve voluntarily, the
29 corporation shall immediately cause notice of the winding up
30 proceedings to be officially published and to be mailed by
19990S0393B2193 - 68 -
1 certified or registered mail to each known creditor and claimant
2 and to each municipal corporation in which [its registered
3 office or principal] it has a place of business in this
4 Commonwealth [is located].
5 (c) Winding up and distribution.--The corporation shall, as
6 speedily as possible, proceed to collect all sums due it,
7 convert into cash all corporate assets the conversion of which
8 into cash is required to discharge its liabilities and, out of
9 the assets of the corporation, discharge or make adequate
10 provision for the discharge of all liabilities of the
11 corporation, according to their respective priorities. Any
12 surplus remaining after paying or providing for all liabilities
13 of the corporation shall be distributed to the shareholders
14 according to their respective rights and preferences. See
15 section 1972(a) (relating to proposal of voluntary dissolution).
16 § 1976. Judicial supervision of proceedings.
17 A business corporation that has elected to proceed under
18 section 1975 (relating to predissolution provision for
19 liabilities), at any time during the winding up proceedings, may
20 apply to the court to have the proceedings continued under the
21 supervision of the court and thereafter the proceedings shall
22 continue under the supervision of the court as provided in
23 Subchapter G (relating to involuntary liquidation and
24 dissolution).
25 § 1977. Articles of dissolution.
26 (a) General rule.--Articles of dissolution and the
27 certificates or statement required by section 139 (relating to
28 tax clearance of certain fundamental transactions) shall be
29 filed in the Department of State when:
30 (1) all liabilities of the business corporation have
19990S0393B2193 - 69 -
1 been discharged, or adequate provision has been made
2 therefor, in accordance with section 1975 (relating to
3 predissolution provision for liabilities), and all of the
4 remaining assets of the corporation have been distributed as
5 provided in section 1975 (or in case its assets are not
6 sufficient to discharge its liabilities, when all the assets
7 have been fairly and equitably applied, as far as they will
8 go, to the payment of such liabilities); or
9 (2) an election to proceed under Subchapter H (relating
10 to postdissolution provision for liabilities) has been made.
11 [See section 134 (relating to docketing statement).]
12 (b) Contents of articles.--The articles of dissolution shall
13 be executed by the corporation and shall set forth:
14 * * *
15 (5) A statement that:
16 (i) [that] all liabilities of the corporation have
17 been discharged or that adequate provision has been made
18 therefor; [or]
19 (ii) [that] the assets of the corporation are not
20 sufficient to discharge its liabilities, and that all the
21 assets of the corporation have been fairly and equitably
22 applied, as far as they will go, to the payment of such
23 liabilities[. An election by]; or
24 (iii) the corporation has elected to proceed under
25 Subchapter H [shall constitute the making of adequate
26 provision for the liabilities of the corporation,
27 including any judgment or decree that may be obtained
28 against the corporation in any pending action or
29 proceeding].
30 * * *
19990S0393B2193 - 70 -
1 (7) [A] In the case of a corporation that has not
2 elected to proceed under Subchapter H, a statement that no
3 actions or proceedings are pending against the corporation in
4 any court, or that adequate provision has been made for the
5 satisfaction of any judgment or decree that may be obtained
6 against the corporation in each pending action or proceeding.
7 (8) [A] In the case of a corporation that has not
8 elected to proceed under Subchapter H, a statement that
9 notice of the winding-up proceedings of the corporation was
10 mailed by certified or registered mail to each known creditor
11 and claimant and to each municipal corporation in which the
12 [registered office or principal place of business of the]
13 corporation has a place of business in this Commonwealth [is
14 located].
15 * * *
16 (d) Cross references.--See sections 134 (relating to
17 docketing statement) and 135 (relating to requirements to be met
18 by filed documents).
19 § 1978. Winding up of corporation after dissolution.
20 * * *
21 (b) Standard of care of directors and officers.--The
22 dissolution of the corporation shall not subject its directors
23 or officers to standards of conduct different from those
24 prescribed by or pursuant to Chapter 17 (relating to officers,
25 directors and shareholders). Directors of a dissolved
26 corporation who have complied with section 1975 (relating to
27 predissolution provision for liabilities) or Subchapter H
28 (relating to postdissolution provision for liabilities) shall
29 not be personally liable to the creditors of the dissolved
30 corporation.
19990S0393B2193 - 71 -
1 § 1979. Survival of remedies and rights after dissolution.
2 (a) General rule.--The dissolution of a business
3 corporation, either under this subchapter or under Subchapter G
4 (relating to involuntary liquidation and dissolution) or by
5 expiration of its period of duration or otherwise, shall not
6 eliminate nor impair any remedy available to or against the
7 corporation or its directors, officers or shareholders for any
8 right or claim existing, or liability incurred, prior to the
9 dissolution, if an action or proceeding thereon is brought on
10 behalf of:
11 (1) the corporation within the time otherwise limited by
12 law; or
13 (2) any other person before or within two years after
14 the date of the dissolution or within the time otherwise
15 limited by this subpart or other provision of law, whichever
16 is less. See sections 1987 (relating to proof of claims),
17 1993 (relating to acceptance or rejection of matured claims)
18 and 1994 (relating to disposition of unmatured claims).
19 [The actions or proceedings may be prosecuted against and
20 defended by the corporation in its corporate name.]
21 * * *
22 (e) Conduct of actions.--An action or proceeding may be
23 prosecuted against and defended by a dissolved corporation in
24 its corporate name.
25 § 1980. Dissolution by domestication.
26 Whenever a domestic business corporation has domesticated
27 itself under the laws of another jurisdiction by action similar
28 to that provided by section 4161 (relating to domestication) and
29 has authorized that action by the vote required by this
30 subchapter for the approval of a proposal that the corporation
19990S0393B2193 - 72 -
1 dissolve voluntarily, the corporation may surrender its charter
2 under the laws of this Commonwealth by filing in the Department
3 of State articles of dissolution under this subchapter
4 containing the statement specified by section [1977(a)(1)]
5 1977(b)(1) through (4) (relating to [preparation of articles).]
6 articles of dissolution). If the corporation as domesticated in
7 the other jurisdiction qualifies to do business in this
8 Commonwealth either prior to or simultaneously with the filing
9 of the articles of dissolution under this section, the
10 corporation shall not be required to file with the articles of
11 dissolution the tax clearance certificates that would otherwise
12 be required by section 139 (relating to tax clearance of certain
13 fundamental transactions).
14 § 1989. Articles of involuntary dissolution.
15 (a) General rule.--In a proceeding under this subchapter,
16 the court shall enter an order dissolving the business
17 corporation when the costs and expenses of the proceeding and
18 all liabilities of the corporation have been discharged, and all
19 of its remaining assets have been distributed to its
20 shareholders or, in case its assets are not sufficient to
21 discharge such costs, expenses and liabilities, when all the
22 assets have been applied, as far as they will go, to the payment
23 of such costs, expenses and liabilities. See section 139(b)
24 (relating to tax clearance in judicial proceedings).
25 (b) Filing.--After entry of an order of dissolution, the
26 office of the clerk of the court of common pleas shall prepare
27 and execute articles of dissolution substantially in the form
28 provided by section 1977 (relating to articles of dissolution),
29 attach thereto a certified copy of the order and transmit the
30 articles and attached order to the Department of State. [A
19990S0393B2193 - 73 -
1 certificate or statement provided for by section 139 (relating
2 to tax clearance of certain fundamental transactions) shall not
3 be required, and the] The department shall not charge a fee in
4 connection with the filing of articles of dissolution under this
5 section. See [section] sections 134 (relating to docketing
6 statement) and 135 (relating to requirements to be met by filed
7 documents).
8 * * *
9 § 1991.1. Authority of board of directors.
10 (a) General rule.--The board of directors of a business
11 corporation that has elected to proceed under this subchapter
12 shall have full power to wind up and settle the affairs of the
13 corporation in accordance with this subchapter both prior to and
14 after the filing of articles of dissolution in accordance with
15 section 1977 (relating to articles of dissolution).
16 (b) Winding up.--The corporation shall, as speedily as
17 possible, proceed to comply with the requirements of this
18 subchapter while simultaneously collecting all sums due it and
19 converting into cash all corporate assets, the conversion of
20 which into cash is required to make adequate provision for its
21 liabilities.
22 § 1992. Notice to claimants.
23 * * *
24 (c) Publication and service of notices.--
25 (1) The notices required by this section shall be
26 officially published at least once a week for two consecutive
27 weeks and, in the case of a corporation having $10,000,000 or
28 more in total assets at the time of its dissolution, at least
29 once in all editions of a daily newspaper with a national
30 circulation.
19990S0393B2193 - 74 -
1 (2) Concurrently with or preceding the publication, the
2 corporation or successor entity shall send a copy of the
3 notice by certified or registered mail, return receipt
4 requested, to each:
5 (i) known creditor or claimant;
6 (ii) holder of a claim described in subsection (b);
7 and
8 (iii) municipal corporation in which [the registered
9 office or principal] a place of business of the
10 corporation in this Commonwealth was located at the time
11 of filing the articles of dissolution in the department.
12 * * *
13 § 1997. Payments and distributions.
14 * * *
15 (b) Disposition.--The claims and liabilities shall be paid
16 in full and any provision for payment shall be made in full if
17 there are sufficient assets. If there are insufficient assets,
18 the claims and liabilities shall be paid or provided for in
19 order of their priority, and, among claims of equal priority,
20 ratably to the extent of funds legally available therefor. Any
21 remaining assets shall be distributed to the shareholders of the
22 corporation according to their respective rights and
23 preferences, except that the distribution shall not be made less
24 than 60 days after the last notice of rejection, if any, was
25 given under section 1993 (relating to acceptance or rejection of
26 matured claims). See section 1972(a) (relating to proposal of
27 voluntary dissolution).
28 * * *
29 [(d) Liability of directors.--Directors of a dissolved
30 corporation or governing persons of a successor entity that has
19990S0393B2193 - 75 -
1 complied with this section shall not be personally liable to the
2 claimants of the dissolved corporation.]
3 § 2105. TERMINATION OF NONSTOCK CORPORATION STATUS. <--
4 * * *
5 (C) MUTUAL INSURANCE COMPANIES.--WITH RESPECT TO THE
6 TERMINATION OF THE STATUS OF A MUTUAL INSURANCE COMPANY AS A
7 NONSTOCK CORPORATION, SEE SECTION 103 (RELATING TO SUBORDINATION
8 OF TITLE TO REGULATORY LAWS) AND [THE ACT OF DECEMBER 10, 1970
9 (P.L.884, NO.279), REFERRED TO AS THE MUTUAL INSURANCE COMPANY
10 CONVERSION LAW.] ARTICLE VIII-A OF THE ACT OF MAY 17, 1921
11 (P.L.682, NO.284), KNOWN AS THE INSURANCE COMPANY LAW OF 1921.
12 § 2524. CONSENT OF SHAREHOLDERS IN LIEU OF MEETING.
13 (A) GENERAL RULE.--AN ACTION MAY BE AUTHORIZED BY THE
14 SHAREHOLDERS OF A REGISTERED CORPORATION WITHOUT A MEETING BY
15 LESS THAN UNANIMOUS [WRITTEN] CONSENT ONLY IF PERMITTED BY ITS
16 ARTICLES.
17 (B) EFFECTIVENESS OF ACTION.--AN ACTION AUTHORIZED BY THE
18 SHAREHOLDERS OF A REGISTERED CORPORATION WITHOUT A MEETING BY
19 LESS THAN UNANIMOUS [WRITTEN] CONSENT MAY BECOME EFFECTIVE
20 IMMEDIATELY UPON ITS AUTHORIZATION, BUT PROMPT NOTICE OF THE
21 ACTION SHALL BE GIVEN TO THOSE SHAREHOLDERS ENTITLED TO VOTE
22 THEREON WHO HAVE NOT CONSENTED.
23 § 2526. VOTING RIGHTS OF DIRECTORS.
24 EVERY DIRECTOR OF A REGISTERED CORPORATION DESCRIBED IN
25 SECTION 2502(1) (RELATING TO REGISTERED CORPORATION STATUS)
26 SHALL BE ENTITLED TO ONE VOTE, EXCEPT AS OTHERWISE PROVIDED IN:
27 (1) THE ARTICLES; OR
28 (2) A BYLAW ADOPTED BY THE SHAREHOLDERS EITHER:
29 (I) ON OR BEFORE (THE LEGISLATIVE REFERENCE BUREAU
30 SHALL INSERT HERE THE EFFECTIVE DATE OF THIS SECTION); OR
19990S0393B2193 - 76 -
1 (II) AT A TIME WHEN THE CORPORATION WAS NOT A
2 REGISTERED CORPORATION DESCRIBED IN SECTION 2502(1).
3 § 2527. AUTHORITY OF BOARD OF DIRECTORS.
4 THE AUTHORITY, POWERS AND FUNCTIONS OF THE BOARD OF DIRECTORS
5 OF A REGISTERED CORPORATION DESCRIBED IN SECTION 2502(1)
6 (RELATING TO REGISTERED CORPORATION STATUS) MAY NOT BE VARIED,
7 AND A COMMITTEE OF THE BOARD OF SUCH A CORPORATION MAY NOT BE
8 ESTABLISHED, BY A BYLAW ADOPTED BY THE SHAREHOLDERS, UNLESS THE
9 BYLAW HAS BEEN ADOPTED:
10 (1) WITH THE APPROVAL OF THE BOARD OF DIRECTORS;
11 (2) ON OR BEFORE (THE LEGISLATIVE REFERENCE BUREAU SHALL
12 INSERT HERE THE EFFECTIVE DATE OF THIS SECTION); OR
13 (3) AT A TIME WHEN THE CORPORATION WAS NOT A REGISTERED
14 CORPORATION DESCRIBED IN SECTION 2502(1).
15 § 2902. Definitions and index of definitions.
16 (a) Definitions.--The following words and phrases when used
17 in this chapter shall have the meanings given to them in this
18 section unless the context clearly indicates otherwise:
19 "Disqualified person." [A] The term "disqualified person" as
20 used in this chapter means a licensed person who for any reason
21 is or becomes legally disqualified (temporarily or permanently)
22 to render the same professional services that the particular
23 professional corporation of which he is an officer, director,
24 shareholder or employee is or was rendering.
25 ["Licensed person." Any natural person who is duly licensed
26 or admitted to practice his profession by a court, department,
27 board, commission or other agency of this Commonwealth or
28 another jurisdiction to render a professional service that is or
29 will be rendered by the professional corporation of which he is,
30 or intends to become, an officer, director, shareholder,
19990S0393B2193 - 77 -
1 employee or agent.
2 "Profession." Includes the performance of any type of
3 personal service to the public that requires as a condition
4 precedent to the performance of the service the obtaining of a
5 license or admission to practice or other legal authorization,
6 including all personal services that prior to the enactment of
7 the act of July 9, 1970 (P.L.461, No.160), known as the
8 Professional Corporation Law, could not lawfully be rendered by
9 means of a corporation. By way of example, and without limiting
10 the generality of the foregoing, the term includes for the
11 purposes of this chapter personal services rendered as an
12 architect, chiropractor, dentist, funeral director, osteopath,
13 podiatrist, physician, professional engineer, veterinarian,
14 certified public accountant or surgeon and, except as otherwise
15 prescribed by general rules, an attorney at law. Except as
16 otherwise expressly provided by law, the definition specified in
17 this paragraph shall be applicable to this chapter only and
18 shall not affect the interpretation of any other statute or any
19 local zoning ordinance or other official document heretofore or
20 hereafter enacted or promulgated.
21 "Professional services." Any type of services that may be
22 rendered by the member of any profession within the purview of
23 his profession.]
24 (b) Index of other definitions.--Other definitions applying
25 to this chapter and the sections in which they appear are:
26 "Licensed person." Section 102 (relating to definitions).
27 "Profession." Section 102.
28 "Professional services." Section 102.
29 § 2904. Election of an existing business corporation to become
30 a professional corporation.
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1 * * *
2 (b) Procedure.--The amendment shall be adopted in accordance
3 with the requirements of Subchapter B of Chapter 19 (relating to
4 amendment of articles) [except that the amendment must be
5 approved by the unanimous consent of all shareholders of the
6 corporation regardless of any limitations on voting rights
7 stated in the articles or bylaws]. If any shareholder of a
8 business corporation that proposes to amend its articles to
9 become a professional corporation objects to that amendment and
10 complies with the provisions of Subchapter D of Chapter 15
11 (relating to dissenters rights), the shareholder shall be
12 entitled to the rights and remedies of dissenting shareholders
13 therein provided, if any.
14 § 2922. Stated purposes.
15 * * *
16 (b) Additional powers.--A professional corporation may be [a
17 partner in or a shareholder] an equity owner of a partnership
18 [or], limited liability company, corporation or other
19 association engaged in the business of rendering the
20 professional service or services for which the professional
21 corporation was incorporated.
22 § 2923. Issuance and retention of shares.
23 (a) General rule.--Except as otherwise provided by a
24 statute, rule or regulation applicable to a particular
25 profession, all of the ultimate beneficial owners of shares in a
26 professional corporation [may be beneficially owned, directly or
27 indirectly, only by one or more] shall be licensed persons and
28 any issuance or transfer of shares in violation of this
29 restriction shall be void. A shareholder of a professional
30 corporation shall not enter into a voting trust, proxy or any
19990S0393B2193 - 79 -
1 other arrangement vesting another person (other than [another
2 licensed] a person who is qualified to be a direct or indirect
3 shareholder of the same corporation) with the authority to
4 exercise the voting power of any or all of his shares, and any
5 such purported voting trust, proxy or other arrangement shall be
6 void.
7 (b) Ownership by estate.--Unless a lesser period of time is
8 provided in a bylaw [of the corporation] adopted by the
9 shareholders or in a written agreement among the shareholders of
10 the corporation, the estate of a deceased shareholder may
11 continue to hold shares of the professional corporation for a
12 reasonable period of administration of the estate, but the
13 personal representative of the estate shall not by reason of the
14 retention of shares be authorized to participate in any
15 decisions concerning the rendering of professional service.
16 * * *
17 § 3133. Notice of meetings of members of mutual insurance
18 companies.
19 (a) General rule.--Unless otherwise restricted in the
20 bylaws, persons authorized or required to give notice of an
21 annual meeting of members of a mutual insurance company for the
22 election of directors or of a meeting of members of a mutual
23 insurance company called for the purpose of considering [an]
24 amendment of the articles or bylaws, or both, of the corporation
25 may, in lieu of any written notice of meeting of members
26 required to be given by this subpart, give notice of such
27 meeting by causing notice of such meeting to be officially
28 published. Such notice shall be published each week for at
29 least:
30 (1) Three successive weeks, in the case of an annual
19990S0393B2193 - 80 -
1 meeting.
2 (2) Four successive weeks, in the case of a meeting to
3 consider [an] amendment of the articles or bylaws, or both.
4 * * *
5 § 4123. Requirements for foreign corporation names.
6 * * *
7 (b) Exceptions.--
8 (1) The provisions of section 1303(b) (relating to
9 duplicate use of names) shall not prevent the issuance of a
10 certificate of authority to a foreign business corporation
11 setting forth a name that is [confusingly similar to] not
12 distinguishable upon the records of the department from the
13 name of any other domestic or foreign corporation for profit
14 or corporation not-for-profit, [or of any domestic or foreign
15 limited partnership that has filed a certificate or qualified
16 under Chapter 85 (relating to limited partnerships) or
17 corresponding provisions of prior law,] or of any corporation
18 or other association then registered under 54 Pa.C.S. Ch. 5
19 (relating to corporate and other association names) or to any
20 name reserved or registered as provided in this part, if the
21 foreign business corporation applying for a certificate of
22 authority files in the department [one of the following:
23 (i) A] a resolution of its board of directors
24 adopting a fictitious name for use in transacting
25 business in this Commonwealth, which fictitious name is
26 [not confusingly similar to] distinguishable upon the
27 records of the department from the name of the other
28 corporation or other association or [to] from any name
29 reserved or registered as provided in this part and that
30 is otherwise available for use by a domestic business
19990S0393B2193 - 81 -
1 corporation.
2 [(ii) The written consent of the other corporation
3 or other association or holder of a reserved or
4 registered name to use the same or confusingly similar
5 name and one or more words are added to make the name
6 applied for distinguishable from the other name.]
7 * * *
8 § 4126. Amended certificate of authority.
9 (a) General rule.--After receiving a certificate of
10 authority, a qualified foreign business corporation may, subject
11 to the provisions of this subchapter, change [the name under
12 which it is authorized to transact business in this
13 Commonwealth] or correct any of the information set forth in its
14 application for a certificate of authority or previous filings
15 under this section by filing in the Department of State an
16 application for an amended certificate of authority. The
17 application shall be executed by the corporation and shall
18 state:
19 (1) The name under which the applicant corporation
20 currently holds a certificate of authority to do business in
21 this Commonwealth.
22 [(2) The name of the jurisdiction under the laws of
23 which the corporation is incorporated.
24 (3) The address, including street and number, if any, of
25 its principal office under the laws of the jurisdiction in
26 which it is incorporated.
27 (4)] (2) Subject to section 109 (relating to name of
28 commercial registered office provider in lieu of registered
29 address), the address, including street and number, if any,
30 of its registered office in this Commonwealth.[, which may
19990S0393B2193 - 82 -
1 constitute a change in the address of its registered office.
2 (5) The new name of the corporation and]
3 (3) The information to be changed or corrected.
4 (4) If the application reflects a change in the name of
5 the corporation, the application shall include a statement
6 that either:
7 (i) the change of name reflects a change effected in
8 the jurisdiction of incorporation; or
9 (ii) documents complying with section 4123(b)
10 (relating to exception; name) accompany the application.
11 (b) Issuance of amended certificate of authority.--Upon the
12 filing of the application, the applicant corporation shall be
13 deemed to hold an amended certificate of authority.
14 (c) Cross reference.--See section 134 (relating to docketing <--
15 statement).
16 (C) CROSS [REFERENCE] REFERENCES.--SEE [SECTION] SECTIONS <--
17 134 (RELATING TO DOCKETING STATEMENT) AND 135 (RELATING TO
18 REQUIREMENTS TO BE MET BY FILED DOCUMENTS).
19 § 4146. Provisions applicable to all foreign corporations.
20 The following provisions of this subpart shall, except as
21 otherwise provided in this section, be applicable to every
22 foreign corporation for profit, whether or not required to
23 procure a certificate of authority under this chapter:
24 Section 1503 (relating to defense of ultra vires), as to
25 contracts and conveyances [made in] governed by the laws of
26 this Commonwealth and conveyances affecting real property
27 situated in this Commonwealth.
28 Section 1506 (relating to form of execution of
29 instruments), as to instruments or other documents [made or
30 to be performed in] governed by the laws of this Commonwealth
19990S0393B2193 - 83 -
1 or affecting real property situated in this Commonwealth.
2 Section 1510 (relating to certain specifically authorized
3 debt terms), as to obligations (as defined in the section)
4 [executed or effected in] governed by the laws of this
5 Commonwealth or affecting real property situated in this
6 Commonwealth.
7 * * *
8 § 4161. Domestication.
9 * * *
10 (b) Articles of domestication.--The articles of
11 domestication shall be executed by the corporation and shall set
12 forth in the English language:
13 (1) The name of the corporation. If the name is in a
14 foreign language, it shall be set forth in Roman letters or
15 characters or Arabic or Roman numerals. If the name is one
16 that is rendered unavailable by any provision of section
17 1303(b) or (c) (relating to corporate name), the corporation
18 shall adopt, in accordance with any procedures for changing
19 the name of the corporation that are applicable prior to the
20 domestication of the corporation, and shall set forth in the
21 articles of domestication an available name.
22 * * *
23 (c) Cross [reference] references.--See [section] sections
24 134 (relating to docketing statement) and 135 (relating to
25 requirements to be met by filed documents).
26 § 4162. Effect of domestication.
27 (a) General rule.--As a domestic business corporation, the
28 domesticated corporation shall no longer be a foreign business
29 corporation for the purposes of this subpart and shall [have],
30 instead, be a domestic business corporation with all the powers
19990S0393B2193 - 84 -
1 and privileges and [be subject to] all the duties and
2 limitations granted and imposed upon domestic business
3 corporations. [The property, franchises, debts, liens, estates,
4 taxes, penalties and public accounts due the Commonwealth shall
5 continue to be vested in and imposed upon the corporation to the
6 same extent as if it were the successor by merger of the
7 domesticating corporation with and into a domestic business
8 corporation under Subchapter C of Chapter 19 (relating to
9 merger, consolidation, share exchanges and sale of assets).] In
10 all other respects, the domesticated corporation shall be deemed
11 to be the same corporation as it was prior to the domestication
12 without any change in or effect on its existence. Without
13 limiting the generality of the previous sentence, the
14 domestication shall not be deemed to have affected in any way:
15 (1) the right and title of the corporation in and to its
16 assets, property, franchises, estates and choses in action;
17 (2) the liability of the corporation for its debts,
18 obligations, penalties and public accounts due the
19 Commonwealth;
20 (3) any liens or other encumbrances on the property or
21 assets of the corporation; or
22 (4) any contract, license or other agreement to which
23 the corporation is a party or under which it has any rights
24 or obligations.
25 (b) Reclassification of shares.--The shares of the
26 domesticated corporation shall be unaffected by the
27 domestication except to the extent, if any, reclassified in the
28 articles of domestication.
29 § 5303. Corporate name.
30 * * *
19990S0393B2193 - 85 -
1 (b) Duplicate use of names.--The corporate name shall [not
2 be the same as or confusingly similar to] be distinguishable
3 upon the records of the Department of State from:
4 (1) The name of any other domestic corporation for
5 profit or not-for-profit which is either in existence or for
6 which articles of incorporation have been filed but have not
7 yet become effective, or of any foreign corporation for
8 profit or not-for-profit which is either authorized to do
9 business in this Commonwealth or for which an application for
10 a certificate of authority has been filed but which has not
11 yet become effective, [or of any domestic or foreign limited
12 partnership that has filed in the Department of State a
13 certificate or qualified under Chapter 85 (relating to
14 limited partnerships) or under corresponding provisions of
15 prior law,] or the name of any association registered at any
16 time under 54 Pa.C.S. Ch. 5 (relating to corporate and other
17 association names), unless[:
18 (i) where the name is the same or confusingly
19 similar,] the other association:
20 [(A)] (i) has stated that it is about to change
21 its name, or to cease to do business, or is being
22 wound up, or is a foreign association about to
23 withdraw from doing business in this Commonwealth,
24 and the statement and [the] a written consent [of the
25 other association] to the adoption of the name
26 executed by the other association is filed in the
27 Department of State;
28 [(B)] (ii) has filed with the Department of
29 Revenue a certificate of out of existence, or has
30 failed for a period of three successive years to file
19990S0393B2193 - 86 -
1 with the Department of Revenue a report or return
2 required by law and the fact of such failure has been
3 certified by the Department of Revenue to the
4 Department of State;
5 [(C)] (iii) has abandoned its name under the
6 laws of its jurisdiction of incorporation, by
7 amendment, merger, consolidation, division,
8 expiration, dissolution or otherwise, without its
9 name being adopted by a successor in a merger,
10 consolidation, division or otherwise, and an official
11 record of that fact, certified as provided by 42
12 Pa.C.S. § 5328 (relating to proof of official
13 records), is presented by any person to the
14 department; or
15 [(D)] (iv) has had the registration of its name
16 under 54 Pa.C.S. Ch. 5 terminated and, if the
17 termination was effected by operation of 54 Pa.C.S. §
18 504 (relating to effect of failure to make decennial
19 filings), the application for the use of the name is
20 accompanied by a verified statement stating that at
21 least 30 days' written notice of intention to
22 appropriate the name was given to the delinquent
23 association at its [registered office] last known
24 place of business and that, after diligent search by
25 the affiant, the affiant believes the association to
26 be out of existence.[; or
27 (ii) where the name is confusingly similar, the
28 consent of the other association to the adoption of the
29 name is filed in the Department of State.
30 The consent of the association shall be evidenced by a
19990S0393B2193 - 87 -
1 statement to that effect executed by the association.]
2 * * *
3 (e) Remedies for violation of section.--The use of a name in
4 violation of this section shall not vitiate or otherwise affect
5 the corporate existence but any court having jurisdiction may
6 enjoin the corporation from using or continuing to use a name in
7 violation of this section, upon the application of:
8 (1) the Attorney General, acting on his own motion or at
9 the instance of any administrative department, board or
10 commission of this Commonwealth; or
11 (2) any person adversely affected.[;
12 may enjoin the corporation from using or continuing to use a
13 name in violation of this section.]
14 (f) Cross references.--See sections 135(e) (relating to
15 distinguishable names) and 5106(b)(2) (relating to limited
16 uniform application of subpart).
17 § 5304. Required name changes by senior corporations.
18 (a) Adoption of new name upon reactivation.--Where a
19 corporate name is made available on the basis that the
20 corporation or [nonprofit unincorporated] other association
21 [which] that formerly registered [such] the name has failed to
22 file with the Department of Revenue [or in the Department of
23 State] a report or a return required by law or where the
24 corporation or [nonprofit unincorporated] other association has
25 filed with the Department of Revenue a certificate of out of
26 existence, [such] the corporation or other association shall
27 cease to have by virtue of its prior registration any right to
28 the use of [such] the name[, and such]. The corporation or other
29 association, upon withdrawal of the certificate of out of
30 existence or upon the removal of its delinquency in the filing
19990S0393B2193 - 88 -
1 of the required reports or returns, shall make inquiry with the
2 Department of State with regard to the availability of its
3 name[,] and, if [such] the name has been made available to
4 another domestic or foreign corporation for profit or not-for-
5 profit or other association by virtue of [the above] these
6 conditions, shall adopt a new name in accordance with law before
7 resuming its activities.
8 (b) Enforcement of undertaking to release name.--If a
9 corporation has used a name [the same as, or deceptively similar
10 to,] that is not distinguishable upon the records of the
11 Department of State from the name of another corporation or
12 [nonprofit unincorporated] other association as permitted by
13 section 5303(b)(1)[(i)] (relating to duplicate use of names) and
14 the other corporation or [nonprofit unincorporated] other
15 association continues to use its name in this Commonwealth and
16 does not change its name, cease to do business, be wound up, or
17 withdraw as it proposed to do in its consent or change its name
18 as required by subsection (a), any court [of competent] having
19 jurisdiction may enjoin the other corporation or other
20 association from continuing to use its name or a name that is
21 not distinguishable therefrom, upon the application of:
22 (1) the Attorney General, acting on his own motion or at
23 the instance of any administrative department, board or
24 commission of this Commonwealth[,]; or
25 (2) upon the application of any person adversely
26 affected[, may enjoin the other corporation or association
27 from continuing to use its name or a name deceptively similar
28 thereto].
29 § 5311. Filing of statement of summary of record by certain
30 corporations.
19990S0393B2193 - 89 -
1 (a) General rule.--Where any of the [valid] charter
2 documents of a nonprofit corporation are not on file in the
3 Department of State or there is an error in any such document as
4 transferred to the department pursuant to section 140 (relating
5 to custody and management of orphan corporate and business
6 records), and the corporation desires to file any document in
7 the department under any other provision of this [article]
8 subpart or the corporation desires to secure from the department
9 any certificate to the effect that the corporation is a
10 corporation duly incorporated and existing under the laws of
11 this Commonwealth or a certified copy of the articles of the
12 corporation or the corporation desires to correct the text of
13 its charter documents as on file in the department, the
14 corporation shall file in the department a statement of summary
15 of record which shall be executed by the corporation and shall
16 set forth:
17 (1) The name of the corporation and, subject to section
18 109 (relating to name of commercial registered office
19 provides in lieu of registered address), the location,
20 including street and number, if any, of its registered
21 office.
22 (2) The statute by or under which the corporation was
23 incorporated.
24 (3) The name under which, the manner in which and the
25 date on which the corporation was originally incorporated,
26 including the date when and the place where the original
27 articles were recorded.
28 (4) The place or places, including volume and page
29 numbers or their equivalent, where the documents
30 [constituting the currently effective articles are] that are
19990S0393B2193 - 90 -
1 not on file in the department or that require correction in
2 the records of the department were originally filed or
3 recorded, the date or dates of each [such] filing or
4 recording and the correct text of [such currently effective
5 articles] the documents. The information specified in this
6 paragraph may be omitted in a statement of summary of record
7 that is delivered to the department contemporaneously with
8 amended and restated articles of the corporation filed under
9 this subpart.
10 [(5) Each name by which the corporation was known, if
11 any, other than its original name and its current name, and
12 the date or dates on which each change of name of the
13 corporation became effective.
14 A corporation shall be required to make only one filing under
15 this subsection.]
16 (b) Validation of prior defects in incorporation.--Upon the
17 filing of a statement by a corporation under this section or the
18 transfer to the department of the records relating to a
19 corporation pursuant to section 140, the corporation [named in
20 the statement] shall be deemed to be a validly subsisting
21 corporation to the same extent as if it had been duly
22 incorporated and was existing under this subpart and the
23 department shall so certify regardless of any absence of or
24 defect in the prior proceedings relating to incorporation.
25 (c) Cross [reference] references.--See [section] sections
26 134 (relating to docketing statement), 135 (relating to
27 requirements to be met by filed documents) and 5106(b)(2)
28 (relating to uniform application of subpart).
29 § 5503. Defense of ultra vires.
30 (a) General rule.--[No] A limitation upon the business,
19990S0393B2193 - 91 -
1 [purpose or] purposes[,] or powers of a nonprofit corporation,
2 expressed or implied in its articles or bylaws or implied by
3 law, shall not be asserted in order to defend any action at law
4 or in equity between the corporation and a third person, or
5 between a member and a third person, involving any contract to
6 which the corporation is a party or any right of property or any
7 alleged liability of [whatsoever] whatever nature[; but such],
8 but the limitation may be asserted:
9 (1) In an action by a member against the corporation to
10 enjoin the doing of unauthorized acts or the transaction or
11 continuation of unauthorized business. If the unauthorized
12 acts or business sought to be enjoined are being transacted
13 pursuant to any contract to which the corporation is a party,
14 the court may, if all of the parties to the contract are
15 parties to the action[,] and if it deems [such action] the
16 result to be equitable, set aside and enjoin the performance
17 of [such] the contract, and in so doing shall allow to the
18 corporation, or to the other parties to the contract, as the
19 case may be, such compensation as may be [equitable]
20 appropriate for the loss or damage sustained by any of them
21 from the action of the court in setting aside and enjoining
22 the performance of [such] the contract, but anticipated
23 profits to be derived from the performance of the contract
24 shall not be awarded by the court as a loss or damage
25 sustained.
26 (2) In any action by or in the right of the corporation
27 to procure a judgment in its favor against an incumbent or
28 former officer, director or member of an other body of the
29 corporation for loss or damage due to his unauthorized acts.
30 (3) In a proceeding by the Commonwealth under section
19990S0393B2193 - 92 -
1 503 (relating to actions to revoke corporate franchises)[,]
2 or in a proceeding by the Commonwealth to enjoin the
3 corporation from the doing of unauthorized or unlawful
4 business.
5 (b) Conveyances of property by or to a corporation.--[No] A
6 conveyance or transfer by or to a nonprofit corporation of
7 property, real or personal, of any kind or description, shall
8 not be invalid or fail because in making [such] the conveyance
9 or transfer, or in acquiring the property, real or personal,
10 [the board of directors or other body or any of the officers]
11 any representative of the corporation acting within the scope of
12 the actual or apparent authority given to [them] him by the
13 [board of directors or other body, have] corporation has
14 exceeded any of the purposes or powers of the corporation.
15 (c) [Nonqualified foreign corporations.--The provisions of
16 this section shall extend to contracts and conveyances made by
17 nonqualified foreign corporations in this Commonwealth and to
18 conveyances by nonqualified foreign corporations of real
19 property situated in this Commonwealth.] Cross reference.--See
20 section 6146 (relating to provisions applicable to all foreign
21 corporations).
22 § 5505. Persons bound by bylaws.
23 Except as otherwise provided by section 5713 (relating to
24 personal liability of directors) or any similar provision of
25 law, bylaws of a nonprofit corporation shall operate only as
26 regulations among the members, directors, members of an other
27 body and officers of the corporation, and shall not affect
28 contracts or other dealings with other persons, unless those
29 persons have actual knowledge of the bylaws.
30 § 5506. Form of execution of instruments.
19990S0393B2193 - 93 -
1 (a) General rule.--Any form of execution provided in the
2 articles or bylaws to the contrary notwithstanding, any note,
3 mortgage, evidence of indebtedness, contract[,] or other
4 [instrument in writing] document, or any assignment or
5 endorsement thereof, executed or entered into between any
6 nonprofit corporation and any other person, when signed by one
7 or more officers or agents having actual or apparent authority
8 to sign it, or by the president or vice-president and secretary
9 or assistant secretary or treasurer or assistant treasurer of
10 [such] the corporation, shall be held to have been properly
11 executed for and in behalf of the corporation.
12 (b) Seal unnecessary.--[Except as otherwise required by
13 statute, the] The affixation of the corporate seal shall not be
14 necessary to the valid execution, assignment or endorsement by a
15 corporation of any instrument [in writing] or other document.
16 (c) [Nonqualified foreign corporations.--The provisions of
17 this section shall extend to instruments in writing made or to
18 be performed in this Commonwealth by a nonqualified foreign
19 corporation and to instruments executed by nonqualified foreign
20 corporations affecting real property situated in this
21 Commonwealth.] Cross reference.--See section 6146 (relating to
22 provisions applicable to all foreign corporations).
23 § 5508. Corporate records; inspection by members.
24 (a) Required records.--Every nonprofit corporation shall
25 keep [an original or duplicate record] minutes of the
26 proceedings of the members [and], the directors[,] and [of] any
27 other body [exercising powers or performing duties which under
28 this article may be exercised or performed by such other body,
29 the original or a copy of its bylaws, including all amendments
30 thereto to date, certified by the secretary of the corporation],
19990S0393B2193 - 94 -
1 and [an original or] a [duplicate] membership register, giving
2 the names [of the members, and showing their respective] and
3 addresses of all members and the class and other details of the
4 membership of each. [Every such] The corporation shall also keep
5 appropriate, complete and accurate books or records of account.
6 The records provided for in this subsection shall be kept at
7 [either] any of the following locations:
8 (1) the registered office of the corporation in this
9 Commonwealth [or at its];
10 (2) the principal place of business wherever
11 situated[.]; or
12 (3) any actual business office of the corporation.
13 (b) Right of inspection by a member.--Every member shall,
14 upon written verified demand [under oath] stating the purpose
15 thereof, have a right to examine, in person or by agent or
16 attorney, during the usual hours for business for any proper
17 purpose, the membership register, books and records of account,
18 and records of the proceedings of the members, directors and
19 [such] any other body, and to make copies or extracts therefrom.
20 A proper purpose shall mean a purpose reasonably related to the
21 interest of [such] the person as a member. In every instance
22 where an attorney or other agent [shall be] is the person who
23 seeks the right [to] of inspection, the demand [under oath]
24 shall be accompanied by a verified power of attorney or [such]
25 other writing [which] that authorizes the attorney or other
26 agent to so act on behalf of the member. The demand [under oath]
27 shall be directed to the corporation:
28 (1) at its registered office in this Commonwealth [or];
29 (2) at its principal place of business wherever
30 situated[.]; or
19990S0393B2193 - 95 -
1 (3) in care of the person in charge of an actual
2 business office of the corporation.
3 (c) Proceedings for the enforcement of inspection by a
4 member.--If the corporation, or an officer or agent thereof,
5 refuses to permit an inspection sought by a member or attorney
6 or other agent acting for the member pursuant to subsection (b)
7 [of this section] or does not reply to the demand within five
8 business days after the demand has been made, the member may
9 apply to the court for an order to compel [such] the inspection.
10 The court shall determine whether or not the person seeking
11 inspection is entitled to the inspection sought. The court may
12 summarily order the corporation to permit the member to inspect
13 the membership register and the other books and records of the
14 corporation and to make copies or extracts therefrom; or the
15 court may order the corporation to furnish to the member a list
16 of its members as of a specific date on condition that the
17 member first pay to the corporation the reasonable cost of
18 obtaining and furnishing [such] the list and on such other
19 conditions as the court deems appropriate. Where the member
20 seeks to inspect the books and records of the corporation, other
21 than its membership register or list of members, he shall first
22 establish:
23 (1) that he has complied with the provisions of this
24 section respecting the form and manner of making demand for
25 inspection of such document; and
26 (2) that the inspection he seeks is for a proper
27 purpose.
28 Where the member seeks to inspect the membership register or
29 list of members of the corporation and he has complied with the
30 provisions of this section respecting the form and manner of
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1 making demand for inspection of [such] the documents, the burden
2 of proof shall be upon the corporation to establish that the
3 inspection he seeks is for an improper purpose. The court may,
4 in its discretion, prescribe any limitations or conditions with
5 reference to the inspection, or award such other or further
6 relief as the court [may deem] deems just and proper. The court
7 may order books, documents and records, pertinent extracts
8 therefrom, or duly authenticated copies thereof, to be brought
9 [within] into this Commonwealth and kept in this Commonwealth
10 upon such terms and conditions as the order may prescribe.
11 (d) Cross references.--See sections 107 (relating to form of
12 records) and 5512 (relating to informational rights of a
13 director).
14 § 5510. [(Reserved).] Certain specifically authorized debt
15 terms.
16 (a) Interest rates.--A nonprofit corporation shall not plead
17 or set up usury, or the taking of more than the lawful rate of
18 interest, or the taking of any finance, service or default
19 charge in excess of any maximum rate therefor provided or
20 prescribed by law, as a defense to any action or proceeding
21 brought against it to recover damages on, or to enforce payment
22 of, or to enforce any other remedy on, any obligation executed
23 or effected by the corporation.
24 (b) Yield maintenance premiums.--A prepayment premium
25 determined by reference to the approximate spread between the
26 yield at issuance, or at the date of amendment of any of the
27 terms, of an obligation of a corporation and the yield at or
28 about such date of an interest rate index of independent
29 significance and contingent upon a change in the ownership of or
30 memberships in the corporation or a default by or other change
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1 in the condition or prospects of the corporation or any
2 affiliate of the corporation shall be deemed liquidated damages
3 and shall not constitute a penalty.
4 (c) Definitions.--As used in this section, the following
5 words and phrases shall have the meanings given to them in this
6 subsection:
7 "Affiliate." An affiliate or associate as defined in section
8 2552 (relating to definitions).
9 "Obligation." Includes an installment sale contract.
10 (d) Cross reference.--See section 6146 (relating to
11 provisions applicable to all foreign corporations).
12 § 5512. Informational rights of a director.
13 (a) General rule.--To the extent reasonably related to the
14 performance of the duties of the director, including those
15 arising from service as a member of a committee of the board of
16 directors, a director of a nonprofit corporation is entitled:
17 (1) in person or by any attorney or other agent, at any
18 reasonable time, to inspect and copy corporate books, records
19 and documents and, in addition, to inspect, and receive
20 information regarding, the assets, liabilities and operations
21 of the corporation and any subsidiaries of the corporation
22 incorporated or otherwise organized or created under the laws
23 of this Commonwealth that are controlled directly or
24 indirectly by the corporation; and
25 (2) to demand that the corporation exercise whatever
26 rights it may have to obtain information regarding any other
27 subsidiaries of the corporation.
28 (b) Proceedings for the enforcement of inspection by a
29 director.--If the corporation, or an officer or agent thereof,
30 refuses to permit an inspection or obtain or provide information
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1 sought by a director or attorney or other agent acting for the
2 director pursuant to subsection (a) or does not reply to the
3 request within two business days after the request has been
4 made, the director may apply to the court for an order to compel
5 the inspection or the obtaining or providing of the information.
6 The court shall summarily order the corporation to permit the
7 requested inspection or to obtain the information unless the
8 corporation establishes that the information to be obtained by
9 the exercise of the right is not reasonably related to the
10 performance of the duties of the director or that the director
11 or the attorney or agent of the director is likely to use the
12 information in a manner that would violate the duty of the
13 director to the corporation. The order of the court may contain
14 provisions protecting the corporation from undue burden or
15 expense and prohibiting the director from using the information
16 in a manner that would violate the duty of the director to the
17 corporation.
18 (c) Cross references.--See sections 107 (relating to form of
19 records), 5508 (relating to corporate records; inspection by
20 members) and 42 Pa.C.S. § 2503(7) (relating to right of
21 participants to receive counsel fees).
22 § 5552. Liabilities of members.
23 (a) General rule.--[The members of a nonprofit corporation
24 shall not be personally liable for the debts, liabilities or
25 obligations of the corporation.] A member of a nonprofit
26 corporation shall not be liable, solely by reason of being a
27 member, under an order of a court or in any other manner for a
28 debt, obligation or liability of the corporation of any kind or
29 for the acts of any member or representative of the corporation.
30 (b) Obligations of member to corporation.--A member shall be
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1 liable to the corporation only to the extent of any unpaid
2 portion of the capital contributions, membership dues or
3 assessments which the corporation may have lawfully imposed upon
4 him, or for any other indebtedness owed by him to the
5 corporation. No action shall be brought by any creditor of the
6 corporation to reach and apply any such liability to any debt of
7 the corporation until after:
8 (1) final judgment [shall have] has been rendered
9 against the corporation in favor of the creditor and
10 execution thereon returned unsatisfied[, or the corporation
11 shall have been adjudged bankrupt, or];
12 (2) a case involving the corporation has been brought
13 under 11 U.S.C. Ch. 7 (relating to liquidation) and a
14 distribution has been made and the case closed or a notice of
15 no assets has been issued; or
16 (3) a receiver [shall have] has been appointed with
17 power to collect debts, and [which] the receiver, on demand
18 of a creditor to bring an action thereon, has refused to sue
19 for [such] the unpaid amount, or the corporation [shall have]
20 has been dissolved or ceased its activities leaving debts
21 unpaid.
22 [No such] (c) Action by a creditor.--An action by a creditor
23 under subsection (b) shall not be brought more than three years
24 after the happening of [any one of such events.] the first to
25 occur of the events listed in subsection (b)(1) through (3).
26 § 5709. Conduct of members meeting.
27 (a) Presiding officer.--There shall be a presiding officer
28 at every meeting of the members. The presiding officer shall be
29 appointed in the manner provided in the bylaws or, in the
30 absence of such provision, by the board of directors. If the
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1 bylaws are silent on the appointment of the presiding officer
2 and the board fails to designate a presiding officer, the
3 president shall be the presiding officer.
4 (b) Authority of the presiding officer.--Except as otherwise
5 provided in the bylaws, the presiding officer shall determine
6 the order of business and shall have the authority to establish
7 rules for the conduct of the meeting.
8 (c) Procedural standard.--Any action by the presiding
9 officer in adopting rules for, and in conducting, a meeting
10 shall be fair to the members.
11 (d) Closing of the polls.--The presiding officer shall
12 announce at the meeting when the polls close for each matter
13 voted upon. If no announcement is made, the polls shall be
14 deemed to have closed upon the final adjournment of the meeting.
15 After the polls close, no ballots, proxies or votes, nor any
16 revocations or changes thereto, may be accepted.
17 § 5729. Voting rights of directors. <--
18 (a) General rule.--Unless otherwise provided in a bylaw
19 adopted by the members, every director of a nonprofit
20 corporation shall be entitled to one vote. Without limiting the
21 generality of the foregoing, a bylaw adopted by the members may
22 provide that a class or other defined group of directors shall
23 have multiple or fractional voting rights, or no right to vote,
24 either generally or under specified circumstances.
25 (b) [Multiple and fractional voting.--The requirement of
26 this article] Application of procedural requirements.--Any
27 requirement of this subpart for the presence of or vote or other
28 action by a specified percentage of directors shall be satisfied
29 by the presence of or vote or other action by directors entitled
30 to cast [such] the specified percentage of the votes [which all]
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1 that all voting directors in office are entitled to cast.
2 § 5731. Executive and other committees of the board.
3 (a) Establishment and powers.--Unless otherwise restricted
4 in the bylaws:
5 (1) The board of directors may, by resolution adopted by
6 a majority of the directors in office, establish one or more
7 committees to consist of one or more directors of the
8 corporation.
9 (2) Any [such] committee, to the extent provided in the
10 resolution of the board of directors or in the bylaws, shall
11 have and may exercise all of the powers and authority of the
12 board of directors, except that [no such] a committee shall
13 not have any power or authority as to the following:
14 (i) The submission to members of any action
15 requiring approval of members under this [article]
16 subpart.
17 (ii) The creation or filling of vacancies in the
18 board of directors.
19 (iii) The adoption, amendment or repeal of the
20 bylaws.
21 (iv) The amendment or repeal of any resolution of
22 the board that by its terms is amendable or repealable
23 only by the board.
24 (v) Action on matters committed by the bylaws or a
25 resolution of the board of directors exclusively to
26 another committee of the board.
27 [(2)] (3) The board may designate one or more directors
28 as alternate members of any committee, who may replace any
29 absent or disqualified member at any meeting of the
30 committee. In the absence or disqualification of a member of
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1 a committee, the member or members thereof present at any
2 meeting and not disqualified from voting, whether or not he
3 or they constitute a quorum, may unanimously appoint another
4 director to act at the meeting in the place of any [such]
5 absent or disqualified member.
6 (b) Term.--Each committee of the board shall serve at the
7 pleasure of the board.
8 § 5745. Advancing expenses.
9 Expenses (including attorneys' fees) incurred in defending
10 any action or proceeding referred to in this subchapter may be
11 paid by a nonprofit corporation in advance of the final
12 disposition of the action or proceeding upon receipt of an
13 undertaking by or on behalf of the representative to repay the
14 amount if it is ultimately determined that he is not entitled to
15 be indemnified by the corporation as authorized in this
16 subchapter or otherwise. Except as otherwise provided in the
17 bylaws, advancement of expenses shall be authorized by the board
18 of directors. Section 5728 (relating to interested members,
19 directors or officers; quorum) shall not be applicable to the
20 advancement of expenses under this section.
21 § 5748. Application to surviving or new corporations.
22 [For] (a) General rule.--Except as provided in subsection
23 (b), for the purposes of this subchapter, references to "the
24 corporation" include all constituent corporations absorbed in a
25 consolidation, merger or division, as well as the surviving or
26 new corporations surviving or resulting therefrom, so that any
27 person who is or was a representative of the constituent,
28 surviving or new corporation, or is or was serving at the
29 request of the constituent, surviving or new corporation as a
30 representative of another domestic or foreign corporation for
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1 profit or not-for-profit, partnership, joint venture, trust or
2 other enterprise, shall stand in the same position under the
3 provisions of this subchapter with respect to the surviving or
4 new corporation as he would if he had served the surviving or
5 new corporation in the same capacity.
6 (b) Divisions.--Notwithstanding subsection (a), the
7 obligations of a dividing corporation to indemnify and advance
8 expenses of its representatives, whether arising under this
9 subchapter or otherwise, may be allocated in a division in the
10 same manner and with the same effect as any other liability of
11 the dividing corporation.
12 § 5758. Voting rights of members.
13 (a) General rule.--Unless otherwise provided in a bylaw
14 adopted by the members, every member of a nonprofit corporation
15 shall be entitled to one vote.
16 (b) Procedures.--The manner of voting on any matter,
17 including changes in the articles or bylaws, may be by ballot,
18 mail or any reasonable means provided in a bylaw adopted by the
19 members. If a bylaw adopted by the members provides a fair and
20 reasonable procedure for the nomination of candidates for any
21 office, only candidates who have been duly nominated in
22 accordance therewith shall be eligible for election. Unless
23 otherwise provided in such a bylaw, in elections for directors,
24 voting shall be by ballot, and the candidates receiving the
25 highest number of votes from each class or group of classes, if
26 any, of members entitled to elect directors separately up to the
27 number of directors to be elected by such class or group of
28 classes shall be elected. If at any meeting of members directors
29 of more than one class are to be elected, each class of
30 directors shall be elected in a separate election.
19990S0393B2193 - 104 -
1 (c) Cumulative voting.--[The members of a nonprofit
2 corporation shall have the right to cumulate their votes for the
3 election of directors only if and to the extent a bylaw adopted
4 by the members so provides.] If a bylaw adopted by the members
5 so provides, in each election of directors of a nonprofit
6 corporation every member entitled to vote shall have the right
7 to multiply the number of votes to which he may be entitled by
8 the total number of directors to be elected in the same election
9 by the members or the class of members to which he belongs and
10 he may cast the whole number of his votes for one candidate or
11 he may distribute them among any two or more candidates.
12 (d) Sale of votes.--No member shall sell his vote or issue a
13 proxy for money or anything of value.
14 (e) Voting lists.--Upon request of a member, the books or
15 records of membership shall be produced at any regular or
16 special meeting of the corporation. If at any meeting the right
17 of a person to vote is challenged, the presiding officer shall
18 require [such] the books or records to be produced as evidence
19 of the right of the person challenged to vote, and all persons
20 who appear by [such] the books or records to be members entitled
21 to vote may vote. See section 6145 (relating to applicability of
22 certain safeguards to foreign corporations).
23 § 5782. Actions against directors, members of an other body and
24 officers.
25 (a) General rule.--Except as provided in subsection (b), in
26 any action or proceeding brought to enforce a secondary right on
27 the part of one or more members of a nonprofit corporation
28 against any present or former officer, director or member of an
29 other body of the corporation because the corporation refuses to
30 enforce rights that may properly be asserted by it, each
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1 plaintiff must aver and it must be made to appear that each
2 plaintiff was a member of the corporation at the time of the
3 transaction of which he complains.
4 (b) Exception.--Any member who, except for the provisions of
5 subsection (a), would be entitled to maintain the action or
6 proceeding and who does not meet such requirements may,
7 nevertheless in the discretion of the court, be allowed to
8 maintain the action or proceeding on preliminary showing to the
9 court, by application and upon such verified statements and
10 depositions as may be required by the court, that there is a
11 strong prima facie case in favor of the claim asserted on behalf
12 of the corporation and that without the action serious injustice
13 will result.
14 (c) Security for costs.--In any action or proceeding
15 instituted or maintained by less than the smaller of 50 members
16 of any class or 5% of the members of any class of the
17 corporation, the corporation in whose right the action or
18 proceeding is brought shall be entitled at any stage of the
19 proceedings to require the plaintiffs to give security for the
20 reasonable expenses, including attorney fees, that may be
21 incurred by it in connection therewith or for which it may
22 become liable pursuant to section 5743 (relating to mandatory
23 indemnification), but only insofar as relates to actions by or
24 in the right of the corporation, to which security the
25 corporation shall have recourse in such amount as the court
26 determines upon the termination of the action or proceeding. The
27 amount of security may, from time to time, be increased or
28 decreased in the discretion of the court upon showing that the
29 security provided has or may become inadequate or excessive. The
30 security may be denied or limited in the discretion of the court
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1 upon preliminary showing to the court, by application and upon
2 such verified statements and depositions as may be required by
3 the court, establishing prima facie that the requirement of full
4 or partial security would impose undue hardship on plaintiffs
5 and serious injustice would result.
6 (d) Cross reference.--See section 6146 (relating to
7 provisions applicable to all foreign corporations).
8 § 5903. Bankruptcy or insolvency proceedings.
9 (a) General rule.--[Whenever] Unless otherwise provided in
10 the bylaws, whenever a nonprofit corporation is insolvent or in
11 financial difficulty, the board of directors may, by resolution
12 and without the consent of the members, authorize and designate
13 the officers of the corporation to execute a deed of assignment
14 for the benefit of creditors, or file a voluntary petition in
15 bankruptcy, or file an answer consenting to the appointment of a
16 receiver upon a complaint in the nature of an equity action
17 filed by creditors or members, or, if insolvent, file an answer
18 to an involuntary petition in bankruptcy admitting the
19 insolvency of the corporation and its willingness to be adjudged
20 a debtor on that ground.
21 (b) Bankruptcy proceedings.--[A] If authorized pursuant to
22 subsection (a), a nonprofit corporation may participate in
23 proceedings under and in the manner provided by Title 11 of the
24 United States Code (relating to bankruptcy) notwithstanding any
25 contrary provision of its articles or bylaws or this subpart,
26 other than [section] sections 103 (relating to subordination of
27 title to regulatory laws) and 5107 (relating to subordination of
28 subpart to canon law). The corporation shall have full power and
29 authority to put into effect and carry out a plan of
30 reorganization or arrangement and the decrees and orders of the
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1 court, or judge or referee relative thereto, and may take any
2 proceeding and do any act provided in the plan or arrangement or
3 directed by such decrees and orders, without further action by
4 its directors or members. Such power and authority may be
5 exercised, and such proceedings and acts may be taken, as may be
6 directed by such decrees or orders, by the trustees or receivers
7 of the corporation appointed in the bankruptcy proceedings, or a
8 majority thereof, or, if none be appointed and acting, by
9 designated officers of the corporation, or by a master or other
10 representative appointed by the court or judge or referee, with
11 the effect as if exercised and taken by unanimous action of the
12 directors and members of the corporation. Without limiting the
13 generality or effect of the foregoing, the corporation may:
14 * * *
15 § 5912. Proposal of amendments.
16 (a) General rule.--Every amendment [to] of the articles of a
17 nonprofit corporation shall be proposed [by]:
18 (1) by the adoption by the board of directors or other
19 body of a resolution setting forth the proposed amendment;
20 (2) unless otherwise provided in the articles, by
21 petition of members entitled to cast at least 10% of the
22 votes [which] that all members are entitled to cast thereon,
23 setting forth the proposed amendment, which petition shall be
24 directed to the board of directors and filed with the
25 secretary of the corporation; or
26 (3) by such other method as may be provided in the
27 bylaws.
28 [The] (b) Submission to members.--Except where the approval
29 of the members is unnecessary under this subchapter, the board
30 of directors or other body [or the petitioning members] shall
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1 direct that the proposed amendment be submitted to a vote of the
2 members entitled to vote thereon at a regular or special meeting
3 of the members.
4 [(b)] (c) Form of amendment.--[The resolution or petition
5 shall contain the language of the proposed amendment to the
6 articles by providing that the articles shall be amended so as
7 to read as therein set forth in full, or that any provision
8 thereof be amended so as to read as therein set forth in full,
9 or that the matter stated in the resolution or petition be added
10 to or stricken from the articles. The resolution or petition may
11 set forth the manner and basis of reclassifying the shares of
12 the corporation.] The resolution or petition shall contain the
13 language of the proposed amendment of the articles:
14 (1) by setting forth the existing text of the articles
15 or the provision thereof that is proposed to be amended, with
16 brackets around language that is to be deleted and
17 underscoring under language that is to be added; or
18 (2) by providing that the articles shall be amended so
19 as to read as therein set forth in full, or that any
20 provision thereof be amended so as to read as therein set
21 forth in full, or that the matter stated in the resolution or
22 petition be added to or stricken from the articles.
23 (d) Terms of amendment.--The resolution or petition may set
24 forth the manner and basis of reclassifying the memberships in
25 or shares of the corporation. Any of the terms of a plan of
26 reclassification or other action contained in an amendment may
27 be made dependent upon facts ascertainable outside of the
28 amendment if the manner in which the facts will operate upon the
29 terms of the amendment is set forth in the amendment. Such facts
30 may include, without limitation, actions or events within the
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1 control of or determinations made by the corporation or a
2 representative of the corporation.
3 § 5922. Plan of merger or consolidation.
4 (a) Preparation of plan.--A plan of merger or consolidation,
5 as the case may be, shall be prepared, setting forth:
6 (1) The terms and conditions of the merger or
7 consolidation.
8 [(2) The mode of carrying the merger or consolidation
9 into effect.
10 (3)] (2) If the surviving or new corporation is or is to
11 be a domestic nonprofit corporation:
12 (i) any changes desired to be made in the articles,
13 which may include a restatement of the articles in the
14 case of a merger; or
15 (ii) in the case of a consolidation, all of the
16 statements required by this [article] subpart to be set
17 forth in restated articles.
18 [(4)] (3) Such other [details and] provisions as are
19 deemed desirable.
20 (b) Post-adoption amendment.--A plan of merger or
21 consolidation may contain a provision that the boards of
22 directors or other bodies of the constituent corporations may
23 amend the plan at any time prior to its effective date, except
24 that an amendment made subsequent to the adoption of the plan by
25 the members of any constituent corporation shall not change:
26 (1) The term of memberships or the amount or kind of
27 securities, obligations, cash, property or rights to be
28 received in exchange for or on conversion of all or any of
29 the memberships in the constituent corporation.
30 (2) Any term of the articles of the surviving or new
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1 corporation to be effected by the merger or consolidation.
2 (3) Any of the terms and conditions of the plan if the
3 change would adversely affect the members of the constituent
4 corporation.
5 [(b)] (c) Proposal.--Every merger or consolidation shall be
6 proposed in the case of each domestic nonprofit corporation
7 [by]:
8 (1) by the adoption by the board of directors or other
9 body of a resolution approving the plan of merger or
10 consolidation;
11 (2) unless otherwise provided in the articles, by
12 petition of members entitled to cast at least 10% of the
13 votes [which] that all members are entitled to cast thereon,
14 setting forth the proposed plan of merger or consolidation,
15 which petition shall be directed to the board of directors
16 and filed with the secretary of the corporation; or
17 (3) by such other method as may be provided in the
18 bylaws.
19 [The] (d) Submission to members.--Except where the
20 corporation has no members entitled to vote thereon, the board
21 of directors or other body [or the petitioning members] shall
22 direct that the plan be submitted to a vote of the members
23 entitled to vote thereon at a regular or special meeting of the
24 members.
25 (e) Party to plan or transaction.--A corporation,
26 partnership, business trust or other association that approves a
27 plan in its capacity as a member or creditor of a merging or
28 consolidating corporation, or that furnishes all or a part of
29 the consideration contemplated by a plan, does not thereby
30 become a party to the plan or the merger or consolidation for
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1 the purposes of this subchapter.
2 (f) Reference to outside facts.--Any of the terms of a plan
3 of merger or consolidation may be made dependent upon facts
4 ascertainable outside of the plan if the manner in which the
5 facts will operate upon the terms of the plan is set forth in
6 the plan. Such facts may include, without limitation, actions or
7 events within the control of or determinations made by a party
8 to the plan or a representative of a party to the plan.
9 § 5923. Notice of meeting of members.
10 (a) General rule.--Written notice of the meeting of members
11 that will act on the proposed plan shall[, not less than ten
12 days before the meeting of members called for the purpose of
13 considering the proposed plan,] be given to each member of
14 record, whether or not entitled to vote thereon, of each
15 domestic nonprofit corporation that is a party to the merger or
16 consolidation. There shall be included in, or enclosed with,
17 [such] the notice a copy of the proposed plan or a summary
18 thereof. The notice shall state that a copy of the bylaws of the
19 surviving or new corporation will be furnished to any member on
20 request and without cost.
21 (b) Cross reference.--See Subchapter A of Chapter 57
22 (relating to notice and meetings generally).
23 § 5929. Effect of merger or consolidation.
24 (a) Single surviving or new corporation.--Upon the merger or
25 consolidation becoming effective, the several corporations
26 parties to the [plan of] merger or consolidation shall be a
27 single corporation which, in the case of a merger, shall be
28 [that] the corporation designated in the plan of merger as the
29 surviving corporation[,] and, in the case of a consolidation,
30 shall be the new corporation provided for in the plan of
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1 consolidation. The separate existence of all corporations
2 parties to the [plan of] merger or consolidation shall cease,
3 except that of the surviving corporation, in the case of a
4 merger. The surviving or new corporation, as the case may be, if
5 it is a domestic nonprofit corporation, shall not thereby
6 acquire authority to engage in any business or exercise any
7 right [which] that a corporation may not be incorporated under
8 this [article] subpart to engage in or exercise.
9 (b) Property rights.--Except as otherwise provided by order,
10 if any, obtained pursuant to section [5547(b)] 5547(c) (relating
11 to nondiversion of certain property), all the property, real,
12 personal[,] and mixed, and franchises of each of the
13 corporations parties to the [plan of] merger or consolidation,
14 and all debts due on whatever account to any of them, including
15 subscriptions for membership and other choses in action
16 belonging to any of them, shall be [taken and] deemed to be
17 [transferred to and] vested in and shall belong to the surviving
18 or new corporation, as the case may be, without further [act or
19 deed] action, and the title to any real estate, or any interest
20 therein, vested in any of the corporations shall not revert or
21 be in any way impaired by reason of the merger or consolidation.
22 The surviving or new corporation shall thenceforth be
23 responsible for all the liabilities [and obligations] of each of
24 the corporations so merged or consolidated. [No liens] Liens
25 upon the property of the merging or consolidating corporations
26 shall not be impaired by [such] the merger or consolidation, and
27 any claim existing or action or proceeding pending by or against
28 any of [such] the corporations may be prosecuted to judgment as
29 if [such] the merger or consolidation had not taken place, or
30 the surviving or new corporation may be proceeded against or
19990S0393B2193 - 113 -
1 substituted in its place. Any devise, gift or grant contained in
2 any will or other instrument, in trust or otherwise, made before
3 or after such merger or consolidation, to or for any of the
4 constituent corporations, shall inure to the surviving or new
5 corporation, as the case may be, subject to compliance with the
6 requirements of section 5550 (relating to devises, bequests and
7 gifts after certain fundamental changes).
8 (c) Taxes.--Any taxes, penalties and public accounts of the
9 Commonwealth, claimed against any of the merging or
10 consolidating corporations, but not settled, assessed or
11 determined prior to [such] the merger or consolidation, shall be
12 settled, assessed or determined against the surviving or new
13 corporation[,] and, together with interest thereon, shall be a
14 lien against the franchises and property, both real and
15 personal, of the surviving or new corporation.
16 (d) Articles of incorporation.--In the case of a merger, the
17 articles of incorporation of the surviving domestic nonprofit
18 corporation, if any, shall be deemed to be amended to the
19 extent, if any, that changes in its articles are stated in the
20 plan of merger[; and in]. In the case of a consolidation into a
21 domestic nonprofit corporation, the statements [which] that are
22 set forth in the plan of consolidation, or articles of
23 incorporation set forth therein, shall be deemed to be the
24 articles of incorporation of the new corporation.
25 § 5952. Proposal and adoption of plan of division.
26 (a) Preparation of plan.--A plan of division shall be
27 prepared, setting forth:
28 (1) The terms and conditions of the division, including
29 the manner and basis of:
30 (i) [the] The reclassification of the membership
19990S0393B2193 - 114 -
1 interests or shares [or obligations] of the surviving
2 corporation, if there be one[; and].
3 (ii) [the] The disposition of the membership
4 interests or shares [and] or obligations, if any, of the
5 new corporation or corporations resulting from the
6 division.
7 [(2) The mode of carrying the division into effect.
8 (3)] (2) A statement that the dividing nonprofit
9 corporation will, or will not, survive the division.
10 [(4)] (3) Any changes desired to be made in the articles
11 of the surviving corporation, if there be one, including a
12 restatement of the articles.
13 [(5)] (4) The articles of incorporation required by
14 subsection (b) [of this section].
15 [(6)] (5) Such other [details and] provisions as are
16 deemed desirable.
17 (b) Articles of new corporations.--There shall be included
18 in or annexed to the plan of division:
19 (1) Articles of incorporation, which shall contain all
20 of the statements required by this [article] subpart to be
21 set forth in restated articles, for each of the new domestic
22 nonprofit corporations, if any, resulting from the division.
23 (2) Articles of incorporation, certificates of
24 incorporation[,] or other charter documents for each of the
25 new foreign nonprofit corporations [not-for-profit], if any,
26 resulting from the division.
27 (c) Proposal and adoption.--[The] Except as otherwise
28 provided in section 5953 (relating to division without member
29 approval), the plan of division shall be proposed and adopted,
30 and may be amended after its adoption and terminated, by a
19990S0393B2193 - 115 -
1 domestic nonprofit corporation in the manner provided for the
2 proposal, adoption, amendment and termination of a plan of
3 merger in Subchapter C (relating to merger, consolidation and
4 sale of assets) or, if the dividing corporation is a foreign
5 nonprofit corporation [not-for-profit], in accordance with the
6 laws of the jurisdiction in which it is incorporated[.] and, in
7 the case of a foreign domiciliary corporation, the provisions of
8 this subpart to the extent provided by section 6145 (relating to
9 applicability of certain safeguards to foreign corporations).
10 There shall be included in or enclosed with the notice of the
11 meeting of members that will act on the plan a copy or summary
12 of the plan.
13 (d) Special requirements.--If any provision of the bylaws of
14 a dividing domestic nonprofit corporation adopted before January
15 1, 1972 shall require for the adoption of a plan of merger or
16 consolidation or a plan involving the sale, lease or exchange of
17 all or substantially all of the property and assets of the
18 corporation a specific number or percentage of votes of
19 directors, members, or members of an other body or other special
20 procedures, the plan of division shall not be adopted without
21 such number or percentage of votes or compliance with such other
22 special procedures.
23 (e) Financial status of resulting corporations.--Unless the
24 plan of division provides that the dividing corporation shall
25 survive the division and that all membership interests or shares
26 or obligations, if any, of all new corporations resulting from
27 the plan shall be owned solely by the surviving corporation, no
28 plan of division may be made effective at a time when the
29 dividing corporation is insolvent or when the division would
30 render any of the resulting corporations insolvent.
19990S0393B2193 - 116 -
1 (f) Rights of holders of indebtedness.--If any debt
2 securities, notes or similar evidences of indebtedness for money
3 borrowed, whether secured or unsecured, indentures or other
4 contracts were issued, incurred or executed by the dividing
5 corporation before January 1, 1972, and have not been amended
6 subsequent to that date, the liability of the dividing
7 corporation thereunder shall not be affected by the division nor
8 shall the rights of the obligees thereunder be impaired by the
9 division, and each of the resulting corporations may be
10 proceeded against or substituted in place of the dividing
11 corporation as joint and several obligors on such liability,
12 regardless of any provision of the plan of division apportioning
13 the liabilities of the dividing corporation.
14 (g) Reference to outside facts.--Any of the terms of a plan
15 of division may be made dependent upon facts ascertainable
16 outside of the plan if the manner in which the facts will
17 operate upon the terms of the plan is set forth in the plan.
18 Such facts may include, without limitation, actions or events
19 within the control of or determinations made by the dividing
20 corporation or a representative of the dividing corporation.
21 § 5953. [(Reserved).] Division without member approval.
22 Unless otherwise required by its bylaws or by section 5952
23 (relating to proposal and adoption of plan of division), a plan
24 of division that does not alter the state of incorporation of a
25 nonprofit corporation nor amend in any respect the provisions of
26 its articles, except amendments that under section 5914(b)
27 (relating to adoption in absence of voting members) may be made
28 without member action, shall not require the approval of the
29 members of the corporation if the transfers of assets effected
30 by the division, if effected by means of a sale, lease, exchange
19990S0393B2193 - 117 -
1 or other disposition, would not require the approval of members
2 under section 5930 (relating to voluntary transfer of corporate
3 assets).
4 § 5957. Effect of division.
5 (a) Multiple resulting corporations.--Upon the division
6 becoming effective, the dividing corporation shall be subdivided
7 into the distinct and independent resulting corporations named
8 in the plan of division and, if the dividing corporation is not
9 to survive the division, the existence of the dividing
10 corporation shall cease. The resulting corporations, if they are
11 domestic nonprofit corporations, shall not thereby acquire
12 authority to engage in any business or exercise any right
13 [which] that a corporation may not be incorporated under this
14 [article] subpart to engage in or exercise. Any resulting
15 foreign nonprofit corporation [which] that is stated in the
16 articles of division to be a qualified foreign nonprofit
17 corporation shall be a qualified foreign nonprofit corporation
18 under [this subpart] Article C (relating to foreign nonprofit
19 corporations), and the articles of division shall be deemed to
20 be the application for a certificate of authority and the
21 certificate of authority issued thereon of [such] the
22 corporation.
23 (b) Property rights; allocations of assets and
24 liabilities.--
25 (1) Except as otherwise provided by order, if any,
26 obtained pursuant to section [5547(b)] 5547(c) (relating to
27 nondiversion of certain property)[, all]:
28 (i) All the property, real, personal[,] and mixed,
29 and franchises of the dividing corporation, and all debts
30 due on whatever account to it, including subscriptions
19990S0393B2193 - 118 -
1 for membership and other choses in action belonging to
2 it, shall, to the extent allocations of assets are
3 contemplated by the plan of division, be [taken and]
4 deemed without further [act or deed] action to be
5 [transferred] allocated to and vested in the resulting
6 corporations on such a manner and basis and with such
7 effect as is specified in the plan [of division], or per
8 capita among the resulting corporations, as tenants in
9 common, if no [such] specification is made in the plan[.
10 The], and the title to any real estate, or interest
11 therein, vested in any of the corporations shall not
12 revert or be in any way impaired by reason of the
13 division.
14 (ii) Upon the division becoming effective, the
15 resulting corporations shall each thenceforth be
16 responsible as separate and distinct corporations only
17 for such liabilities [and obligations] as each
18 corporation may undertake or incur in its own name, but
19 shall be liable [inter se] for the [debts and]
20 liabilities of the dividing corporation in the manner and
21 on the basis [specified in the plan of division. No
22 liens] provided in paragraphs (4) and (5).
23 (iii) Liens upon the property of the dividing
24 corporation shall not be impaired by the division.
25 [One] (iv) To the extent allocations of liabilities
26 are contemplated by the plan of division, the liabilities
27 of the dividing corporation shall be deemed without
28 further action to be allocated to and become the
29 liabilities of the resulting corporations on such a
30 manner and basis and with such effect as is specified in
19990S0393B2193 - 119 -
1 the plan; and one or more, but less than all, of the
2 resulting corporations shall be free of [all] the
3 liabilities [and obligations] of the dividing corporation
4 to the extent, if any, specified in the plan, if in
5 either case:
6 (A) no fraud [of corporate creditors or] on
7 members without voting rights [and if no] or
8 violation of law shall be effected thereby[,]; and
9 [if applicable provisions of law are complied with.
10 Otherwise, the liability]
11 (B) the plan does not constitute a fraudulent
12 transfer under 12 Pa.C.S. Ch. 51 (relating to
13 fraudulent transfers).
14 (v) If the conditions in subparagraph (iv) for
15 freeing one or more of the resulting corporations from
16 the liabilities of the dividing corporation, or for
17 allocating some or all of the liabilities of the dividing
18 corporation, are not satisfied, the liabilities of the
19 dividing corporation[, or of its members, directors, or
20 officers,] as to which those conditions are not satisfied
21 shall not be affected by the division[,] nor shall the
22 rights of [the] creditors [thereof or of any person
23 dealing with such corporation] thereunder be impaired by
24 [such] the division[,] and[, except as otherwise provided
25 in this section,] any claim existing or action or
26 proceeding pending by or against [such] the corporation
27 with respect to those liabilities may be prosecuted to
28 judgment as if [such] the division had not taken place,
29 or the resulting corporations may be proceeded against or
30 substituted in [its] place of the dividing corporation as
19990S0393B2193 - 120 -
1 joint and several obligors on [such liability] those
2 liabilities, regardless of any provision of the plan of
3 division apportioning the [debts and] liabilities of the
4 dividing corporation.
5 (2) It shall not be necessary for a plan of division to
6 list each individual asset or liability of the dividing
7 corporation to be allocated to a new corporation so long as
8 those assets and liabilities are described in a reasonable
9 manner.
10 (3) Each new corporation shall hold any assets and
11 liabilities allocated to it as the successor to the dividing
12 corporation, and those assets and liabilities shall not be
13 deemed to have been assigned to the new corporation in any
14 manner, whether directly or indirectly or by operation of
15 law.
16 (c) Taxes.--Any taxes, penalties and public accounts of the
17 Commonwealth, claimed against the dividing corporation, but not
18 settled, assessed or determined prior to [such] the division,
19 shall be settled, assessed or determined against any of the
20 resulting corporations[,] and, together with interest thereon,
21 shall be a lien against the franchises and property, both real
22 and personal, of all [such] the corporations. [The] Upon the
23 application of the dividing corporation, the Department of
24 Revenue [may, upon the application of the dividing corporation],
25 with the concurrence of the Office of Employment Security of the
26 Department of Labor and Industry, shall release one or more, but
27 less than all, of the resulting corporations from liability and
28 liens for all taxes, penalties and public accounts of the
29 dividing corporation due the Commonwealth [or any other taxing
30 authority] for periods prior to the effective date of the
19990S0393B2193 - 121 -
1 division, if [the Department of Revenue is] those departments
2 are satisfied that the public revenues will be adequately
3 secured.
4 (d) Articles of surviving corporation.--The articles of
5 incorporation of the surviving corporation, if there be one,
6 shall be deemed to be amended to the extent, if any, that
7 changes in its articles are stated in the plan of division.
8 (e) Articles of new corporations.--The statements [which]
9 that are set forth in the plan of division with respect to each
10 new domestic nonprofit corporation and [which] that are required
11 or permitted to be set forth in restated articles of
12 incorporation of corporations incorporated under this [article]
13 subpart, or the articles of incorporation of each new
14 corporation set forth therein, shall be deemed to be the
15 articles of incorporation of each [such] new corporation.
16 (f) Directors and officers.--Unless otherwise provided in
17 the plan, the directors and officers of the dividing corporation
18 shall be the initial directors and officers of each of the
19 resulting corporations.
20 (g) Disposition of memberships.--Unless otherwise provided
21 in the plan, the memberships and other securities or
22 obligations, if any, of each new corporation resulting from the
23 division shall be distributable to:
24 (1) the surviving corporation, if the dividing
25 corporation survives the division; or
26 (2) the members of the dividing corporation pro rata, in
27 any other case.
28 (h) Conflict of laws.--It is the intent of the General
29 Assembly that:
30 (1) The effect of a division of a domestic business
19990S0393B2193 - 122 -
1 corporation shall be governed solely by the laws of this
2 Commonwealth and any other jurisdiction under the laws of
3 which any of the resulting corporations is incorporated.
4 (2) The effect of a division on the assets and
5 liabilities of the dividing corporation shall be governed
6 solely by the laws of this Commonwealth and any other
7 jurisdiction under the laws of which any of the resulting
8 corporations is incorporated.
9 (3) The validity of any allocations of assets or
10 liabilities by a plan of division of a domestic business
11 corporation, regardless of whether or not any of the new
12 corporations is a foreign business corporation, shall be
13 governed solely by the laws of this Commonwealth.
14 (4) In addition to the express provisions of this
15 subsection, this subchapter shall otherwise generally be
16 granted the protection of full faith and credit under the
17 Constitution of the United States.
18 § 5975. Predissolution provision for liabilities.
19 (a) Powers of board.--The board of directors or other body
20 of a nonprofit corporation that has elected to proceed under
21 this section shall have full power to wind up and settle the
22 affairs of [a nonprofit] the corporation in accordance with this
23 section prior to filing articles of dissolution in accordance
24 with section 5977 (relating to articles of dissolution).
25 (b) Notice to creditors and taxing authorities.--After the
26 approval by the members or the board of directors or other body
27 pursuant to section 5974(b) (relating to adoption in absence of
28 voting members) that the corporation dissolve voluntarily, the
29 corporation shall immediately cause notice of the winding up
30 proceedings to be officially published and to be mailed by
19990S0393B2193 - 123 -
1 certified or registered mail to each known creditor and claimant
2 and to each municipal corporation in which [its registered
3 office or principal] it has a place of business in this
4 Commonwealth [is located].
5 (c) Winding up and distribution.--The corporation shall, as
6 speedily as possible, proceed to collect all sums due it,
7 convert into cash all corporate assets the conversion of which
8 into cash is required to discharge its liabilities and, out of
9 the assets of the corporation, discharge or make adequate
10 provision for the discharge of all liabilities of the
11 corporation, according to their respective priorities. Except as
12 otherwise provided in a bylaw adopted by the members or in this
13 subpart or by any other provision of law, any surplus remaining
14 after paying or providing for all liabilities of the corporation
15 shall be distributed to the shareholders, if any, pro rata, or
16 if there be no shareholders, among the members per capita. See
17 section 1972(a) (relating to proposal of voluntary dissolution).
18 § 5976. Judicial supervision of proceedings.
19 (a) General rule.--A nonprofit corporation that has elected
20 to proceed under section 1975 (relating to predissolution
21 provision for liabilities), at any time during the winding up
22 proceedings, may apply to the court to have the proceedings
23 continued under the supervision of the court and thereafter the
24 proceedings shall continue under the supervision of the court as
25 provided in Subchapter G (relating to involuntary liquidation
26 and dissolution).
27 * * *
28 § 5977. Articles of dissolution.
29 * * *
30 (b) Contents of articles.--The articles of dissolution shall
19990S0393B2193 - 124 -
1 be executed by the corporation and shall set forth:
2 * * *
3 (5) A statement that:
4 (i) [that] all liabilities of the corporation have
5 been discharged or that adequate provision has been made
6 therefor; [or]
7 (ii) [that] the assets of the corporation are not
8 sufficient to discharge its liabilities, and that all the
9 assets of the corporation have been fairly and equitably
10 applied, as far as they will go, to the payment of such
11 liabilities[. An election by]; or
12 (iii) the corporation has elected to proceed under
13 Subchapter H [shall constitute the making of adequate
14 provision for the liabilities of the corporation,
15 including any judgment or decree that may be obtained
16 against the corporation in any pending action or
17 proceeding].
18 * * *
19 (7) [A] In the case of a corporation that has not
20 elected to proceed under Subchapter H, a statement that no
21 actions or proceedings are pending against the corporation in
22 any court, or that adequate provision has been made for the
23 satisfaction of any judgment or decree that may be obtained
24 against the corporation in each pending action or proceeding.
25 (8) [A] In the case of a corporation that has not
26 elected to proceed under Subchapter H, a statement that
27 notice of the winding-up proceedings of the corporation was
28 mailed by certified or registered mail to each known creditor
29 and claimant and to each municipal corporation in which the
30 [registered office or principal place of business of the]
19990S0393B2193 - 125 -
1 corporation has a place of business in this Commonwealth [is
2 located].
3 * * *
4 (d) Cross references.--See sections 134 (relating to
5 docketing statement) and 135 (relating to requirements to be met
6 by filed documents).
7 § 5989. Articles of involuntary dissolution.
8 (a) General rule.--In a proceeding under this subchapter,
9 the court shall enter an order dissolving the nonprofit
10 corporation when the order, if any, obtained pursuant to section
11 5547(b) (relating to nondiversion of certain property) has been
12 entered and when the costs and expenses of the proceeding, and
13 all liabilities of the corporation have been discharged, and all
14 of its remaining assets have been distributed to the persons
15 entitled thereto, or, in case its assets are not sufficient to
16 discharge such costs, expenses and liabilities, when all the
17 assets have been applied, as far as they will go, to the payment
18 of such costs, expenses and liabilities. See section 139(b)
19 (relating to tax clearance in judicial proceedings).
20 (b) Filing.--After entry of an order of dissolution, the
21 office of the clerk of the court of common pleas shall prepare
22 and execute articles of dissolution substantially in the form
23 provided by section 5977 (relating to articles of dissolution),
24 attach thereto a certified copy of the order and transmit the
25 articles and attached order to the Department of State. [A
26 certificate or statement provided for by section 139 (relating
27 to tax clearance of certain fundamental transactions) shall not
28 be required, and the] The department shall not charge a fee in
29 connection with the filing of articles of dissolution under this
30 section. See [section] sections 134 (relating to docketing
19990S0393B2193 - 126 -
1 statement) and 135 (relating to requirements to be met by filed
2 documents).
3 * * *
4 § 5991.1. Authority of board of directors.
5 (a) General rule.--The board of directors or other body of a
6 nonprofit corporation that has elected to proceed under this
7 subchapter shall have full power to wind up and settle the
8 affairs of the corporation in accordance with this subchapter
9 both prior to and after the filing of articles of dissolution in
10 accordance with section 5977 (relating to articles of
11 dissolution).
12 (b) Winding up.--The corporation shall, as speedily as
13 possible, proceed to comply with the requirements of this
14 subchapter while simultaneously collecting all sums due it and
15 converting into cash all corporate assets, the conversion of
16 which into cash is required to make adequate provision for its
17 liabilities.
18 § 6126. Amended certificate of authority.
19 (a) General rule.--After receiving a certificate of
20 authority, a qualified foreign nonprofit corporation may,
21 subject to the provisions of this subchapter, change [the name
22 under which it is authorized to transact business in this
23 Commonwealth] or correct any of the information set forth in its
24 application for a certificate of authority or previous filings
25 under this section by filing in the Department of State an
26 application for an amended certificate of authority. The
27 application shall be executed by the corporation and shall
28 state:
29 (1) The name under which the applicant corporation
30 currently holds a certificate of authority to do business in
19990S0393B2193 - 127 -
1 this Commonwealth.
2 [(2) The name of the jurisdiction under the laws of
3 which the corporation is incorporated.
4 (3) The address, including street and number, if any, of
5 its principal office under the laws of the jurisdiction in
6 which it is incorporated.
7 (4)] (2) Subject to section 109 (relating to name of
8 commercial registered office provider in lieu of registered
9 address), the address, including street and number, if any,
10 of its registered office in this Commonwealth. [which may
11 constitute a change in the address of its registered office.
12 (5) The new name of the corporation and]
13 (3) The information to be changed or corrected.
14 (4) If the application reflects a change in the name of
15 the corporation, the application shall include a statement
16 that either:
17 (i) the change of name reflects a change effected in
18 the jurisdiction of incorporation; or
19 (ii) documents complying with section 6123(b)
20 (relating to exceptions) accompany the application.
21 (b) Issuance of amended certificate of authority.--Upon the
22 filing of the application, the applicant corporation shall be
23 deemed to hold an amended certificate of authority.
24 (c) Cross reference.--See section 134 (relating to docketing
25 statement).
26 § 6146. Provisions applicable to all foreign corporations.
27 The following provisions of this subpart shall, except as
28 otherwise provided in this section, be applicable to every
29 foreign corporation not-for-profit, whether or not required to
30 procure a certificate of authority under this chapter:
19990S0393B2193 - 128 -
1 Section 5503 (relating to defense of ultra vires), as to
2 contracts and conveyances governed by the laws of this
3 Commonwealth and conveyances affecting real property situated
4 in this Commonwealth.
5 Section 5506 (relating to form of execution of
6 instruments), as to instruments or other documents governed
7 by the laws of this Commonwealth or affecting real property
8 situated in this Commonwealth.
9 Section 5510 (relating to certain specifically authorized
10 debt terms), as to obligations (as defined in the section)
11 governed by the laws of this Commonwealth or affecting real
12 property situated in this Commonwealth.
13 Section 5782 (relating to actions against directors,
14 members of an other body and officers), as to any action or
15 proceeding brought in a court of this Commonwealth.
16 § 8105. Ownership of certain professional partnerships.
17 Except as otherwise provided by statute, rule or regulation
18 applicable to a particular profession, all of the [partners in]
19 ultimate beneficial owners of the partnership interests in a
20 partnership that renders one or more restricted professional
21 services shall be licensed persons. As used in this section,
22 the term "restricted professional services" shall have the
23 meaning specified in section 8903 (relating to definitions and
24 index of definitions).
25 § 8201. Scope.
26 * * *
27 (e) Prohibited termination.--A registration under this
28 subchapter may not be terminated while the partnership is a
29 bankrupt as that term is defined in section 8903 (relating to
30 definitions and index of definitions). See section 8221(f)
19990S0393B2193 - 129 -
1 (relating to annual registration).
2 (f) Alternative procedure.--In lieu of filing a statement of
3 registration as provided in subsection (a), a limited
4 partnership may register as a registered limited liability
5 partnership by including in its certificate of limited
6 partnership, either originally or by amendment, the statements
7 required by subsection (a)(3) and (4). To terminate its
8 registration, a limited partnership that uses the procedure
9 authorized by this subsection shall amend its certificate of
10 limited partnership to delete the statements required by this
11 subsection.
12 (g) Constructive notice.--Filing under this section shall
13 constitute constructive notice that the partnership is a
14 registered limited liability partnership and that the partners
15 are entitled to the protections from liability provided by this
16 subchapter.
17 [(e)] (h) Cross references.--See sections 134 (relating to
18 docketing statement) and 135 (relating to requirements to be met
19 by filed documents).
20 § 8202. Definitions.
21 The following words and phrases when used in this chapter
22 shall have the meanings given to them in this section unless the
23 context clearly indicates otherwise:
24 * * *
25 "Partner." Includes a person who is or was a partner in a
26 registered limited liability partnership at any time while the
27 registration of the partnership under this subchapter is or was
28 in effect.
29 * * *
30 § 8204. Limitation on liability of partners.
19990S0393B2193 - 130 -
1 (a) General rule.--Except as provided in subsection (b), a
2 partner in a registered limited liability partnership shall not
3 be individually liable directly or indirectly, whether by way of
4 indemnification, contribution or otherwise, for debts and
5 obligations of, or chargeable to, the partnership, whether
6 sounding in contract or tort or otherwise, that arise from any
7 negligent or wrongful acts or misconduct committed by another
8 partner or other representative of the partnership while the
9 registration of the partnership under this subchapter is in
10 effect.
11 (b) Exceptions.--
12 (1) [Subsection (a) shall not apply to any debt or
13 obligation with respect to which the partnership is not in
14 compliance with section 8206(a) (relating to insurance).]
15 (Repealed).
16 * * *
17 (3) Subsection (a) shall not affect in any way:
18 (i) the liability of the partnership itself for all
19 its debts and obligations; [or]
20 (ii) the availability of the entire assets of the
21 partnership to satisfy its debts and obligations; or
22 (iii) any obligation undertaken by a partner in
23 writing to individually indemnify another partner of the
24 partnership or to individually contribute toward a
25 liability of another partner.
26 * * *
27 § 8205. Liability of withdrawing partner.
28 * * *
29 (b) Exceptions.--Subsection (a) shall not affect the
30 liability of a partner:
19990S0393B2193 - 131 -
1 * * *
2 (7) For any obligation undertaken by a partner in
3 writing to individually indemnify another partner of the
4 partnership or to individually contribute toward a liability
5 of another partner.
6 * * *
7 (e) Permissive filing.--Filing under this section is
8 permissive, and failure to make a filing under this section by a
9 partner entitled to do so shall not affect the right of that
10 partner to the limitation on liability provided by section 8204
11 (relating to limitation on liability of partners).
12 (f) Constructive notice.--Filing under this section shall
13 constitute constructive notice that the partner has withdrawn
14 from the partnership and is entitled to the protection from
15 liability provided by this section.
16 (g) Variation of section.--A written provision of the
17 partnership agreement may restrict or condition the application
18 of this section to some or all of the partners of the
19 partnership.
20 (h) Application of section.--A partner in a foreign
21 registered limited liability partnership, regardless of whether
22 or not it has registered to do business in this Commonwealth
23 under section 8211 (relating to foreign registered limited
24 liability partnerships), shall not be entitled to make a filing
25 under this section with regard to that partnership.
26 [(e)] (i) Cross references.--See sections 134 (relating to
27 docketing statement) and 135 (relating to requirements to be met
28 by filed documents).
29 § 8211. Foreign registered limited liability partnerships.
30 (a) Governing law.--Subject to the Constitution of
19990S0393B2193 - 132 -
1 Pennsylvania:
2 (1) The laws of the jurisdiction under which a foreign
3 registered limited liability partnership is organized govern
4 its organization and internal affairs and the liability of
5 its partners, except as provided in subsection (c).
6 (2) A foreign registered limited liability partnership
7 may not be denied registration by reason of any difference
8 between those laws and the laws of this Commonwealth.
9 (b) Registration to do business.--A foreign registered
10 limited liability partnership, regardless of whether or not it
11 is also a foreign limited partnership, shall be subject to
12 Subchapter K of Chapter 85 (relating to foreign limited
13 partnerships) as if it were a foreign limited partnership,
14 except that [the]:
15 (1) Its application for registration shall state that it
16 is a registered limited liability partnership.
17 (2) The name under which [the foreign registered limited
18 liability partnership] it registers and conducts business in
19 this Commonwealth shall comply with the requirements of
20 section 8203 (relating to name).
21 (3) Section 8582(a)(5) and (6) (relating to
22 registration) shall not be applicable to the application for
23 registration of a foreign limited liability partnership that
24 is not a foreign limited partnership.
25 (c) Exception.--The liability of the partners in a foreign
26 registered limited liability partnership shall be governed by
27 the laws of the jurisdiction under which it is organized, except
28 that the partners shall not be entitled to greater protection
29 from liability than is available to the partners in a domestic
30 registered limited liability partnership.
19990S0393B2193 - 133 -
1 § 8221. Annual registration.
2 * * *
3 (e) [Annual fee to be lien] Failure to pay annual fee.--
4 (1) Failure to [pay the annual registration fee imposed]
5 file the certificate of annual registration required by this
6 section [shall not affect the existence or] for five
7 consecutive years shall result in the automatic termination
8 of the status of the registered limited liability partnership
9 as such[, but the]. In addition, any annual registration fee
10 that is not paid when due shall be a lien in the manner
11 provided in this subsection from the time the annual
12 registration fee is due and payable [upon]. If a certificate
13 of annual registration is not filed within 30 days after the
14 date on which it is due, the department shall assess a
15 penalty of $500 against the partnership, which shall also be
16 a lien in the manner provided in this subsection. The
17 imposition of that penalty shall not be construed to relieve
18 the partnership from liability for any other penalty or
19 interest provided for under other applicable law.
20 (2) If the annual registration fee paid by a registered
21 limited liability partnership is subsequently determined to
22 be less than should have been paid because it was based on an
23 incorrect number of general partners or was otherwise
24 incorrectly computed, that fact shall not affect the
25 existence or status of the registered limited liability
26 partnership as such, but the amount of the additional annual
27 registration fee that should have been paid shall be a lien
28 in the manner provided in this subsection from the time the
29 incorrect payment is discovered by the department.
30 (3) The annual registration fee shall bear simple
19990S0393B2193 - 134 -
1 interest from the date that it becomes due and payable until
2 paid. The interest rate shall be that provided for in section
3 806 of the act of April 9, 1929 (P.L.343, No.176), known as
4 The Fiscal Code, with respect to unpaid taxes. The penalty
5 provided for in paragraph (1) shall not bear interest. The
6 payment of interest shall not relieve the registered limited
7 liability partnership from liability for any other penalty or
8 interest provided for under other applicable law.
9 (4) The lien created by this subsection shall attach to
10 all of the property and proceeds thereof of the registered
11 limited liability partnership in which a security interest
12 can be perfected in whole or in part by filing in the
13 department under 13 Pa.C.S. Div. 9 (relating to secured
14 transactions; sales of accounts, contract rights and chattel
15 paper), whether the property and proceeds are owned by the
16 partnership at the time the annual registration fee or any
17 penalty or interest becomes due and payable or whether the
18 property and proceeds are acquired thereafter. Except as
19 otherwise provided by statute, the lien created by this
20 subsection shall have priority over all other liens, security
21 interests or other charges, except liens for taxes or other
22 charges due the Commonwealth. The lien created by this
23 subsection shall be entered on the records of the department
24 and indexed in the same manner as a financing statement filed
25 under 13 Pa.C.S. Div. 9. At the time an annual registration
26 fee, penalty or interest that has resulted in the creation of
27 a lien under this subsection is paid, the department shall
28 terminate the lien with respect to that annual registration
29 fee, penalty or interest without requiring a separate filing
30 by the partnership for that purpose.
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1 (5) If the annual registration fee paid by a registered
2 limited liability partnership is subsequently determined to
3 be more than should have been paid for any reason, no refund
4 of the additional fee shall be made.
5 (6) Termination of the status of a registered limited
6 liability partnership as such, whether voluntarily or
7 involuntarily, shall not release it from the obligation to
8 pay any accrued fees, penalties and interest and shall not
9 release the lien created by this subsection.
10 (f) Exception for bankrupt partnerships.--A partnership that
11 would otherwise be required to pay the annual registration fee
12 set forth in subsection (b) shall not be required to pay that
13 fee with respect to any year during any part of which the
14 partnership is a bankrupt as defined in section 8903 (relating
15 to definitions and index of definitions). The partnership shall,
16 instead, indicate on its certificate of annual registration for
17 that year that it is exempt from payment of the annual
18 registration fee pursuant to this subsection. If the partnership
19 fails to file timely a certificate of annual registration, a
20 lien shall be entered on the records of the department pursuant
21 to subsection (e) which shall not be removed until the
22 partnership files a certificate of annual registration
23 indicating its entitlement to an exemption from payment of the
24 annual registration fee as provided in this subsection. See
25 section 8201(e) (relating to scope).
26 § 8359. Right to wind up affairs.
27 Unless otherwise agreed, the partners who have not wrongfully
28 dissolved the partnership, or the legal representative of the
29 last surviving partner, not bankrupt, has the right to wind up
30 the partnership affairs except that any partner, his legal
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1 representative or his assignee, upon cause shown, may obtain
2 winding up by the court. See section 139(b) (relating to tax
3 clearance in judicial proceedings).
4 § 8503. Definitions and index of definitions.
5 (a) Definitions.--The following words and phrases when used
6 in this chapter shall have the meanings given to them in this
7 section unless the context clearly indicates otherwise:
8 "Certificate of limited partnership." The certificate
9 referred to in section 8511 (relating to certificate of limited
10 partnership) and the certificate as amended. The term includes
11 any other statements or certificates permitted or required to be
12 filed in the Department of State by sections 108 (relating to
13 change in location or status of registered office provided by
14 agent) and 138 (relating to statement of correction) or this
15 part. If an amendment of the certificate of limited partnership
16 or a certificate of merger or division made in the manner
17 permitted by this chapter restates the certificate in its
18 entirety or if there is a certificate of consolidation,
19 thenceforth the "certificate of limited partnership" shall not
20 include any prior documents and any certificate issued by the
21 department with respect thereto shall so state.
22 * * *
23 "Court." Subject to any inconsistent general rule prescribed
24 by the Supreme Court of Pennsylvania:
25 (1) the court of common pleas of the judicial district
26 embracing the county where the registered office of the
27 limited partnership is or is to be located; or
28 (2) where a limited partnership results from a merger,
29 consolidation, division or other transaction without
30 establishing a registered office in this Commonwealth or
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1 withdraws as a foreign limited partnership, the court of
2 common pleas in which venue would have been laid immediately
3 prior to the transaction or withdrawal.
4 ["Department." The Department of State of the Commonwealth.]
5 * * *
6 "Partnership agreement." Any agreement, written or oral, of
7 the partners as to the affairs of a limited partnership and the
8 conduct of its business. [A written partnership agreement:
9 (1) May provide that a person shall be admitted as a
10 limited partner, or shall become an assignee of a partnership
11 interest or other rights or powers of a limited partner to
12 the extent assigned, and shall become bound by the
13 partnership agreement:
14 (i) if such person (or a representative authorized
15 by such person orally, in writing or by other action such
16 as payment for a partnership interest) executes the
17 partnership agreement or any other writing evidencing the
18 intent of such person to become a limited partner or
19 assignee; or
20 (ii) without such execution, if such person (or a
21 representative authorized by such person orally, in
22 writing or by other action such as payment for a
23 partnership interest) complies with the conditions for
24 becoming a limited partner or assignee as set forth in
25 the partnership agreement or any other writing and
26 requests (orally, in writing or by other action such as
27 payment for a partnership interest) that the records of
28 the limited partnership reflect such admission or
29 assignment.
30 (2) Shall not be unenforceable by reason of its not
19990S0393B2193 - 138 -
1 having been signed by a person being admitted as a limited
2 partner or becoming an assignee as provided in paragraph (1)
3 or by reason of its having been signed by a representative as
4 provided in section 8514(b) (relating to attorney-in-fact).
5 (3) May provide that, whenever a provision of this
6 chapter requires the vote or consent of a specified number or
7 percentage of partners or of a class of partners for the
8 taking of any action, a higher number or percentage of votes
9 or consents shall be required for the action. Except as
10 otherwise provided in the partnership agreement, whenever the
11 partnership agreement requires for the taking of any action
12 by the partners or a class of partners a specific number or
13 percentage of votes or consents, the provision of the
14 partnership agreement setting forth that requirement shall
15 not be amended or repealed by any lesser number or percentage
16 of votes or consents of the partners or the class of
17 partners.]
18 * * *
19 "Relax." When used with respect to a provision of the
20 certificate of limited partnership or partnership agreement,
21 means to provide lesser rights for an affected representative or
22 partner.
23 (b) Index of definitions.--Other definitions applying to
24 this chapter and the sections in which they appear are:
25 "Act" or "action." Section 102.
26 "Department." Section 102.
27 "Licensed person." Section 102.
28 "Professional services." Section 102.
29 § 8510. Indemnification.
30 * * *
19990S0393B2193 - 139 -
1 (b) When indemnification is not to be made.--Indemnification
2 pursuant to subsection (a) shall not be made in any case where
3 the act [or failure to act] giving rise to the claim for
4 indemnification is determined by a court to have constituted
5 willful misconduct or recklessness. The certificate of limited
6 partnership or partnership agreement may not provide for
7 indemnification in the case of willful misconduct or
8 recklessness.
9 * * *
10 (f) Mandatory indemnification.--Without regard to whether
11 indemnification or advancement of expenses is provided under
12 subsections (a) and (d), a limited partnership shall be subject
13 to section 8331(2) (relating to rules determining rights and
14 duties of partners).
15 SUBCHAPTER B
16 FORMATION[; CERTIFICATE OF LIMITED PARTNERSHIP]
17 § 8511. Certificate of limited partnership.
18 (a) General rule.--In order to form a limited partnership, a
19 certificate of limited partnership must be executed and filed in
20 the Department of State. The certificate shall set forth:
21 (1) The name of the limited partnership.
22 (2) Subject to section 109 (relating to name of
23 commercial registered office provider in lieu of registered
24 address), the address, including street and number, if any,
25 of its registered office.
26 (3) The name and business address of each general
27 partner.
28 (4) If a partner's interest in the limited partnership
29 is to be evidenced by a certificate of partnership interest,
30 a statement to that effect.
19990S0393B2193 - 140 -
1 (5) Any other [matters the partners determine to include
2 therein. A provision included in the certificate of limited
3 partnership pursuant to this paragraph shall be deemed to be
4 a provision of the partnership agreement for purposes of any
5 provision of this chapter that refers to a rule as set forth
6 in the partnership agreement.] provision, whether or not
7 specifically authorized by or in contravention of this
8 chapter, that the partners elect to set out in the
9 certificate of limited partnership for the regulation of the
10 internal affairs of the limited partnership, except where a
11 provision of this chapter expressly provides that the
12 certificate of limited partnership shall not relax or
13 contravene any provision on a specified subject.
14 (b) Effective date of formation.--A limited partnership is
15 formed at the time of the filing of the certificate of limited
16 partnership in the department or at any later time specified in
17 the certificate of limited partnership if, in either case, there
18 has been substantial compliance with the requirements of this
19 section or the corresponding provisions of prior law.
20 (c) [Duties of recorders of deeds.--Each recorder of deeds
21 shall continue to keep open for public inspection the record of
22 limited partnership certificates recorded under the statutes
23 supplied by this chapter and by prior law the custody of which
24 has not been transferred to the department pursuant to section
25 140 (relating to custody and management of orphan corporate and
26 business records).] (Repealed).
27 (d) Transitional provision.--A limited partnership formed
28 under prior law shall not be required to set forth in its
29 certificate of limited partnership a registered office or the
30 business address of each general partner until such time as it
19990S0393B2193 - 141 -
1 first amends its certificate of limited partnership under this
2 chapter.
3 (e) Effect of provisions.--A provision of the certificate of
4 limited partnership shall be deemed to be a provision of the
5 partnership agreement for purposes of any provision of this
6 chapter that refers to a rule as set forth in the partnership
7 agreement.
8 [(e)] (f) Cross references.--See sections 134 (relating to
9 docketing statement), 135 (relating to requirements to be met by
10 filed documents) and 8514 (relating to execution of
11 certificates).
12 § 8517. Notice.
13 The fact that a certificate of limited partnership is on file
14 in the Department of State is not notice of any fact other than:
15 (1) that the partnership is a limited partnership and
16 that all partners are limited partners except the persons
17 designated therein as general partners[, but it is not notice
18 of any other fact]; and
19 (2) if it is registered under Chapter 82 (relating to
20 registered limited liability partnerships), that it is also a
21 registered limited liability partnership.
22 § 8519. Filing of certificate of summary of record by limited
23 partnerships formed prior to 1976.
24 (a) General rule.--[Any limited partnership that was not
25 formed under this chapter, has never made any filing under this
26 section or corresponding provisions of prior law and] Where any
27 of the organic documents of a limited partnership are not on
28 file in the Department of State or there is an error in any such
29 document as transferred to the department pursuant to section
30 140 (relating to custody and management of orphan corporate and
19990S0393B2193 - 142 -
1 business records), and the limited partnership desires to file
2 any document in the [Department of State] department under any
3 other provision of this chapter or [that desires] to secure from
4 the department a certified copy of the certificate of limited
5 partnership or to correct the text of its organic documents as
6 on file in the department, the limited partnership shall file in
7 the department a certificate of summary of record which shall
8 set forth:
9 (1) The name of the limited partnership.
10 (2) Subject to section 109 (relating to name of
11 commercial registered office provider in lieu of registered
12 address), the address, including street and number, if any,
13 of its registered office.
14 (3) The statute under which the limited partnership was
15 formed.
16 (4) The name under which, and the date on which, the
17 limited partnership was originally formed, including the date
18 when and the place where the original certificate was
19 recorded.
20 (5) The place or places, including the volume and page
21 numbers or their equivalent, where the documents
22 [constituting the currently effective certificate are] that
23 are not on file in the department or that require correction
24 in the records of the department where originally recorded,
25 the date or dates of each recording and the correct text of
26 the [currently effective certificate] documents. The
27 information specified in this paragraph may be omitted in a
28 certificate of summary of record that is delivered to the
29 department contemporaneously with an amended certificate
30 filed under this chapter that restates the certificate in its
19990S0393B2193 - 143 -
1 entirety.
2 [(6) Each name by which the limited partnership was
3 known, if any, other than its original name and its current
4 name and the date or dates on which each change of name of
5 the partnership became effective.]
6 (b) Cross references.--See sections 134 (relating to
7 docketing statement), 135 (relating to requirements to be met by
8 filed documents) and 8514 (relating to execution of
9 certificates).
10 § 8520. Partnership agreement.
11 (a) Admission of limited partners.--A partnership agreement
12 may provide in writing that a person shall be admitted as a
13 limited partner, or shall become an assignee of a partnership
14 interest or other rights or powers of a limited partner to the
15 extent assigned, and shall become bound by the partnership
16 agreement:
17 (1) if such person (or a representative authorized by
18 such person orally, in writing or by other action such as
19 payment for a partnership interest) executes the partnership
20 agreement or any other writing evidencing the intent of such
21 person to become a limited partner or assignee; or
22 (2) without such execution, if such person (or a
23 representative authorized by such person orally, in writing
24 or by other action such as payment for a partnership
25 interest) complies with the conditions for becoming a limited
26 partner or assignee as set forth in the partnership agreement
27 or any other writing and requests (orally, in writing or by
28 other action such as payment for a partnership interest) that
29 the records of the limited partnership reflect such admission
30 or assignment.
19990S0393B2193 - 144 -
1 (b) Signature by limited partners.--A written partnership
2 agreement shall not be unenforceable by reason of its not having
3 been signed by a person being admitted as a limited partner or
4 becoming an assignee as provided in subsection (a) or by reason
5 of its having been signed by a representative as provided in
6 section 8514(b) (relating to attorney-in-fact).
7 (c) Voting requirements.--A partnership agreement may
8 provide in writing that, whenever a provision of this chapter
9 requires the vote or consent of a specified number or percentage
10 of partners or of a class of partners for the taking of any
11 action, a higher number or percentage of votes or consents shall
12 be required for the action. Except as otherwise provided in the
13 partnership agreement, whenever the partnership agreement
14 requires for the taking of any action by the partners or a class
15 of partners a specific number or percentage of votes or
16 consents, the provision of the partnership agreement setting
17 forth that requirement shall not be amended or repealed by any
18 lesser number or percentage of votes or consents of the partners
19 or the class of partners.
20 (d) Freedom of contract.--A written partnership agreement
21 may contain any provision for the regulation of the internal
22 affairs of the limited partnership agreed to by the partners,
23 whether or not specifically authorized by or in contravention of
24 this chapter, except where this chapter:
25 (1) refers only to a rule as set forth in the
26 certificate of limited partnership; or
27 (2) expressly provides that the partnership agreement
28 shall not relax or contravene any provision on a specified
29 subject.
30 (e) Oral provisions.--A partnership agreement may provide in
19990S0393B2193 - 145 -
1 writing that it cannot be amended or modified except in writing,
2 in which case an oral agreement, amendment or modification shall
3 not be enforceable.
4 (f) Cross reference.--See section 8511(a)(5) (relating to
5 certificate of limited partnership).
6 § 8523. Liability of limited partners to third parties.
7 (a) General rule.--A limited partner is not liable [for the
8 obligations of a limited partnership unless he is also a general
9 partner or, in addition to the exercise of his rights and powers
10 as a limited partner, he participates in the control of the
11 business. However, if the limited partner participates in the
12 control of the business, he is liable only to persons who
13 transact business with the limited partnership reasonably
14 believing, based upon the conduct of the limited partner, that
15 the limited partner is a general partner.], solely by reason of
16 being a limited partner, under an order of a court or in any
17 other manner, for a debt, obligation or liability of the limited
18 partnership of any kind or for the acts of any partner, agent or
19 employee of the limited partnership.
20 (b) [Activities compatible with limited partner status.--A
21 limited partner does not participate in the control of the
22 business within the meaning of subsection (a) solely by doing
23 one or more of the following:
24 (1) Being a contractor for, or an agent or employee of
25 the limited partnership or of a general partner, or being an
26 officer, director, trustee, partner or shareholder of a
27 general partner.
28 (2) Consulting with and advising a general partner with
29 respect to any matter, including, without limitation, the
30 business of the limited partnership.
19990S0393B2193 - 146 -
1 (3) (i) Acting as surety for the limited partnership,
2 or guaranteeing, endorsing or assuming one or more
3 specific obligations of the limited partnership, or a
4 general partner.
5 (ii) Borrowing money from the limited partnership or
6 a general partner.
7 (iii) Lending money to the limited partnership or a
8 general partner.
9 (iv) Providing collateral for the limited
10 partnership or a general partner.
11 (4) Taking any action required or permitted by law to
12 bring, pursue or settle or otherwise terminate a derivative
13 action in the right of the limited partnership.
14 (5) Requesting or attending a meeting of partners.
15 (6) Acting or causing the taking or refraining from the
16 taking of any action, including, without limitation, by
17 proposing, approving, consenting or disapproving, by voting
18 or otherwise, with respect to one or more of the following
19 matters:
20 (i) The dissolution and winding up of the limited
21 partnership, or an election to continue the limited
22 partnership or the business of the limited partnership.
23 (ii) The sale, exchange, lease, mortgage, pledge or
24 other transfer of, or the grant of a security interest
25 in, any asset or assets of the limited partnership.
26 (iii) The incurrence, renewal, refinancing or
27 payment or other discharge of indebtedness by the limited
28 partnership.
29 (iv) A change in the nature of the business.
30 (v) The admission or removal of a general partner.
19990S0393B2193 - 147 -
1 (vi) The admission or removal of a limited partner.
2 (vii) A transaction involving an actual or potential
3 conflict of interest between a general partner and the
4 limited partnership or the limited partners.
5 (viii) An amendment to the partnership agreement or
6 certificate of limited partnership.
7 (ix) The merger or consolidation of the limited
8 partnership.
9 (x) The indemnification of any partner or other
10 person.
11 (xi) Matters related to the business of the limited
12 partnership not otherwise enumerated in this subsection,
13 which the partnership agreement states in writing may be
14 subject to the approval or disapproval of limited
15 partners.
16 (7) Applying for dissolution of the partnership pursuant
17 to section 8572 (relating to judicial dissolution).
18 (8) Winding up the limited partnership pursuant to
19 section 8573 (relating to winding up).
20 (9) In the case of a registered investment company,
21 voting on one or more of the following matters:
22 (i) The approval or termination of investment
23 advisory or underwriting contracts.
24 (ii) The approval of auditors.
25 (iii) Any other matter that by reason of the
26 Investment Company Act of 1940 (54 Stat. 789, 15 U.S.C. §
27 80a-1 et seq.) the general partners consider to be a
28 proper matter for the vote of the holders of voting
29 securities or beneficial interests in the limited
30 partnership.
19990S0393B2193 - 148 -
1 (10) Serving on a committee of the limited partnership
2 or the limited partners.
3 (11) Exercising any right or power permitted to limited
4 partners under this chapter and not specifically enumerated
5 in this subsection.
6 (12) Exercising any other right or power stated in the
7 partnership agreement.] (Repealed).
8 (c) [Enumeration nonexclusive.--The enumeration in
9 subsection (b) does not mean that the possession or exercise of
10 any other powers, or having or acting in other capacities, by a
11 limited partner constitutes participation by him in the control
12 of the business of the limited partnership.] (Repealed).
13 (d) Use of name of limited partner.--A limited partner does
14 not [participate in the control of the business within the
15 meaning of subsection (a)] become liable for the obligations of
16 a limited partnership by reason of the fact that all or any part
17 of the name of the limited partner is included in the name of
18 the limited partnership.
19 (e) [Effect of section.--This section does not create rights
20 or powers of limited partners. Such rights and powers may be
21 created only by the certificate of limited partnership,
22 partnership agreement or any other agreement or other provisions
23 of this chapter.] (Repealed).
24 * * *
25 § 8546. Approval of merger or consolidation.
26 (a) Preparation of plan of merger or consolidation.--A plan
27 of merger or consolidation, as the case may be, shall be
28 prepared, setting forth:
29 * * *
30 (3) The manner and basis of converting the partnership
19990S0393B2193 - 149 -
1 interests of each limited partnership into partnership
2 interests, securities or obligations of the surviving or new
3 limited partnership, as the case may be, and, if any of the
4 partnership interests of any of the limited partnerships that
5 are parties to the [plan] merger or consolidation are not to
6 be converted solely into partnership interests, securities or
7 obligations of the surviving or new limited partnership, the
8 partnership interests, securities or obligations of any other
9 person or cash, property or rights that the holders of such
10 partnership interests are to receive in exchange for, or upon
11 conversion of, such partnership interests, and the surrender
12 of any certificates evidencing them, which securities or
13 obligations, if any, of any other person or cash, property or
14 rights may be in addition to or in lieu of the partnership
15 interests, securities or obligations of the surviving or new
16 limited partnership.
17 (4) Such other provisions as are deemed desirable.
18 [Any of the terms of the plan may be made dependent upon facts
19 ascertainable outside of the plan if the manner in which the
20 facts will operate upon the terms of the plan is set forth in
21 the plan.]
22 (b) Post-adoption amendment of plan of merger or
23 consolidation.--A plan of merger or consolidation may contain a
24 provision that the general partners of the constituent limited
25 partnerships may amend the plan at any time prior to its
26 effective date, except that an amendment made subsequent to any
27 adoption of the plan by the limited partners of any constituent
28 domestic limited partnership shall not change:
29 (1) The amount or kind of partnership interests,
30 obligations, cash, property or rights to be received in
19990S0393B2193 - 150 -
1 exchange for or on conversion of all or any of the
2 partnership interests of the constituent domestic limited
3 partnership adversely to the holders of those partnership
4 interests.
5 (2) Any term of the certificate of limited partnership
6 or partnership agreement of the surviving or new limited
7 partnership [to be effected by] as it is to be in effect
8 immediately following consummation of the merger or
9 consolidation except provisions that may be amended without
10 the approval of the limited partners.
11 (3) Any of the other terms and conditions of the plan if
12 the change would adversely affect the holders of any
13 partnership interests of the constituent domestic limited
14 partnership.
15 * * *
16 (d) Party to plan.--[A limited partnership] An association
17 that approves a plan in its capacity as a partner or creditor of
18 a merging or consolidating limited partnership, or that
19 furnishes all or a part of the consideration contemplated by a
20 plan, does not thereby become a party to the [plan] merger or
21 consolidation for the purposes of this subchapter.
22 (e) Notice of meeting of limited partners.--Notwithstanding
23 any other provision of the partnership agreement, written notice
24 of the meeting of limited partners called for the purpose of
25 considering the proposed plan shall be given to each limited
26 partner of record, whether or not entitled to vote thereon, of
27 each domestic limited partnership that is a party to the [plan]
28 proposed merger or consolidation. There shall be included in, or
29 enclosed with, the notice a copy of the proposed plan or a
30 summary thereof. The provisions of this subsection may not be
19990S0393B2193 - 151 -
1 relaxed by the certificate of limited partnership or partnership
2 agreement.
3 (f) Adoption of plan by limited partners.--The plan of
4 merger or consolidation shall be adopted upon receiving a
5 majority of the votes cast by all limited partners, if any,
6 entitled to vote thereon of each of the domestic limited
7 partnerships that is a party to the [plan] proposed merger or
8 consolidation and, if any class of limited partners is entitled
9 to vote thereon as a class, a majority of the votes cast in each
10 class vote. A proposed plan of merger or consolidation shall not
11 be deemed to have been adopted by the limited partnership unless
12 it has also been approved by the general partners, regardless of
13 the fact that the general partners have directed or suffered the
14 submission of the plan to the limited partners for action.
15 * * *
16 (h) Termination of plan.--Prior to the time when a merger or
17 consolidation becomes effective, the merger or consolidation may
18 be terminated pursuant to provisions therefor, if any, set forth
19 in the plan. If a certificate of merger or consolidation has
20 been filed in the department prior to the termination, a
21 certificate of termination executed by each limited partnership
22 that is a party to the [plan] merger or consolidation, unless
23 the plan permits termination by less than all of the limited
24 partnerships, in which case the certificate shall be executed on
25 behalf of the limited partnership exercising the right to
26 terminate, shall be filed in the department. The certificate of
27 termination shall set forth:
28 (1) A copy of the certificate of merger or consolidation
29 relating to the plan that is terminated.
30 (2) A statement that the plan has been terminated in
19990S0393B2193 - 152 -
1 accordance with the provisions therefor set forth therein.
2 See sections 134 (relating to docketing statement), 135
3 (relating to requirements to be met by filed documents), 138
4 (relating to statement of correction) and 8514 (relating to
5 execution of certificates).
6 * * *
7 (j) Reference to outside facts.--Any of the terms of a plan
8 of merger or consolidation may be made dependent upon facts
9 ascertainable outside of the plan if the manner in which the
10 facts will operate upon the terms of the plan is set forth in
11 the plan. Such facts may include, without limitation, actions or
12 events within the control of or determinations made by a party
13 to the plan or a representative of a party to the plan.
14 § 8549. EFFECT OF MERGER OR CONSOLIDATION. <--
15 * * *
16 (B) PROPERTY RIGHTS.--ALL THE PROPERTY, REAL, PERSONAL AND
17 MIXED, OF EACH OF THE LIMITED PARTNERSHIPS PARTIES TO THE PLAN
18 OF MERGER OR CONSOLIDATION, AND ALL DEBTS DUE ON WHATEVER
19 ACCOUNT TO ANY OF THEM, AS WELL AS ALL OTHER THINGS AND CAUSES
20 OF ACTION BELONGING TO ANY OF THEM, SHALL BE DEEMED TO BE
21 [TRANSFERRED TO AND] VESTED IN AND SHALL BELONG TO THE SURVIVING
22 OR NEW LIMITED PARTNERSHIP, AS THE CASE MAY BE, WITHOUT FURTHER
23 ACTION, AND THE TITLE TO ANY REAL ESTATE, OR ANY INTEREST
24 THEREIN, VESTED IN ANY OF THE LIMITED PARTNERSHIPS SHALL NOT
25 REVERT OR BE IN ANY WAY IMPAIRED BY REASON OF THE MERGER OR
26 CONSOLIDATION. THE SURVIVING OR NEW LIMITED PARTNERSHIP SHALL
27 THENCEFORTH BE RESPONSIBLE FOR ALL THE LIABILITIES OF EACH OF
28 THE LIMITED PARTNERSHIPS SO MERGED OR CONSOLIDATED. LIENS UPON
29 THE PROPERTY OF THE MERGING OR CONSOLIDATING LIMITED
30 PARTNERSHIPS SHALL NOT BE IMPAIRED BY THE MERGER OR
19990S0393B2193 - 153 -
1 CONSOLIDATION, AND ANY CLAIM EXISTING OR ACTION OR PROCEEDING
2 PENDING BY OR AGAINST ANY OF THE LIMITED PARTNERSHIPS MAY BE
3 PROSECUTED TO JUDGMENT AS IF THE MERGER OR CONSOLIDATION HAD NOT
4 TAKEN PLACE OR THE SURVIVING OR NEW LIMITED PARTNERSHIP MAY BE
5 PROCEEDED AGAINST OR SUBSTITUTED IN ITS PLACE.
6 (C) TAXES.--ANY TAXES, INTEREST, PENALTIES AND PUBLIC
7 ACCOUNTS OF THE COMMONWEALTH CLAIMED AGAINST ANY OF THE MERGING
8 OR CONSOLIDATING LIMITED PARTNERSHIPS [BUT NOT] THAT ARE
9 SETTLED, ASSESSED OR DETERMINED PRIOR TO OR AFTER THE MERGER OR
10 CONSOLIDATION SHALL BE [SETTLED, ASSESSED OR DETERMINED AGAINST]
11 THE LIABILITY OF THE SURVIVING OR NEW LIMITED PARTNERSHIP AND,
12 TOGETHER WITH INTEREST THEREON, SHALL BE A LIEN AGAINST THE
13 PROPERTY, BOTH REAL AND PERSONAL, OF THE SURVIVING OR NEW
14 LIMITED PARTNERSHIP.
15 * * *
16 § 8553. Voluntary withdrawal of limited partner.
17 (a) General rule.--A limited partner may withdraw from a
18 limited partnership only at the time or upon the happening of
19 events specified in writing in the partnership agreement. [If
20 the partnership agreement does not specify in writing the time
21 or the events upon the happening of which a limited partner may
22 withdraw or a definite time for the dissolution and winding up
23 of the limited partnership, a limited partner may withdraw upon
24 not less than six months' prior written notice to each general
25 partner at his address on the books of the limited partnership.]
26 (b) [Prohibition of withdrawal.--The partnership agreement
27 may provide that a limited partner may not withdraw from the
28 limited partnership or assign a partnership interest in the
29 limited partnership prior to the dissolution and winding up of
30 the limited partnership.] (Repealed).
19990S0393B2193 - 154 -
1 (c) Transitional rule.--This section applies to all limited <--
2 partnerships formed on or after January 1, 2000. If the
3 partnership agreement of a limited partnership formed before
4 January 1, 2000, did not on December 31, 1999, specify in
5 writing the time or the events upon the happening of which a
6 limited partner could withdraw or a definite time for the
7 dissolution and winding up of the limited partnership, the
8 provisions of this section that were in effect prior to January
9 1, 2000, shall apply until such time, if any, as the partnership
10 agreement is amended in writing after January 1, 2000, to
11 specify:
12 (1) a time or the events upon the happening of which a
13 limited partner may withdraw;
14 (2) a definite time for the dissolution and winding up
15 of the limited partnership; or
16 (3) that this section as effective January 1, 2000,
17 shall apply to the limited partnership.
18 (C) TRANSITIONAL RULE.--THIS SECTION APPLIES TO ALL LIMITED <--
19 PARTNERSHIPS FORMED ON OR AFTER JANUARY 1, 2001. IF THE
20 PARTNERSHIP AGREEMENT OF A LIMITED PARTNERSHIP FORMED BEFORE
21 JANUARY 1, 2001, DID NOT ON DECEMBER 31, 2000, SPECIFY IN
22 WRITING THE TIME OR THE EVENTS UPON THE HAPPENING OF WHICH A
23 LIMITED PARTNER COULD WITHDRAW OR A DEFINITE TIME FOR THE
24 DISSOLUTION AND WINDING UP OF THE LIMITED PARTNERSHIP, THE
25 PROVISIONS OF THIS SECTION THAT WERE IN EFFECT PRIOR TO JANUARY
26 1, 2001, SHALL APPLY UNTIL SUCH TIME, IF ANY, AS THE PARTNERSHIP
27 AGREEMENT IS AMENDED IN WRITING AFTER JANUARY 1, 2001, TO
28 SPECIFY:
29 (1) A TIME OR THE EVENTS UPON THE HAPPENING OF WHICH A
30 LIMITED PARTNER MAY WITHDRAW;
19990S0393B2193 - 155 -
1 (2) A DEFINITE TIME FOR THE DISSOLUTION AND WINDING UP
2 OF THE LIMITED PARTNERSHIP; OR
3 (3) THAT THIS SECTION AS EFFECTIVE JANUARY 1, 2001,
4 SHALL APPLY TO THE LIMITED PARTNERSHIP.
5 § 8557. [Limitations on distribution.] Distributions and
6 allocation of profits and losses.
7 [A partner may not receive a distribution from a limited
8 partnership to the extent that, after giving effect to the
9 distribution, all liabilities of the limited partnership, other
10 than liabilities to partners on account of their partnership
11 interests and liabilities as to which recourse of creditors is
12 limited to specified property of the limited partnership, exceed
13 the fair value of the partnership assets. The fair value of any
14 property that is subject to a liability as to which recourse of
15 creditors is so limited shall be included in the partnership
16 assets only to the extent that the fair value of the property
17 exceeds that liability.] A limited partnership may from time to
18 time make distributions and allocate the profits and losses of
19 its business to the partners upon the basis stipulated in the
20 partnership agreement or, if not stipulated in the partnership
21 agreement, per capita. The allocation of losses pursuant to this
22 section shall not affect the limitation on liability of limited
23 partners as provided in section 8523 (relating to liability of
24 limited partners to third parties).
25 § 8558. Liability upon return of contribution.
26 * * *
27 (c) Determination of return of contribution.--A partner
28 receives a return of his contribution to the extent that a
29 distribution to him reduces his share of the fair value of the
30 net assets of the limited partnership[, as determined under
19990S0393B2193 - 156 -
1 section 8557 (relating to limitations on distribution),] below
2 the value (as stated or determined in the manner provided in the
3 partnership agreement, if stated or provided for therein) of his
4 contribution (to the extent it has been received by the limited
5 partnership) that has not been distributed to him, and otherwise
6 to the extent of the fair value of the distribution.
7 (d) Fair value of net assets.--For purposes of computing the
8 fair value of the net assets of the limited partnership under
9 subsection (c):
10 (1) liabilities of the limited partnership to partners
11 on account of their partnership interests and liabilities as
12 to which recourse of creditors is limited to specified
13 property of the limited partnership shall not be considered;
14 and
15 (2) the fair value of property that is subject to a
16 liability as to which recourse of creditors is so limited
17 shall be included in the partnership assets only to the
18 extent that the fair value of the property exceeds that
19 liability.
20 § 8571. Nonjudicial dissolution.
21 (a) General rule.--A limited partnership is dissolved and
22 its affairs shall be wound up upon the happening of the first to
23 occur of the following:
24 (1) At the time or upon the happening of events
25 specified in the certificate of limited partnership.
26 (2) At the time or upon the happening of events
27 specified in writing in the partnership agreement.
28 (3) Written consent of all partners.
29 (4) An event of withdrawal of a general partner unless
30 at the time there is at least one other general partner and
19990S0393B2193 - 157 -
1 the written provisions of the partnership agreement permit
2 the business of the limited partnership to be carried on by
3 the remaining general partner and that partner does so. The
4 limited partnership is not dissolved and is not required to
5 be wound up by reason of any event of withdrawal if, within
6 180 days after the withdrawal, [all] a majority in interest,
7 or such greater number as shall be provided in writing in the
8 partnership agreement, of the partners agree in writing to
9 continue the business of the limited partnership or to the
10 appointment of one or more replacement general partners.
11 (5) Entry of an order of judicial dissolution under
12 section 8572 (relating to judicial dissolution).
13 * * *
14 (c) Dissolution by domestication.--Whenever a domestic
15 limited partnership has domesticated itself under the laws of
16 another jurisdiction by action similar to that provided by
17 section 8590 (relating to domestication) and has authorized that
18 action in the manner required by this subchapter for the
19 approval of a proposal that the partnership dissolve
20 voluntarily, the partnership may surrender its certificate of
21 limited partnership under the laws of this Commonwealth by
22 filing in the department a certificate of cancellation under
23 section 8513 (relating to cancellation of certificate). If the
24 partnership, as domesticated in the other jurisdiction,
25 registers to do business in this Commonwealth either prior to or
26 simultaneously with the filing of the certificate of
27 cancellation under this subsection, the partnership shall not be
28 required to file with the certificate of cancellation the tax
29 clearance certificates that would otherwise be required by
30 section 139 (relating to tax clearance of certain fundamental
19990S0393B2193 - 158 -
1 transactions).
2 [(c)] (d) Cross [references] reference.--See [sections 8103
3 (relating to continuation of certain limited partnerships) and]
4 section 8512(b) (relating to events requiring amendment).
5 § 8573. Winding up.
6 Except as otherwise provided in the partnership agreement,
7 the general partners who have not wrongfully dissolved a limited
8 partnership or, if none, the limited partners, or a person
9 approved by the limited partners or, if there is more than one
10 class or group of limited partners, by each class or group of
11 limited partners, in either case by a majority in interest of
12 the limited partners in each class or group, may wind up the
13 affairs of the limited partnership, but the court may wind up
14 the affairs of the limited partnership upon application of any
15 partner, his legal representative or assignee, and in connection
16 therewith, may appoint a liquidating trustee. See section 139(b)
17 (relating to tax clearance in judicial proceedings).
18 § 8577. Proposal and adoption of plan of division.
19 * * *
20 (b) Reference to outside facts.--Any of the terms of the
21 plan may be made dependent upon facts ascertainable outside of
22 the plan if the manner in which the facts will operate upon the
23 terms of the plan is set forth in the plan. Such facts may
24 include, without limitation, actions or events within the
25 control of or determinations made by the dividing limited
26 partnership or a representative of the dividing limited
27 partnership.
28 * * *
29 (e) [Restrictions on certain distributions.--A plan of
30 division may not be made effective if the effect of the plan is
19990S0393B2193 - 159 -
1 to make a distribution to the holders of any class or series of
2 partnership interests of the dividing limited partnership unless
3 the distribution is permitted by section 8557 (relating to
4 limitations on distribution.] (Repealed).
5 (f) [Action by] Rights of holders of indebtedness.--[Unless
6 otherwise provided by an indenture or other contract by which
7 the dividing limited partnership is bound, a plan of division
8 shall not require the approval of the holders of any debt
9 securities or other obligations of the dividing limited
10 partnership or of any representative of the holders if the
11 transfer of assets effected by the division, if effected by
12 means of a sale, lease, exchange or other disposition, and any
13 related distribution would not require the approval of the
14 holders or representatives thereof.] If any such debt
15 securities, notes, similar evidences of indebtedness, indentures
16 or other contracts were issued, incurred or executed by the
17 dividing limited partnership before (the Legislative Reference
18 Bureau shall insert here the effective date of the amendments of
19 this section) and have not been amended subsequent to that date,
20 the liability of the dividing limited partnership thereunder
21 shall not be affected by the division nor shall the rights of
22 the obligees thereunder be impaired by the division, and each of
23 the resulting limited partnerships may be proceeded against or
24 substituted in place of the dividing limited partnership as
25 joint and several obligors on such liability, regardless of any
26 provision of the plan of division apportioning the liabilities
27 of the dividing limited partnership.
28 * * *
29 § 8580. Effect of division.
30 * * *
19990S0393B2193 - 160 -
1 (b) Property rights; allocations of assets and
2 liabilities.--
3 (1) (i) All the property, real, personal and mixed, of
4 the dividing limited partnership, and all debts due on
5 whatever account to it, including subscriptions for
6 partnership interests or other causes of action belonging
7 to it, shall, except as otherwise provided in paragraph
8 (2), to the extent [transfers] allocations of assets are
9 contemplated by the plan of division, be deemed without
10 further action to be [transferred] allocated to and
11 vested in the resulting limited partnerships on such a
12 manner and basis and with such effect as is specified in
13 the plan, or per capita among the resulting limited
14 partnerships, as tenants in common, if no specification
15 is made in the plan, and the title to any real estate or
16 interest therein vested in any of the limited
17 partnerships shall not revert or be in any way impaired
18 by reason of the division.
19 (ii) Upon the division becoming effective, the
20 resulting limited partnerships shall each thenceforth be
21 responsible as separate and distinct limited partnerships
22 only for such liabilities as each limited partnership may
23 undertake or incur in its own name but shall be liable
24 for the liabilities of the dividing limited partnership
25 in the manner and on the basis provided in subparagraphs
26 (iv) and (v).
27 (iii) Liens upon the property of the dividing
28 limited partnership shall not be impaired by the
29 division.
30 (iv) [One] To the extent allocations of liabilities
19990S0393B2193 - 161 -
1 are contemplated by the plan of division, the liabilities
2 of the dividing limited partnership shall be deemed
3 without further action to be allocated to and become the
4 liabilities of the resulting limited partnerships on such
5 a manner and basis and with such effect as is specified
6 in the plan; and one or more but less than all of the
7 resulting limited partnerships shall be free of the
8 liabilities of the dividing limited partnership to the
9 extent, if any, specified in the plan [if no fraud of
10 creditors or partners or violation of law shall be
11 effected thereby and if all applicable provisions of law
12 are complied with.], if in either case:
13 (A) no fraud of partners or violation of law
14 shall be effected thereby; and
15 (B) the plan does not constitute a fraudulent
16 transfer under 12 Pa.C.S. Ch. 51 (relating to
17 fraudulent transfers).
18 (v) If the conditions in subparagraph (iv) for
19 freeing one or more of the resulting limited partnerships
20 from the liabilities of the dividing limited partnership,
21 or for allocating some or all of the liabilities of the
22 dividing limited partnership, are not satisfied, the
23 liabilities of the dividing limited partnership as to
24 which those conditions are not satisfied shall not be
25 affected by the division nor shall the rights of
26 creditors [thereof] thereunder or of any person dealing
27 with the limited partnership be impaired by the division,
28 and any claim existing or action or proceeding pending by
29 or against the limited partnership with respect to those
30 liabilities may be prosecuted to judgment as if the
19990S0393B2193 - 162 -
1 division had not taken place, or the resulting limited
2 partnerships may be proceeded against or substituted in
3 [its] place of the dividing limited partnership as joint
4 and several obligors on [such liability] those
5 liabilities, regardless of any provision of the plan of
6 division apportioning the liabilities of the dividing
7 limited partnership.
8 (vi) The conditions in subparagraph (iv) for freeing
9 one or more of the resulting limited partnerships from
10 the liabilities of the dividing limited partnership and
11 for allocating some or all of the liabilities of the
12 dividing limited partnership shall be conclusively deemed
13 to have been satisfied if the plan of division has been
14 approved by the Pennsylvania Public Utility Commission in
15 a final order issued after (the Legislative Reference
16 Bureau shall insert here the effective date of the
17 amendments of this section) that has become not subject
18 to further appeal.
19 (2) (i) The [transfer] allocation of any fee or
20 freehold interest or leasehold having a remaining term of
21 30 years or more in any tract or parcel of real property
22 situate in this Commonwealth owned by a dividing limited
23 partnership (including property owned by a foreign
24 limited partnership dividing solely under the law of
25 another jurisdiction) to a new limited partnership
26 resulting from the division shall not be effective until
27 one of the following documents is filed in the office for
28 the recording of deeds of the county, or each of them, in
29 which the tract or parcel is situated:
30 (A) A deed, lease or other instrument of
19990S0393B2193 - 163 -
1 confirmation describing the tract or parcel.
2 (B) A duly executed duplicate original copy of
3 the certificate of division.
4 (C) A copy of the certificate of division
5 certified by the Department of State.
6 (D) A declaration of acquisition setting forth
7 the value of real estate holdings in the county of
8 the limited partnership as an acquired company.
9 (ii) The provisions of 75 Pa.C.S. § 1114 (relating
10 to transfer of vehicle by operation of law) shall not be
11 applicable to [a transfer] an allocation of ownership of
12 any motor vehicle, trailer or semitrailer [from a
13 dividing limited partnership] to a new limited
14 partnership under this section or under a similar law of
15 any other jurisdiction, but any such [transfer]
16 allocation shall be effective only upon compliance with
17 the requirements of 75 Pa.C.S. § 1116 (relating to
18 issuance of new certificate following transfer).
19 (3) It shall not be necessary for a plan of division to
20 list each individual asset or liability of the dividing
21 limited partnership to be allocated to a new limited
22 partnership so long as those assets and liabilities are
23 described in a reasonable and customary manner.
24 (4) Each new limited partnership shall hold any assets
25 and liabilities allocated to it as the successor to the
26 dividing limited partnership, and those assets and
27 liabilities shall not be deemed to have been assigned to the
28 new limited partnership in any manner, whether directly or
29 indirectly or by operation of law.
30 * * *
19990S0393B2193 - 164 -
1 (g) Conflict of laws.--It is the intent of the General
2 Assembly that:
3 (1) The effect of a division of a domestic limited
4 partnership shall be governed solely by the laws of this
5 Commonwealth and any other jurisdiction under the laws of
6 which any of the resulting limited partnerships is organized.
7 (2) The effect of a division on the assets and
8 liabilities of the dividing limited partnership shall be
9 governed solely by the laws of this Commonwealth and any
10 other jurisdiction under the laws of which any of the
11 resulting limited partnerships is organized.
12 (3) The validity of any allocations of assets or
13 liabilities by a plan of division of a domestic limited
14 partnership, regardless of whether or not any of the new
15 limited partnerships is a foreign limited partnership, shall
16 be governed solely by the laws of this Commonwealth.
17 (4) In addition to the express provisions of this
18 subsection, this subchapter shall otherwise generally be
19 granted the protection of full faith and credit under the
20 Constitution of the United States.
21 § 8590. Domestication.
22 * * *
23 (b) Certificate of domestication.--The certificate of
24 domestication shall be executed by the limited partnership and
25 shall set forth in the English language:
26 (1) The name of the limited partnership. If the name is
27 in a foreign language, it shall be set forth in Roman letters
28 or characters or Arabic or Roman numerals. If the name is one
29 that is rendered unavailable for use by any provision of
30 section 8505 (relating to name), the limited partnership
19990S0393B2193 - 165 -
1 shall adopt, in accordance with any procedures for changing
2 the name of the limited partnership that are applicable prior
3 to the domestication of the limited partnership, and shall
4 set forth in the certificate of domestication an available
5 name.
6 * * *
7 (c) Effect of domestication.--
8 (1) As a domestic limited partnership, the domesticated
9 limited partnership shall no longer be a foreign limited
10 partnership for the purposes of this chapter and shall [have]
11 instead be a domestic limited partnership with all the powers
12 and privileges and [be subject to] all the duties and
13 limitations granted and imposed upon domestic limited
14 partnerships. [The property, debts, liens, estates, taxes,
15 penalties and public accounts due the Commonwealth shall
16 continue to be vested in and imposed upon the limited
17 partnership to the same extent as if it were the successor by
18 merger of the domesticating limited partnership with and into
19 a domestic limited partnership under Subchapter F (relating
20 to merger and consolidation).] In all other respects, the
21 domesticated limited partnership shall be deemed to be the
22 same limited partnership as it was prior to the domestication
23 without any change in or affect EFFECT on its existence. <--
24 Without limiting the generality of the previous sentence, the
25 domestication shall not be deemed to have dissolved the
26 limited partnership or to have affected in any way:
27 (i) the right and title of the limited partnership
28 in and to its assets, property, franchises, estates and
29 choses in action;
30 (ii) the liability of the limited partnership for
19990S0393B2193 - 166 -
1 its debts, obligations, penalties and public accounts due
2 the Commonwealth;
3 (iii) any liens or other encumbrances on the
4 property or assets of the limited partnership; or
5 (iv) any contract, license or other agreement to
6 which the limited partnership is a party or under which
7 it has any rights or obligations.
8 (2) The partnership interests in the domesticated
9 limited partnership shall be unaffected by the domestication
10 except to the extent, if any, reclassified in the certificate
11 of domestication.
12 § 8903. Definitions and index of definitions.
13 (a) Definitions.--The following words and phrases when used
14 in this chapter shall have the meanings given to them in this
15 section unless the context clearly indicates otherwise:
16 * * *
17 ["Department." The Department of State of the Commonwealth.]
18 * * *
19 "Event of dissociation." An event that causes a person to
20 cease to be a member of a limited liability company. See
21 section [8971(a)(4)] 8971(4) (relating to dissolution).
22 * * *
23 ["Licensed person." A natural person who is duly licensed or
24 admitted to practice his profession by a court, department,
25 board, commission or other agency of this Commonwealth or
26 another jurisdiction to render a professional service that is or
27 will be rendered by the professional company of which he is or
28 intends to become a manager, member, employee or agent.]
29 "Limited liability company," "domestic limited liability
30 company" or "company." An association that is a limited
19990S0393B2193 - 167 -
1 liability company organized and existing under this chapter.
2 * * *
3 "Operating agreement." Any [agreement of the members as to]
4 rules or procedures adopted for the regulation and governance of
5 the affairs of a limited liability company and the conduct of
6 its business. [The operating agreement need not be in writing
7 except where this chapter refers to a written provision of the
8 operating agreement. The operating agreement may contain any
9 provision for the regulation of the internal affairs of the
10 company agreed to by the members, whether or not specifically
11 authorized by or in contravention of this chapter, except where
12 this chapter:
13 (1) refers only to a rule as set forth in the
14 certificate of organization; or
15 (2) expressly provides that the operating agreement
16 shall not relax or contravene any provision on a specified
17 subject. See sections 8913(8) (relating to certificate of
18 organization) and 8915 (relating to modification by
19 agreement).]
20 * * *
21 ["Professional services." The term shall have the meaning
22 specified in section 2902 (relating to definitions).]
23 * * *
24 (b) Index of other definitions.--Other definitions applying
25 to this chapter and the sections in which they appear are:
26 "Act" or "action." Section 102.
27 "Department." Section 102.
28 "Licensed person." Section 102.
29 "Professional services." Section 102.
30 SUBCHAPTER B
19990S0393B2193 - 168 -
1 ORGANIZATION[; CERTIFICATE OF ORGANIZATION]
2 § 8915. Modification by agreement.
3 The provisions of this chapter are intended to permit a
4 limited liability company to qualify for taxation as an entity
5 that is not an association taxable as a corporation under the
6 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1
7 et seq.). Notwithstanding the limitations in [the definition of
8 "operating agreement" in section 8903 (relating to definitions)
9 and the limitations in section] sections 8913(8) (relating to
10 certificate of organization) and 8916(b) (relating to operating
11 agreement), the certificate of organization and operating
12 agreement may effect any change in the form of organization of
13 the company, in addition to or in contravention of the
14 provisions of this chapter, that may be necessary to accomplish
15 that purpose.
16 § 8916. Operating agreement.
17 (a) General rule.--The operating agreement of a limited
18 liability company need not be in writing except where this
19 chapter refers to a written provision of the operating
20 agreement. If a written operating agreement provides that it
21 cannot be amended or modified except in writing, an oral
22 agreement, amendment or modification shall not be enforceable.
23 (b) Freedom of contract.--An operating agreement may contain
24 any provision for the regulation of the internal affairs of a
25 limited liability company adopted by the members, whether or not
26 specifically authorized by or in contravention of this chapter,
27 except where this chapter:
28 (1) refers only to a rule as set forth in the
29 certificate of organization; or
30 (2) expressly provides that the operating agreement
19990S0393B2193 - 169 -
1 shall not relax or contravene any provision on a specified
2 subject.
3 (c) Cross references.--See sections 8913(8) (relating to
4 certificate of organization) and 8915 (relating to modification
5 by agreement).
6 § 8922. Liability of members [and managers].
7 (a) General rule.--[Neither] Except as provided in
8 subsection (e), the members of a limited liability company [nor
9 the managers of a company managed by one or more managers are]
10 shall not be liable, solely by reason of being a member [or a
11 manager], under an order of a court or in any other manner for a
12 debt, obligation or liability of the company of any kind or for
13 the acts [or omissions] of any [other] member, manager, agent or
14 employee of the company.
15 (b) Professional relationship unaffected.--Subsection (a)
16 shall not afford members [and managers] of a professional
17 company with greater immunity than is available to the officers,
18 shareholders, employees or agents of a professional corporation.
19 See section 2925 (relating to professional relationship
20 retained).
21 * * *
22 (d) Conflict of laws.--The personal liability of a member of
23 a company to any person or in any action or proceeding for the
24 debts, obligations or liabilities of the company or for the acts
25 [or omissions] of other members, managers, employees or agents
26 of the company shall be governed solely and exclusively by this
27 chapter and the laws of this Commonwealth. Whenever a conflict
28 arises between the laws of this Commonwealth and the laws of any
29 other state with regard to the liability of members of a company
30 organized and existing under this chapter for the debts,
19990S0393B2193 - 170 -
1 obligations and liabilities of the company or for the acts [or
2 omissions] of the other members, managers, employees or agents
3 of the company, the laws of this Commonwealth shall govern in
4 determining such liability.
5 (e) Expansion of liability.--The certificate of organization
6 may provide that some or all of the members shall be liable for
7 some or all of the debts, obligations and liabilities of the
8 company to the extent and under the circumstances provided in
9 the certificate.
10 (f) Medical professional liability.--A professional company
11 shall be deemed to be a partnership for purposes of section 811
12 of the act of October 15, 1975 (P.L.390, No.111), known as the
13 Health Care Services Malpractice Act.
14 [(e)] (g) Cross reference.--See section 8904(b) (relating to
15 rules for cases not provided for in this chapter).
16 § 8924. Limited transferability of membership interest.
17 (a) General rule.--The interest of a member in a limited
18 liability company constitutes the personal estate of the member
19 and may be transferred or assigned as provided in writing in the
20 operating agreement. Unless otherwise provided in writing in
21 the operating agreement, if all of the other members of the
22 company other than the member proposing to dispose of his
23 interest do not approve of the proposed transfer or assignment
24 by unanimous vote or written consent, which approval may be
25 unreasonably withheld by any of the other members, the
26 transferee of the interest of the member shall have no right to
27 participate in the management of the business and affairs of the
28 company or to become a member. The transferee shall only be
29 entitled to receive the distributions and the return of
30 contributions to which that member would otherwise be entitled.
19990S0393B2193 - 171 -
1 (b) Certificate of membership interest.--The certificate of
2 organization may provide that a member's interest in a company
3 may be evidenced by a certificate of membership interest issued
4 by the company [and]. If such provision is made for the issuance
5 of certificates of membership interest, the operating agreement
6 may [also] provide for the assignment or transfer of any
7 membership interest represented by such a certificate and make
8 other provisions with respect to such certificates. [See 13
9 Pa.C.S. § 8102 (relating to definitions and index of
10 definitions).]
11 § 8932. Distributions and allocation of profits and losses.
12 A limited liability company may from time to time [divide]
13 make distributions and allocate the profits and losses of its
14 business [and distribute the same] to [and allocate any losses
15 among] the members of the company upon the basis stipulated in
16 the operating agreement or, if not stipulated in the operating
17 agreement, per capita. The allocation of losses pursuant to this
18 section shall not affect the limitation on liability of members
19 as provided in section 8922 (relating to liability of members).
20 § 8942. Voting.
21 * * *
22 (c) Exception.--An amendment of the certificate of
23 organization that:
24 (1) restates without change all of the operative
25 provisions of the certificate of organization as theretofore
26 in effect;
27 (2) changes the name or registered office of the
28 company; or
29 (3) accomplishes any combination of the foregoing
30 purposes;
19990S0393B2193 - 172 -
1 is not an amendment of the certificate of organization for the
2 purposes of subsection (b). Unless otherwise provided in writing
3 in the operating agreement, an amendment described in this
4 subsection may be made by the affirmative vote of a majority of
5 the managers or, in the case of a company that is not managed by
6 one or more managers, of a majority of the members.
7 * * *
8 § 8943. Duties of managers and members.
9 * * *
10 (b) Companies with managers.--If the certificate of
11 organization provides that the company shall be managed by one
12 or more managers:
13 (1) [Unless otherwise provided in writing in the
14 operating agreement, the provisions of Subchapter B of
15 Chapter 17 (relating to officers, directors and
16 shareholders)] Sections 1711 (relating to alternative
17 provisions) through 1717 (relating to limitation on standing)
18 shall be applicable to representatives of the company. A
19 written provision of the operating agreement may increase,
20 but not relax, the duties of representatives of the company
21 to its members under those sections. For purposes of applying
22 the provisions of those sections, references to the "articles
23 of incorporation," "bylaws," "directors" and "shareholders"
24 shall mean the certificate of organization, operating
25 agreement, managers and members, respectively.
26 (2) A member who is not a manager shall have no duties
27 to the company or to the other members solely by reason of
28 acting in his capacity as a member.
29 § 8944. [Classes of members.] Members.
30 (a) General rule.--A limited liability company may have one
19990S0393B2193 - 173 -
1 or more members.
2 (b) Classes of members.--An operating agreement may provide
3 for:
4 (1) classes or groups of members having such relative
5 rights, powers and duties as the operating agreement may
6 provide;
7 (2) the future creation in the manner provided in the
8 operating agreement of additional classes or groups of
9 members having such relative rights, powers and duties as may
10 from time to time be established, including rights, powers
11 and duties senior to existing classes and groups of members;
12 and
13 (3) the taking of an action, including, without
14 limitation, amendment of the certificate of organization or
15 operating agreement or creation of a class or group of
16 interests in the limited liability company that was not
17 previously outstanding, without the vote or approval of any
18 member or class or group of members.
19 [(b)] (c) Class voting.--The operating agreement may grant
20 to all or certain identified members or a specified class or
21 group of members the right to vote (on a per capita or other
22 basis), separately or with all or any class or group of members,
23 upon any matter.
24 § 8945. Indemnification.
25 * * *
26 (f) Mandatory indemnification.--Without regard to whether
27 indemnification or advancement of expenses is provided under
28 subsections (a) and (d), a limited liability company shall be
29 subject to section 8331(2) (relating to rules determining rights
30 and duties of partners) and both the members and the managers,
19990S0393B2193 - 174 -
1 if any, shall be deemed to be general partners for purposes of
2 applying that section.
3 § 8948. [Dissociation of member limited.] Limitation on
4 dissociation or assignment of membership interest.
5 Notwithstanding anything to the contrary set forth in this
6 part, an operating agreement may provide that a member may not
7 voluntarily dissociate from the limited liability company or
8 assign his membership interest prior to the dissolution and
9 winding-up of the company, and an attempt by a member to
10 dissociate voluntarily from the company or to assign his
11 membership interest in violation of the operating agreement
12 shall be ineffective.
13 § 8957. Approval of merger or consolidation.
14 * * *
15 (b) Reference to outside facts.--Any of the terms of the
16 plan may be made dependent upon facts ascertainable outside of
17 the plan if the manner in which the facts will operate upon the
18 terms of the plan is set forth in the plan. Such facts may
19 include, without limitation, actions or events within the
20 control of or determinations made by a party to the plan or a
21 representative of a party to the plan.
22 (c) [Postadoption] Post-adoption amendment of plan of merger
23 or consolidation.--A plan of merger or consolidation may contain
24 a provision that the managers, if any, of the constituent
25 companies may amend the plan at any time prior to its effective
26 date, except that an amendment made subsequent to any adoption
27 of the plan by the members of any constituent domestic company
28 shall not, without the approval of the members, change:
29 (1) The amount or kind of membership interests,
30 obligations, cash, property or rights to be received in
19990S0393B2193 - 175 -
1 exchange for or on conversion of all or any of the membership
2 interests of the constituent domestic company adversely to
3 the holders of those membership interests.
4 (2) Any [term] provision of the certificate of
5 organization or operating agreement of the surviving or new
6 company [to be effected by] as it is to be in effect
7 immediately following consummation of the merger or
8 consolidation except provisions that may be amended without
9 the approval of the members.
10 (3) Any of the other terms and conditions of the plan if
11 the change would adversely affect the holders of any
12 membership interests of the constituent domestic company.
13 * * *
14 (e) Party to plan.--An association that approves a plan in
15 its capacity as a member or creditor of a merging or
16 consolidating company or that furnishes all or a part of the
17 consideration contemplated by a plan does not thereby become a
18 party to the [plan or the] merger or consolidation for the
19 purposes of this subchapter.
20 * * *
21 (i) Termination of plan.--Prior to the time when a merger or
22 consolidation becomes effective, the merger or consolidation may
23 be terminated pursuant to provisions therefor, if any, set forth
24 in the plan. If a certificate of merger or consolidation has
25 been filed in the department prior to the termination, a
26 certificate of termination executed by each company that is a
27 party to the merger or consolidation, unless the plan permits
28 termination by less than all of the companies, in which case the
29 certificate shall be executed on behalf of the company
30 exercising the right to terminate, shall be filed in the
19990S0393B2193 - 176 -
1 department. The certificate of termination shall set forth:
2 (1) A copy of the certificate of merger or consolidation
3 relating to the plan that is terminated.
4 (2) A statement that the plan has been terminated in
5 accordance with the provisions therefor set forth therein.
6 See sections 134 (relating to docketing statement), 135
7 (relating to requirements to be met by filed documents), 138
8 (relating to statement of correction) and 8907 (relating to
9 execution of documents).
10 * * *
11 § 8959. EFFECT OF MERGER OR CONSOLIDATION. <--
12 * * *
13 (B) PROPERTY RIGHTS.--ALL THE PROPERTY, REAL, PERSONAL AND
14 MIXED, OF EACH OF THE COMPANIES PARTIES TO THE MERGER OR
15 CONSOLIDATION AND ALL DEBTS DUE ON WHATEVER ACCOUNT TO ANY OF
16 THEM, AS WELL AS ALL OTHER THINGS AND CAUSES OF ACTION BELONGING
17 TO ANY OF THEM, SHALL BE DEEMED TO BE [TRANSFERRED TO AND]
18 VESTED IN AND SHALL BELONG TO THE SURVIVING OR NEW COMPANY, AS
19 THE CASE MAY BE, WITHOUT FURTHER ACTION, AND THE TITLE TO ANY
20 REAL ESTATE OR ANY INTEREST THEREIN VESTED IN ANY OF THE
21 COMPANIES SHALL NOT REVERT OR BE IN ANY WAY IMPAIRED BY REASON
22 OF THE MERGER OR CONSOLIDATION. THE SURVIVING OR NEW COMPANY
23 SHALL THENCEFORTH BE RESPONSIBLE FOR ALL THE LIABILITIES OF EACH
24 OF THE COMPANIES SO MERGED OR CONSOLIDATED. LIENS UPON THE
25 PROPERTY OF THE MERGING OR CONSOLIDATING COMPANIES SHALL NOT BE
26 IMPAIRED BY THE MERGER OR CONSOLIDATION, AND ANY CLAIM EXISTING
27 OR ACTION OR PROCEEDING PENDING BY OR AGAINST ANY OF THE
28 COMPANIES MAY BE PROSECUTED TO JUDGMENT AS IF THE MERGER OR
29 CONSOLIDATION HAD NOT TAKEN PLACE OR THE SURVIVING OR NEW
30 COMPANY MAY BE PROCEEDED AGAINST OR SUBSTITUTED IN ITS PLACE.
19990S0393B2193 - 177 -
1 (C) TAXES.--ANY TAXES, INTEREST, PENALTIES AND PUBLIC
2 ACCOUNTS OF THE COMMONWEALTH CLAIMED AGAINST ANY OF THE MERGING
3 OR CONSOLIDATING COMPANIES [BUT NOT] THAT ARE SETTLED, ASSESSED
4 OR DETERMINED PRIOR TO OR AFTER THE MERGER OR CONSOLIDATION
5 SHALL BE [SETTLED, ASSESSED OR DETERMINED AGAINST] THE LIABILITY
6 OF THE SURVIVING OR NEW COMPANY AND, TOGETHER WITH INTEREST
7 THEREON, SHALL BE A LIEN AGAINST THE PROPERTY, BOTH REAL AND
8 PERSONAL, OF THE SURVIVING OR NEW COMPANY.
9 * * *
10 § 8962. Proposal and adoption of plan of division.
11 * * *
12 (b) Reference to outside facts.--Any of the terms of the
13 plan may be made dependent upon facts ascertainable outside of
14 the plan if the manner in which the facts will operate upon the
15 terms of the plan is set forth in the plan. Such facts may
16 include, without limitation, actions or events within the
17 control of or determinations made by the dividing limited
18 liability company or a representative of the dividing limited
19 liability company.
20 * * *
21 (e) [Action by holders of indebtedness.--Unless otherwise
22 provided by an indenture or other contract by which the dividing
23 limited liability company is bound, a plan of division shall not
24 require the approval of the holders of any debt securities or
25 other obligations of the dividing company or of any
26 representative of the holders if the transfer of assets effected
27 by the division, if effected by means of a sale, lease, exchange
28 or other disposition, and any related distribution would not
29 require the approval of the holders or representatives thereof.]
30 (Repealed).
19990S0393B2193 - 178 -
1 § 8965. Effect of division.
2 * * *
3 (b) Property rights; allocations of assets and
4 liabilities.--
5 (1) (i) All the property, real, personal and mixed, of
6 the dividing company and all debts due on whatever
7 account to it, including subscriptions for membership
8 interests and other causes of action belonging to it,
9 shall, except as otherwise provided in paragraph (2), to
10 the extent [transfers] allocations of assets are
11 contemplated by the plan of division, be deemed without
12 further action to be [transferred] allocated to and
13 vested in the resulting companies on such a manner and
14 basis and with such effect as is specified in the plan,
15 or per capita among the resulting companies as tenants in
16 common if no specification is made in the plan, and the
17 title to any real estate or interest therein vested in
18 any of the companies shall not revert or be in any way
19 impaired by reason of the division.
20 (ii) Upon the division becoming effective, the
21 resulting companies shall each thenceforth be responsible
22 as separate and distinct companies only for such
23 liabilities as each company may undertake or incur in its
24 own name but shall be liable for the liabilities of the
25 dividing company in the manner and on the basis provided
26 in subparagraphs (iv) and (v).
27 (iii) Liens upon the property of the dividing
28 company shall not be impaired by the division.
29 (iv) [One] To the extent allocations of liabilities
30 are contemplated by the plan of division, the liabilities
19990S0393B2193 - 179 -
1 of the dividing company shall be deemed without further
2 action to be allocated to and become the liabilities of
3 the resulting companies on such a manner and basis and
4 with such effect as is specified in the plan; and one or
5 more, but less than all, of the resulting companies shall
6 be free of the liabilities of the dividing company to the
7 extent, if any, specified in the plan [if no fraud of
8 creditors or members or violation of law shall be
9 effected thereby and if all applicable provisions of law
10 are complied with.], if in either case:
11 (A) no fraud on members or violation of law
12 shall be effected thereby; and
13 (B) the plan does not constitute a fraudulent
14 transfer under 12 Pa.C.S. Ch. 51 (relating to
15 fraudulent transfers).
16 (v) If the conditions in subparagraph (iv) for
17 freeing one or more of the resulting companies from the
18 liabilities of the dividing company, or for allocating
19 some or all of the liabilities of the dividing company,
20 are not satisfied, the liabilities of the dividing
21 company as to which those conditions are not satisfied
22 shall not be affected by the division nor shall the
23 rights of creditors [thereof] thereunder or of any person
24 dealing with the company be impaired by the division, and
25 any claim existing or action or proceeding pending by or
26 against the company with respect to those liabilities may
27 be prosecuted to judgment as if the division had not
28 taken place, or the resulting companies may be proceeded
29 against or substituted in [its] place of the dividing
30 company as joint and several obligors on [such liability]
19990S0393B2193 - 180 -
1 those liabilities, regardless of any provision of the
2 plan of division apportioning the liabilities of the
3 dividing company.
4 (vi) The conditions in subparagraph (iv) for freeing
5 one or more of the resulting companies from the
6 liabilities of the dividing company and for allocating
7 some or all of the liabilities of the dividing company
8 shall be conclusively deemed to have been satisfied if
9 the plan of division has been approved by the
10 Pennsylvania Public Utility Commission in a final order
11 issued after (the Legislative Reference Bureau shall
12 insert here the effective date of the amendments of this
13 section) that has become not subject to further appeal.
14 (2) (i) The [transfer] allocation of any fee or
15 freehold interest or leasehold having a remaining term of
16 30 years or more in any tract or parcel of real property
17 situate in this Commonwealth owned by a dividing company
18 (including property owned by a foreign limited liability
19 company dividing solely under the law of another
20 jurisdiction) to a new company resulting from the
21 division shall not be effective until one of the
22 following documents is filed in the office for the
23 recording of deeds of the county, or each of them, in
24 which the tract or parcel is situated:
25 (A) A deed, lease or other instrument of
26 confirmation describing the tract or parcel.
27 (B) A duly executed duplicate original copy of
28 the certificate of division.
29 (C) A copy of the certificate of division
30 certified by the Department of State.
19990S0393B2193 - 181 -
1 (D) A declaration of acquisition setting forth
2 the value of real estate holdings in such county of
3 the company as an acquired company.
4 (ii) The provisions of 75 Pa.C.S. § 1114 (relating
5 to transfer of vehicle by operation of law) shall not be
6 applicable to [a transfer] an allocation of ownership of
7 any motor vehicle, trailer or semitrailer [from a
8 dividing company] to a new company under this section or
9 under a similar law of any other jurisdiction but any
10 such [transfer] allocation shall be effective only upon
11 compliance with the requirements of 75 Pa.C.S. § 1116
12 (relating to issuance of new certificate following
13 transfer).
14 (3) It shall not be necessary for a plan of division to
15 list each individual asset or liability of the dividing
16 company to be allocated to a new company so long as those
17 assets and liabilities are described in a reasonable and
18 customary manner.
19 (4) Each new company shall hold any assets and
20 liabilities allocated to it as the successor to the dividing
21 company, and those assets and liabilities shall not be deemed
22 to have been assigned to the new company in any manner,
23 whether directly or indirectly or by operation of law.
24 * * *
25 (h) Conflict of laws.--It is the intent of the General
26 Assembly that:
27 (1) The effect of a division of a domestic limited
28 liability company shall be governed by the laws of this
29 Commonwealth and any other jurisdiction under the laws of
30 which any of the resulting companies is organized.
19990S0393B2193 - 182 -
1 (2) The effect of a division on the assets and
2 liabilities of the dividing company shall be governed solely
3 by the laws of this Commonwealth and any other jurisdiction
4 under the laws of which any of the resulting companies is
5 organized.
6 (3) The validity of any allocation of assets or
7 liabilities by a plan of division of a domestic limited
8 liability company, regardless of whether or not any of the
9 new companies is a foreign limited liability company, shall
10 be governed solely by the laws of this Commonwealth.
11 (4) In addition to the express provisions of this
12 subsection, this subchapter shall otherwise generally be
13 granted the protection of full faith and credit under the
14 Constitution of the United States.
15 § 8971. Dissolution.
16 [(a) General rule.--]A limited liability company is <--
17 dissolved and its affairs shall be wound up upon the happening
18 of the first to occur of the following events:
19 (1) At the time or upon the happening of events
20 specified in the certificate of organization.
21 (2) At the time or upon the happening of events
22 specified in writing in the operating agreement.
23 (3) [By] EXCEPT AS OTHERWISE PROVIDED IN THE OPERATING <--
24 AGREEMENT, BY the unanimous written agreement or consent of
25 all members.
26 (4) [Upon] Except as otherwise provided in writing in
27 the operating agreement, upon a member becoming a bankrupt or
28 executing an assignment for the benefit of creditors or the
29 death, retirement, insanity, resignation, expulsion or
30 dissolution of a member or the occurrence of any other event
19990S0393B2193 - 183 -
1 that terminates the continued membership of a member in the
2 company unless the business of the company is continued by
3 the vote or consent of [all] a majority in interest, or such
4 greater number as shall be provided in writing in the
5 operating agreement, of the remaining members given within
6 [90] 180 days following such event [or under a right to do so
7 stated in the operating agreement].
8 (5) Entry of an order of judicial dissolution under
9 section 8972 (relating to judicial dissolution).
10 [(b) Cross reference.--See section 8103 (relating to
11 continuation of certain limited partnerships and limited
12 liability companies).]
13 (B) PERPETUAL EXISTENCE.--THE CERTIFICATE OF ORGANIZATION <--
14 MAY PROVIDE THAT THE COMPANY SHALL HAVE PERPETUAL EXISTENCE, IN
15 WHICH CASE SUBSECTION (A)(4) SHALL NOT BE APPLICABLE TO THE
16 COMPANY.
17 § 8973. Winding up.
18 * * *
19 (b) Judicial supervision.--The court may wind up the affairs
20 of the company upon application of any member, his legal
21 representative or assignee and, in connection therewith, may
22 appoint a liquidating trustee. See section 139(b) (relating to
23 tax clearance in judicial proceedings).
24 § 8974. Distribution of assets upon dissolution.
25 (a) General rule.--In settling accounts after dissolution,
26 the liabilities of the limited liability company shall be
27 entitled to payment in the following order:
28 (1) Those to creditors, including members or managers
29 who are creditors, in the order of priority as provided by
30 law, in satisfaction of the liabilities of the company,
19990S0393B2193 - 184 -
1 whether by payment or the making of reasonable provision for
2 payment thereof, other than liabilities for distributions to
3 members under section 8932 (relating to distributions and
4 allocation of profits and losses) or 8933 (relating to
5 distributions upon an event of dissociation).
6 (2) Unless otherwise provided in the operating
7 agreement, to members and former members in satisfaction of
8 liabilities for distributions under section 8932 or 8933.
9 (3) Unless otherwise provided in the operating
10 agreement, to members in respect of:
11 (i) Their contributions to capital.
12 (ii) Their share of the profits and other
13 compensation by way of income on their contributions.
14 * * *
15 § 8978. Dissolution by domestication.
16 Whenever a domestic limited liability company has
17 domesticated itself under the laws of another jurisdiction by
18 action similar to that provided by section 8982 (relating to
19 domestication) and has authorized that action by the vote
20 required by this subchapter for the approval of a proposal that
21 the company dissolve voluntarily, the company may surrender its
22 certificate of organization under the laws of this Commonwealth
23 by filing in the Department of State a certificate of
24 dissolution under section 8975 (relating to certificate of
25 dissolution). In lieu of the statements required by section
26 8975(a)(2) through (4), the certificate of dissolution shall set
27 forth a statement that the company has domesticated itself under
28 the laws of another jurisdiction. If the company, as
29 domesticated in the other jurisdiction, registers to do business
30 in this Commonwealth either prior to or simultaneously with the
19990S0393B2193 - 185 -
1 filing of the certificate of dissolution under this section, the
2 company shall not be required to file with the certificate of
3 dissolution the tax clearance certificates that would otherwise
4 be required by section 139 (relating to tax clearance of certain
5 fundamental transactions).
6 § 8982. Domestication.
7 * * *
8 (b) Certificate of domestication.--The certificate of
9 domestication shall be executed by the company and shall set
10 forth in the English language:
11 (1) The name of the company. If the name is in a foreign
12 language, it shall be set forth in Roman letters or
13 characters or Arabic or Roman numerals. If the name is one
14 that is rendered unavailable for use by any provision of
15 section 8905 (relating to name), the company shall adopt, in
16 accordance with any procedures for changing the name of the
17 company that are applicable prior to the domestication of the
18 company, and shall set forth in the certificate of
19 domestication, an available name.
20 * * *
21 (c) Effect of domestication.--
22 (1) As a domestic limited liability company, the
23 domesticated company shall no longer be a foreign limited
24 liability company for the purposes of this chapter and shall
25 [have] instead be a domestic limited liability company with
26 all the powers and privileges and [be subject to] all the
27 duties and limitations granted and imposed upon domestic
28 limited liability companies. [The property, debts, liens,
29 estates, taxes, penalties and public accounts due the
30 Commonwealth shall continue to be vested in and imposed upon
19990S0393B2193 - 186 -
1 the company to the same extent as if it were the successor by
2 merger of the domesticating company with and into a domestic
3 limited liability company under Subchapter G (relating to
4 mergers and consolidations).] In all other respects, the
5 domesticated limited liability company shall be deemed to be
6 the same limited liability company as it was prior to the
7 domestication without any change in or affect EFFECT on its <--
8 existence. Without limiting the generality of the previous
9 sentence, the domestication shall not be deemed to have
10 dissolved the company or to have affected in any way:
11 (i) the right and title of the company in and to its
12 assets, property, franchises, estates and choses in
13 action;
14 (ii) the liability of the company for its debts,
15 obligations, penalties and public accounts due the
16 Commonwealth;
17 (iii) any liens or other encumbrances on the
18 property or assets of the company; or
19 (iv) any contract, license or other agreement to
20 which the company is a party or under which it has any
21 rights or obligations.
22 (2) The [shares of] membership interests in the
23 domesticated company shall be unaffected by the domestication
24 except to the extent, if any, reclassified in the certificate
25 of domestication.
26 § 8996. Restrictions.
27 * * *
28 (b) Ownership and governance of restricted professional
29 companies.--Except as otherwise provided by a statute, rule or
30 regulation applicable to a particular profession, all of the
19990S0393B2193 - 187 -
1 [members] ultimate beneficial owners of membership interests in
2 and all of the managers, if any, of a restricted professional
3 company shall be licensed persons.
4 * * *
5 (d) Application.--For purposes of applying subsection (a):
6 * * *
7 (3) The practice of the restricted professional service
8 of law shall be deemed to include THE FOLLOWING ACTIVITIES <--
9 WHEN CONDUCTED INCIDENTAL TO THE PRACTICE OF LAW:
10 (i) serving as an attorney-in-fact, guardian,
11 custodian, executor, personal representative, trustee or
12 fiduciary;
13 (ii) serving as a director or trustee of a
14 corporation for profit or not-for-profit, manager of a
15 limited liability company or a similar position with any
16 other form of association;
17 (iii) testifying, teaching, lecturing or writing
18 about any topic related to the law;
19 (iv) serving as a master, receiver, arbitrator or
20 similar official;
21 (v) providing actuarial, insurance, investment,
22 estate and trust administration, tax return preparation,
23 financial and other similar services and advice; AND <--
24 (vi) conducting intellectual property and other real
25 and personal property title searches and providing other
26 title insurance agency services.; and <--
27 (vii) engaging in any activity incidental to any of
28 the foregoing.
29 § 8997. TAXATION OF RESTRICTED PROFESSIONAL COMPANIES. <--
30 (A) GENERAL RULE.--EXCEPT AS PROVIDED IN SUBSECTION (B) AND
19990S0393B2193 - 188 -
1 IN SECTION 8925(B) (RELATING TO TAXATION OF LIMITED LIABILITY
2 COMPANIES), FOR THE PURPOSES OF THE IMPOSITION BY THE
3 COMMONWEALTH OR ANY POLITICAL SUBDIVISION OF ANY TAX OR LICENSE
4 FEE ON OR WITH RESPECT TO ANY INCOME, PROPERTY, PRIVILEGE,
5 TRANSACTION, SUBJECT OR OCCUPATION, A DOMESTIC OR QUALIFIED
6 FOREIGN RESTRICTED PROFESSIONAL COMPANY:
7 (1) DURING ANY PERIOD THAT IT HAS ONLY ONE MEMBER:
8 (I) SHALL BE DEEMED TO BE A SOLE PROPRIETORSHIP AND
9 THE MEMBER OF SUCH A COMPANY, AS SUCH, SHALL BE DEEMED TO
10 BE A SOLE PROPRIETOR; AND
11 (II) SHALL NOT BE SUBJECT TO ARTICLE VI OF THE ACT
12 OF MARCH 4, 1971 (P.L.6, NO.2) KNOWN AS THE TAX REFORM
13 CODE OF 1971, OR
14 (2) DURING ANY PERIOD THAT IT HAS MORE THAN ONE MEMBER,
15 SHALL BE DEEMED TO BE A LIMITED PARTNERSHIP ORGANIZED AND
16 EXISTING UNDER CHAPTER 85 (RELATING TO LIMITED PARTNERSHIPS),
17 AND A MEMBER OF SUCH A COMPANY, AS SUCH, SHALL BE DEEMED A
18 LIMITED PARTNER OF A LIMITED PARTNERSHIP.
19 (B) EXCEPTION.--A DOMESTIC OR QUALIFIED FOREIGN RESTRICTED
20 PROFESSIONAL COMPANY SHALL BE SUBJECT TO SECTION 8925(A),
21 INSTEAD OF SUBSECTION (A), FOR THE WHOLE OF ANY TAXABLE YEAR OF
22 THE COMPANY DURING ANY PART OF WHICH THE COMPANY [HAS]:
23 (1) HAS ENGAGED IN ANY BUSINESS NOT PERMITTED BY SECTION
24 8996(A) (RELATING TO PURPOSES OF RESTRICTED PROFESSIONAL
25 COMPANIES);
26 (2) [HAD ONLY ONE MEMBER; OR] REPEALED.
27 (3) BEEN A MEMBER OF A LIMITED LIABILITY COMPANY[.]; OR
28 (4) IS TAXABLE AS A CORPORATION FOR FEDERAL INCOME TAX
29 PURPOSES.
30 § 8998. Annual registration.
19990S0393B2193 - 189 -
1 * * *
2 (f) Annual fee to be lien.--
3 (1) Failure to [pay the annual registration fee imposed]
4 file the certificate of annual registration required by this
5 section shall not affect the existence or status of the
6 restricted professional company as such, but the annual
7 registration fee that would have been payable shall be a lien
8 in the manner provided in this subsection from the time the
9 annual registration fee is due and payable [upon]. If a
10 certificate of annual registration is not filed within 30
11 days after the date on which it is due, the department shall
12 assess a penalty of $500 against the company, which shall
13 also be a lien in the manner provided in this subsection. The
14 imposition of that penalty shall not be construed to relieve
15 the company from liability for any other penalty or interest
16 provided for under other applicable law.
17 (2) If the annual registration fee paid by a restricted
18 professional company is subsequently determined to be less
19 than should have been paid because it was based on an
20 incorrect number of members or was otherwise incorrectly
21 computed, that fact shall not affect the existence or status
22 of the restricted professional company as such, but the
23 amount of the additional annual registration fee that should
24 have been paid shall be a lien in the manner provided in this
25 subsection from the time the incorrect payment is discovered
26 by the department.
27 (3) The annual registration fee shall bear simple
28 interest from the date that it becomes due and payable until
29 paid. The interest rate shall be that provided for in section
30 806 of the act of April 9, 1929 (P.L.343, No.176), known as
19990S0393B2193 - 190 -
1 The Fiscal Code, with respect to unpaid taxes. The penalty
2 provided for in paragraph (1) shall not bear interest. The
3 payment of interest shall not relieve the restricted
4 professional company from liability for any other penalty or
5 interest provided for under other applicable law.
6 (4) The lien created by this subsection shall attach to
7 all of the property and proceeds thereof of the restricted
8 professional company in which a security interest can be
9 perfected, in whole or in part, by filing in the department
10 under 13 Pa.C.S. Div. 9 (relating to secured transactions;
11 sales of accounts, contract rights and chattel paper),
12 whether the property and proceeds are owned by the company at
13 the time the annual registration fee or any penalty or
14 interest becomes due and payable or whether the property and
15 proceeds are acquired thereafter. Except as otherwise
16 provided by statute, the lien created by this subsection
17 shall have priority over all other liens, security interests
18 or other charges, except liens for taxes or other charges due
19 the Commonwealth. The lien created by this subsection shall
20 be entered on the records of the department and indexed in
21 the same manner as a financing statement filed under 13
22 Pa.C.S. Div. 9. At the time an annual registration fee,
23 penalty or interest that has resulted in the creation of
24 [the] a lien under this subsection is paid, the department
25 shall terminate the lien with respect to that annual
26 registration fee, penalty or interest without requiring a
27 separate filing by the company for that purpose.
28 (5) If the annual registration fee paid by a restricted
29 professional company is subsequently determined to be more
30 than should have been paid for any reason, no refund of the
19990S0393B2193 - 191 -
1 additional fee shall be made.
2 * * *
3 § 9502. Creation, status and termination of business trusts.
4 (a) Creation.--A business trust may be created in real or
5 personal property, or both, with power in the trustee [or a
6 majority of the trustees]:
7 (1) To receive title to, hold, buy, sell, exchange,
8 transfer and convey real and personal property for the use of
9 the business trust.
10 (2) To take, receive, invest or disburse the receipts,
11 earnings, rents, profits or returns from the trust estate.
12 (3) To carry on and conduct any lawful business
13 designated in the deed or other instrument of trust, and
14 generally to do any lawful act in relation to such trust
15 property that any individual owning the same absolutely might
16 do.
17 (4) To merge with another business trust or other
18 association, to divide or to engage in any other fundamental
19 or other transaction contemplated by the deed or other
20 instrument of trust.
21 (b) Term.--Except as otherwise provided in the instrument, a
22 business trust shall have perpetual existence.
23 (c) Separate entity.--A business trust is a separate legal
24 entity. Except as otherwise provided in the instrument, title to
25 real and personal property may be held in the name of the trust,
26 without in any manner diminishing the rights, powers and duties
27 of the trustees as provided in subsection (a).
28 (d) Termination.--Except as otherwise provided in the
29 instrument:
30 (1) The business trust may not be terminated, dissolved
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1 or revoked by a beneficial owner or other person.
2 (2) The death, incapacity, dissolution, termination or
3 bankruptcy of a beneficial owner or a trustee shall not
4 result in the termination, dissolution or revocation of the
5 business trust.
6 (e) Contents of instrument.--The instrument may contain any
7 provision for the regulation of the internal affairs of the
8 business trust included in the instrument by the settlor, the
9 trustee or the beneficiaries in accordance with the applicable
10 procedures for the adoption or amendment of the instrument.
11 § 9503. Documentation of trust.
12 (a) General rule.--A business trust shall not be valid
13 unless created by deed of trust or other written instrument
14 subscribed by one or more individuals, associations or other
15 entities. The trustees of a business trust shall promptly cause
16 the instrument or any amendment thereof, except an amendment
17 solely effecting or reflecting the substitution of or other
18 change in the trustees, to be filed in the Department of State.
19 [The failure to effect the filing shall not affect the validity
20 of a business trust. A trustee who violates the requirements of
21 this subsection shall be liable for a civil penalty in the
22 amount of $1,000 payable to the department.]
23 * * *
24 § 9505. [Succession of trustees.] Trustees.
25 (a) Succession of trustees.--An instrument may provide for
26 the succession of title to [the] any trust property not titled
27 in the name of the trust to a successor trustee, in case of the
28 death, resignation, removal or incapacity of any trustee. In the
29 case of any such succession, the title to [the] such trust
30 property shall at once vest in the succeeding trustee.
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1 (b) Nature of service.--Service as the trustee of a business
2 trust by an association that is not a banking institution shall
3 not be deemed to constitute acting as a fiduciary for purposes
4 of the act of November 30, 1965 (P.L.847, No.356), known as the
5 Banking Code of 1965.
6 § 9506. Liability of trustees and beneficiaries.
7 (a) General rule.--[Liability to third parties for any act,
8 omission or obligation of a trustee of a business trust when
9 acting in such capacity shall extend to so much of the trust
10 estate as may be necessary to discharge such liability, but
11 personal liability shall not attach to the trustee or the
12 beneficiaries of the trust for any such act, omission or
13 liability.]
14 (1) Except as otherwise provided in the instrument, the
15 beneficiaries of a business trust shall be entitled to the
16 same limitation of personal liability as is extended to
17 shareholders in a domestic business corporation.
18 (2) Except as otherwise provided in the instrument, the
19 trustees of a trust, when acting in that capacity, shall not <--
20 be personally liable to any person other than the trust or a
21 beneficiary for any act or obligation of the trust or any
22 trustee. TRUSTEES OF A TRUST, AS SUCH, SHALL NOT BE <--
23 PERSONALLY LIABLE TO ANY PERSON FOR ANY ACT OR OBLIGATION OF
24 THE TRUST OR ANY OTHER TRUSTEE.
25 (3) An obligation of a trust based upon a writing may be
26 limited to a specific fund or other identified pool or group
27 of assets of the trust.
28 * * *
29 (f) Permissible beneficiaries.--Except as otherwise provided
30 by a statute, rule or regulation applicable to a particular
19990S0393B2193 - 194 -
1 profession, all of the [beneficiaries of] ultimate beneficial
2 owners of interests in a business trust that renders one or more
3 restricted professional services shall be licensed persons. As
4 used in this subsection, the term "restricted professional
5 services" shall have the meaning specified in section 8903
6 (relating to definitions and index of definitions).
7 * * *
8 (h) Medical professional liability.--A business trust shall
9 be deemed to be a professional corporation for purposes of
10 section 811 of the act of October 15, 1975 (P.L.390, No.111),
11 known as the Health Care Services Malpractice Act.
12 Section 3. Amendment of Title 54.
13 As much of Title 54 as is hereinafter set forth is amended or
14 added to read:
15 § 302. Definitions.
16 The following words and phrases when used in this chapter
17 shall have, unless the context clearly indicates otherwise, the
18 meanings given to them in this section:
19 "Business." Any commercial or professional activity.
20 "Entity." Any individual[,] or any OR ANY corporation, <--
21 association, partnership, joint-stock company, business trust,
22 syndicate, joint adventureship or other combination or group of
23 persons, regardless of whether it is organized or formed under
24 the laws of this Commonwealth or any other jurisdiction.
25 "Fictitious name." Any assumed or fictitious name, style or <--
26 designation other than the proper name of the entity using such
27 name. The term includes [the], without limitation, any name [of
28 any association,] assumed by any general partnership, [business
29 trust,] syndicate, joint adventureship or similar combination or
30 group of persons.
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1 "Proper name." When used with respect to an entity of a type
2 listed in the following paragraphs, the term means the name set
3 forth in:
4 (1) the articles of incorporation, if it is a
5 corporation;
6 (2) the statement of registration, if it is a limited
7 liability partnership;
8 (3) the certificate of limited partnership, if it is a
9 limited partnership;
10 (4) the statement of election, if it is an electing
11 partnership;
12 (5) the certificate of organization, if it is a limited
13 liability company;
14 (6) the articles of association, if it is a professional
15 association;
16 (7) the deed of trust or other instrument, if it is a
17 business trust; or
18 (8) a publicly filed document of a type listed in any of
19 the foregoing paragraphs even though the document is referred
20 to by a different title under the laws of any other
21 jurisdiction.
22 "PROPER NAME." [THE] WHEN USED WITH RESPECT TO AN <--
23 ASSOCIATION OF A TYPE LISTED IN THE FOLLOWING PARAGRAPHS, THE
24 TERM MEANS THE NAME SET FORTH IN:
25 (1) THE ARTICLES OF INCORPORATION, FOR A CORPORATION;
26 (2) THE STATEMENT OF REGISTRATION, FOR A LIMITED
27 LIABILITY PARTNERSHIP;
28 (3) THE CERTIFICATE OF LIMITED PARTNERSHIP, FOR A
29 LIMITED PARTNERSHIP;
30 (4) THE STATEMENT OF ELECTION, FOR AN ELECTING
19990S0393B2193 - 196 -
1 PARTNERSHIP;
2 (5) THE CERTIFICATE OF ORGANIZATION, FOR A LIMITED
3 LIABILITY COMPANY;
4 (6) THE ARTICLES OF ASSOCIATION, FOR A PROFESSIONAL
5 ASSOCIATION;
6 (7) THE DEED OF TRUST OR OTHER TRUST INSTRUMENT, IF ANY,
7 THAT HAS BEEN FILED IN THE DEPARTMENT OF STATE, FOR A
8 BUSINESS TRUST; OR
9 * * *
10 § 303. Scope of chapter. <--
11 * * *
12 (b) Mandatory registration.--
13 * * *
14 (2) Paragraph (1) shall not apply to any:
15 (i) Nonprofit or professional activities.
16 (ii) Activities [which] that are expressly or
17 impliedly prohibited by law from being carried on under a
18 fictitious name.
19 (iii) [Limited partnership which is registered in
20 the department pursuant to 15 Pa.C.S. Ch. 85 (relating to
21 limited partnerships) or under corresponding provisions
22 of prior law. The preceding sentence shall not apply to
23 any entity which includes the limited partnership as a
24 participant unless the entity is itself such a limited
25 partnership.] (Repealed).
26 (iv) Unincorporated nonprofit association.
27 (v) [Electing partnership existing under 15 Pa.C.S.
28 Ch. 87 (relating to electing partnerships).] (Repealed).
29 (vi) [Limited liability company which is registered
30 in the department pursuant to 15 Pa.C.S. Ch. 89 (relating
19990S0393B2193 - 197 -
1 to limited liability companies).] (Repealed).
2 (vii) [Registered limited liability partnership
3 which is registered in the department pursuant to 15
4 Pa.C.S. Ch. 82 (relating to registered limited liability
5 partnerships).] (Repealed).
6 (viii) [Business trust which is registered in the
7 department pursuant to 15 Pa.C.S. Ch. 95 (relating to
8 business trusts).] (Repealed).
9 * * *
10 § 311. Registration.
11 * * *
12 (e) Duplicate use of names.--The fictitious name shall not
13 be the same as or confusingly similar to:
14 (1) The name of any domestic corporation, or any foreign
15 corporation authorized to do business in this Commonwealth,
16 or the name of any corporation or other association
17 registered at any time under Chapter 5 (relating to corporate
18 and other association names) unless such name is available or
19 is made available for use under the provisions or procedures
20 of 15 Pa.C.S. § [5303(b)(1)(i) or (ii)] 5303(b)(1) (relating
21 to duplicate use of names) or the equivalent.
22 (2) [The name of any limited partnership organized under
23 15 Pa.C.S. Ch. 85 (relating to limited partnerships).]
24 (Repealed).
25 (3) The name of any administrative department, board or
26 commission or other agency of this Commonwealth.
27 (4) A name the exclusive right to which is at the time
28 reserved by any other person whatsoever in the manner
29 provided by statute.
30 * * *
19990S0393B2193 - 198 -
1 § 502. Certain additions to register.
2 * * *
3 (c) Limitation on names which may be registered.--
4 Notwithstanding subsections (a) and (b), no new name shall be
5 registered or deemed to be registered under this section [which
6 is the same as or confusingly similar to] that is not
7 distinguishable upon the records of the department from any
8 other name then registered or deemed to be registered under this
9 chapter, without the consent of the senior registrant.
10 * * *
11 § 503. DECENNIAL FILINGS REQUIRED. <--
12 * * *
13 (B) EXCEPTIONS.--SUBSECTION (A) SHALL NOT APPLY TO ANY OF
14 THE FOLLOWING:
15 (1) A CORPORATION OR OTHER ASSOCIATION [WHICH] THAT
16 DURING THE [PRECEDING] TEN YEARS ENDING ON DECEMBER 31 OF THE
17 YEAR IN WHICH A FILING WOULD OTHERWISE BE REQUIRED UNDER
18 SUBSECTION (A) HAS MADE ANY FILING IN THE DEPARTMENT PURSUANT
19 TO A PROVISION OF THIS TITLE OR 15 PA.C.S. (RELATING TO
20 CORPORATIONS AND UNINCORPORATED ASSOCIATIONS), OTHER THAN:
21 (I) A REPORT REQUIRED BY SUBSECTION (A); OR
22 (II) A FILING [REQUIRED BY] UNDER:
23 (A) 15 PA.C.S. § 1305 (RELATING TO RESERVATION
24 OF CORPORATE NAME);
25 (B) 15 PA.C.S. § 5305 (RELATING TO RESERVATION
26 OF CORPORATE NAME);
27 (C) 15 PA.C.S. § 8203(B) (RELATING TO NAME);
28 (D) 15 PA.C.S. § 8505(B) (RELATING TO NAME); OR
29 (E) 15 PA.C.S. § 8905(B) (RELATING TO NAME).
30 (2) A CORPORATION WHOSE NAME IS REGISTERED PURSUANT TO
19990S0393B2193 - 199 -
1 SECTION 501(A)(4) (RELATING TO REGISTER ESTABLISHED).
2 (3) A CORPORATION [WHICH] THAT HAS HAD OFFICER
3 INFORMATION FORWARDED TO THE DEPARTMENT BY THE DEPARTMENT OF
4 REVENUE DURING THE PRECEDING TEN YEARS UNDER 15 PA.C.S. §
5 1110 (RELATING TO ANNUAL REPORT INFORMATION).
6 [(B.1) EXEMPTION.--AN ENTITY WHICH MADE A FILING AFTER
7 DECEMBER 31, 1989, AND BEFORE JANUARY 1, 1991, PURSUANT TO A
8 PROVISION OF THIS TITLE OR 15 PA.C.S. (RELATING TO CORPORATIONS
9 AND UNINCORPORATED ASSOCIATIONS) SHALL BE EXEMPT FROM THE 2001
10 DECENNIAL FILING. FOR PURPOSES OF THIS SUBSECTION, NONE OF THE
11 FOLLOWING SHALL BE CONSIDERED A FILING:
12 (1) A FILING UNDER:
13 (I) 15 PA.C.S. § 1305;
14 (II) 15 PA.C.S. § 5305;
15 (III) 15 PA.C.S. § 8203(B);
16 (IV) 15 PA.C.S. § 8505(B); OR
17 (V) 15 PA.C.S. § 8905(B).
18 (2) A NAME REGISTRATION UNDER SECTION 501(A)(4).
19 (3) FORWARDING OF INFORMATION TO THE DEPARTMENT BY THE
20 DEPARTMENT OF REVENUE UNDER 15 PA.C.S. § 1110.]
21 (C) EXEMPTIONS.--AN ASSOCIATION SHALL BE EXEMPT FROM THE
22 2001 DECENNIAL FILING IF THE ASSOCIATION MADE A FILING:
23 (1) AFTER DECEMBER 31, 1989 AND BEFORE JANUARY 1, 1992,
24 PURSUANT TO A PROVISION OF THIS TITLE OR 15 PA.C.S. OTHER
25 THAN A FILING UNDER:
26 (I) 15 PA.C.S. § 1305;
27 (II) 15 PA.C.S. § 5305;
28 (III) 15 PA.C.S. § 8203(B);
29 (IV) 15 PA.C.S. § 8505(B); OR
30 (V) 15 PA.C.S. § 8905(B).
19990S0393B2193 - 200 -
1 (2) UNDER THIS SECTION DURING THE YEAR 2000.
2 [(C) CROSS REFERENCE] (D) CROSS REFERENCES.--SEE 15 PA.C.S.
3 §§ 134 (RELATING TO DOCKETING STATEMENT) AND 135 (RELATING TO
4 REQUIREMENTS TO BE MET BY FILED DOCUMENTS).
5 § 1314. DECENNIAL FILINGS REQUIRED. * * *
6 (B) REQUIREMENT SATISFIED BY OTHER FILINGS.--SUBSECTION (A)
7 SHALL NOT APPLY TO A REGISTRANT WHICH DURING THE [PRECEDING] TEN
8 YEARS ENDING ON DECEMBER 31 OF THE YEAR IN WHICH A FILING WOULD
9 OTHERWISE BE REQUIRED UNDER SUBSECTION (A) HAS MADE ANY FILING
10 WITH THE DEPARTMENT UNDER THIS CHAPTER OTHER THAN A REPORT
11 REQUIRED BY SUBSECTION (A).
12 * * *
13 § 1515. DECENNIAL FILINGS REQUIRED.
14 * * *
15 (B) REQUIREMENT SATISFIED BY OTHER FILINGS.--SUBSECTION (A)
16 SHALL NOT APPLY TO A REGISTRANT WHICH DURING THE [PRECEDING] TEN
17 YEARS ENDING ON DECEMBER 31 OF THE YEAR IN WHICH A FILING WOULD
18 OTHERWISE BE REQUIRED UNDER SUBSECTION (A) HAS MADE ANY FILING
19 WITH THE DEPARTMENT UNDER THIS CHAPTER OTHER THAN A REPORT
20 REQUIRED BY SUBSECTION (A).
21 * * *
22 Section 4. Repeals.
23 The following acts and parts of acts are repealed:
24 Section 32 of the act of June 1, 1889 (P.L.420, No.332),
25 entitled "A further supplement to an act entitled 'An act to
26 provide revenue by taxation,' approved the seventh day of June,
27 Anno Domini one thousand eight hundred and seventy-nine," to the
28 extent that it applies to the judicial dissolution of an
29 association under 15 Pa.C.S.
30 As much as reads ", and act as the attorney-in-fact and
19990S0393B2193 - 201 -
1 authorized agent of such corporations for the service of process
2 thereon" in section 806 of the act of April 9, 1929 (P.L.177,
3 No.175), known as The Administrative Code of 1929.
4 Section 404(b) of the act of December 19, 1990 (P.L.834,
5 No.198), known as the GAA Amendments Act of 1990, insofar as it
6 applies to 15 Pa.C.S. §§ 1745 and 5745.
7 15 Pa.C.S. §§ 5543.1, 5546.1, 5764.1, 8103 and 8206.
8 Section 5. Effective date.
9 This act shall take effect in 60 days.
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